Audit and Accountability Bill: Second Stage

– in the Northern Ireland Assembly at 12:00 am on 1 October 2002.

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Photo of Sean Farren Sean Farren Social Democratic and Labour Party 12:00, 1 October 2002

I beg to move

That the Second Stage of the Audit and Accountability Bill (NIA 6/02) be agreed.

Last week, I introduced to the Assembly my draft Budget, which outlined how the Executive intend to spend almost £7 billion of taxpayers’ money. It is a fundamental principle of public life that the Executive are accountable to the Assembly and the people of Northern Ireland for the way in which that money is spent.

The Audit and Accountability Bill deals with the mechanics of public audit. It is a technical Bill, but it is important, as public audit is a key link in the chain of accountability that gives the public confidence that their money is properly spent.

The Bill relates to public audit structures and powers and has two main components. First, it reorganises the structure of public audit in Northern Ireland. Secondly, it is a central component in our implementation of the recommendations of Lord Sharman’s report, ‘Holding to Account: The Review of Audit and Accountability for Central Government’, following public consultation in Northern Ireland.

I remind Members of the Bill’s context. The restructuring of public audit was originally included in the legislative programme for the previous session, as the audit reorganisation Bill. In that session, wider debate took place about public audit during the passage of the Government Resources and Accounts Act (Northern Ireland) 2001. The Sharman Report was also published at that time. Accordingly, my predecessor Mark Durkan undertook to withdraw the audit reorganisation Bill and to reintroduce it as the Audit and Accountability Bill, a vehicle to implement aspects of the reforms recommended in the Sharman Report. I shall outline the proposals in the Bill to restructure public audit.

The Comptroller and Auditor General is responsible for most public audits in Northern Ireland. The main exceptions are local government and the Health Service. Health Service audits are carried out by the Department of Health, Social Services and Public Safety. In order to enhance the key principle of the independence of public audit, my Executive Colleagues and I intend that the Comptroller and Auditor General should assume responsibility for the statutory audit of Health Service bodies. The Department of Health staff who audit the Health Service will transfer to the employment of the Northern Ireland Audit Office.

Local government audits are different, as district councils are directly elected and local government is primarily funded by the rates, not by central Government. Independent auditing is still a fundamental requirement, but constitutional propriety means that local government should not be the responsibility of the Comptroller and Auditor General, who is an officer of the Assembly. It is, therefore, more appropriate that the responsibility for the audit function should remain with the Department of the Environment. However, for employment purposes, local government auditors should avail themselves of the enhanced career development and training prospects open to them as a result of their being part of a bigger organisation — the Northern Ireland Audit Office. We intend that those staff will be employed by the Northern Ireland Audit Office but will continue to be appointed to local government audits by the Department of the Environment.

It has been a matter of concern, especially to the Public Accounts Committee, that, in the course of his audits, the Comptroller and Auditor General should be able to follow public money to ensure that it is being spent as intended and in a proper manner. That means that he must have proper access to documents. The Sharman review emphasised that the Comptroller and Auditor General should have the full range of powers necessary to do his job properly.

In carrying out statutory audits and value-for-money studies, the Comptroller and Auditor General needs the power to obtain relevant documents. Those are normally available from the public body that he is investigating, but occasionally he will require access to third parties who may hold information that he needs. We could give the Comptroller and Auditor General that power if my Department were to make an Order. However, the principle of independence comes into play again. It is important that the Comptroller and Auditor General’s powers should not appear to be dependent on the very Executive that he is auditing, and that is why we have chosen to include access rights in the legislation.

At present, the Comptroller and Auditor General often obtains information from third parties voluntarily. The Bill will mean that people and bodies that have a financial relationship with Government will be required to provide access to information relevant to that relationship. The Bill, therefore, goes further than both the Sharman review and the UK Government’s response to it. It requires not merely grant recipients and contractors, but also those benefiting from other kinds of financial assistance, including loans and guarantees, to provide relevant documents to the Comptroller and Auditor General. The Bill, therefore, ensures that he has the necessary powers to do his job.

The Bill also ensures that those powers do not impose too great a burden on those who hold relevant documents. It takes account of the Human Rights Act 1998 and the European Convention on Human Rights. In particular, the Comptroller and Auditor General will be aware of the rights of third parties, under article 8(2) of the Convention, not to have the state interfere unreasonably in their private lives and correspondence. The Bill provides a legal framework to cover that and states that the Comptroller and Auditor General can use the power only where it is necessary and reasonable for him to do so. He will also draw up a more detailed code of practice to explain to those likely to be affected how he will use the powers.

There are some situations in which it simply would not be reasonable to expect people to provide information. The most important of those is where a person is in receipt of a social security benefit or a similar grant for their maintenance.

It is reasonable to expect someone who received a grant to insulate a house, for example, to be able to provide receipts and papers. That is what he got the money for. However, it is unreasonable to expect someone on benefits to be able to produce receipts for every item of groceries or clothing he buys, so people on benefits will be excluded from the legislation.

Bodies under the remit of the Comptroller and Auditor General at Westminster will also be excluded as a matter of technical jurisdictional courtesy. If the Comptroller and Auditor General requires information held by such bodies, he may obtain it on consultation with his Westminster counterpart.

The Bill then deals with the extension of the number of bodies that will be subject to public audit. The Sharman review recommended that the Comptroller and Auditor General should be the auditor of all major non-departmental public bodies (NDPBs). That is a sound principle of public accountability, and the Executive intend that, where he is not already auditor of such a body, steps should be taken to appoint the Comptroller and Auditor General as its statutory auditor. The Bill is one necessary step to ensure that that happens.

However, legislation is only necessary for some NDPBs. The Comptroller and Auditor General is already statutory auditor of many executive NDPBs. Other NDPBs are not founded in statute, so statutory amendment is not required to change their audit regimes. To fulfil the Executive’s policy, statutory amendment is only part of the picture. Accordingly, the Bill lists those major NDPBs that have a foundation in statute for which the Comptroller and Auditor General is not already the appointed auditor, and for which legislative action is necessary.

It is also important to recognise that some NDPBs are advisory in nature or are small and do not have enough funds to make it desirable that we apply the full rigours of a statutory audit regime. Others are limited companies, set up under companies legislation. European Directives govern those who can audit limited companies, and that does not include the Comptroller and Auditor General. Officials in the Department of Trade and Industry in London, in conjunction with the Department of Enterprise, Trade and Investment here, are considering the best way forward on that difficult issue.

The Bill’s final measure again reinforces the important principle of independence. To ensure that the Executive cannot be seen to fetter the work of the Comptroller and Auditor General, the power to appoint the auditor and accounting officer of the Northern Ireland Audit Office is being transferred. My Department will no longer exercise that power; the Assembly’s Audit Committee will do so.

The Bill does not comprise the entirety of the Executive’s response to the Sharman review. It comprises the element about which it is possible and desirable to legislate. We are actively considering several of the other Sharman proposals.

As regards the timetable for implementation, we intend the new proposals to apply to statutory audits and value-for-money studies taking place in the new financial year — after 1 April 2003. We also intend the transfer of audit staff to take place on that date.

The Bill deals with technical and complex matters, but its aim is simple — to ensure that our Comptroller and Auditor General’s independence is not compromised and that he has all the powers that he needs to ensure that those who are responsible for handling public money are held fully accountable for the use of that money. By enhancing his powers, we enhance accountability both to the Assembly and to the citizens of Northern Ireland. The Bill reorganises audit structures to enhance independence, and it is central to our implementation of the Sharman recommendations. Accordingly, I commend the Bill to the Assembly.

Photo of Francie Molloy Francie Molloy Sinn Féin 10:45, 1 October 2002

Go raibh maith agat, a LeasCheann Comhairle. I thank the Minister and his Department for the regular briefs and updates on the Bill that they have given to the Committee. The Committee has taken a keen interest in financial accountability, audit arrangements and the role of the Comptroller and Auditor General since the passage of the Government Resources and Accounts Act (Northern Ireland) 2001.

The Committee successfully moved several amendments to the Government Resources and Accounts Bill and accepted an assurance from the then Minister of Finance and Personnel, Mr Mark Durkan, that its concerns, as well as those of the Public Accounts Committee, on the Comptroller and Auditor General’s right to follow public money would be addressed in the Audit and Accountability Bill.

The Committee welcomes the Bill and looks forward to the detailed examination of its provisions at Committee Stage. It especially welcomes the inclusion of all non-departmental public bodies within the remit of the Comptroller and Auditor General and the decision to grant him statutory access to documents held by third parties, including subcontractors, in receipt of public money.

In its response to the Department’s consultation document, the Committee accepted the arguments in favour of the reorganisation of the health and personal social services audit and the local government audit, and the greater powers given to the Comptroller and Auditor General in that respect.

The Committee has not commented on the proposed transfer of powers to the Assembly’s Audit Committee and will be seeking the views of Committee members on that before compiling a report. The Committee will also be consulting the Assembly’s Public Accounts Committee on the Bill’s general provisions and on the role envisaged for the Public Accounts Committee, which is not made explicit in the Bill.

The Committee would be grateful for clarification on several issues, and the Minister may wish to respond today. Will the Bill provide the Comptroller and Auditor General with access to all organisations that receive public money? If not, what rules will govern access? For what purpose will access be provided, and what powers of inspection will the Comptroller and Auditor General have?

What are the implications of transferring the appointment of the Northern Ireland Audit Office’s accounting officer and auditor to the Assembly’s Audit Committee, and what views has the Audit Committee expressed on that proposal?

The Committee for Finance and Personnel will issue a public notice inviting views on the Bill. It will target organisations and individuals that provided input to the Government Resources and Accounts Act (Northern Ireland) 2001 and will be requesting further views and information.

Photo of Roy Beggs Roy Beggs UUP

I also welcome the introduction of the Bill, both as Deputy Chairperson and a member of the Assembly’s Public Accounts Committee.

It is important when handling public money to ensure that it is well used, and that there is value for money and traceability. I welcome the fact that the Bill will widen the Comptroller and Auditor General’s remit to include the Health Service, local government and non-departmental public bodies. That should bring about significant improvements.

Although the Public Accounts Committee has not gone into the detail of the accounts presented to it, the Comptroller and Auditor General has not been the main auditor and has not had the same control in directing the audits. Therefore I welcome the increased responsibility and independence given to him through the Bill.

That will be particularly significant given the increased expenditure allocated to the Health Service. There is concern that money has not been well spent there: the Committee for Health, Social Services and Public Safety has had trouble, because of the complexities of the Health Service, tracing where money has been spent. I hope that, as a result of further input from the Comptroller and Auditor General, constructive suggestions come forward that may assist the Assembly in providing better services to all.

As a member of the Public Accounts Committee, I have experienced unfortunate occasions when non-departmental public bodies have handled public money poorly. The Bill will give the Comptroller and Auditor General an increased remit to ensure that proper standards are applied not only to Departments but to every non-departmental public body. That should have been happening. However, incidents that have been drawn to the Public Accounts Committee’s attention have made us aware that that has not been happening in the past. I hope that this development will increase the level of public scrutiny and increase the public’s confidence in how their money is being spent.

Photo of Jim Wilson Jim Wilson UUP

It seems that a live mobile phone in the Chamber is interfering with the sound system. Members should check their phones; it is not the Deputy Speaker’s.

Photo of John Dallat John Dallat Social Democratic and Labour Party

As Chairperson of the Audit Committee and a member of the Public Accounts Committee I warmly welcome the Minister’s announcement of the new legislation. Increased powers for the Comptroller and Auditor General will enable that office to conduct audit trails that will send out a clear message, particularly to non-departmental Government bodies and, as Mr Beggs said, to the health boards and trusts, that the gravy train has at last run out of steam. The legislation has the potential to put the fat cats out of business once and for all.

The new legislation has the full endorsement of the Audit Committee and the Public Accounts Committee. Members of those Committees recognise that it will elevate public accountability to a new level, where nearly every pound of public money can be scrutinised to see whether it was spent honestly, wisely and in the best interests of those who matter most — the people. Increased Audit Office powers mean that additional resources will have to be found to pay for the additional work. Nevertheless, I am certain that the return to the taxpayer will be at least tenfold.

One of the greatest tragedies of direct rule was the inability to ask questions about accountability. Even when the Assembly came into being and was allowed to get on with the business of scrutiny, the Public Accounts Committee had only a limited involvement. Many large bodies that guzzled huge amounts of public money were outside its remit.

The impression has been created that the health boards and trusts are bottomless pits that consume hugely increased budgets, only to provide a service that is getting worse. The Comptroller and Auditor General’s increased powers mean that Assembly Members, if we are allowed to, will be much better able to ask why we have increased waiting lists for operations, why the trolley waits have become a national scandal, and why bed blocking is now the most fashionable medical term in common use. I do not, I hasten to add, single out the Health Service. There are other equally important examples that I could use, as, no doubt, other Members will.

The new legislation will allow the Assembly to delve into the affairs of many other public bodies. I hope that those who in the past foolishly described members of the Public Accounts Committee as begrudgers, because they dared question how public money was spent, will draw their horns in. I hope that they will lend their full support to ensuring that never again will we have the scandals that have gone before, and that the services provided are the very best and serve the interest of nobody but the long-suffering public.

All that depends on our ability to defend the institutions of democracy. I hope that the weeping willows who are undermining the Assembly at present, and who do not show a great deal of interest in such mundane matters as increased powers for the Audit Office and the Public Accounts Committee, will prove me wrong. Meanwhile, I thank the former Minister of Finance and Personnel, Mark Durkan, and the current Minister, Seán Farren, for their total co-operation with the Audit Committee in ensuring that the legislation has the broadest possible impact on how public money is accounted for.

Photo of Peter Weir Peter Weir DUP

As the previous Member laid down the challenge of avoiding begrudgery — a trap into which he himself occasionally falls — I shall try to look at the Bill constructively. We cautiously welcome the Audit and Accountability Bill.

It is welcome because of the need to increase the Comptroller and Auditor General’s powers. We live in an era in which money can be moved around more quickly than before — and with more hidden quality to it, we live in an electronic age in which powers so extensive are important to ensure that public money is spent correctly. Moreover, we live in an era in which the public, rightly, has a greater expectation that their money is well spent. As such, the principle behind the Bill that greater audit and accountability powers be given to the Comptroller and Auditor General is right.

I also welcome the principles outlined in some aspects of the Bill. The fact that audit control seems to have been given to all non-departmental bodies is welcome. An increase in statutory access to documents that are held by third parties was highlighted in the Committee for Finance and Personnel by DUP members and others when discussing the Government Resources and Accounts Bill. Therefore I welcome those changes.

The Committee for Finance and Personnel, the Public Accounts Committee and the Audit Committee have also stated that the Comptroller and Auditor General should be given a proper degree of independence. The proposals contained in the Bill that afford that person the required level of independence to properly carry out his or her work are also welcomed. It makes sense that the Comptroller and Auditor General is the overseer of all Government activity. Therefore the movement of the health and local government functions into the hands of the Comptroller and Auditor General is logical.

However, I do strike a note of caution — and I mean no disrespect to the Minister or the proposals — because the Audit and Accountability Bill deals with complex financial arrangements. As such, it would be foolhardy for members of the Committee for Finance and Personnel to rubber-stamp what is before them now. The Committee will want to scrutinise the Bill to ensure that the key test is met, and, as the Minister rightly said, that test should be whether the Comptroller and Auditor General will be able to follow the money.

When discussing the Government Resources and Accounts Bill, the Finance Committee expressed reservations about the Department of Finance and Personnel’s apparent proposals. At that stage, the Committee looked at several proposed amendments. The Committee did not move those amendments in the end, because assurances were given that the concerns that they addressed would be dealt with in the Audit and Accountability Bill. It appears that those concerns have been met and that the Department of Finance and Personnel made moves to ensure that that was so. However, it is important that the Committee looks at the fine detail of the Bill to ensure that the assurances given during discussions on the Government Resources and Accounts Bill have been fulfilled. I hope that that is the case, because it is important to get it right now.

I am glad that we have taken the best aspects of the Sharman Report and seem to be implementing them. However, there is an indication that the Bill rightly moves beyond the Sharman Report. In Northern Ireland — above all parts of the United Kingdom — there is a need for close scrutiny of audit and accountability. There has not been close enough scrutiny of audit and accountability for 30 years because of direct rule. However, the people of Northern Ireland are concerned that devolution has not made sufficient difference to their daily lives, and that their money is not being as well spent as it could be by this institution. It is important that Members satisfy people’s interest in this matter.

Northern Ireland’s public sector is larger than that of any other part of the United Kingdom, with regard to its expenditure and the vast range of bodies that can spend that money. Therefore, there is a particular need for scrutiny in Northern Ireland.

It is important that the Bill give greater powers to the Comptroller and Auditor General to provide sufficient scrutiny to ensure that people get value for money. The key test for any Bill is how it impacts on people’s daily lives. If the Bill ensures that money is better spent and that it reaches people, rather than being wasted and spent corruptly, it will be a valuable contribution to society.

We give the Bill a cautious welcome. However, we wish to ensure that the details match up to the principles that have been outlined. We hope that, when the Bill comes back for consideration, our questions and concerns will be properly addressed. Then we can move forward together with a Bill that satisfies the vast range of opinion in the Assembly Chamber, so that people are properly represented and their money is properly spent.

Photo of Seamus Close Seamus Close Alliance 11:00, 1 October 2002

I welcome the general principles enshrined in the Bill. In short, it gives the Comptroller and Auditor General greater access to follow taxpayers’ money. One of the greatest responsibilities of an elected representative in a body such as the Assembly is to ensure that taxpayers’ money is properly spent, in a manner and for the purposes for which the House voted it.

Over the past few years, it has come to the attention of the Public Accounts Committee that there has been a bad attitude towards the expenditure of taxpayers’ money. In the past, I have characterised that attitude as "Well, it is coming off a broad back, and, therefore, it does not really matter." However, the challenge of every Member and the officials in Departments that have the onerous responsibility of accounting for taxpayers’ money comes in the following questions: if it were my money, would I spend it in that fashion? Would I adopt the same attitude, or would I be more cautious about how I spent it? If they can answer those questions in the affirmative, the chances are that the taxpayer will receive good value for money and that it will be spent for the purpose for which Members voted it.

However, that has not always been the case. Yesterday, we had a discussion wherein some Members suggested that it was not necessary to fill in little pieces of paper and that money should have been poured into an organisation because the cause underlying that body was good, and I accept that. However, we are responsible for every penny of taxpayers’ money, and, therefore, we should abhor any shortcuts.

Reference was made yesterday to credit cards, which we will discuss later today. There is an attitude that must be changed. The sentiments and principles in the Bill will go some way towards changing attitudes, because it is all about the independence of auditing. It is all about transparency and accountability, and, if those factors are fed into the system, we can, and should, have a better system.

I concur with Mr Weir. We are charged with the responsibility of scrutinising the Bill in the Committee for Finance and Personnel and of ensuring that, to the best of our ability, it properly fulfils the functions that we, as elected representatives speaking on behalf of the taxpayer, require and demand. I hope that the Bill will fulfil those functions, and, at a cursory glance, I believe that it will.

I thank the Minister of Finance and Personnel and his predecessor, Mark Durkan. I recall the Finance and Personnel Committee’s discussions of the Government Resources and Accounts Bill. I had profound doubt about whether the avoidance of producing a Bill that would implement the recommendations of the Sharman review had more to do with expediency than with a desire to move forward. The Department has honoured its commitments, for which I commend it. I look forward to the Committee’s forthcoming scrutiny of the Bill.

Photo of Sean Farren Sean Farren Social Democratic and Labour Party

I thank all the Members who commented usefully and positively on the general principles of the Audit and Accountability Bill. The Assembly is working together towards a common goal. I pay tribute to the Committee of Finance and Personnel’s efforts to ensure that we work closely towards the goal of ensuring that the Comptroller and Auditor General will be as independent as possible and will have all the powers necessary to ensure that those responsible for handling public money are held fully accountable for its use.

It is important to appreciate that the Bill does not stand alone. It is part of a web of accountability procedures, laws and structures that have been discussed in the debate and that bring us closer to the goal of ensuring proper accountability for the use of public funds.

Several Members expressed concern about the possibility that public money is not being spent properly. The Bill, on its own, does not provide a fail-safe guarantee that mismanagement, laxity and fraud will never again occur in the public sector in Northern Ireland. Those who seek to perpetrate fraud will continue to scheme and devise the means to do so, but we can try to develop mechanisms to prevent fraud, laxity and mismanagement as far as humanly possible, and, if they do happen, to detect them.

Although evidence of mismanagement, laxity and fraud emerges from time to time, we can be proud of the standards of accountability that existed in the public sector, notwithstanding the absence of the scrutiny by local politicians that is now possible under devolution.

My experience and the evidence demonstrate that there are high levels of probity and responsibility in all sectors of public service. We should be proud that our public service operates, by and large, to very high standards. That notwithstanding, it is the Assembly’s responsibility to ensure full accountability, which is as transparent as possible.

I shall touch on some of the points raised by Members. Mr Molloy, speaking as Chairperson of the Committee for Finance and Personnel, asked for what purpose access is provided. The clear purpose is for statutory audit or value-for-money studies, particularly in the case of third parties. He also asked what powers of inspection are given. The powers are to request documents that are relevant to the audit or the value-for-money study in question from persons or bodies in certain relationships with the Government.

Mr Molloy asked about the implications of the transfer to the Audit Committee. That will give the Assembly rather than the Executive the power to appoint the accounting officer. It will enhance the independence of public audit, and the Committee for Finance and Personnel will discuss that with the Audit Committee.

Mr Beggs touched on the audit of the Health Service. The Comptroller and Auditor General is already the statutory auditor of the Department of Health, Social Services and Public Safety. This Bill will make him auditor of health trusts and boards. At present he reports to the Assembly on the findings of the primary auditors of those bodies. The auditors are frequently from the private sector. This Bill makes the Comptroller and Auditor General the primary auditor of the whole health sector. I assure Mr Beggs that the public can continue to have full confidence in the statutory audits and value-for-money studies of the health sector in the same way as before the reform.

Mr Molloy raised a point that I should have touched on regarding consultation with specific Committees, one being the Public Accounts Committee. My predecessor gave an undertaking during the passage of the Government Resources and Accounts Act (Northern Ireland) 2001 to consult on further steps to improve audit and accountability arrangements in Northern Ireland and revisit the subject of further legislation as we are doing. He said that we should carry out a consultation exercise in that regard on all the matters covered in this Bill and on the wider issues in the Sharman review of audit accountability from September 2001 until the end of November 2001.

We received 56 written responses, including those from Departments, local councils, voluntary and community organisations, professional bodies, audit bodies and individuals. The Public Accounts Committee held a public hearing on the Sharman review on 13 June 2002, and the Committee for Finance and Personnel has also taken a very keen interest in the subject. A summary of responses to the public consultation has been prepared and is due to be published very soon.

Other Members said that they would be scrutinising the Bill in greater detail during the Committee Stage. I accept and acknowledge the compliments paid to my predecessor regarding his commitments, on which we are now attempting to deliver. That is why I feel that Members will see, in the final stages of this Bill, that the legislation will be effective and ensure that the objective of full and proper accountability will be achieved.

Question put and agreed to.


That the Second Stage of the Audit and Accountability Bill (NIA 6/02) be agreed.