Transcript created by WordWave
22 February 2005
SIR JOHN BOURN KCB, Comptroller and Auditor General.
Chairman
1. Welcome again, Sir John. We will get straight into the questioning because colleagues like yourselves have engagements. Can we start first of all with your total resource budget?
Now, what is interesting, taking a longer view of it, is that over a five year period it shows an increase of 47.7%, and that is quite formidable. How can you live with Gershon with that sort of performance?
(Sir John Bourn) Well, Chairman, we certainly can live with Gershon because if, in resource terms, you compare the increase in our budget with that of central government expenditure we are less than them. For example, in the forthcoming year central government expenditure in resource terms increases by 7.25%, whereas our increase in resource terms is
6%. In terms of the Gershon exercise, essentially what that is about is not of course reducing the total amount of central government expenditure, but realigning it and focusing more on frontline services.
2. Is there a necessary correlation of any sort between central government expenditure and yours? It is a matter of programmes, is it not? It may well be that they expand expenditure but the monitoring work does not expand, necessarily, in ratio with the financial expenditure, does it?
020 7404 1400 [email protected] www.wordwave.co.uk Smith Bernal WordWave, 190 Fleet Street, London EC4A 2AG (Sir John Bourn) No, it does not, and of course it is not, as I say. I think one particular feature of the present circumstances is of course that the accounts are more complicated under resource accounting than they were. A number of new organisations are being formed. I give an example: the Court Service, which brings together the administration of the Magistrates
Courts with those courts and the Department of Constitutional Affairs. Well, the whole basis on which the assets were valued in the Magistrates Courts is different from the basis on which they were valued in the Crown Courts. So, bringing these together creates a complicated set of accounts and, of course, gives the auditor the requirement to put more attention on them— certainly in the early years.
3. Has the implementation of Sharman made a significant contribution to your extra costs or not? I have forgotten how far we are ahead with Sharman in relation to companies and executive agencies and so on. Is there much left to bring into the camp at the moment, or have we got nearly everything back?
(Sir John Bourn) Yes, we have reached the point that the Special Health Authorities and all the executive non-departmental public bodies are now audited by us. And the target to put out to the firms of 25% of the financial audit will be achieved in 2005/2006.
4. So who is understanding? Is there anyone who is resisting coming into the fold?
(Sir John Bourn) Certainly not as far as the executive non-departmental public bodies are concerned. The one area we have finally to reach a conclusion on is the right to audit PLCs.
And you will recall, Chairman, the discussions that we had in relation to this. We got the
European Commission to agree there was no problem about our doing it. We got the DTI to agree there was no problem about our doing it. We still have to get the agreement of the
Institute of Chartered Accountants of England and Wales, who are the body who determine who has the licence to audit PLCs. Under their rules, to audit PLCs, the practice must be headed by a qualified accountant. Of course, the legislation setting up the National Audit
www.wordwave.co.uk 2 Office does not restrict the appointment of a C&AG to someone who is a qualified accountant. So, we are currently engaged with the Institute of Chartered Accountants to find a way through that.
5. Well I think we should invite the Institute to appear before the Public Accounts
Committee, to explain to us why they will not recognise the difference. I do not see why they should not recognise their need to make a change in their charter, if they are not to stand in the way of public and parliamentary accountability. I wonder if we can perhaps set this up— perhaps Edward and I can talk about it and we will consider getting them in within the next few months, assuming we are not otherwise occupied over the next few months.
(Sir John Bourn) I would be grateful for that, Chairman. If you would like me to start off by telling the Institute of the meeting this afternoon, and of the points that you had raised and that you might wish to ask them to come in, I will do that.
6. And if you would let us have a background note?
(Sir John Bourn) Yes, I will.
7. Okay, thank you very much. Now, back then to Gershon: we expect you, obviously, to be on the best financial diet in Whitehall, but does that mean you are not capable of further slimming down in the spirit of Gershon?
(Sir John Bourn) Not only in the spirit of Gershon. I am proposing to slim down. When
I appeared before you in July—
8. But Perkins says you are overeating.
(Sir John Bourn) The fact of the matter is, as I say, that when I appeared before you in
July I said I would reduce the administration costs of the Office by the 2.5%. I am in fact doing that. In 2005/2006 my administration costs will in fact go down by 3%. So, I am doing better than the Gershon requirement, and I will take that forward through the next two years.
9. But is not a part of that just an accounting technicality relating to pension funds?
www.wordwave.co.uk 3 (Sir John Bourn) No, it is not. It is not to do with that. It is outside the pension contribution adjustment. How I am doing it is depicted in the table on page 1 of the memorandum I submitted to you. In the line entitled, “Infrastructure and Support” you will see that the expenditure in the current financial year of £14.4 million goes down to £13.5 million in 2005/2006. So, that is a reduction essentially in Gershon type economies through things like better procurement and simplification of back office arrangements. I am saving
£450,000 by better procurement, more framework contracts and the simplification of procedures for handling human relations. So, these are real cases where, but for the changes we have made, we would have spent this money. So, it is not an accounting technicality.
10. We are not going to have departments turning around and sniping and saying, “Well
Gershon is being applied to everyone else but not the NAO”?
(Sir John Bourn) But I am glad to be able to say that I have not had any sniping from them. And we are doing more than Gershon has asked departments to do.
11. A reverse possibility put at yesterday’s meeting by one of our colleagues was that perhaps one could set an example in a different direction. We have all, as members of the
Public Accounts Committee been proud to talk about the 8:1 ratio in savings, and we are proud of it, but one of our colleagues said, “Well, if you are not going to save more could you raise the ratio?”
(Sir John Bourn) Well, of course, as I said yesterday, because we asked for 6% more resources next year, we shall in fact, on the 8:1 ratio, make more savings next year than we will have done under the ratio in this year. But if you would like me to consider, and I have been expecting this for some time, a 9:1 possibility, then I will consider it and, if I may, come back to you on it.
12. Yes. Well, I have led you into dangerous fields by saying because you are doing so well at eight I will give you more money for value for money studies. I still think that is
www.wordwave.co.uk 4 logical at 8:1. And I would be in dereliction of my duty if I did not ask why do not you aspire to become even more than that? So, if you feel like putting a note in relation to that, if there is anything appropriate to add.
(Sir John Bourn) Well, if there is, Chairman, I will. Thank you.
13. Okay, thank you very much. And then, coming back to the 8:1 and Gershon, your value for money reports are getting shorter. Is that how you are doing it? I used to look forward to 270 page documents to read on a Sunday, and I now find I have an hour to spare in the evening, you have cut a few pages out of each of them. What is happening there? Is this affecting quality at all?
(Sir John Bourn) It is certainly not affecting quality, Chairman, and it is certainly not affecting the outcomes, which stay at the savings level. We are trying to write them well and clearly. And of course in a number of cases now some of the supporting material is on the website, rather than becoming part of the report itself. So, that is one of the reasons for the change.
14. The savings that were audited by Haines Watts for us, they applied to 2003. Will you be able to provide similar breakdown figures for the following year, 2004?
(Sir John Bourn) Yes.
15. On what sort of timescale do you think?
(Sir John Bourn) Well, this will be for the current financial year, will it not Mr
Woodward?
(Mr Woodward) Yes, I imagine that we should get the provisional figures out in a month or two and then our internal auditors are going to review them and then Haines Watts will do the external audit review and I expect they will be available for the Commission’s hearing in the summer on the corporate plan, when we have the annual accounts ready for you.
www.wordwave.co.uk 5 16. Thank you. This is a point of ignorance on my part. The Haines Watts report, is it your property or our property? I will tell you why I am asking, and I am sure there is no complication about this, it is just I am not sure whether you need to make the decision or I do.
A couple of members of the Public Accounts Committee said they would like to see the
Haines Watts report, is it easily available?
(Sir John Bourn) Yes, it was published. Yes.
17. Okay. So, we can make sure we get a copy around the committee.
Chairman: Mr Mitchell.
Mr Mitchell
18. Yes, the Treasury’s letter, 16 February, which you have got as well as us. I mean, it looks to me, clearly as a layman in these things, that the Treasury has been upset by what he has voiced here, and perhaps that applies—their comments on the estimates were kind of terse and condescending. Now, to rebut that they have gone into overdrive and produced a letter which where it is not insulting, is a slight. And where it is neither it is stupid. Now, I know you will not tell us whether you were terribly hurt by this letter, but do you think it shows an adequate understanding on the part of the Treasury of the role and achievements of the NAO.
(Sir John Bourn) Well, Mr Mitchell, thank you. I do not think it does. I think that it does ignore the achievements that the Office has made in making suggestions about areas that might be covered. It makes statements without examples, and ignores the fact of course that
I have regular meetings with the Permanent Secretary of the Treasury, and my colleagues meet people in the Treasury expenditure divisions. So, we are always happy to have ideas from the Treasury and we will consider them, but of course we are not part of the Treasury and we are far more concerned with the views of the Committee of Public Accounts, and
www.wordwave.co.uk 6 indeed of the Members of this House generally, in the determination of our programme. So,
I think that while my back is broad and I am not unhorsed by this, I am happy to extend—
Chairman: We are not getting into hunting disputes here, so watch your metaphors.
(Sir John Bourn) But I do think that it does not betray, and I absolutely agree with you
Mr Mitchell, an understanding of our work, and that is unfortunate.
19. Do those regular meetings include Julian Kelly?
(Sir John Bourn) No, they do not, but I am sure he could come if he wanted to. And the things that he said here, if he had written to us beforehand, or as part of the ordinary exchange between ourselves and the auditees, had he had any particular ideas, we would of course have been happy to have them, but he did not.
20. Can I just ask you about a couple of points it makes,
“It would still seem right for any extra resource for staffing to be substantially resourced from internal efficiency savings”.
Could you in fact do that, or is it just a kind of impossible dream the government is holding out as an election approaches, that they were to save large sums of money in this way?
(Sir John Bourn) Well of course the efficiency savings we are making will help in staffing requirements.
21. Well a substantial saving from them is another matter.
(Sir John Bourn) Yes, so there will be extra resources that come from that, and they are of course being applied to the range of financial audit and value for money work. So, it is right for resources released through internal efficiency savings to be applied to frontline work, and that is what happening.
www.wordwave.co.uk 7 22. On the point of extra funding, the Treasury does not see why it cannot be achieved through better planning and deployment of existing resources. Now, that is just a broad sweeping dismissal—it has not given you any indication of what they actually mean by that.
(Sir John Bourn) No. And the relevant point here is that the better planning and deployment of existing resources is what is required by departments. This is about the acceleration of the presentation of the accounts to the House, and the target is that by July
2006 the regime in progress will mean all 58 resource accounts are presented to, and audited by, us by July. Last year only 11 actually managed to get done by the summer holidays. So, there are another 47 which have got to be brought into the same timescale. And the requirement for extra resources on our side is to help departments in getting on with preparing their accounts quicker so that we can audit them quicker. So, as I say, it is not better planning and deployment of our resources. What’s needed, if this is the way to go, is better planning and deployment of departmental resources.
23. Yes. And he also makes a point that the NAO sometimes carries out value for money studies in areas of modest overall spending. In other words you should not indulge small fry,
I take it as saying. And that you—it seems to be saying you need more emphasis on areas of big spending in the value for money. Well, clearly, that means fewer reports. Now, is that a tenable criticism? Clear reports, more concentration on areas where there are big items of saving to be made.
(Sir John Bourn) Well, the number of reports we do is at the specific request of the PAC.
They ask for 60, so we do 60. In terms of the areas that we look at, of course most of the work is related to the big spenders: work and pensions, health, education and defence. But some of it, of course, it is quite right to say does relate to smaller organisations. But sometimes you can get a lot of savings out of a relatively small area of government expenditure. For example, an area that is relatively modest in expenditure terms is the
www.wordwave.co.uk 8 Ministry of Defence’s married quarters. We audited there and came up with proposals that saved £25 million a year by the Ministry of Defence running their married quarters programme better. And members of the Committee and Members of the House generally are often interested in smaller organisations and they often ask us, “Can you have a look at x or y?” It is my decision whether to do it, but of course I am anxious to respond, so far as possible, to what Members ask to be done. As I say, I think that if you take the overall plan to repeat the point, the savings made out of the 60 studies and the financial audit speak for themselves. But if Mr Kelly had any particular ideas we should be glad to look at them, but so far he has not given them to us.
24. Okay. I hope that Treasury reading this will develop a better idea of how the system works.
Chairman: Edward.
Mr Leigh
25. Well I was very surprised by this letter, Sir John, actually, because as you know we have regular meetings with the Treasury, with the Chief Secretary, and they are always to our face very complimentary about our work and your work, and the fact that we are very much helping the Treasury in their efforts. So this was quite a surprising letter. I think actually we should try and see the Chief Secretary and we should try and work out—I do not know how senior a man this Julian Kelly is, and how influential he is in the Treasury, but some of his criticisms, just to amplify what has already been asked by Mr Mitchell, you know, at first sight, appeared to be very tough:
“It would be appropriate for NAO to adopt a more radical and more carefully targeted approach for identifying areas for study. It would be better to concentrate the limited resources available on areas of public expenditure where the room for improvement appears to be greatest in order to maximise the value of its work”.
www.wordwave.co.uk 9 Now, you said in your answer there to Mr Mitchell that you do 60 inquiries a year—that is at our request, the request of the PAC. And just for a moment, can we take this letter seriously—assume it is written in a serious spirit. I mean, are we asking you to do too many studies a year? Would it be better if you did 20? Just for the sake of argument, it is important that we—I think as this is a serious letter from, you know, a serious organisation—I think we just need to talk this through in a public forum, because my view always, and I think it is a view of the Chairman as well, I cannot speak for him, but my view is that when you are dealing with a government which spends the best part of £500 billion a year, 60 value for money inquiries is not that many each year perhaps. And sometimes we have been accused—
I think Mr Williams particularly feels this—that we skim the surface and that if we had two or three more PACs there would be room to do 100 inquiries a year or 120 inquiries a year. So, this is a very surprising comment that we are doing too many.
Chairman: I mean, do you think that if we only did 20 a year we could actually save much more money?
(Sir John Bourn) No, I do not, Chairman. I do not think that 60 is too many. If I had thought it was, when the PAC had asked me to do it, I would have said so. You are right,
Mr Kelly’s letter is entirely different in tone from what the Chief Secretary says when he sees me and also what the Permanent Secretary says when he sees me. And this line of criticism has not been one that has been drawn to my attention by the Treasury on any previous occasion.
Certainly in the working out of the programme we are looking for areas where savings can be achieved. And not simply savings. I mean, in some areas we are looking at programmes for the delivery of more effective services. Sometimes we are looking at how well departments can collaborate together in cross-cutting studies. Those do not always save you a
www.wordwave.co.uk 10 lot of money, but it is an important aspect of government policy to do this, have these cross- cutting activities, so it is right that we should look at them.
The Haines Watts report last year said there was no other audit office in the world that produced this 8:1 payoff for its work. But as I say, I should be glad to have specific proposals from the Treasury so that I could consider them. But as I say, I have not, and the letter from the Treasury arrived only a few days ago. If it had come in a bit earlier—and this meeting was known to be being held a long time ago—if they had written to me earlier on we could have pursued it with Mr Kelly and found out what was in his mind.
26. For instance he says that some of the NAO’s larger studies are poorly timed, that you miss opportunities to draw well-founded conclusions on which departments can act, well what does he mean?
(Sir John Bourn) Well, I would like to have some examples because we have fashioned the studies around savings and activities, and remember of course that the facts of the studies—not the conclusions and recommendations which are mine—but the facts of the studies are agreed with the Permanent Secretary. So, if they have ideas and ways in which our work could be more valuable to them that is the opportunity for them to say so, and of course, sometimes they do and we take that into account. I mean, there are cases, going back to what I said before, where discussions between colleagues in the NAO and people in the
Treasury do lead into work that we do. For example, the study on light rail that the PAC took a few weeks ago—our decision to do it, but the Treasury has been very interested in it and supportive of it, and thought it was a good idea to do it and thought it would be valuable for their concerns that we did it. So we do, in fact, as I say, both myself and the Permanent
Secretary, and colleagues in the Office all the way down, do talk to people in the Treasury, and we do think about what we say.
www.wordwave.co.uk 11 Mr Tyrie
27. Well, in the nature of things the Treasury has few enough allies at the best of times, in
Whitehall, since everybody wants to hate them. It seems to me they are kicking one of the few institutions that they might have on their side. When I read this letter I came to the conclusion that there must have been some breakdown of normal relations with the Treasury, and I have just been reassured by Edward and yourself the fact that it is not the case. The only alternative conclusion one can come to is that there has been, deep in the Treasury, some nursing of a grudge, which has been going on for a very long time, which has finally bubbled to the surface in what either amounts to an over zealous official’s scribbling, on a bad day, that should never have got out of the building. Or it is the tip of a large iceberg of a very serious set of allegations about the ineffectiveness of the NAO’s work. And I think we need to decide which of those it is. I think I have got a view myself. Perhaps you could just put this on the record, is it the case that you could speed up the resource accounts work through better deployment of existing resources? It is one of the allegations.
(Sir John Bourn) Of course nobody would ever say that what they were doing was incapable of improvement. And so, I agree, we could do better, and we do do better year by year. But the programme of the studies that we do, the subjects that we take, the methodologies that we use, are all matters of open and transparent information. As I say, nothing in the discussions I have with the Treasury has ever led any of them to say to me,
“Now if you had only re-timed it or done it in this way it would have been very much better”.
So, as I say, I am absolutely happy to have the suggestions from the Treasury, as indeed from any government department, as to how, as their external auditor, we can do work more effectively.
28. Well, I could go through these more but I do not feel it is worthwhile. Chairman, may
I suggest that we write to the Treasury and ask them for detailed evidence to support the
www.wordwave.co.uk 12 allegations that are made in this letter. And by detailed I mean detailed. This is a critique of a whole department. And either we are going to take this seriously or we are going to quietly forget it, and they will have another opportunity, without too much embarrassment, to do that.
Can I just ask two more—
Chairman: Before we leave that, can I make a point here? We are not allowed to question the policy of Treasury. The Treasury has no right to question the policy of PAC and the
Public Accounts Commission. And when I put forward the proposition we increased the number of inquiries to 60—was that two years ago?
(Sir John Bourn) Yes.
29. Chairman: I had served 12 years, at that stage, on this committee. And you know my perception is that even at its best we only scrape the surface of £650 billion worth of expenditure and income to government. I think it is utterly unacceptable that officials, even someone as elevated as the team leader of the Home, Legal and Communications Team, that anyone in Treasury should try and tell the Public Accounts Committee what it will arrange with the National Audit Office to ensure that Parliament gets the correct scrutiny. And I hope this passage of the minutes will be conveyed to the Chief Secretary.
Mr Mitchell
30. We have been fairly critical on this Commission about the baldness and paucity of
Treasury letters in the past, which have come in late and said nothing. So we might be to a degree to blame. So I am moderately sympathetic.
Chairman: We motivated them. That is very generous of you, Austin.
31. Mr Mitchell: Another possibility is that somewhere you have got some report brewing on the Treasury, and that you have clearly got them in your sights and they have got in with retaliation first.
www.wordwave.co.uk 13 (Sir John Bourn) If fact, a lot of the things that we are doing are very much around assisting the Treasury, for example their financial management initiative. We are assisting a great deal in that. But for my own curiosity, I would in any case after the meeting have raised this with the Permanent Secretary to find out for myself, what does this letter mean?
32. Well I think that is what we are going to try and do. I have got one more question now, which I do think it is worth your thinking about, which I gave some thought to when we raised the number from 50 to 60, and now recalling what I was thinking then. In order to try and work out what the right level of value for money studies is, and what the right size of each value for money study is, one needs to have a sort of criterion by which to assess it.
I would have thought that must be one which combines two things, which maximises identified savings and which also provides, this is more difficult to ensure, a maximum demonstration effect.
Mr Leigh: And public interest.
33. Mr Mitchell: Yes, I suppose so. I was thinking maybe a demonstration effect in this has a public interest. Now, if that is the test, and if you agree with the analysis, do you on an annual, or biannual or triennial basis think about the overall structure of your work in that context—in the context of a criteria or set of criteria such as I have outlined? Or do you think it is worth giving us something setting that out?
(Sir John Bourn) The basic criterion that I have followed has been the wishes of the PAC; they have asked me for 60 studies, I will do 60. If they wanted more I would do that. If they wanted less I would do that. Some years ago, Mr Williams did raise the question, “is it worth a marginal study?” The papers about that are in the Commission’s records, but I could have a look at that and see if I might update it in any way, if that would be of interest to the
Commission.
www.wordwave.co.uk 14 But I may say, just on the point of good relations with the Treasury, in fact it was the
Chancellor of the Exchequer who in the last year did ask us to make a study of the pension capping arrangements. He had been not convinced by the Treasury analysis which had been opposed in the City by the accountancy profession. We did a piece of work which was well received by the Chancellor and the Permanent Secretary. And in that sense, I took the fact that we had been asked to do this piece of work, which I did on the basis that I would do it and publish it in my own name and it would be available for everybody to see and study, but
I took the fact that the Chancellor of the Exchequer had asked us to do it as a degree of commitment and respect for the quality of our work, because he could have asked other people to do it but he asked us.
Chairman
34. And then, of course, the budgetary—
(Sir John Bourn) Yes, the budget assumptions.
35. These seemed to be expanding, finding new roles for you. Is there in fact a danger, do you think, in that? I think we are all pleased that the status of NAO was being recognised as completely independent. Do you think there we are reaching a limit as to how far we should go down that route without risking the independence of NAO from the executive? Do you see any risk in the nature of the things that they are asking?
(Sir John Bourn) I think that you have to think very seriously whether you can accede to the requests. And my basic approach has been to look at it just as you say. Is this something which is really a piece of work about the implementation of a policy idea? Not about whether it is a good idea to do it or not. And so the basic criterion is: does it lie within the field of management implementation and value for money. The other safeguard is to say, as I did in this case, and as we have done on the budget assumptions, that if I do it I will want to publish
www.wordwave.co.uk 15 it myself, and have it ascribed to the National Audit Office, rather than having it as an annex to a departmental publication. And so you certainly could think of hypothetical requests which I would not accept for exactly the reason that you sketch out, Chairman. But where they are reasonable and play to our strengths, where it is something that we could do, that we could make available, like all our work, to Parliament and to the PAC, then I think, if I had your support and that of the PAC, that we should do it.
36. Do you think perhaps in view of your role that it might make sense in the event of further such requests that you at least consult with the two chairmen, PAC and Public
Accounts Commission, before acceding to such requests? There is no problem of confidentiality here is there?
(Sir John Bourn) No, there is not. I would be very glad, and I think I probably have, but for the record, I would be very glad to speak to yourself and the Chairman of the PAC if I get any future requests. As I may have said, I think for the purposes of preserving your own independence it would still be my decision as to whether I did it or not. But I would certainly tell you.
37. Exactly, yes, exactly. I can understand that. I am so eager to get your advice on some of these matters. Do you find it slightly strange—we are dealing with something that Andrew raised last year and the year before—that they paid so little attention to your recommendations in relation to what is on and off balance sheet?
(Sir John Bourn) Of course on the Network Rail case they did pay attention to it. And
I think that we have not had any trouble or difficulty about the balance sheets of central government departments. The areas where there is still progress to be made is in relation to local government and the Health Service, of neither of which we are the external auditors.
Gus O’Donnell’s response to the concerns that we raised with him was encouraging. It is, therefore, very disappointing to see that on the website of the Department for Education and
www.wordwave.co.uk 16 Skills—Mr Woodward has the point here. Yes. On the current Department for Education and
Skills website their guidance for the current financial year still requires that applications for
PFI credits require confirmation that the local authority expects the project to be off balance sheet for accounting purposes. Now you could say that is not trying to say you should do anything but follow accounting rules. In fact, of course, we know the thrust of this is to make people think that unless I can get it off the balance sheet then I am not going to get it.
So, there is still some progress to be made throughout the wider public sector in getting full acceptance of the proper accounting treatment. As I say, in terms of central government departments it is now, I think, on a proper footing and I do not get any trouble if I say, “On this basis you have got to put it on the balance sheet, or I qualify the accounts”. I have not had people say, “All right then, but we are still going to stick with what we do”; they have come into line.
38. How, intellectually, can you reconcile the fact that, for example, 3% of projects are not on. How can you justify having 97% off and 3% on? I do not quite follow the accompanying logic in that.
(Sir John Bourn) Well I think that if you have that breakdown, you would have to assume that those who structured the projects were so finely tuned to be able to secure the offloading of risk that they pretty well always hit the bull’s eye. And that goes beyond common sense, because the projects are so various that you cannot believe that it would be possible to do that and for the projects still to be ones for which the department had continuing responsibility.
So, I think that the 97%/3% represents failure to follow the precept, which the Treasury accepts, that what is important is value for money, and the accounting treatment comes afterwards. Not that the accounting treatment comes first, and then value for money comes second.
www.wordwave.co.uk 17 39. It seems strange that the proportions are different. For example, prisons and roads are currently a lower percentage than the Ministry of Defence, in balance sheet terms, so there is now a move of course to account for road maintenance as capital, I understand.
(Sir John Bourn) Well, it has certainly been reported that the Office for National Statistics has reached the view that a lot of maintenance expenditure on roads, which was revenue, can now count as capital. I find it surprising to see that is a decision for statisticians. It is an accounting decision and, of course, the accounting standards for central government departments are for the Treasury to lay down. But we are going to discuss with the Treasury how they feel, from the viewpoint of accounting standards, that this change can be justifiable.
If it would be a help, Chairman, I would be glad to report to the Commission on the outcome of those discussions.
40. That would be very helpful. You had a letter from the Treasury Permanent Secretary on 22 March on the topic of PFI accounting. How did you assess that reply? Was it in the nature of a rather dismissive approach, as epitomised by the letter referred to earlier, or did you feel that it allayed your fears in any way?
(Sir John Bourn) Well I was encouraged by the reply because the Permanent Secretary said he took the points that value for money came first, accounting treatment next, and that he would attend to the difficulties which surfaced in relation to local government and the Health
Service.
I think it is fair to say, as I have said, that in terms of central government departments we have seen a lot of progress. Again, as I have said, there is still progress to make, for example in the local authority education sector. So, it is a subject that I shall be discussing with the
Permanent Secretary at my next meeting with him.
www.wordwave.co.uk 18 Mr Mitchell
41. Just on that general area, PFI initiatives, we have some very interesting and illuminating reports once you have examined them. They are not the particular points I would make, of course you cannot, but it is an interesting picture. I wonder if there is not a need for some cumulative totals, so that people could know of over a period how much more expensive this approach is than financing it out of public spending, and what the consequences are going to be. For instance, those hospital areas which erect PFI hospitals, which are going to take a proportions of their allocations from government, and those areas which do not. It is a cumulative picture which I think is fairly telling. Is that kept?
(Sir John Bourn) It is possible to produce, and this has been done, a cumulative account of the total number of PFI projects that there are, broken down by the sectors. The question as to whether it costs more to do these things through a PFI than through conventional procurement would be very difficult to do, especially because of course most of them have a life of around 20 to 30 years. And of course the nature of the project will probably change as you go down the line.
For example, take the PFI on the tube railway. Well over time the tube railway project is going to change its nature. Of course what we have done, and this I recognise is around some of the early stages of projects, is to do reports on refinancing. It was as a result of our reports that the government agreed 50% of the financing gains would be shared with the taxpayer.
We are at work on another report on refinancing.
Another thing where I think the interest of the Commission and the PAC was influential, was in the introduction of the Treasury Guarantee Finance Scheme, which is an arrangement under which the money for a PFI scheme is provided by the Treasury and thus is financed at gilt rates rather than market rates. The recipient of this funding has to secure a City guarantee that if the project fails he has a backup, which will bring money, the right amount of money,
www.wordwave.co.uk 19 back to the public sector. This is a scheme which has just started: there are two projects, a council centre and a project in Leeds, which are being financed in this way. I mean, we are very interested in this and we shall be reporting on the development of this scheme. The emphasis that the PAC and the Commission have placed on this question, “why are you borrowing money at a higher rate than you can borrow it yourself?” and the work we are doing, I hope, will provide further enlightenment on that.
42. Do you think a running cumulative total of the extra costs of doing it through PFI—
I assume the extra costs would reflect higher interest rates, but the burdens of errors fall on the government—accumulative extra costs is not possible.
(Sir John Bourn) I think that it would be very difficult to do that in a way that secured general acceptance, because one of the things is that we may have paid more but we got a better service from the contractor. Well, a better service than what? Since you have not got the service you would have had if you had done it by publicly employed people, you can get into a counter-factual situation with these things.
43. There are two other elements. The PFI gets a hospital on the ground probably more quickly, and therefore it is of great benefit to the areas that get them. But there are two other processes going on, for instance council housing and academy schools. In academy schools somebody puts up £2 million and gets £20 million from government and the school buildings.
In other words, public assets are being given away as part of the process. In council housing,
I think it was your report that said it costs £435 to give away a council house; in other words the fees, the advertising, the consultancies and all the rest of it. And I think the figures from memory were £1,700 or £1,300 cheaper over ten years to refurbish a house as a council house than it is if it is refurbished by a housing association. In other words, we are giving away, because in negative equity areas they are giving away, council houses and land worth billions,
www.wordwave.co.uk 20 at the cost of spending millions to do it. Now, that seems to me to be crazy economics. Is there any calculation, cumulative or otherwise, of the cost of these processes?
(Sir John Bourn) On the hospitals, we are in fact working on a report about PFI hospitals, so we will cover that. We did one a year or so ago about PFI prisons. On council houses and schools, our colleagues in the Audit Commission have done some work, but I will get that out and look at it and discuss it with them as necessary and bring it to the Commission, so you see the work that has been done on this.
Chairman
44. One final question, I will be interested to hear your answer and Mr Dowdall’s, when he comes to answer. The Freedom of Information Act: if I were a journalist, I would regard you as a prime area for attention. Is it presenting you with any opportunities or challenges, and if so is it proving to be costly to you?
(Sir John Bourn) Well we have so far had 31 requests for information under the Freedom of Information Act. The costs of doing it—so far each of the requests we have had has taken, on average, 15 hours to process at say £60 an hour. If we assume that we might get 250 a year, we are talking about something getting on for £250,000. What is very interesting,
Chairman, are the kind of things we have been asked about.
45. Yes, fascinating. I want to know why we did not think of them.
(Sir John Bourn) Well, of course, quite a lot of them do relate to work that the Public
Accounts Committee had done, for example on hospital acquired infection we had done work and the PAC took it; we were asked for information that we had on one individual NHS trust—somebody trying to get one of the bricks in the edifice, as it were. I have also been asked for all my papers about the financial audit of the security services, which of course we have not been able to disclose.
www.wordwave.co.uk 21 We have also had requests for a number of personal cases where people have either directly, or through their Member of Parliament, written in. For example somebody feels they are not getting the right pension. We had a particular one about somebody who felt that the
Public Guardianship Office had not looked after the affairs of a relative and we had done some work and provided an answer to the correspondent. But then the correspondent at the end of it said, “Well I want to see all the NAO papers about this, and the work that they did that led them to be able to supply advice”, but doing this comes up against data protection.
But overall, Chairman, we spent a lot of time getting our records into the kind of shape to enable us to respond to these requests. So far we have not had anything which has presented to us real difficulties. Either it is quite clear that under the Act we should disclose it and we do, or it is quite clear that it relates, as with the security services, to matters which are to remain confidential.
Mr Mitchell
46. Is it likely to inhibit you? Would the possibility of a Freedom of Information application make you destroy papers or …?
(Sir John Bourn) No, that would be asking for trouble, and it would be wrong, and we are not doing it.
Chairman: Edward, then Bill.
Edward Leigh
47. I am still confused about these efficiency gains. I can understand the point in a central government department of asking people to save money. But the trouble is, you say that for every £1 you spend you actually save £8 to the public sector as a whole. So, if the
www.wordwave.co.uk 22 Treasury force you through efficiency gains to save £1 million, are you not in fact losing
£8 million over the public sector as a whole? That is what I do not quite understand.
(Sir John Bourn) Well, I think that the work we do, which after all is independent of the
Treasury, and some of the savings that we point out and suggest, will in fact go to the
Gershon totals. We will make, as we have already done, proposals for more effective procurement and proposals for the better management and use of assets. And in this way, the work of the external auditor will make its contribution to the totals that the departments are required to log up for Gershon.
Chairman: Perhaps we should put a Gershon letter to the Treasury in support of our letter in reply to the Treasury. Bill.
Mr O’Brien
48. On the question of Gershon, I am looking at the summary boxes that you referred to earlier, Sir John. And you referred to the reduction in the estimate for infrastructure and support. All the others are increases in the estimates and in the proportion of gross resources, and in paragraph 13 of your submission, the memorandum, you refer to supporting and giving additional resources to various departments. How do you reconcile that with Gershon then, if they are going to save something in Gershon?
(Sir John Bourn) Well, the work that we are doing in relation to paragraph 13, some of it certainly will contribute to the Gershon figures, but it is not being done for Gershon, because we are not part of executive government. We are doing the studies that we think are right. In a way you could say we have been the anticipators of Gershon, because the work that we have done over the years has been very largely around helping government departments to be more effective implementers of government policy. And that is essentially what Gershon is saying.
Gershon’s economies are not, as it were, to take resources away from central government -
www.wordwave.co.uk 23 they are to use them more effectively. And in that way, although I am not part of executive government, and therefore I am not part of Gershon, Gershon’s work and our work run together over large areas.
And of course we have been talking to the Office of Government Commerce, who have the responsibility for overseeing it, and a number of reports that we are currently engaged on are particularly related to Gershon subjects. We are looking at the efficiency of service delivery chains. Those will come out and they will accrue as it were, to NAO savings, but they will also, without double accounting, accrue to Gershon, so I think they are consistent.
Chairman
49. In the spirit of open government you do not even need to close your eyes. Is the
Commission ready to approve the NAO 2005/2006 estimate?
[Members assented.]
Thank you very much.
(Sir John Bourn) Thank you.
MR JOHN DOWDALL CB, Controller and Auditor General for Northern Ireland
Chairman
50. Well, gentlemen, once again, as always, we are delighted to see you but regret the circumstances that lead you to be in here. We will get straight into the questioning.
Mr O’Brien
51. The point that I wanted to raise with you was that in previous meetings, there has been considerable discussion on the challenges involved in integrating and the additional
www.wordwave.co.uk 24 function with regard to health and local government audits. Has this process now been completed, or if not what is still outstanding?
(Mr Dowdall) I think I do regard the processes as largely complete. We are now just coming up to the end of our second year of the grouping together. If you bring together three groups of auditors with slightly different traditions, there are always integration and professional issues between central government auditors such as ourselves, local government auditors with their independent tradition and health auditors.
I think the whole process has gone relatively well. I am amazed that at this early stage, at the end of the second year, that we are genuinely beginning to develop more of a single culture in the office. We have managed to move staff around between different groups which is a very good way of levelling them. And I think a key is that during that process, I think the three different units have met the objectives that were set for them, and so it was a smooth transition in work terms. I was quite anxious that our local government clients in Northern
Ireland should not sense a big difference or disruption because of these changes in the audit process. And I have had no complaints from the customers.
52. Have any savings or changes which have been beneficial to the groups been identified?
(Mr Dowdall) I think we see the potential for savings and we have secured some in the health area already, where we have managed to get a far tighter grip professionally on the amount of contracted outwork that is done. And because we are administering that centrally we are getting quite significant savings in terms of the tenders that we are getting in, so there are savings beginning to appear.
The real savings that we are anticipating on this are still to come. They are going to come as soon as government completes its ideas on how to restructure the three sectors that we
www.wordwave.co.uk 25 audit. Because at that point there will be an opportunity for us to reduce staff in some sectors, perhaps in local government, and put them onto high priority work in other areas.
Chairman
53. The government work then, in carrying out the restructuring, where is that at, do you know?
(Mr Dowdall) Yes, well I gave you rather a rosy picture of that the last time I was before the Commission. It was anticipated, when I was speaking to you last summer, that there might be a fair indication of where that was going by the autumn. That proved to be just another consultation process but I see there was a parliamentary question a few weeks ago, which made it clear the government is now planning to announce the changes next month, and
I am really hoping I can build some of the expected changes into the corporate plan we will be bringing to you after that.
54. Before I come to you, Roy, there is one minor point but it puzzles me slightly. In the background notes I read that a technical adjustment concerning the principal civil service pension scheme means that your Estimate is around £3 million higher than it was last July.
Now, interestingly, there is similar parenthesis on the NAO, but theirs is down £2 million.
Now why is it that—I am sure there is a sensible explanation, it just has not occurred to me.
(Mr Dowdall) It is a sensible explanation that defies me, I am afraid. I can explain why mine has gone up, it is obvious. We talked about this.
55. Do you mean I have got to call Sir John back?
(Mr Dowdall) I think really it would be more a question for him, because the point is counter-intuitive. The Treasury have required an increase and the only thing I can suggest, but it is just a guess, is that when we talked about this with you last summer, Sir John had a figure and I did not, because he had got an early estimate off the Treasury. And it may well
www.wordwave.co.uk 26 be that on further refinement that early estimate has come down. I have a later figure, it is an authoritative figure I am speaking of, and it puts mine up.
56. So in other words we will invite the Treasury, we have got to find out then if both of you have got their figures right. Is that right?
(Mr Dowdall) That is right.
Mr Beggs
57. Mr Chairman, good afternoon. The provision you were seeking for 2005/2006 was
8.5% higher than the estimate of the net outturn in 2004/2005. Could you please take the
Commission through the reason for this increase?
(Mr Dowdall) Yes. When I came to you last July and we talked about the corporate plan
I had just under a 4% increase there, which was about 1% in real terms, and you were reasonably comfortable with that at the time. That has now shot up to 8.5%. And I am glad of the opportunity to explain it, because it is almost entirely technical factors which do not increase public expenditure overall. The big one is the one the Chairman just referred to that the Treasury have decided that all departments, not just mine and Sir John’s, should factor in an estimate for the superannuation costs of their staff. And so where they require a department to do it they are also giving the department the public expenditure cover to deal with it. And that is, if you like, an inside government transaction. It adds to my costs, but it is not pushing up the expenditure total overall. And that accounts to almost 4% of that big jump.
The other bit is another technical adjustment, which I had no idea about at the time of the corporate plan, but one of the government departments that we rent premises off for our health auditors has decided to enact government policy, it is perfectly proper for them to do it, and hard charge us for the rent of that—to put a full rent onto us, whereas previously it had
www.wordwave.co.uk 27 only been notionally. I support that, I like to see hard charging in government, where it is appropriate. Whenever they introduce a hard charge in government they are also required to give us the money in their budget to pay for it. And so, the hard charge appears as an increase in my budget, but also the government department’s public expenditure goes down by that amount. And so again, it does not increase the total public expenditure. That accounts for the remaining half out of the 8½ percent. So, it is odd, but what I can really assure you, Mr
Beggs, is that when we discussed my workload in the corporate plan last summer, and I really needed 1% in real terms off you to fund that, I have not changed my plans on that real workload at all, it is exactly the same, and that is basically what the increase in public expenditure is funding.
58. Is the University Street headquarters building not sufficiently large to accommodate staff on one site, after the recent intake of audit functions for health and local government?
(Mr Dowdall) No, it was not. Originally our staff was spread over four sites, the bulk of us, as we had always been, in what you will know is a new modern building in University
Street; the health audit in Londonderry House in Chichester Street; the local government audit scattered around a bit, mainly focussed in the City Hall. We have rationalised that and we have now got it down to three sites.
I think it is fair to say we are now having to rethink our location strategy. We are likely to be turfed out of the City Hall because they are refurbishing it and have other plans for the staff. And that means, whereas I have said in my corporate plan that over a three-year period
I might have to address our accommodation needs, I think now it is becoming rather more urgent. I am going to try and bring forward some proposals in the corporate plan in the summer, which will be costed to show the Commission how we propose to deal with the location of staff.
www.wordwave.co.uk 28 Chairman
58. Is it affecting efficiency in any way?
(Mr Dowdall) I think at the margins it is, because although we have good modern premises in University Street, and the Chichester Street premises are okay, the City Hall premises, I do not know if you have been in them, they are really like a sweat shop. We have a large block of local government staff working in what are not very productive conditions.
We will be happy to get them out, and we now want to do it urgently, rather than leaving it for a couple of years.
59. Is the fact of separation an efficiency factor or is it just the nature of the two different properties?
(Mr Dowdall) It always is. I could tolerate separation, because local government really does have a different remit; it works out and about around all the small local authorities in the province. Health audit covered different clientele, again scattered around the province, and we tend to deal more with central government in the centre. We could tolerate it, but in terms of building up that unified culture that I was talking to Mr O’Brien about originally, the ideal for us would be to bring everybody in to what is a good building in University Street, where we can do our training more centrally, where we can develop more of a single corporate ethos. And so there would be big synergies if we could do that, I think, and that is one of the things we will be focussing on.
Mr Beggs
60. So, are we likely to get the bill some time in the future for a larger building with more functions than your present headquarters?
(Mr Dowdall) No, I do not want to do that, because you will appreciate with a review of the government in the pipeline, if that produces the reduction in the number of public bodies
www.wordwave.co.uk 29 that I would like to see and perhaps you would like to see too, we really should be thinking about capping, and even bringing down our numbers in the more distant future. So, I think the solution to this has got to be finding a way to get the best out of the modern premises we have got in University Street and trying to create more capacity there.
Chairman
61. Is Gershon applicable in Northern Ireland, and if so is it identical in what its objectives are?
(Mr Dowdall) Yes. It might not have been, because I do not think it has been read across identically into Scotland, and I do not think it has been read across identically into Wales, but it has been in Northern Ireland. Because we are under direct rule with Whitehall ministers they wanted to see it implemented. And so they have, in the spending review that was out just before Christmas, set precisely the same targets for Northern Ireland departments, as for the equivalents in Whitehall.
62. Could I put the same question to you I put to Sir John? What if they said to you,
“Well we want Gershon type economies within NIAO”? Now, NAO has, and we referred to it, the defensive armour of its savings, but that is not the sort of situation in your own department. Would you regard yourself as more susceptible to a Gershon approach, perhaps, than Sir John’s department?
(Mr Dowdall) Not really, and I think you can see it in some ways in the kind of response you get from our Treasury. Generally we work very closely with them, they are appreciative of the contribution we make, and they are certainly not unconstructive in their approach to my budget requirements. But part of the answer to that is that they understand very well the kind of workload increases that I am coping with and that Sir John is coping with in Whitehall.
You know the pattern generally. I am following the kind of developments that he has to deal
www.wordwave.co.uk 30 with: whole of government accounts; earlier closure; working with the government in assisting government reform, reforms like Gershon, wherever we can constructively do it.
And those kinds of workload increases, where they are set out in my corporate plan, more than cover the kind of Gershon savings that are being requested of departments. So, I am quite confident that my Treasury colleagues in Northern Ireland recognise that I am doing my
2½%, 5%, 7½% efficiency savings across the spending review period. Just as Northern
Ireland departments are expected to do. And I think that probably explains the difference.
63. I know we have asked you on previous occasions, and we understand that you do not have Ministry of Defence and so on, how practicable would it be, or is it, to get a meaningful comparison with the eightfold savings that NAO is able to make on the mainland?
(Mr Dowdall) I actually think the meaningful comparison is the one which is in the corporate plan. I mean, we do give a lot of attention to impacts. And doing that with our audit field of £9 billion as against the £650 billion of expenditure and income that you mentioned earlier, we get a three times return and we are committed to pushing that upwards.
We have help from the NAO in understanding how they do it; we have the audit report on the
NAO’s savings, so that we can see in detail how it is done. And we really are working hard to try and read that across into our smaller environment. And I am confident, Chairman, that we can keep that on a rising trend, but I am equally certain, not only that I cannot move quickly toward eight times, where Sir John is, but I will never be able to get towards eight times. If
I could be at four times within the next corporate plan period I would be really quite happy with that, pleased with that.
64. Is there any meaningful statistical way in which one could draw up a comparative objective? Has your own external auditor any suggestions as to how we could establish what would be an appropriate level to expect?
www.wordwave.co.uk 31 (Mr Dowdall) I doubt if our external auditor could really, because they are a relatively small private sector auditor and they would never have had to encounter this kind of problem.
You remember with the NAO’s auditors, they actually said no other auditor anywhere in the world, as far as they knew, was trying to do what Sir John was doing, and quantifying it in the way he way. So we are now trying to quantify it in the way that he does it and that comes up with a figure of about three times.
65. This is a random question, is there no way then that perhaps the people that did the study in relation to NAO then for 2003 would be able to give worthwhile advice in relation to your own operation?
(Mr Dowdall) Well I think they could, but of course we do get worthwhile advice from the NAO themselves. We always discuss every year where their impacts are coming from and how we might be able to tune our programme to catch the kind of impacts that they are doing, as well as looking locally at our picture.
Chairman: Austin.
Mr Mitchell
66. Yes, they mentioned the amount of PFI work. In Northern Ireland, where it is presumably a late starter, is it too soon to draw any value for money conclusions about the way you audit those contracts?
(Mr Dowdall) No, I do not think it is too soon, Mr Mitchell, because we have been looking at this very closely as it has begun to take off. So far Sir John has produced dozens of reports on PFI value for money. I have only produced 3 over the last 18 months or so, and what I did was I went back to look at some of the small number of early PFI projects in
Northern Ireland in the 1990s. The first of them on a large education IT project. It actually
www.wordwave.co.uk 32 looked as though it had been reasonably successful. And that would have been done in the late 1990s so they had some experience of reading across from Whitehall.
The second one was in the health sector, which was some small health projects, and that was a very mixed bag, one of them very bad, because they missed out on the basic lesson of trying to tie into some—well, if there were any windfall profits, to make sure we get some clawback. There were enormous windfall profits and they forgot—they had omitted to do that. The other two smallish ones were quite good, so, a mixed bag.
The last one, on education projects, where PFI has been most widely used, and there we thought the kind of projects that were coming through as PFI in education were actually quite good, and we compared them with schools PFI projects in GB at local authority level, comparing them with work the Audit Commission had done. Indeed we even used the same building consultants that the audit commission had used to come and advise us on the quality of the projects. Interestingly, they thought the quality of the projects in Northern Ireland was pretty good that were coming forward in PFI.
So, some early quite, quite good indications, but the key thing now is that this is taking off on a much larger scale and it is very easy for us to see where it goes from here. Our role, as we have set out in detail in the corporate plan, is to try and get a grip on this early enough, in a constructive way, so that we are feeding in to the project managers the lessons that have been learnt through NAO’s work and PAC hearings over the last decade or so. We are not sitting back as auditors, with our arms folded, waiting for them to land flat on their faces and then doing a report on it. We want to make sure that the lessons, which are well known over here, are being fully applied.
In doing that, I have set up a team, I have sent them over to NAO for training, I have got somebody seconded to NAO at the moment. I have had NAO over to do a seminar with us, to all of the PFI project managers in Northern Ireland, telling them of the best practice, which
www.wordwave.co.uk 33 NAO has distilled out, particularly in relationship management. We want to try and maintain that stance of constructive help, but also reporting early on the projects as they come to a reasonable stage of completion, so that we are actually checking and giving a public account of how we see them being delivered.
67. So it would be true to say would it, therefore, that looking at Sir John’s reports and learning from experience on the mainland, your experience of PFI contracts in Northern
Ireland is actually better?
(Mr Dowdall) It should be.
68. Do you think it is?
(Mr Dowdall) Well, the projects that I had looked at in the reports I indicated to you all went back into the 1990s when everybody was learning. The big bulge in projects is now just starting in Northern Ireland, and there is about £1.8 billion of projects in the pipeline started over the last 12 months or so and to be delivered over the next 2 or 3 years. It is too early to judge those. All we can do at this stage is make sure the advice is clearly trailed in front of them.
69. That increase in proposals that is now going on, how far does the plan of inhibition, which you mentioned earlier, on education quarters and the Health Service against applying— going through the procedure for public financing the cost, it is indicated to the members to be far better and quicker if they went for a PFI. How far is that operative in Northern Ireland?
(Mr Dowdall) Yes and no, in the sense that yes, in the very early period when these projects were mainly being done in the health sector and the education sector, and I was not the auditor, it looks as though most of them were off balance sheets. With this new set of projects they are coming in in the wake of all of the work Sir John has been doing, that he has just been talking to you about, to get a grip on this and to get the Treasury to get a grip on it.
We have certainly got a grip on it, because I am now, of course, the auditor for the health
www.wordwave.co.uk 34 sector, following Sharman, and I am the auditor for the education sector as well. And I have just checked back on the seven or eight projects that we had given balance sheet guidance on over the last six months or so, in PPFI, and we had given guidance that six out of that group of seven or eight should be on balance sheet. And as far as I know departments will accept that. So, I think we have actually got that problem cracked.
It is always likely to slip away from you, because unless departments are doing their bit and bringing these projects to us for balance sheet advice at an early stage they can sometimes get very far down the line. But at the moment the systems seems to be working properly, most of the projects now coming forward in Northern Ireland seem to be more on balance sheet than off balance sheet, and that would be in line with the way Sir John would treat them in GB.
70. And you establish whether they are accounted for in the private sector balance sheet?
(Mr Dowdall) Yes, that is right, we would want to see they are on somebody’s balance sheet.
Mr O’Brien
71. The question of the Freedom of Information Act, how will it work with the NIAO?
(Mr Dowdall) Yes. Well, it will work exactly with us as with the NAO in Westminster, except for one anomaly, which I do not want to put a lot of weight on, but legislation is never perfect, you all know that, and somehow or other, the legislators for this Bill forgot to include,
I think, both the Audit Commission in GB and my local authority auditors in Northern
Ireland, so they are apparently not covered by the Act as it stands. The rest of us are. And so my office is gearing up for FOI on all of our central government work and all of our health work, and we are pressing of course for the omission in the legislation to be rectified as soon as possible. I think it will be.
www.wordwave.co.uk 35 It is going to be demanding for us because, as auditors, we like to set an example in compliance for things like Freedom of Information; we have got a commitment to transparency as auditors for parliament. And if anybody asked us for information, even before Freedom of Information, we would have had an instinct to give it. But also, it is demanding because we hold an awful lot of information drawn in from the whole of the public sector, in a not very systematic way, because we draw on samples actually in audit work, and we are going to have to get a much better management information system into the office if we are to meet the real demands of freedom of information.
So far we have been lucky. We got off to a very slow start in Northern Ireland. In the first month, January, I had a few discussions with outside interests about Freedom of
Information, but they were not really hard inquiries. Many people will accept that if they are coming to us for information it might be better to go to the department that holds the originals and, if it was not a firm enquiry, we were trying to steer them in that direction. It is only in the last few weeks that we have had, I think, two or three queries come in. And that suggests to me it might now build up a bit, but we are not at quite the volume that Sir John— proportionately in the volume Sir John is in in Whitehall. I hope this will settle down at two or three dozen queries for us per year. We will have to handle them professionally, we will have to handle them promptly within the period, and we will need better management of information even to do that. But I do not think there is going to be quite the interest in
Northern Ireland in accessing our work as Sir John is likely to have at Whitehall.
72. So what you are saying then is even when the Act is more acknowledged, people are more aware of it, and that there will be perhaps greater demand, but you do not think it will be exceptional in Northern Ireland?
(Mr Dowdall) I do not really see why it should be. I also think there is a good understanding in Northern Ireland that that it is better to go to the originators of the
www.wordwave.co.uk 36 information that they want and that is not usually the auditor. What we may find happening is if departments are not giving enquirers open and satisfactory answers, if they are not working the Act properly, that will bounce back onto us because we will operate the Act properly; we will have a strong commitment in favour of openness.
73. I am sure you will report on this in the summer—the progress.
(Mr Dowdall) We will.
Chairman
74. The Treasury lays emphasis on timeliness in government financial reporting, how far are you satisfying that?
(Mr Dowdall) Yes. We have a slightly different schedule for our report in Northern
Ireland, but actually our last set of resource accounts from Northern Ireland departments were timely, they came to us by the scheduled date, we had them reported to parliament by the end of October, which is the statutory date for every account. And so we have reached the stage in that process where every account has met the statutory deadline. We have also been monitoring of course the quality of those accounts, as well as timeliness, and I am pleased to say that for the set of accounts we have just finished there has been another improvement in the quality. The qualifications have come down from that, very high, 10 out of 17 resource accounts qualified to 7 in year 2 and only 4 in this latest set of accounts. And I say only four because when I look at them, Chairman, I can see two of the qualifications in them are related to the complications arising from the new treatment of pensions in government, and those are going to be really very easy to remove next year. So, I think we are getting down to what
I would say is very similar to the position prior to resource accounts, in terms of the qualification of government accounts.
www.wordwave.co.uk 37 75. The final question from me: I asked Sir John about progress on the mainland in implementation of Sharman, do you have any outstanding areas now?
(Mr Dowdall) No, not really, Chairman. We have benefited enormously from Sharman.
As you know it was all implemented very promptly in Northern Ireland, including bringing in all of the NDPBs to our audit remit as well. So we have got all of those audits. I too share the problem Sir John has that I could not audit some of the company entities that have been set up in Northern Ireland. But it seems to me that it is right for that to be dealt with in the way you are proposing at national level and then, as with Sharman, our situation will just follow on from that.
76. That is very good, thank you. No other questions? Well thank you very much.
Before we finish now, we do not have to approve your estimates but we do have to note them.
Does the committee agree to note NIAO’s 2005/2006 estimate? Great, thank you. Thank you very much, good to see you both again.
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