Transcript created by WordWave
Event: Public Accounts Commission Meeting
Date: 18 October 2005
Commission: Rt Hon Alan Williams MP - Chairman Mr Edward Leigh MP - Member Mr John McFall MP - Member Mr Austin Mitchell MP - Member
Witnesses: Sir John Bourn KCB Comptroller and Auditor General
Mr Michael Whitehouse Assistant Auditor General - National Audit Office
Mr Phil Woodward Director of Finance - National Audit Office
Mr Richard Duck Partner, Haines Watts
Mr John Dowdall CB Comptroller and Auditor General for Northern Ireland
Deputy Comptroller and Mr Ciaran Moore Auditor General for Northern Ireland
Mr Robert Hutcheson Director - Northern Ireland Audit Office
[Mr Richard Bacon MP attended as an observer].
020 7404 1400 [email protected] www.wordwave.co.uk Smith Bernal WordWave, 190 Fleet Street, London EC4A 2AG CHAIRMAN: May I remind witnesses that, they’re covered at this meeting only by
qualified privilege? And, secondly, may I apologise for the small
membership here today? This, again, isn’t our fault. Neither set of
whips have yet put three replacements on the order paper and so we
have a bare quorum, and Mr McFall has to leave for another meeting
fairly quickly. So, my apologies for that. Welcome to Richard Bacon,
who does know he’s coming on to the Commission and, is as you
know, a very enthusiastic member of the Public Accounts Committee.
Such is his enthusiasm that, although he doesn’t have to be here
today he’s come here to watch you wipe the floor with us.
So, welcome to you all. And may we start on the obvious question
about the additional 6% increase in your resources? Year 1 - 6%,
Year 2 - 6%, Year 3 - 6%. It’s getting a bit repetitive and it looks a bit
coincidental rather than precisely thought through. Why is it that
you’re consistently putting forward the 6%, and what is the prospect
of it varying in the future, hopefully downwards?
SIR JOHN BOURN: Well, thank you, Chairman. As far as the 6% is concerned, for the
first two years they were in the plan that the Commission considered
last year, so it repeats the figures that you had before you then and
which you agreed. As far as the third year is concerned, we don’t yet
have the figures for government expenditure in that year. We usually
do, but on this occasion the government have not announced their
expenditure figure for the year 2008/2009, so it’s been necessary to
put a figure in our corporate plan which, as we say in the plan, is
subject to review when government plans become available.
So, in going for 6%, when we do have the government’s figures, we
shall be able to look again at that third year. And, certainly, by the www.wordwave.co.uk 2 time that we come to you next year, we will have been able to
analyse and see whether 6% is justified. Of course, Chairman, as the
Commission know, all these figures are subject to review when they
become the Estimates. And therefore the Commission’s view on the
figures is subject to their re-examination year by year for the
Estimate.
CHAIRMAN: And, of course, some concern to the Commission is that all the
successive years of a similar uplift mean that there will have been an
increase of nearly a third over that period, which is quite a significant
increase, isn’t it?
JOHN BOURN: Well, it is, Chairman. But, of course, in the years where we have
direct evidence, it is essentially in line with the increases in
government expenditure, which, over the first two years in the plan,
come to 11.8%. As for the really significant expenditure programmes,
like the health service and education, in each year health service
expenditure goes up 10% and in each year education expenditure
goes up 7%.
CHAIRMAN: We’ll explore in a moment the coincidence of public expenditure and
your costs because I must admit I’m a bit puzzled by it. Now you’ve
put forward in your proposition the 2.5% efficiency gain, but that only
covers a limited part of your budget, doesn’t it? So, in effect, that
efficiency gain will only apply to one-fifth of your budget. Over the
budget as a whole, therefore, it becomes smaller than 2.5%.
www.wordwave.co.uk 3 JOHN BOURN: In fact, Chairman, the savings, which are implicit in the plan, are more
than the 2.5% for corporate services. There are savings on the
financial audit, which are referred to in paragraph 3.56 and there are
savings on value for money audit, which are in paragraph 4.62.
Together they total another 2%. So, it is 2.5% on corporate services
and 2% on the rest of our work, that is financial audit and value for
money work. So, that is a larger sum simply than corporate services.
And, of course, in terms of the savings that come from the work, they
are eight times the cost of running the office. And therefore that is a
real savings figure which is achieved as a consequence of our work.
CHAIRMAN: You see, there’s a bit of quandary for us because in the last few years
the proposition has been that it’s the change in complexity of delivery,
risk factors and so on, resulting from changes taking place within the
accounting procedures. And now suddenly we still have the same
figure but for a completely different reason. And that’s where I’m a bit
nervous about it. And I really don’t see the necessary correlation
between increase in expenditure and increase in your financial
requirements. I mean, it doesn’t matter how big the expenditure is;
it’s a matter of whether it’s straightforward or simple accounting, isn’t
it?
JOHN BOURN: Well, as we say in the plan, Chairman, there isn’t a direct correlation
between the expenditure of the government as a whole and audit
expenditure. It is not an exact correlation. But there are a number of
developments which are taking place which are new and which have
come to the fore since the last plan came before the Commission.
www.wordwave.co.uk 4 For example, the government have now accepted the Commission’s
proposal that the Comptroller and Auditor General should be the
auditor of non-departmental public bodies which are plcs. So, the
government’s acceptance of the Commission’s proposal will bring in
another 50 accounts which we have to audit.
CHAIRMAN: How is that proportionately? That many accounts added to how
many accounts?
JOHN BOURN: That’s added to 500 accounts. So, another 10% more accounts.
There is also faster closing of accounts. The Treasury now want all
the resource accounts to be completed by departments and audited
by us before the House rises for the summer. That means that in the
summer of 2006 there’ll be 55 resource accounts which have to be
completed and audited by the summer break.
CHAIRMAN: Is there any logic in that requirement? Is it just a matter of
convenience to Treasury or is there some pressing requirement there,
causing this extra pressure on time – and also on cost?
JOHN BOURN: Well, it certainly does have a cost, Chairman, because in this financial
year only 25 departments have managed to get the accounts ready
so that we could audit them before the House rose. The reason for
the --
CHAIRMAN: Before you leave that. If that many are outstanding how long do you
have for them? I mean if you have to clear them by the beginning of
the summer recess, by when do you need them from a department, www.wordwave.co.uk 5 and are the departments under pressure to deliver by the required
date?
JOHN BOURN: Well, the departments certainly are under pressure. Of course, we’re
working with the department during the preparation of the accounts.
It isn’t, as it were, that we stand back until a finished set of accounts
come. Of course, we are engaged in the discussion with the
department for a considerable time before the accounts are
completed. But you asked for the reason why the Treasury want to
do it. They want to do it because it’s thought to be both in the private
sector and the public sector an example of good governance to
complete the accounts as soon as possible after the end of the
financial year and get them audited as soon as possible.
CHAIRMAN: Why?
JOHN BOURN: Well, in the private sector, so that the users of the accounts should
have the earliest possible information about how the last financial
year has turned out. And the Treasury believe that it’s valuable for all
those who are interested in government departments that they should
have that information early rather than wait until the turn of the
calendar year.
CHAIRMAN: With Public Accounts Committee hats on, when I see in the
Treasury’s view or in a department’s view that such and such is the
outcome, that usually means that’s in their view but not in your view.
Is there a coincidence of thought on this or do you differ on the
requirement? www.wordwave.co.uk 6
JOHN BOURN: Well, I don’t differ, Chairman, because I accept the general logic of
the idea of producing audited accounts sooner rather than later. I do
recognise, of course, that if that is required there is a cost to it. And
that is one, but it is only one, of the features that lie behind the case
we put before you. I mentioned more accounts, I mentioned faster
closing; there are other aspects as well. What we are seeing is the
continual development of services which are provided in complicated
ways. For example, there’s a government programme for the
reduction in child obesity. There are around 20 funding streams
which lead into that programme and it’s transmitted through four tiers
of government. So actually getting a feel for what it is and where the
accountability lies, is quite a complex process. Another example is
Sure Start, which is a subject members of the PAC asked us to look
at, and which we are starting to look at. The Sure Start programme is
a programme for providing services to disadvantaged families with
children. There are currently several hundred separate organisations
engaged in carrying forward the project. Two other things I would
mention to you: one is the work on the Gershon Efficiency
programme, on which we are producing a report for the PAC at the
turn of the year. To what extent is the claim that up to £21.5 billion
will be released justifiable? To what extent is the claim to move
80,000 people out of the, as it were, back office services into frontline
service coming to fruition? To what extent are 20,000 people moving
out of London and the South East?
And, of course, only last week Sir Gus O’Donnell announced a series
of capability reviews, which is to look at the capability – and, of
course, this has been discussed with you, Chairman – the capability www.wordwave.co.uk 7 of departments to achieve government programmes. Have they got
the right people? Have they got the right training? Sir Gus O’Donnell
spoke to me after he announced this programme when he was giving
evidence to the Public Administration Committee of the House, and
said that he would appreciate the assistance of the National Audit
Office in taking it forward, and I said we would be prepared to help –
on condition, of course, that I was able to report publicly to Parliament
on the programme. So, all these, Chairman, are developments which
essentially come after the Commission’s discussion last year, and lie
behind the case for the 6% in the next two years and the 6% on a
provisional basis for the third.
CHAIRMAN: Did the Treasury initiative come before you’d drawn up your corporate
plan or after you’d drawn it up?
JOHN BOURN: After.
CHAIRMAN: So, that’s something you have had to accommodate.
JOHN BOURN: Indeed.
CHAIRMAN: But how then will you be able to do that within the figures you’ve put
forward? I mean it sounds as if it would be quite a formidable amount
of work.
JOHN BOURN: Well, it will be. But, it will be the challenge to us within the context of
the plan to do that work through a further efficiency rather than to ask
you for more money. www.wordwave.co.uk 8
CHAIRMAN: Can I put the thought to you, that that worries me more than if you
had said you can’t absorb it? I worry that you can because we were
about to approve a corporate plan on one set of work, on the grounds
that that was the amount required, and we’re now being told there’s a
bigger volume of work but the same amount of money will enable you
to accommodate it. So, does this suggest that there’s a certain
slackness in your own financial control?
JOHN BOURN: No, it doesn’t suggest that, Chairman, although I recognise why you
put the question to me. What it does mean - and this is part of the
continuing challenge in the public service - is to increase the
efficiency and effectiveness year by year, even going beyond what
you’ve said you’ve done, and would do. But the programme for
capability reviews will not all be done in the first two years. It will be
one of the subjects which would come in the third year, for which
there is, as I said before, a provisional figure.
JOHN MCFALL: To take Mr Williams’s point further, Sir John, when departments close
off their accounts and you’re asked to give them to the Treasury by
the end of July, is there a set period of time that you require the
departments to give you? Have you negotiated a set period of time
with the Treasury, and do you say, “Look, if somebody gives it to us
with two or three weeks notice we can’t do anything about it”?
JOHN BOURN: Well, if it were not for the possibility of discussing the account during
the preparatory period, that’s just what we would do. If we just sat
back and waited for the accounts to come we would have to qualify www.wordwave.co.uk 9 large numbers of them. We are working with departments but we
certainly need to get them more than a fortnight before I have to
certify them. If you have good work with the department for three or
four months before the accounts are in the final form, you can get
them audited by the end of July. If you haven’t had that time or if the
accounts are very complicated, we would still have to qualify a
number. It becomes more difficult.
JOHN MCFALL: Does that involve you putting in additional resources during that
month of July? More money?
JOHN BOURN: Well, it does, yes.
JOHN MCFALL: Could you give us an idea, maybe a ballpark figure, as to what that
would cost you? If you can’t give us it just now maybe write to us.
JOHN BOURN: We cater for that within the ability to contract in work from the private
sector. I don’t know if we’ve got a figure on what we have to --
JOHN MCFALL: No problem with that. Now, Sir John, the memorandum that the
Treasury sent to us in February criticised some of the costs of the
NAO’s work and you indicated at the meeting that you would take up
these criticisms with the Treasury. Can you bring us up to date on
the discussions you’ve had with the Treasury on that?
JOHN BOURN: Yes, Mr McFall, we did discuss it with the Treasury, and I think that
we reached a common mind on the way forward. The Treasury, as
they say in their latest letter, appreciate the value and quality of our www.wordwave.co.uk 10 work. There are some points that they make in their letter to you,
some of which the Chairman has raised with me and that I have dealt
with. But the Treasury certainly do appreciate the work of the
National Audit Office because, as well as the value for money studies
and the audit of the accounts, we are asked by the Treasury to do a
number of special pieces of work. I’ve referred to some of these in
the past, like the work they asked us to do on pensions, on the cost of
seeking out asylum seekers who should be removed, and, of course,
the most recent one from the Treasury was to look at this question of
when the economic cycle started, and the Chancellor’s acceptance of
the Office of National Statistics recommendation that the economic
cycle started in 1997 and not 1999. And we’ve been asked to say
was that right? Was it fair for the Treasury to accept that advice?
So, that’s the Treasury coming to us and asking us to do a piece of
work. I shall publish the results of course but it argues, I think, a
degree of trust in our work that they come to us and ask us to do it.
JOHN MCFALL: The Treasury presented the Treasury Committee with that paper in
July. Did you have an input into that paper in any way?1
JOHN BOURN: The paper is not one that we had -- I’m not one of the authors of it.
I’m examining it, yes.
JOHN MCFALL: Okay. When will your views be known?
JOHN BOURN: By the end of the year.
JOHN MCFALL: December 2005? www.wordwave.co.uk 11
JOHN BOURN: Yes.
JOHN MCFALL: Okay. What about the Treasury’s views on your 2005 corporate
plan? Have you had discussions with them on that?
JOHN BOURN: Our 2005 corporate plan is, of course, the document that you have
before you. And the views of the Treasury are that they agree that
this plan will be producing valuable results of the kind that I’ve
touched on. They do raise the point about our efficiency savings. In
the letter that they sent you they made the reference only to the 2.5%
corporate service savings, whereas I’ve said to the Chairman there
are other savings which come from other activities. And, as I said,
pre-eminently there is the saving of eight times the cost of the Office.
They also made the point that: hasn’t the preparatory work for the
changes in financial audit been done? And, again, as I said to the
Chairman, not all of it has been done because some of the changes
are still in prospect and so we have to provide for them. And the
Treasury also mentioned, for example, that surely, as far as the
combined Revenue and Customs is concerned, now the department
is one, surely the work is over. But of course it isn’t over. There is
more work to be done because, as our reports most recently showed,
as far as HM Revenue and Customs is concerned, there are
thousands of taxpayers who have paid the wrong PAYE. Some not
enough, some too much. There’s also the continuing difficulties
about tax credits, where 1.9 million families have been paid the wrong
amount.
www.wordwave.co.uk 12 So, there are continuing pieces of work that we have to attend to and
they tend to be, as I was saying to the Chairman, complicated pieces
of work, given the nature of the complex way in which public services
are now increasingly provided.
JOHN MCFALL: Yes. Well, that’s a very valid comparison. The Treasury Sub-
Committee had David Varney before it just a couple of weeks ago on
this issue, and he more or less indicated to us that overpayment was
an institutional element of the system. Are you going to be looking at
that issue generally and the point I made in particular.
JOHN BOURN: Well, we certainly are because the difficulty about it being an
institutional feature is it often means that families get money and then
they’re asked to pay it back. And, of course, they’re often people – by
the nature of the scheme - who find it difficult to do that and they’re at
a lot of disadvantage. So, I don’t really think that you can, with a
public service, accept a sort of concept of institutional error because
of the impact on citizens, and I hope that the work that we are doing
with HM Revenue and Customs will find a way round that.
AUSTIN MITCHELL: Just a supplementary on that. I’m pleased to hear you say the
Treasury recognises the value of the National Audit Office. It would
be insane if they didn’t. But did you find out in these discussions why
it was such a snotty letter? I mean, are they just less good at
expressing themselves or is there an element of jealousy about your
effectiveness? It was a snotty letter.
www.wordwave.co.uk 13 JOHN BOURN: Well, I think that what lay behind it was the fact that the letter had to
be put together by the Treasury very quickly and the officer who put it
together did not have the time to consult more widely with his
colleagues or to talk to the Permanent Secretary.
CHAIRMAN: More widely or more wisely?
JOHN BOURN: Possibly both, Chairman. So, I think that the origin of the particular
tone taken lay in the fact of somebody having to compile a letter very
quickly without the ability to talk to people, as I say, more widely, and
as the Chairman says, more wisely, in the Treasury, who understood
the range of our work, because it was written by an official --
CHAIRMAN: What sort of level would someone writing that be?
MR WHITEHOUSE Grade 7 or Grade 5. Grade 7, probably.
CHAIRMAN: Clearly, someone with little understanding of the role of the National
Audit Office and the Public Accounts Committee, I suppose – our
thought at the time.
JOHN BOURN: I think that’s right. And, of course, we have talked more widely in the
Treasury and with Sir Gus O’Donnell about it, before he left the
Treasury, of course, and other senior people.
CHAIRMAN: Thank you. I just want to ask you on the Value For Money work.
That inevitably has had to increase because we asked you to
increase the workload on value for money from 50 to 60 reports, on www.wordwave.co.uk 14 the basis that if you were getting 8 times the benefit that it was
costing, we were in on a bargain and the more of them we got done
the better. But how have the costs varied? We used to quote a
figure of about £180,000, if I remember correctly, as being the
average cost of a Value For Money report. But what is it in current
day terms? Is there a figure available? Otherwise drop us a note.
JOHN BOURN: Well, I will send you a note about this. As you rightly say, the
average, of course, gives figures very much on the side of the
arithmetic mean. And as you rightly say, Chairman, some of the
studies that the Committee of Public Accounts have asked us to do –
I mentioned Sure Start, the study about the West Coast main line,
and overstretch and retention in the Armed Forces – are quite
expensive ones to do. But I will send you a note about it.
CHAIRMAN: Okay, that would be helpful.
AUSTIN MITCHELL: Why is there a fall in the activity on support for Parliament,
international work, etc? I mean, I would have thought the demand for
work from select committees and Members is a fairly constant factor.
So, has there been a big fall in international work or are you exporting
jobs to Bangalore and having the work done there or what?
JOHN BOURN: No, the reason for that drop, as shown in table 4, is that in Wales now
there is an entirely independent Wales Audit Office, so the work for
the National Assembly for Wales --
AUSTIN MITCHELL: Is that international work? www.wordwave.co.uk 15
JOHN BOURN: -- has dropped out. In fact, we are doing more work for Parliament.
And over the period, as table 12 on page 43 shows, the total money
spent in support of Parliament rises during the year. And we have
always accepted requests from all committees, either for
secondments of staff to reinforce their own staff or to do pieces of
work. So, we did a report for the Public Administration Committee on
choice in public services. We did one for the Environmental Audit
Committee on sustainable procurement. So, we are certainly doing
more for Parliament and plan to do more still.
AUSTIN MITCHELL: Are you doing less international work, though?
JOHN BOURN: No. Our international work continues to produce an income of about
£3.5 million a year.
AUSTIN MITCHELL: I’d like to move on to another area. You do international
organisations and it’s quite possible that they’re beset by problems or
corruption or mismanagement or whatever, and whenever that
happens in a PLC, for the auditor and they shoot him, if possible. Are
you in any danger from retribution of any nature from the international
work you’re doing?
JOHN BOURN: That is a very good point, if I may say so. In fact, before we tender
for or take on a piece of international work we do evaluate that risk.
And so far as all United Nations agencies are concerned, the way in
which their legal position is protected – is that their staff have
exemption from all issues of civil liability and that exemption is carried www.wordwave.co.uk 16 over to the auditor. So, I can’t be sued for civil misdemeanours for
audit work. So, we do have that protection, essentially the same as
the protection that I have through Parliamentary privilege here.
AUSTIN MITCHELL: So, you’re not evaluating the risk in advance; you’re evaluating the
protection in advance?
JOHN BOURN: Well, it comes to that, yes. I need to see that I’ve got protection, yes.
AUSTIN MITCHELL: Just another one on that. In terms of government-owned companies
or public companies, not PLCs, in this country, the forthcoming
Companies Bill seems to propose some drastic penalties for auditors,
including imprisonment for, I forget what it is, wilful distortion. At any
rate, it’s something wilful. Now, I don’t associate you with wilful
distortion but is there going to be a danger from the enhanced
penalties on auditors, exactable from auditors, in that forthcoming
legislation?
JOHN BOURN: Well, if the legislation goes forward in the way that you say, there
would be greater risk for private sector auditors. But, of course, I
have the protection through Parliamentary privilege for the work that I
do in the United Kingdom and the protection of the United Nations
arrangements that I have for other work.
But the idea in the private sector, as you say, is to introduce an
offence. It’s not yet finally decided, but, in fact, it’s a kind of trade-off
that is being talked about. In exchange for a reduction in the auditor’s
liability – so, they couldn’t be sued for as much – they would have to
accept the possibility of a criminal penalty rather than a civil case. As www.wordwave.co.uk 17 you can imagine, there’s a good deal of heat in the profession as to
whether this bargain with the devil, as we might say, would be worth
it. So, it is a live issue but it doesn’t impact on our work for the British
Parliament or the United Nations.
AUSTIN MITCHELL: Good, I’m glad to hear that. I’d keep quiet about the exemptions you
have, otherwise the big four will be lobbying for the same. And, given
their relationship with the DTI, they’ll get them.
CHAIRMAN: The figure in the corporate plan shows a reallocation between
frontline and corporate services. Whereas the ratio was 66%
frontline, it now moves up to 75%, while the corporate falls from 34%
to 25%. How far is this real and how far is it cosmetic and what’s the
rationale behind it?
JOHN BOURN: Well, Chairman, it is real. And it does come through the working out
year by year of the 2.5% reduction and expenditure on corporate
services. And it is therefore a reality. It represents a challenge to us
to do it but it is a challenge that we are determined to surmount
because we, just like all public authorities, have to make our
contribution to more expenditure upfront and less expenditure in the
backroom, as you might say, so we will do it.
CHAIRMAN: And we can be sure it’s going to be a meaningful change, not just
cosmetic, is it?
JOHN BOURN: Absolutely.
www.wordwave.co.uk 18 CHAIRMAN: That’s very good. That’s helpful.
On figure 14, we’re given a breakdown of the forecast requirement for
corporate services. Now, this envisages reductions. How far is that
realistic in the face of cost pressures, particularly in such things as IT
expenditure?
JOHN BOURN: Well, the expenditure on IT is increasing throughout that period. But
the IT, of course, builds upon the IT we already have. IT is, of
course, a very competitive market. For the kind of IT we’ve got, it
isn’t state of the art IT. I’ve always been keen that I should use IT
hardware and software which had been used by the accounting
profession. So, I don’t buy it until the bugs are taken out of it.
So, the IT that we’re buying is realistic; it does work and it will make
an important contribution to the achievement of those figures. I think
also, of course, we are improving our procurement of goods and
services. We have a professional team. If you really try year by year,
you can buy goods and services at the required quality for better
prices and we accept the challenge to do that.
CHAIRMAN: Thank you. We now want to move quickly to the Haines
Watts value for money report.
EDWARD LEIGH: Could I ask a question? Just there’s more and more interest in
efficiency savings and you’re doing this report for the PAC. Give us a
flavour of how important this work is to you. You’re talking about
Gershon and the fact that he’s promised £21 billion. Give us a flavour
of what you’re finding so far and how much work you’re doing in the
www.wordwave.co.uk 19 Office. This is the topic of the month inside government circles and it
would be helpful if you could comment.
JOHN BOURN: What we are finding so far is that the claims made to date have been
largely around procurement savings and they seem generally well
founded – buying goods and services more cheaply. I think the real
challenge comes with the savings for productive time, which are a
very large component of the Gershon savings. And the methodology
for calculating how productive time savings have been made, I think,
is posing problems to departments. And, as things look today, that’s
the area of particular concern, and we shall be following it up in the
report.
CHAIRMAN: Back to the Haines Watts report. Now, first of all may I say how much
we appreciate the work you’ve done which has helped the
Commission and the NAO over the years, and we understand that the
parting of the ways is a matter of best practice which one well
understands. And thank you for the report you’ve done.
Can I ask just how you came to choose this particular topic out of all
you could have chosen? Was it your own choice? Was it suggested
by the NAO? Why this particular theme?
RICHARD DUCK: Each year there’s a process whereby a number of topics are
considered. We have an input to that process. Senior people in the
NAO have an input to that, and the topics, when short-listed, are
considered both by the NAO’s management board with our input and
by the NAO Audit Committee.
www.wordwave.co.uk 20 This was one of a short-list which was topical in that there was a
recognised potential benefit to the NAO for this topic to be researched
at a time when, shall I say, the NAO has not yet got to the position of
addressing some known problems, and that was the underlying
approach. There’s a significant amount of money spent in this area
and the NAO is in competition with the big four.
CHAIRMAN: Were there any surprises in your investigation?
RICHARD DUCK: No, I don’t think “surprises” would be the correct word. What was
underlined was the fact that the NAO is well aware of its position in
the market and operates well in selecting and recruiting and
appointing the best graduates. Perhaps one of the interesting
findings, rather than a surprise, was the perception in the graduate
recruitment market that the NAO somehow paid less than the going
rate, and that’s something which has come forward into one of our
recommendations. That on the website and in general promotion and
publicity material that that myth, perhaps, as it’s grown up in the milk
round of university recruitment processes should be dispelled.
CHAIRMAN: I suppose it could as well be the fact that, while what you say is right
at junior and middle level, inevitably, in the open market particularly
the four main contenders, there’s no way the public sector can
compete at the top levels. And could that be causing a
misconception?
RICHARD DUCK: Possibly so, but I think it’s more the perception that the intake level,
and also perhaps that potential graduate recruits would perceive that www.wordwave.co.uk 21 there is somewhat less of a career pattern, a career progress,
opportunity for them. But that’s not the case. It’s not the case. And
that’s also come through from the finding on the way the NAO
manages to retain its better graduate recruits once they’re qualified.
AUSTIN MITCHELL: We’ve talked about this in previous sessions. Sir John manages to
retain and recruit the best and the brightest and, frankly, I don’t
understand it still because accountancy is the fattest cat profession
around. These are big money boys. We haven’t got a new anatomy
of Britain because it was so partial but the Rolls Royce minds that
used to go into the civil service, I would have thought, if they had any
sense, go into the big four and make money. It will be very, very
difficult for the NAO to compete with this kind of glamour in today’s
society.
RICHARD DUCK: I think this is outside the remit of the study as performed. But there
may be the balance between a career which has a monetary value
and a career which has a job satisfaction value as well.
AUSTIN MITCHELL: Oh, I see that. This is far more satisfying. But you know the lure of
money. I mean, you’re an accountant. And that must be a big draw.
RICHARD DUCK: It may be. I don’t think --
AUSTIN MITCHELL: Part 4, which I’ve just been looking at, I know there’s a lot of interest
in the politically correct stuff like women and disability and ethnic
minorities, about which I’ve been asking questions of the Chartered
Institute and the other accountancy bodies. But the real issue on www.wordwave.co.uk 22 retention is: why did you want to take the analysis back to, what was
it, 2001? Why didn’t you go back to 1995 and see how the class of
1995 survived and what happened to them? How many were lost
and how had their careers developed?
RICHARD DUCK: I think that’s a slightly different study on the retention --
AUSTIN MITCHELL: You talk about retention.
RICHARD DUCK: Retention in terms of this report is limited to the retention during the
training programme. Retention of staff post-qualification is essentially
a different subject and one that was specifically excluded from the
terms of reference of this study. The idea is not to lose an
expensively recruited graduate during the period of the training
programme, and that’s the focus of how we looked at this. Because
people do jump ship these days, as you said.
AUSTIN MITCHELL: Though one must, to a degree, reflect the other. If you’ve got a
greater ability to retain in the training period it might well be followed
by a greater ability to retain afterwards. I don’t know. I mean, surely
the two go together. You can’t just look at the one.
RICHARD DUCK: In the wider accountancy profession, think of the big four or perhaps
the ten top firms, it’s not unusual for a chartered accountant to move
on shortly, maybe within one year or two of becoming qualified.
AUSTIN MITCHELL: Have you done any studies, Sir John? On Retention?
www.wordwave.co.uk 23 JOHN BOURN: Yes, we have done studies on retention. And your point is a good
one, Mr Mitchell. We do find that people -- indeed this was looked at
some years ago, I think, by our external auditor who found then that
our loss rate, if that’s the right way of looking at it, was much the
same as the big four or the big ten as they were then. As Mr Duck
has said, people often seek to move on after qualification. But, at the
bottom is your point, of course. Young men and women who join us,
they get a qualification of a high market value and then they see, as
everyone can now, that, for example, the average remuneration of an
Ernst & Young partner is something like £500,000 a year for each of
its 400 UK partners. And there’s no way, as the Chairman has said,
that we can match that.
So, some people know that they have to leave us by about 29, 30,
31, 32, to stand a real chance of getting a partnership in one of the
firms – no good waiting until you’re 40 – and some people do leave
us because they do see this as possible. But again, as Mr Duck from
our external auditor says, there is the attraction of the NAO and
there’s the original ambition of people. There are still people in
society who do want to work for the public service, who do hope and
think that by coming to the NAO they will have a fair remuneration
plus very interesting work and value to the public service. And it’s our
business to make sure that they can go on feeling that.
CHAIRMAN: The report makes eight recommendations. What would be helpful --
we understand there might be a vote in about 20 minutes again, so
could you, in relation to the eight recommendations, could you let us
have a written account of what you intend to do to implement or react
to those and we will make this public? www.wordwave.co.uk 24
JOHN BOURN: I do accept them and I will write to confirm that I agree all eight of
them.
CHAIRMAN: That’s helpful, thank you. At the last meeting a series of issues were
raised that you promised to look into. We may want written answers
on some of them, but there are a couple of them where you can
clearly briefly, I think, explain what’s happened; because for many
years we’ve been chasing, for example, to get you the power to look
at government companies. And it took the Sharman Report to make
a recommendation and jolt the government. Where are we with that
now?
JOHN BOURN: Well, the government have now accepted that recommendation and
provision will be made in the Company Law Reform Bill to give myself
and the other Auditors General in the UK the power to audit the
companies which are owned by the government.
CHAIRMAN: So, is there any more action needed by government?
JOHN BOURN: Just to make sure that the Bill becomes an Act.
CHAIRMAN: Okay, that’s helpful. Then at the last meeting we also asked, since
you were getting the eight to one ratio of savings and so on, could
you get nine to one? Myself, I can quite understand if you can keep
it. I’d be happy if we can keep going at the eight to one. What’s your
answer on this one?
www.wordwave.co.uk 25 JOHN BOURN: Well, I did return to that in the note that I sent in, Chairman. I think
that certainly for 2006 - 2007 I would want to stick to eight to one. But
for 2007- 2008 I would be prepared to go to nine to one.
CHAIRMAN: You will?
JOHN BOURN: Yes.
CHAIRMAN: Well, that’s very commendable. The Treasury should be delighted.
You’d expect there are more amicable letters from them, wouldn’t
you, in the circumstances.
Again, in the document you provided, you provided a little diagram
showing the criteria used for the selection of studies. They then form
a circle in a quadrant. It was interesting to know what was in each
quadrant. What wasn’t explained is: what weight is given to each
quadrant? They can’t all be equal. So, how do you devise the
weighting for each of the areas that you had to consider in selecting
your subjects? This is for value for money. And it’s a fascinating
academic point. If you could let the committee have a note on that.
JOHN BOURN: Certainly, Chairman.
AUSTIN MITCHELL: Section 5 of that paper: concern about the issue of on-balance sheet
and off-balance sheet. Certainly, there’s been clamping down
strenuously in the States on off-balance sheet transactions. So, why
is this still going on? I mean, your note says you’re pressing for it to
remain clear that it should be on-balance sheet. The Treasury
guidance implies it’s -- but only implies, on-balance sheet treatment s www.wordwave.co.uk 26 appropriate. But departmental guidance still requires that PFI
projects to be off-balance sheet. Now, shouldn’t we have a
consistent practice? Shouldn’t that be on-balance sheet and why
can’t that be enforced?
JOHN BOURN: You’re absolutely right in saying that, Mr Mitchell. As far as Central
government projects are concerned, I’m satisfied that those that
should be on the balance sheet are. What we’re now talking about, of
course, is local government ones of which I’m not the auditor. One
movement of a positive nature is that the Department for Education
and Skills have removed their advice to local authorities to do projects
off-balance sheet but they have not yet been followed by their
colleagues in the Office of the Deputy Prime Minister.
We continue to press the Office and the Treasury to take that forward,
but, of course, we also have coming up the Whole of Government
Accounts where we shall determine what is on the balance sheet and
off the balance sheet. And we shall, as that comes forward, be able
to resolve the issue finally.
AUSTIN MITCHELL: So, we are working our way towards it?
JOHN BOURN: We certainly are. We’ve made some progress, as I say, with the
Department for Education and Skills, and Whole of Government
Accounts will provide a means by which we can weave local
government fully into the picture.
AUSTIN MITCHELL: Can I just go on to social housing? You say that on the whole RSL’s
have delivered the expected benefits but you didn’t conduct any www.wordwave.co.uk 27 survey of tenant satisfaction. Now, in the earlier report you did, there
was a survey of tenant satisfaction, although I think it was done by
the ODPM. And what it showed was that after the travails of
large-scale landlord transfer there was an increase in tenant
satisfaction of only 3%, which hardly justifies the effort. And there
was a decline in tenant satisfaction of 7% in respect of repairs. So,
why didn’t you test the performance of the RSL’s, as claimed, against
some poll of your own of tenant satisfaction?
JOHN BOURN: That’s a good point. We are, in fact, revisiting social housing in
conjunction with the Audit Commission, so in the report that we
produce we will consider the point that you make.
CHAIRMAN: What sort of timescale might that be in?
MICHAEL WHITEHOUSE: The report on the delivery chain that we’re looking at in social
housing should be available in January.
CHAIRMAN: January? Good, that’s helpful.
AUSTIN MITCHELL: Just finally on that, you point out that some RSL’s had experienced
financial difficulties. Now, it’s fair that some have, I get
correspondence about it, taken it up with Housing Corporation. There
doesn’t seem to be an effective financial regulation or method of
enquiry into those that are in difficulties or are the subject of major
complaints. Now, when you say that some have had to merge with
other more viable ones, that’s true. But it is Treasury policy to get
www.wordwave.co.uk 28 them all to merge into bigger and bigger RSLs or Housing
Associations.
MICHAEL WHITEHOUSE: It’s a very interesting point that you make. We have been doing
some work with the Housing Corporation developing what we call a
value for grant indicator, which is supposed to help the Housing
Corporation understand better the value for money that they’re getting
from registered social landlords. They need this information to target
their efforts more to get through some of the mergers that you’re
talking about and that was launched a couple of months ago.
So, the information is there to actually assess the performance of the
RSL’s where they’re not meeting the criteria that you talked about.
AUSTIN MITCHELL: And lastly on that point, you say that since 2001 the ODPM has
required authorities to involve tenants more, notably the one in
Grimsby, which I opposed for a long time. But, in general, tenant
involvement and representation does seem to wither within the
Housing Associations. I mean, it’s originated by councils but it fails
when the Housing Association takes over.
Did you actually enquire into that? Was that a specific part of the
enquiry?
MICHAEL WHITEHOUSE: It wasn’t. We’re continuing with the work that we do on housing
and particularly under Sharman we have greater access to the
Housing Corporation. We’ve got an ongoing strategy to look at the
investment in housing, social housing in particular. It is something
that we could take into account in our future work. That might be the
best way forward. www.wordwave.co.uk 29 One of the issues that we are very particularly interested in is: how do
you get proper community engagement? We did a report earlier, a
couple of years ago, looking at the ODPM programmes to see how
far they were getting community engagement but we would certainly
take the point that you make and look at this in more depth in the
housing sector.
CHAIRMAN: Well, thank you, Sir John. That completes our deliberations on your
proposals.
The Commission is now invited to endorse the NAO’s Corporate Plan
2006 - 2007 to 2008 -2009. Agreed? That is agreed. Right, thank
you very much.
JOHN BOURN: Thank you, Chairman.
CHAIRMAN: And to your colleagues.
NORTHERN IRELAND AUDIT OFFICE
CHAIRMAN: Welcome, Mr Dowdall and colleagues. In your Corporate Plan, you
ask for a further real increase in resources. Now, this follows a period
of quite substantial increases. Can we take it then that this now
marks the end of the substantial increases and we’re now in a much
lower phase or is it just a one-off coincidence?
JOHN DOWDALL: No, I think you can, Chairman. Those very big increases we’ve had
in the past two or three years were the result of us taking on the www.wordwave.co.uk 30 Audit Commission’s role in Northern Ireland. All their staff were
transferred to us and those unusual technicalities of the
superannuation costs which were put on us by the Treasury. None of
those, in total, increased public expenditure but they were lumped
into our budget and we have now looked carefully at our forward
workload in a reasonably stable situation, and that 4.9% is what we
think we need to exist over the 3 year period of the Plan.
CHAIRMAN: Well, a 2% real increase is hardly extravagant. Do we take it that you
have the support of the Department of Finance for the proposed
increase? I would be somewhat surprised if you didn’t.
JOHN DOWDALL: There is a supporting letter. They have generally been supportive of
our resource requirements in these matters, yes.
CHAIRMAN: I can almost hear them rubbing their hands. Now, I gather – this is a
separate financial provision I know – that there will be some future
accommodation requirements and you will be tabling a memorandum
which is likely to take effect in the years 2006-2007. Is there anything
substantive you would like to say at this stage about the
accommodation needs?
JOHN DOWDALL: Yes. I would like to add a little bit to the tentative discussion we had
on this last time, Chairman, because we have clarified our ideas on
what we want to do. I think you know, because you visited us a few
years ago when you were in Northern Ireland, that we have a good
modern building and we want to maximise the use of that with all of
www.wordwave.co.uk 31 these additional staff who have been attached and bring them in from
their outlying locations.
There are really three elements in it. Getting the benefits of a single
location and uniting all our staff on the one site, with the business
efficiencies we think will come from that. That building, which your
Commission gave us the money to buy just about the time I became
C&AG, it is --
CHAIRMAN: We approved. I am afraid we can’t claim credit for giving it.
JOHN DOWDALL: Well, you approved it. That’s right. Without your approval we
wouldn’t have got it. It is now 12 years old. We need to re-cable it for
our modern IT requirements and we also want to - because of the
training we’re doing ourselves with our graduate trainees and others -
convert the top floor, which is a bit like an attic. When you came, we
were able to cram the staff into the top floor where everybody could
hear you. We would like to turn that into a proper training facility on
our premises so that we can do our training. Not just for an hour’s
talk as you did, but for the full day’s training and have staff there
operating in reasonable conditions.
It makes sense to do those three changes at once, get all of the
disruption over at one go. We would like to bring the investment
appraisal, which we are just starting, which hopefully will show you
the most cost-effective option, forward at the time of our Estimates,
give you the capital costs and get it approved then. So, I will be
bringing you a fully costed appraisal at the Estimates meeting early
next year.
www.wordwave.co.uk 32 CHAIRMAN: Thanks very much.
Now, your plan refers to a budgetary crisis in education and health.
Can you expand on quite what is behind this and how serious it is?
JOHN DOWDALL: Yes. It is serious, Chairman, in the sense that two of our largest
education bodies - the Education and Library Boards - went into
unexpected financial deficits. Things like that happen occasionally in
NDPBs as you know, but two of them at the same time, totally
unexpected, has raised concerns generally about levels of
governance in the province. At the same time I have had a large
health body, not with a deficit crisis, but their accounts turned out to
be very poor quality in the year and I had to make a disclaimer.
Worrying symptoms in two areas, education and health, where of
course the government is putting in massive resources. As I say, two
big and unexpected problems in the Education and Library Boards.
These were actually touched on at PAC earlier in the year when we
had an education topic up and I did say I would report on them. They
have been the subject of a very thorough investigation by my
predecessor, who was brought out of retirement to do it, and that will
give me a good basis for a report. Whether you take it as a PAC
session or not I think will depend on how assiduously they are
actually following up the recommendations putting things right but we
are left with a feeling of just general concern if big problems like this
can crop up unexpectedly in those two bodies, what else is going on
in these areas?
CHAIRMAN: Yes, exactly.
www.wordwave.co.uk 33 JOHN DOWDALL: Part of the rationale for what you generously described as the modest
increase I am looking for is for us to try and do some more proactive
work with our quangos. Those that we think might be in the higher
risk category to see if their governance arrangements are really as
good as they are cracked up to be because we got the message from
these problems that, although they had the structures of governance
in - they had audit committees, they had controls - they weren’t using
them properly.
CHAIRMAN: So, is your feeling that there are lessons here that need widely
publicising where perhaps PAC attention would be beneficial?
JOHN DOWDALL: Yes, I think so. They have already been widely publicised within
Northern Ireland because these were very high profile issues but
that’s the problem. I think it’s drawing lessons out that needs the
more considered process. If the lessons are obvious, and they were
just being corrected, it may not need PAC time. If I report on it and it
is being addressed, there are always other issues for PAC to tackle in
Northern Ireland.
CHAIRMAN: Thanks. And the Chairman of PAC will note down your comments as
well. We discussed previously savings and so on and the way in
which the NAO produces figures on savings. You have managed to
produce some figures which are new to us showing savings of £41
million and waste of £21 million. Would you like to highlight any
particular points on that?
www.wordwave.co.uk 34 JOHN DOWDALL: Yes, I would like to say a quick general word about it too because
we’ve never, of course, managed to come near the NAO’s very
substantial achievements and their ratio of savings to costs. But,
encouraged by this Commission and PAC, we have been trying to get
ourselves on an upward trend. And these figures now do show a
move from last year’s recovery of about three times our costs up to
five times our costs. So, we are moving in the right direction. And I
did actually take up a suggestion of yours at the last meeting,
Chairman, when you suggested we might get our auditors to look at
the figures to get the same kind of endorsement from them that the
NAO had done. And although I didn’t jump at your suggestion at the
time, when I had time to reflect on it, I thought it was very sensible. If
we gave our auditors the NAO’s methodology, which their own audit
report had very clearly set out, they should be able to run the same
measure over us. They have done it. We have a report which is
quite encouraging about our measurement. I would like to table it
with the Commission and I will leave a copy with the Clerk.
CHAIRMAN: That is helpful. Thank you.
JOHN DOWDALL: The particular examples -- I think I would just like to mention one,
Chairman, and that is an example of the way PAC works with us,
because we had identified in Northern Ireland this problem of high
levels of sickness absence in the public sector compared with other
parts of the UK. And we’d brought forward two reports to PAC: one
on sickness absence in the education sector amongst teachers and
the expensive substitute cover for teachers, and one on industrial
staff in the civil service. www.wordwave.co.uk 35 PAC dealt with those very robustly and made it clear that they wanted
to see all of the recommendations we had suggested implemented.
They have been implemented. On the teaching side there are
already quantifiable savings of £2 million per year coming through,
which are very substantial in terms of our part of the UK.
CHAIRMAN: Yes, that’s good.
JOHN DOWDALL: And on the later one, on industrial sickness absence, on which there
hasn’t been quite so much time yet, again, they’ve implemented
everything and there’s already £600,000 of identifiable savings. So,
that’s an example of the way in which, by paying more attention to
quantifiable impacts, with the thrust of PAC behind us to make sure
departments fully implement their recommendations, we can actually
increase our savings.
CHAIRMAN: That’s very encouraging.
AUSTIN MITCHELL: I don’t understand item 2 in your savings chart, “Impact not accepted
by DFP”. Does that mean they said you didn’t save that money, or
what?
JOHN DOWDALL: Yes. Now, generally the methodology is, and you will know this,
Chairman, that we like to have all of our impacts, like the NAO’s,
agreed with the Department. And 90% or more of ours are. But
item 2 is the one that isn’t and we clearly flag that up. If you look at it,
Chairman, you will see there’s a clear conflict. They don’t want to
concede to us that these savings were due to our work. www.wordwave.co.uk 36
AUSTIN MITCHELL: But the project board was cancelled within a week.
JOHN DOWDALL: Within a week of us putting up our initial findings.
AUSTIN MITCHELL: That must indicate that it was, in fact, planned.
JOHN DOWDALL: Well, the PAC knows very well that Departments have a habit of
running just immediately ahead of our recommendations. And in
those circumstances I felt I was justified counting it, whether they
agree or not. It’s not worth my while to dispute it with them. If I can
get their agreement, fine, and if they have good grounds for
disagreeing I will take notice of that. But in that case I thought we
should actually count it but show clearly that agreement was not
reached.
CHAIRMAN: But it’s good the savings have been made.
AUSTIN MITCHELL: Can I just ask as well, not specifically on that, but it might be covered
by later questions, that there must be a peace dividend in
Northern Ireland in the sense that life is easier for everybody because
in the bodies you audit --
JOHN DOWDALL: That’s right. Absolutely.
AUSTIN MITCHELL: -- not necessarily the Northern Ireland Office but everybody’s costs
must be down, life must be easier. I mean, is there any figure you
can put on that? www.wordwave.co.uk 37
JOHN DOWDALL: There are figures on that. It’s very substantial. I don’t really have
them off the top of my head. But to give you a feel for it, the big
peace dividend is, of course, in the security services, in the police, in
the courts and generally in the Home Office type functions, if you like.
Those are outside my audit. Those are all audited by Sir John. And,
of course, in the Ministry of Defence as well, who have secured very
substantial savings.
But there has been a very big physical peace dividend in army, prison
and other property now being released. Those have been bundled up
and are being managed as a strategic resource for Northern Ireland
as an explicit and traceable peace dividend. There’s a Strategic
Investment Board which oversees that. So, there is a visible peace
dividend in quantified terms and an invisible one in terms of the very
real feel good factor for everybody right across the board, which does
make the general climate of delivering public services much easier
than it was at the height of the troubles.
CHAIRMAN: Thank you. I was interested to see the figures on road safety. That
was quite dramatic.
JOHN DOWDALL: Yes.
CHAIRMAN: And you feel genuinely that the work that was done at our level
contributed to that.
JOHN DOWDALL: Yes. That was one of the main legacies of the Assembly’s PAC.
That was the major impact that they had. They were very concerned www.wordwave.co.uk 38 about the high levels of road accidents in Northern Ireland - higher
than the rest of the UK. They got a very strong grip on it, produced a
set of, I think, important recommendations for bringing the region
more into line with the rest of the UK, and ensured that demanding
targets were set. Those targets have largely been delivered and road
safety, Chairman, saves masses of money if you can actually cut the
accident rate in terms of fatalities never mind the anguish for citizens,
the public expenditure costs of an accident are enormous. So, if you
bring the accident rate down it’s very beneficial. That’s one of our
largest impacts, as you can see.
EDWARD LEIGH: As you keep telling us, we only see the worst cases when PAC
considers it. Do you think, in broad terms, Northern Ireland
departments are as efficient as the United Kingdom departments, and
therefore are you less efficient, more efficient, are you adequately
resourced compared per head of population or per pound spent than
the National Audit Office? Should you be resourced more, less,
equivalent? Is there no difference?
JOHN DOWDALL: No, I always work on the assumption -- and for most of my career I
had a good oversight … well, I had an insight into the Northern
Ireland Civil Service. I was a civil servant and I had close links with
Whitehall and I follow now very closely the NAO’s work. And I do
think that standards of service delivery, service, for service are very
equivalent in Northern Ireland to the rest of the UK. Having said that,
we do operate within a less efficient structure of government.
One legacy of the troubles which is not yet resolved, Mr Leigh, is that
we have an elaborate quangocracy, which was put in place to try and www.wordwave.co.uk 39 give some sense of democratic participation in the absence of
meaningful local politics. And that has created a structure which is
overly bureaucratic. That is well recognised at the moment and being
dealt with. Until that big issue is cracked we can’t really say we’re as
efficient as the rest of the UK. Like everywhere else, we do have
serious lapses and it’s true you tend to see the more serious of them
at PAC because that’s the sensible way for PAC to spend its time.
But, I think, compared with the NAO, I’m properly resourced to do a
very equivalent job in Northern Ireland and I think standards of
service delivery are similar. I highlight particularly where they are not,
because you’ll often see as a theme of our PAC work we will be
telling you very clearly if we think a service is not delivering to the
same standard as its UK counterpart. I think in my own area I do
manage to audit every taxpayer’s pound in Northern Ireland to more
or less the same standard as it is audited in Whitehall or Cardiff or
Edinburgh.
EDWARD LEIGH: Do you now think that PAC does as good a job in Northern Ireland as
the Assembly’s own Committee was doing?
JOHN DOWDALL: You can’t do as good a job, Chairman. Sorry to put it as bluntly as
that but you don’t have the local knowledge. And I must say I was
enormously impressed by the detail which a good constituency MP, if
he knows an issue in a small area like Northern Ireland, can bring into
a PAC discussion. And there just isn’t the opportunity for that in the
kind of sessions that we would have with you at Westminster.
I don’t think I would really be surprising you if I said a good elected
representative with local knowledge is really as good as an auditor www.wordwave.co.uk 40 any day and can often significantly enhance the work that we’ve
done.
AUSTIN MITCHELL: What you said there about the complicated structure – that’s
presumably the kind of bodies, that quangos or whatever that were
put in place to conciliate the minority community about a system
which they didn’t think was legitimate. It has been a way of both
carrying on and giving legitimacy to the system to create a rather
complicated set of quangos. Now, is that now reversible once they’re
there --
JOHN DOWDALL: It is.
AUSTIN MITCHELL: -- and is the public administration review going to take account of
that?
JOHN DOWDALL: It will. I don’t think it is an intercommunity issue. It was a way, in the
absence of active local politicians, which we just didn’t have for much
of the period of direct rule of cutting the democratic deficit.
AUSTIN MITCHELL: But there were, actually. They were both elected to this Parliament
and council elections.
JOHN DOWDALL: Well, a small number of them.
AUSTIN MITCHELL: Yes, a small number.
www.wordwave.co.uk 41 JOHN DOWDALL: Nineteen. Not equivalent to the sort of representation which the
province had been used to in the past when it had had its own
Parliament. And I am not thinking at all about those kind of
institutions which were particularly set up to address community
concerns like the Equality Commission and those kind of reassurance
institutions which we have to have and which will have to continue. I
am thinking about the fact that in a small area like Northern Ireland
we’ve kept 26 district councils – an enormous fragmentation. Some
of them are tiny. They are not big enough to deliver effective services
and that’s clearly recognised in the review which will lump them up
into larger entities. We have five Education and Library Boards, and,
frankly, one would be enough. I imagine the review is likely to move
in that direction. We have 27 health bodies and I audit 70 sets of
accounts for health bodies. In a region our size of 1.5 million people
that is a level of bureaucracy, where, now that we have normality
restored, there are big savings to be had because if you can see the
audit savings in reducing the number of accounts, think of the staff
savings and potential movement from bureaucracy to frontline staff if
you can reduce the number of health bodies from, say, 27 to maybe
the 7 or so that are being considered. So, I think the review of public
administration is in many ways equivalent to Gershon. We are trying
to do Gershon as well, of course, but the really big savings in
Northern Ireland are likely to come out of that kind of structural
change. And that will occur over the period of this plan and it will
affect us too by the end of the plan because we, too, should be
seeing the prospect of very big efficiency savings in our work.
www.wordwave.co.uk 42 CHAIRMAN: I don’t like to sound a note of slight scepticism when there’s a list of
very good achievements here.
JOHN DOWDALL: Oh, you’ve been reading the list.
CHAIRMAN: Item 16 shows a saving of £12.1 million in relation to SSA income
support and it says that a fraud reduction target of 5% has been set
for the next five years. Now, I, who have served on the Public
Accounts Committee almost since it was set up over a century ago, I
have a long recollection of qualified accounts, as the PAC Chairman
has as well, for the social security sector. Isn’t it slightly optimistic to
include the £12.1 million as a result of a fraud reduction of 5% over
the next three years? Or wouldn’t it be better to wait for three years
rather than risk ending up not quite --
JOHN DOWDALL: Mr Williams, you’re as professional a sceptic as I am myself. It’s
always a pleasure to deal with you. I can only think the wording of
that is misplaced. We wouldn’t count savings coming in the next
three years.
Rodney, am I right in that?
RODNEY ALLEN: Yes, it’s achieved savings to date.
JOHN DOWDALL: We have only counted in £12 million that has actually been achieved
to date. So, the wording is misleading in the table provided.
CHAIRMAN: Who provided the table?
www.wordwave.co.uk 43 JOHN DOWDALL: We have.
CHAIRMAN: Oh.
JOHN DOWDALL: These were never intended for you. These are our own internal notes
which we supplied to Professor Heald, of course. He quite fairly
passed them onto you but we didn’t scrutinise these, not imagining
we were going to be discussing them with you.
CHAIRMAN: I see. So, does that mean you have similar doubts to myself about
JOHN DOWDALL: No, it means I can confirm that that £12 million has been delivered
and the wording attached to it is incorrect.
CHAIRMAN: It’s not the future; it’s past?
JOHN DOWDALL: There will be more in the future, I hope, but it’s past.
CHAIRMAN: Okay. That’s helpful then. Now, a couple of quick questions before
we finish. You have had problems with companies limited by
guarantee and I gather you are preparing a report to Parliament on
two cases. Is there anything we should know about at this stage?
JOHN DOWDALL: Well, there will be no surprises for you in this, Mr Williams. A
company limited by guarantee is a private sector entity which is used
sometimes as a form for quangos so it gives them a company
structure, and, of course, a company structure I wasn’t able to audit.
That’s not too much of a problem. I would have had inspection rights. www.wordwave.co.uk 44 I could keep in touch with what was going on. But what’s been
happening is that quangos set up as companies limited by guarantee
that turn out to have been setting up subsidiary companies limited by
guarantee. Really, it is almost impossible to discern if you are in my
chair. Very difficult for the department to control. What happens
when you get wholly funded public bodies on the periphery of the
public sector with very vague agreements? The first one, which I can
comment on because I published a short report on it, you get
excessive hospitality claims and imaginative foreign travel of the sort
you have come across very frequently, or not too frequently, but
frequently enough on PAC in the past, and severe problems of
propriety.
In the second one, which I am preparing a report on at the moment,
which I think will come to PAC, we have enormously complex and
serious conflicts of interest which had not been subject to any control
at all. Again, I think we could think back in other cases you have
experienced with the Halton and FE Colleges, bodies on the
periphery of normal accountability, where strange things start to
happen.
CHAIRMAN: So, have you had to call the police in to investigate?
JOHN DOWDALL: The police have been called in in nearly all of these cases. But they
are very difficult to prosecute.
CHAIRMAN: Really?
www.wordwave.co.uk 45 JOHN DOWDALL: Impropriety is not always provable fraud and I don’t think I’d want to
say a lot about that.
CHAIRMAN: No, I can understand.
JOHN DOWDALL: Other than the fact that when the case I am talking about -- when and
if it comes before PAC, you, too, will be asking the question: was this
referred to the police?
CHAIRMAN: The changes that are being made here in relation to the companies,
as a result of Sharman, which give access, will that have the same
effect?
JOHN DOWDALL: It will.
CHAIRMAN: So, their life is limited.
JOHN DOWDALL: That’s it. Just shows how urgent those changes were.
CHAIRMAN: Great. Because we had a fight to get Sharman set up, as you know,
against the wishes of the government originally. And we feel that it’s
been a highly beneficial move by the previous chairman of the PAC
and myself. And I am delighted that it’s going to help you because I
can imagine how complex the situation must be, as you have
described it. Then something that should be easily remediable:
ministerial clearance for your reports. I say it should be but in
fairness I have to say, and the chair of PAC will confirm this, that we
are continually getting complaints at the Liaison Committee from www.wordwave.co.uk 46 select committees about the difficulties of getting replies to reports.
But your problem is of a somewhat more important, immediate
significance. Is there any correlation between the degree of criticism
in your report and the length of the delay?
JOHN DOWDALL: Absolutely. There certainly is.
CHAIRMAN: Really?
JOHN DOWDALL: Departments fight hardest over the more critical reports and that’s
always been part of the process. I’m not sure this is any worse now
than it has been in the past but we have had some critical reports
recently. We’ve been conscious they’ve been taking a long time to
clear. I think these things just have to be managed on a
case-by-case basis and I can manage them, Chairman, for two
reasons. Firstly, if my staff begin to feel that the clearance process is
unduly delayed I will get involved myself and bring it to a head with
the Permanent Secretary and that is generally a way of successfully
concluding it. But, secondly, I also have the assurance, a
longstanding one, from the Commission, I think, which goes back to
your predecessor as chair, that if ever there were cases where we felt
we were being unreasonably delayed, you would expect us to tell you
about them. I think the knowledge of that support in the background
ensures that actually we can obtain clearance within a reasonable
time.
www.wordwave.co.uk 47 CHAIRMAN: Well, can I ask you to do me a favour? Which is for the next
12 months will you let us have a report, on a quarterly basis, of every
delay beyond the agreed dates, in relation to reports?
JOHN DOWDALL: Yes.
CHAIRMAN: What is the status of -- and I should know the answer to this myself,
as chair of the Liaison Committee, would this be a matter we could
ask the Northern Ireland select committee to look into?
JOHN DOWDALL: No, I don’t think so, Chairman. It’s not really a matter for the select
committee. It’s a matter for PAC itself. And I think the very easy
answer is, if you are taking an interest in this, Permanent Secretaries
will be interested in it themselves and they will know that they are
vulnerable to coming before PAC with a report that you may be
asking them about why it took them so long to clear it. That would be
quite an effective mechanism, I would think.
CHAIRMAN: If you agree, we will start with 12 months, or we could start with
longer – what period would you recommend? I want the reports
quarterly to us. Shall we do it for 12 months or 2 years? What would
you consider?
JOHN DOWDALL: I think 12 months is fine.
CHAIRMAN: 12 months, okay. Let’s try it and see whether it has any effect in
focusing attention.
www.wordwave.co.uk 48 AUSTIN MITCHELL: On the crises in health and education. What is this about? Is it
something like the fact that so many primary care trusts and health
trusts are in deficit in this country? Or is it a question of
administrative structure that should be taken care of by the
administrative reform review?
JOHN DOWDALL: The health one was not a funding problem. It was an accountancy
problem. So, it was a matter of technical competence of the body
concerned but it reflected poorly on their whole governance structures
and controls. The education one is definitely a funding problem
because the very high deficits are there to be seen. But I actually
think it was more a matter of budgetary control than shortage of
funding. In other words, they weren’t operating a good budgetary
control system. And that may have been going on for some years but
it took some time for them actually to be caught out on it.
That is, in a way, a relatively easy matter to address. It’s internal
control systems and making sure they are staffed with people with the
right expertise who understand their role who are then properly
monitored by the department. And I think those are the kind of
actions we will be looking for in judging whether this has been
followed up satisfactorily.
AUSTIN MITCHELL: So, that’s the kind of thing where the Causeway HSS Trust is making
two payments to Rock Insulation Services. I mean, that’s
incompetence, not corruption.
CHAIRMAN: Where are you?
www.wordwave.co.uk 49 AUSTIN MITCHELL: The company kept the money. This is Item 32 on page 15.
JOHN DOWDALL: Yes. Causeway Trust HSS.
AUSTIN MITCHELL: And the Mater Hospital didn’t know its car park machine --
JOHN DOWDALL: That’s right. Well, you’re really getting down to it there.
AUSTIN MITCHELL: That’s either accountancy and auditing incompetence or management
incompetence.
JOHN DOWDALL: Well, perhaps management incompetence. That’s the kind of thing
that small organisations can trip up on and we would pick it up at
audit and get them to correct it. But you’re quite right. That is just a
slip-up. A minor slip-up, actually, but one which we take credit for
correcting.
CHAIRMAN: In the past you have referred to your hopes that the review of public
administration would lead to simplification of government structures.
Has that been any way given any stimulus by the budgetary crises
that have arisen? Have they helped to push that cause forward?
JOHN DOWDALL: I think it has just generally made the case stronger. I won’t say it will
influence the outcome because I think – my impression is – that
Ministers locally are very determined to get maximum efficiency
savings out of this restructuring. And that is an important
consideration in the changes that they will be announcing in a few
www.wordwave.co.uk 50 weeks. I don’t know the outcome myself but I think the budgetary
crisis will just have been grist to the mill.
CHAIRMAN: The final question from me is that you heard the discussion with
Sir John about PFI and the differing advice and also the different
perceptions of himself and the government departments. Do you
have a similar problem in relation to Northern Ireland? Is there
anything you would like to add? For example, we also had the point
that Austin referred to that the Treasury says that on balance sheet is
acceptable. The departments give a very clear guidance of,
"Regardless of what Treasury say you do that and you don’t get the
money". Is that happening with you?
JOHN DOWDALL: It was happening, Chairman. We were very conscious of this at the
stage that NAO were trying to tackle the issue in GB as well. I must
say, rather like Sir John, I think we are getting to a stage where that is
much more settled now. As PFI projects are coming forward we find
that departments now understand they need to bring them to us at a
very early stage to get a preliminary view. And so, we do feel that we
are beginning to get a net which covers all of the PFI work as it’s
coming forward. We have a proper chance to put our views in. There
is less of that mindless drive to get things off balance sheet that
seemed to be evident some time ago. And I think that’s largely
reflecting the improvements which Sir John has agreed with the
Treasury in GB. Those have carried over to Northern Ireland.
So, I just looked at the nine most recent PFI projects that we had
examined to give views on and six of those are clearly on balance
sheet. And we have given that view and that will be accepted and www.wordwave.co.uk 51 that is probably about the right proportion. So, it does suggest that
that issue is now settling.
CHAIRMAN: Well, thank you very much, Mr Dowdall, Mr Moore and Mr Hutcheson,
both for your information, for your full answers, and, above all, for
your patience.
JOHN DOWDALL: No, thank you.
CHAIRMAN: And can we apologise for the fact that we have deprived you, it can
only be a great hardship, of your opportunity to be home watching the
football on television this evening? Instead, you are having to drift
around London like lost souls. But thank you very much and it is as
always a pleasure to see you. We had better do the formality.
The Commission is invited to take note of the Northern Ireland Audit
Office Corporate Plan 2006 - 2007, 2008 - 2009. Agreed? That is
agreed.
www.wordwave.co.uk 52