THE PRESS SATURDAY, FEBRUARY 18, 1989. Constitutional watchdogs

Press, 18 February 1989, Page 24

THE PRESS SATURDAY, FEBRUARY 18, 1989. Constitutional watchdogs

Parliament’s Finance and Expenditure Select Committee will serve Parliament and the people well if it rejects proposals to bridle the office of Auditor-General. As matters stand, the Controller and Auditor-General has wide but loosely defined powers; the holder of the post is an officer of the Crown, independent of the Executive, and reports to Parliament, not to the Government. Whether the existing provisions distance the post sufficiently from Ministerial influence is one of the matters being considered by the Parliamentary committee. Another is whether the powers of the Auditor-General should be more precisely prescribed or limited.

The Treasury, in submissions to the committee, wants the Audit Office limited in its inquiries to exclude State-owned enterprises, and to remove the provision that allows the Audit Office to comment on the merit of policies beyond the accounts. This would severely limit the role of the AuditorGeneral. It would also remove one of the important checks that Parliament, and the taxpayers on whose authority Parliament raises and spends public revenue, have against financial mismanagement and inefficiency in government. The accounting may be excellent, and the business procedures impeccable; but the AuditorGeneral has long had the duty and authority to draw Parliament’s attention to the financial consequences of policy or legislation. This is meant to help Parliament do its job.

The Audit Office has three main functions: Controlling, auditing and reporting. In the capacity of Controller, the Controller and Auditor-General ensures that Parliament’s will is being followed in the way that revenue is raised and is spent. The Auditor-General actually controls the Government’s access to money in the Public Account in a simple and practical way. Each day the office monitors the amounts lawfully available for expenditure. The money is not forthcoming until the daily funding cheque drawn on the Public Account is countersigned by the Audit Office.

The Controller is empowered, and obliged, to refuse to countersign the cheque if he is not satisfied that there are appropriations, or other authorities approved by Parliament, against which specified payments can be charged. In a very real way, the Controller and Auditor-General holds the purse-strings for the Government’s day-to-day spending. It would be possible for an officer of the Treasury to perform this task, but that would compromise the principle of accountability to Parliament, since the Treasury and its officers are answerable not to Parliament, but to the Minister of Finance. The ultimate power over the Government’s spending would be transferred from Parliament to. the Minister of Finance alone. The other side to the Auditor-General’s role is the examination of the accounts of the Government and of the vast array of public bodies and agencies raising and spendng public money. The procedures followed in this auditing responsibility are very similar to the financial audit of a public company and in practical terms the work could be done by almost any competent accountant. This checking is only a part of the value of an independent Auditor-General’. The Auditor-General must also report annually to Parliament on any matters arising from audits which he desires to bring to public attention. The office regularly considers the need for public sector entities to demonstrate value for money. These reports draw Parliament’s attention to failings or dangers in public financial administration, to shortcomings in the mechanisms of accountability, and warn of the erosion of Parliamentary control over the Cabinet and bureaucracy so that Parliament can act. It is this function of the AuditorGeneral’s duties that most excites efforts to muzzle the public’s watchdog. One such effort is the attempt by the Treasury to have State-owned enterprises excluded from the Auditor-General’s surveillance. The Treasury’s' argument is based on a notional flow-chart of accountability. According to this, Ministers are accountable to Parliament for the use and purpose of the money Parliament has

voted; State corporations are accountable to Ministers but no longer directly to Parliament. Thus, the Treasury argues, the Audit Department should limit itself to surveillance of the stewardship of shareholding Ministers and not concern itself with the management of the public’s investment beyond that.

Fortunately for taxpayers, the fallacy of this argument was quickly demonstrated by members of the select committee. The Opposition spokesman on finance, Miss Ruth Richardson, correctly contended that taxpayers, as the ultimate owners of Stateowned enterprises, should have the protection afforded by the office of Auditor-General. The former Minister of Revenue, Mr de Cleene, pertinently asked who would audit aspects of S.O.E. performance in matters such as equal opportunity employment, feather-bedding of jobs, observing a sense of social responsibility, and other special duties required of them in their empowering legislation, if the Audit Office did not. The theory that increased commercialisation of State-owned enterprises and the restructuring of the public sector somehow removes the risk of mismanagement and of inefficiency in these public investments, and therefore removes the need for Audit Office surveillance, has gained favour in the Treasury and some other quarters. It is a flawed theory. The business-oriented approach of the State corporations might well result in better internal monitoring of performance, and the new accountability pfi chief executives might reduce the risk of mismanagement; but they are not guarantees. It is easy enough to say that the shareholding Minister is to be the judge, but where will he get the information on which to base his judgment unless from the Audit Office? In any event, the trend to corporatisation is removing great chunks of State activity and public investment from direct public oversight; this is a persuasive reason for strengthening the role of the Audit Office, not confining it. Even if some of its work is delegated to private practitioners the office must surely have oversight that enables it to speak with authority.

The committee has been invited to consider a legislative change that would formally make the Auditor-General an Officer of Parliament. The Auditor-General is not classed as an ordinary public servant, but is appointed directly by the GovernorGeneral with the concurrence of Parliament and, once appointed, can be removed from office only by the Governor-General with the endorsement of Parliament. This arrangement protects the Auditor-General’s tenure of office from interference by the Executive; but it seems likely that Parliament will change the law to spell out more precisely that the selection is the business of Parliament, much in the way that the more recently created offices of Ombudsman, Privacy Commissioner, and Parliamentary Commissioner for the Environment have been reserved for Parliament to bestow.

Perhaps the more important distinction that being an Officer of Parliament would confer is that pay and rations for the running of the department would no longer be subject to the subtle pressures from the Executive and the Treasury. The salaries of the Auditor-' General and his Deputy are covered by permanent legislative authority — they are, in effect, guaranteeed and safe from Cabinet cost-cutting. The rest of the Audit Department, however, relies on an annual vote in Parliament, subject to Treasury recommendations and the enthusiasm for the allocation in the Cabinet. Formally making the Auditor-General an Officer of Parliament would mean that the Audit Office’s ability to perform its tasks would not be subject to a potentially hostile hand on the financial tap. One suggestion has been that the Leader of the House, the Leader of the Opposition, and the Speaker of the House could form a supervisory committee to oversee the office’s budget and recommend the appropriate allocation for Parliament’s endorsement. The suggestion is being explored by the committee. Something like this arrangement would be a valuable safeguard for the public, for it would help to ensure that a necessary public watchdog could not be starved into silence.