Wednesday 30 April 2008 at 9.30am in Speaker's House
Sir Stuart Bell MP
Nick Harvey MP
Mr David Maclean MP
Mrs Theresa May MP
In the absence of the Speaker, Mr David Maclean MP was called to the chair.
The Committee met with Tim Burr, Comptroller and Auditor General and Helen Booth, Director of Financial Audit, NAO
Mr Burr said that the NAO had been concerned that there was no complete audit trail for expenditure on Members' allowances. This had been discussed about ten years ago with the then accounting officer and a statement of responsibilities had been agreed which was set out in the resource accounts. This now stated "the framework is based on the principle that Members are primarily responsible for identifying, claiming and certifying their own expenditure. The Department of Finance and Administration is responsible for ensuring that the stated purpose of Members' claims falls within the agreed framework. The controls on expenditure therefore ensure that payments are correctly accounted for and paid to the correct recipient; but it is primarily the responsibility of Members to ensure the regularity and propriety of expenditure for which they claim reimbursement".
Continuing, Mr Burr said that the change to a receipts threshold of £25 created a new situation which, if rigorously enforced, would enable the NAO to check receipts and claims. This would give the NAO sufficient evidence to be able to report greater assurance because checks could be conducted behind a Members' signature. The SSRB recommendation for a sampling check on Members' claims was not the best way forward. The NAO already audited allowance by allowance selecting individual claims for further checks. A system which conducted a random sample check of MPs might produce un-representative results given the varying nature of Members' working and claiming patterns. The current sample sizes were quite small and could be extended.
Concluding, Mr Burr said there were two objectives of audit of the Members Estimate accounts:
- checking the accuracy of the accounts themselves; and
- expressing an opinion on whether money spent had been applied for the authorised purpose. The latter check on regularity was an essential consequence of involvement of public money and would not apply in the private sector.
In discussion the following points were made:
- Although a receipt was an important part of the audit trail it was not absolutely conclusive that money had been spent for the purpose intended. The NAO would want to test transactions based on records such as receipts rather than specific systems. They would be willing to follow up individual cases, but would rely where appropriate on the House's own internal systems.
- While the current arrangement does not entail checks behind the Member's signature, a change in the remit of the audit would permit either random or risk-based checks under each allowance. This might, but was not guaranteed to, identify cases of misuse of the staffing allowance on family members.
- Any audit would have to be carried out against the House's rules and the management letter would draw attention to specific issues that needed further work. Some issues would have to be handed over by the auditor to the House or some body under it.
- There was a case for NAO to carry out such checks rather than a private firm because they were already the House's auditors but it was a question of whether they would be seen as being sufficiently independent. Either way the audit system could not rely wholly one external controlthere must be sufficient internal controls which were properly verified.
- There was a case for having an audit system in which the receipts and claims were actually held by Members and only shown to the Department of Resources temporarily.
- One alternative to reimbursing spending would be a flat rate allowance which all the auditor had to do was to check whether the Member was eligible for that allowance.
- The NAO would not normally retain paperwork when checking claims after a site visit except for in cases of doubt. The FOI Act did provide for an exemption for audit, but it was subject to a public interest test.
- The new £25 threshold meant that expenditure below that level was insignificant from an audit point of view.
- There were some inconsistencies in Members' record keeping and the fact that in some cases supporting evidence of a claim was missing would itself be damaging.
- The Department of Resources should enforce the Green Book more rigorously but needed the authority of the House to do so and in cases of conflict its actions should not be undermined by other House bodies.
Summing up the discussion, David Maclean thanked the Comptroller and Auditor General and Helen Booth very much and asked them to provide a paper on how the NAO would put into practice what had been proposed.