Review of Recent Developments in Legislative Oversight in Britain and Australia, with special reference to Public Accounts Committees (PACs)

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3 Table of Contents Background Objective Scope and Methodology Good Practices Exercising leadership - the role that PACs play in bringing significance to the public accountability issue, including how to best engage the main stakeholders Influencing the Auditor General s work program to include audits or studies of key issues Launching enquiries into matters not raised by the Office Encouraging the government to take action Reviewing the performance of the Auditor General Building and sustaining capacity people, time, resources, information, tools Subcommittees and information gathering sessions Expert assistance Exchanging ideas Achieving and demonstrating results - especially impact and effectiveness Setting objectives, and publishing an annual report with performance information on the extent to which objectives have been met Identifying the factors that lead to effective committee performance PAC commissions a review of its own effectiveness Conclusion Notes Bibliography i

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5 Background CCAF-FCVI is a national, non-profit research foundation. Its mission is to provide thought leadership and to build both knowledge and capacity for effective governance and meaningful accountability, management and audit. One of CCAF s current research programs deals with accountability and audit relationships in various sectors and areas. The Accountability and Audit Program is a broad multi-phase initiative approved by CCAF s Board of Governors in June It explores the interaction between accountability and audit in view of emerging thinking and priorities, and changes in structures and practices both internationally and in Canada. A key component of CCAF s research program in the area of accountability and audit pertains to public accounts committees. Initially, the focus of this research is the identification and analysis of best practices as this relates to, among other matters the procedural framework within which PACs operate, structure, process, interrelationships with other stakeholders, leadership, capacity, and PAC performance and results. The project explores the role of PACs in the accountability process. This issue was last looked at by CCAF in and was the Foundation s first research project, Improving Accountability: Canadian Public Accounts Committees and Legislative Auditors. The issue was further addressed in the Canadian Council of Public Accounts Committees (CCPAC) Guidelines for Public Accounts Committees in Canada (1989). There are several research components. These include: identification and analysis of international practices and recent experience of PACs; questionnaire survey of PACs (a joint venture with the CCPAC Executive Secretariat); questionnaire survey of legislative audit offices; a cross-cutting interview program aimed at leaders in these communities; round table discussion sessions; and experts and leaders symposia. 1

6 Objective The terms of reference of this particular review are to: 1. Search for and review recent international literature published on thesubject of legislative oversight in Commonwealth countries (and a cursory review of work in the USA). 2. Establish contact with recognized experts and practitioners in Britain, Australia, New Zealand, and perhaps other countries to determine whether any research has recently been done or is ongoing concerning the effective powers and practices of oversight committees. Obtain copies of any published work. 3. From the contacts and information obtained, draw out any principles of effective operation, constraints to effective operation, or lessons learned from experience, and compare these with the the1981 CCAF report recommendations and the 1989 CCPAC working guidelines. 4. Prepare a bibliography and a short report summarizing the information and any insights obtained. For the purposes of this review, the words oversight and scrutiny are used to embrace the main functions of PACs in holding the government to account for its financial and operational performance. There are other aspects of the legislative accountability process, and other actors who carry out scrutiny, but this summary report is limited to the role of PACs. PACs usually review the audited financial statements and accounts for financial prudence and compliance with authorities, and they review the implementation of the government s programs for economy, efficiency, and effectiveness. 2

7 Scope and Methodology This study covers the United Kingdom (UK) and Australia, the main jurisdictions outside Canada that have the most experience with PAC operation - for example, the Committee in Great Britain has been in existence since 1861; the Committee in the Australian state of Victoria since 1895; and the one in New South Wales since Because of time constraints, this study has not reviewed other commonwealth countries beyond making some brief contacts, even though there may be interesting developments in some of them. In addition, the terms of reference of this brief review do not include Canada, and so it does not cover recent Canadian experience. This should not reflect unfavourably on Canadian practices, which are sometimes referred to in other jurisdictions as good examples 1. The study was conducted by reviewing documents and by interviewing parliamentary staff and experts in Canada and other countries by telephone or . In addition to the 1981 CCAF Research report, this review builds upon two main works, the Commonwealth Parliamentary Association (CPA) report The Overseers based on a survey of Commonwealth practice in 2000, and an unpublished World Bank Institute (WBI) survey of PACs in Very few published works that deal with good practices in parliamentary scrutiny have appeared since the CPA and WBI studies, the most notable being the Scottish Audit Committee s Legacy Report (2003), and the Report of the UK Liaison Committee in A bibliography of recent work is attached to this report. But beyond these publications, there is a lot of interest particularly in Britain and Australia in improving the effectiveness of the PAC, of the overall scrutiny process, and of Parliament itself. Some PACs have taken the start of the new millennium as an opportune time to review their powers and particularly their practices in an effort to adapt to changing conditions. In trying to assess which powers and practices are effective and which do not work, they have to come to grips with what IS effective performance - not an easy question 2. This reflection has led some to the realization that committee goals and objectives need to be agreed upon before there can be an assessment of the effectiveness of committee 3

8 performance, or a useful discussion of committee powers and procedures. Steps have been taken in the UK to clarify committee objectives, and the need for this has also been noted in Australia where academic John Uhr has stated: No amount of information-gathering can help evaluate performance if there is no prior identification of politically appropriate results or impacts expected of parliamentary institutions 3 Because there are no clear criteria as to what is effective performance and what is not, the format adopted in this review is to propose examples of good rather than best practices. It is hard to assess the validity or applicability to Canada of what is happening in other jurisdictions. There is little objective information. PACs are not good at providing performance information that is independently verifiable, and little new academic work is being done. So what follows is essentially what other PACs themselves claim they have achieved, with some comments. In future, more could be done to assess the advantages and disadvantages of each good practice point. The aim of this survey is not to pass judgement on other committees, which may or may not work exactly the way they say they do. Rather, the purpose is to identify approaches that could be assessed for applicability in Canada and, if they are found interesting, could be tried here. Good practices are listed and organized around the following three themes: PAC leadership and its role in contributing to government accountability; building and sustaining PAC capacity; and achieving results and demonstrating PAC effectiveness. 4

9 Good Practices 1. Exercising leadership - the role that PACs play in bringing significance to the public accountability issue, including how to best engage the main stakeholders. The intention in this section is to identify examples of where PACs have raised major accountability or cross-cutting management issues - such as the need for better performance reporting, risk analysis, accounting systems, use of information technology, human resource management, procurement - that are either not on the Government s current agenda or are moving slowly. Good practices could include how committees go about identifying important issues, how they bring them to the attention of the government and other main stakeholders like crown corporations, how they get the parties together and ensure commitments are made to act, and how they follow up. Influencing the Auditor General s work program to include audits or studies of key issues UK Central Government The National Audit Office (NAO), with PAC assistance, claims to save an average of 8 for every 1 spent on audit work, and has consistently recovered more than it spends for many years. Because of this high rate of return, the PAC recently recommended an increase in the number of NAO VFM audits (that Parliament approved) and it also successfully supported the expansion of the NAO mandate to audit more entities.the Comptroller and Auditor General (C&AG) who heads the NAO has complete discretion in selecting performance audit subjects, but is required to take into account representations from the Public Accounts Committee. These can be made periodically, as well as in the Committee s formal annual consideration of the C&AG s work programme for the next two years. 5

10 Launching enquiries into matters not raised by the Audit Office Australia Commonwealth Government The Joint Committee on Public Accounts and Audit (JCPAA) is responsible for determining the audit priorities of Parliament, advising the Auditor General of those priorities 4, reviewing the proposed audit program and approving the budget of the Australian National Audit Office (ANAO). It reviews all the reports of the ANAO and holds public hearings on those that raise significant accountability issues 5. But it also has the power to initiate independent or supplementary inquiries, and regularly carries out two or more major enquiries a year that appear to occupy at least half of the Committee s total time. For example, it recently examined airport security because, shortly after an AG s report on the subject was published, there were three serious security incidents. Encouraging the government to take action UK Central Government The Public Accounts Committee takes stock periodically of the broader implications of its work by preparing cross-cutting reports that deal with issues arising in several departments or several NAO reports. For example, in 1994 it issued a groundbreaking report called the Proper Conduct of Public Business 6 that provided a broad checklist of improvements to help departments avoid the failings in financial administration that had brought them before the auditors and the PAC in the past. In 2002 it issued a report on improving public services through e- government. More recently, the Committee has held hearings on NAO reports dealing with the need for better accounting systems to manage resources to deliver better public services, but these have not yet resulted in reports. Australia Commonwealth Government The Joint Committee on Public Accounts and Audit (JCPAA) has members from both houses of the Australian Parliament. The Chair, as well as a majority of members, are from the governing party and the Vice Chair is from the main opposition party. JCPAA has a long tradition of agreeing 6

11 on unanimous reports, except for a brief period before the national election in The Committee s reports make few recommendations, a deliberate choice of the Chair, who has long experience and insists recommendations be practical, and high level. He then meets privately with Ministers to encourage their agreement. The result (they say) is that most recommendations are implemented. Author s Comment: What issues does this example raise? Can government-led Australian committees achieve more than opposition-led? Or are they constrained to examine and report only on matters with which the government will agree? Reviewing the performance of the Auditor General Australia (Author s Comment) It is the norm in Australia at the federal and state levels for the PAC to be responsible for commissioning an independent review of the work of the Auditor General on a regular basis. The Committee then frequently holds public hearings on the resulting report, the same way they would with an Audit Office report on a department of government. Recently, some of these reviews have been acrimonious and have led to disagreements which apparently are not resolved 7 (see the following example). One wonders whether this type of disagreement could damage the credibility of both PAC and AG. State of New South Wales PAC is responsible for commissioning an independent review of the Audit Office every three years, and expanded the scope of the most recent review in 2003 because it had some concerns about the work of the Audit Office. The report (which is public) by a management consulting firm is critical of the quality of financial, compliance and particularly performance audits although not of the economy or efficiency of the work. The Audit Office disagrees with many of the observations, and the PAC has met in camera with the Audit Office several times to discuss them, but does not plan to publish a report to resolve the differences of opinion. The PAC clearly depends on the Audit Office to identify 7

12 the need for many of its enquiries and to follow-up its own recommendations. It claims in its reports to have a close and harmonious working relationship Building and sustaining capacity people, time, resources, information, tools. The intention in this section is to identify factors that support and strengthen the capacity of committee members for effective scrutiny of public expenditure. Scrutiny or oversight is not always a primary interest or an inherent strength of legislators, or the principal reason voters elect them. And when first elected, legislators may need help in navigating the corridors of power, and orientation to understand the complex procedures of government. Good practices for building the capacity of members could include training and development, continuity of membership, teamwork, specialization and division of labour, information briefings, expert witnesses and advisors. Additional capacity can be bought, borrowed or rented, and some committees use all three modalities. Subcommittees and information gathering sessions Australia Commonwealth Government The Joint Committee on Public Accounts and Audit (JCPAA) casts a very wide net in seeking information. Before starting an enquiry, the Committee sets up a subcommittee of members with its own full-time secretariat, and if necessary with observers from the Department of Finance and with observers and secondees from the Audit Office. It then advertises the enquiry in the national press and on the Internet. It will call for written submissions from interested individuals and organizations, and encourage key stakeholders to attend public hearings. On occasion, evidence is gathered directly from field inspections, or by questionnaire. For example, a 2004 inquiry into the Management and Integrity of Electronic Information had a staff of six: a secretary, two research officers and three administrative officers. It held public hearings and made site visits. During the inquiry, the subcommittee determined 9 (from the press) that information germane to the inquiry had been withheld from them. A department had testified before the subcommittee, but failed to 8

13 inform the subcommittee about the theft of computer equipment that had taken place the day before. The subcommittee then wrote to all departments seeking details of security breaches, and were surprised to learn that 950 laptops and over 500 other computers had gone missing over a four-year period. Their report, tabled in Parliament, recommended steps to deal with this most basic requirement for ensuring the integrity of information held by the Government. Expert assistance UK Central Government Many parliamentary committees and commissions of enquiry have helped to expand scrutiny, for example of the estimates, in an attempt to shift the balance of power somewhat from the Executive towards Parliament. The UK Parliamentary Research organization has set up a separate Scrutiny Unit of researchers to help committees. The NAO now provides support to the departmental select committees to review departmental estimates, business plans and annual reports. Members of Parliament would like even more and stronger research support similar to that of US congressional committees. 10 Australia State of Victoria The Public Accounts and Estimates Committee (PAEC) seconds a performance auditor from the Auditor General s Office to help with research for the Committee s review of departmental estimates. Exchanging ideas Australia (Author s Comment) Australian committee chairs place a high value on publishing and exchanging information. They are willing to share their experiences, to receive visitors, and to listen to other ideas. They make a special effort to reach out to the public via the internet, and to communicate with the clients of government services. They organize study tours and attend gatherings of parliamentarians in Asia, Europe and North America. Their biennial conferences (some of which Canadian parliamentarians have attended) appear to deal with significant issues. 9

14 3. Achieving and demonstrating results - especially impact and effectiveness Some of the powers and practices that actually achieve results and lead to successful hearings and reports have been addressed in the two previous sections. The intention in this section is to identify examples of PACs that are starting to identify and report on the impact of their work, or good practices that will help equip them to do so. Documenting and reporting results conveys a sense of direction to the participants. This means being specific about the types of improvements in public service that the PAC hopes to achieve. Committee activities will have a much better chance of achieving results when they are known both to the Committee members as well as government decision makers. Measures of results are what the PAC often asks of the government representatives who appear before them. Yet they, like most parliamentary committees 11, appear to have doubts about the practicality of measuring their own work. Some committee speeches and documents mention examples of their impact such as changes in legislation, improvements in public safety or service, cost savings in wasteful programs, or budget increases for under funded programs. But this information is seldom quantified, and the chain of events leading to such results is never clear. The issue of results measurement raises a host of difficult questions about the objectives of the committee, who sets them, and to whom the committee reports. If despite these difficulties, the PAC can demonstrate a clear and purposeful direction and outcome for its work, it can help to raise public confidence in government. That is why it is interesting to see what progress some jurisdictions are making in dealing with the thorny issues of impact and effectiveness. Setting objectives, and publishing an annual report with performance information on the extent to which objectives have been met. UK Central Government As a result of the recommendations of the Newton Commission (Hansard Society UK 2001), the Modernisation Committee and other developments at Westminster, the departmental select committees are now required to set 10

15 objectives, identify main tasks, and report on these each year to the Liaison Committee (i.e. not necessarily in public). Other select committees like the PAC are not obliged but are encouraged to follow suit, but PAC has not yet done so. 12 Australia Commonwealth Government The Joint Committee on Public Accounts and Audit (JCPAA) issues a comprehensive annual report summarizing each year s work completed and in progress. Results are described in terms of whatever action the Government has taken to implement the Committee s recommendations. For each independent inquiry, such as the one in 2002 into the significant number of high profile corporate failures 13, there is a brief description of the problem and the committee s recommendations, such as in this case amendments to the Corporations Act 2001 and protection of whistleblowers. The Government has not yet taken any action to implement the recommendations, but it is working on changes in legislation. The Committee s annual report includes details about who worked on each inquiry, and the costs of the work (although not the salary costs). Australia State of New South Wales The PAC publishes an Annual Review of its work. It includes highlights of hearings and recommendations and implementation actions by the Government. A table summarizes the timeliness of Government responses and the number of recommendations agreed to. Additional tables show who originated the committee s inquiries - government, Auditor General or self-initiated (mostly the latter) - and which members attended which meetings Australia State of Victoria PAEC s Annual Report is clearly a good practice. Objectives, impacts and plans are identified. The report for shows that the Committee met its targets for work completed but not its timeliness targets, however does explain the reasons for the latter. It contains a thoughtful chart showing how the Committee s inputs and activities can lead to better scrutiny of government, implementation of recommendations, improved financial and management practices, and ultimately to better government 11

16 performance. It recognizes (realistically) that implementation of its recommendations often must wait several years for the Government to make legislative and policy decisions. It set a target for of having 75% or more of its recommendations accepted, and it actually had 82% accepted, partially accepted or accepted in principle. There is no data on the recommendations actually implemented, although the Annual Report states that the majority are. Victoria also publishes the cost of its enquiries and this is also considered to be an important performance measure. Identifying the factors that lead to effective committee performance Australia Commonwealth Government In presentations to international meetings 14 and to other PACs, the Joint Committee on Public Accounts and Audit (JCPAA) identifies six critical success factors for itself: Clear underpinning legislation Independence Wide role and extensive powers, defined in legislation, to report on any income or expenditure matter Transparency of activities Multi-party, high quality and committed membership Links with an independent Auditor General Australia State of New South Wales PAC supports the four success factors proposed by the 2002 WBI Study 15 : Having a broad scope (meaning looking at road conditions and not just traffic accidents or doing additional detailed work) Power to select issues without government direction (and also to initiate enquiries) 12

17 Power to report conclusions, suggest improvements and follow up on these Strong support from the legislative auditor, members of parliament, and research staff that creates a unity of purpose about PAC work. PAC commissions a review of its own effectiveness (whether published or not, this is a good practice ) Scotland The Scottish Parliament was established when powers were devolved from Westminster, the Public Finance and Accountability (Scotland) Act was passed in 2000, and an Audit Committee began operation. At the end of Parliament s first term in 2002, the Audit Committee commissioned a Legacy Study 16 by independent academic experts to identify international best practices and to suggest improvements for the next committee to consider. The wide-ranging report raised many issues for consideration to improve the effective powers and practices of the Committee in the form of questions, such as the following four questions about increasing the impact of PAC work (paragraph 0.11): -Could the output of reports be greater, without affecting their quality or the scope for public notice of them or action to be taken on them? -Would the publication of..its follow-up procedures, and the dissemination of its reports, enhance public awareness of its work? -Should the Committee s annual report be more substantial and informative? -Are the Committee s arrangements for tracking progress on the implementation of its recommendations...as robust and transparent as they could be? 13

18 Author s Comment: These and others asked in the study are good general questions. To date, there does not appear to be any action on its recommendations. Australia State of New South Wales PAC published a History of the Committee 17 (September 2003) during its first 100 years It concludes it has been more effective since its mandate was expanded in Since that time, the Committee has had the power to initiate its own enquiries, and has a permanent Secretariat of parliamentary officers. It assesses itself favourably against the four WBI study success factors. Strengthening of the PAC s statutory powers received bipartisan support in 1982, and since then has been supported by all political parties and independents (as well as the media). The New South Wales Annual Review states that PAC inquiries have contributed to or been entirely responsible for restructuring government agencies and systems. 18 In the public health care system for example, the PAC has driven improvements in the accountability of hospitals and the efficiency of the Home Care Service. In the public sector generally, the Committee has provided impetus to the adoption of annual reporting, accrual accounting and the strengthening of internal audit. UK Central Government In 2001, the PAC commissioned a review by the National Audit Office on the impact of its work. The review, which was for the Committee s private information and was not published, considers three key indicators of impact: the acceptance and implementation of PAC recommendations for improvement, the views of senior public servants about the usefulness of the PAC s work, and the quality of press coverage of PAC reports. The assessment also reviewed some known examples of PAC reports that had been implemented, including a recent follow-up report where the government took action to abolish an agency. Although there are no current plans to repeat this exercise, the NAO keeps the implementation of PAC recommendations under constant review. 14

19 Western Australia The Public Accounts Committee commenced an inquiry called "The Review of the Role of the Public Accounts Committee: Ensuring Public Sector Accountability in the 21st Century" in The committee has not yet reported. 19 South Australia The Economic and Finance Committee in 2003 resolved to inquire into its own roles and functions, after examining committee powers in other jurisdictions. This committee has not yet reported. 15

20 Conclusion This brief review has identified some examples of practices in other commonwealth countries that might be of interest to Canadian Public Accounts Committees, such as setting objectives and preparing an annual report that discusses the performance of the committee. 20 Although there are few independent or academic assessments of PAC performance, there is a lot of interest in Britain and Australia in improving the effectiveness of the PAC and of Parliament itself. Some experiments in evaluation are under way and are worth watching. But as yet there has not been a lot of progress in that few if any committees seem to be addressing the issue of their own performance in a rigorous and systematic manner. Each committee has different objectives, and thus different factors will affect their success. What light does this review shed on the continuing validity of the recommendations in the 1981 CCAF study and the 1989 guidelines of the CCPAC? They deal with many important matters that have concerned other PACs over the years, and they may even have influenced the design of new PACs, for example in Eastern Europe. But powers and practices differ dramatically for example, the chairs of committees in Australia are from the governing party, unlike in Britain and Canada. What is considered an essential requirement in one jurisdiction may not be as important in another. And, as previously noted, there is a shortage of information on the actual performance of PACs. Without evidence linking powers and practices with results, it is difficult to identify the most important success factors the dealbreakers without which a committee could not be effective. Some attempts have been made to prioritize the CCPAC guidelines and others, separating absolute requirements that committees need to have, from those that are just nice to have. In the World Bank Institute study in 2002, there was general agreement among the PACs surveyed on a framework of powers and practices for an effective PAC: Having a broad scope (meaning looking at road conditions and not just traffic accidents or doing additional detailed work) 16