Accountability

Public Accounts Committee Legacy Report

On the last day of the last States meeting of the 21012-2016 term I presented the legacy report of the Public Accounts Committee. I have been proud and honoured to represent the Committee for 4 years and believe it is in a better place than at the start of the term. My speech is below.

 

Sir, I am pleased to present the legacy report of the PAC for this term. It is not my intention to go through the contents of the report given this late hour both in terms of the time of day and with respect to this meeting. It is a comprehensive record and members are only being asked to note it after all – and more on that later.

What I will do is focud on just 3 aspects of the report and then look to the future.

 

The present Committee had only just put its feet under the table when we were informed of a fraud committed against the States of £2.6m. In fact it was just a month into this term. This States has often been blamed for that event. However, sa I stated at the time the Committee published its report into the states of financial controls and risk management at the time, this was an incident waiting to happen.

Reports produced int he past, including those of previous PACs has, for whatever reason, been ignored. I am pleased that this States has acted on the findings of this PAC’s report which reflects the understanding particularly of the CM and PSD Minister of the time and the T&R Minister, in particular, as to the seriousness of the issue, as well as the pressure from the Committee to ensure our recommendations were acted upon.

Our second report on financial controls demonstrated the improvements made. However, the Committee is concerned that the focus on risk management will be lost as attention turns to public service reform. It is therefore critical that the Scrutiny Management Committee monitors developments closely.

I would no like to turn to the FTP, which has dominated much of this term. The Committee ha spent a considerable amount of time reviewing progress, or otherwise, of what was one of the most significant programmes of work ever undertaken by the States of Guernsey. The Committee took various approached in order to cover off various aspects of what was a complex area.

The Committee on a regular basis called in the T&R Minister and officers for updates as well as having a direct input on improving reporting for the Policy Council. The cost/benefit review which looked at the largest projects in the FTP acknowledged that savings has been made and found evidence of some excellent initiatives but expressed concern over some of the calculations and, more importantly whether certain savings would indeed be sustainable. And in addition, the Committee fought vociferously and successfully against the payment of commission to the consultant in respect of a transfer of £650k from general review to the Guernsey health service fund as it did not represent a saving to the taxpayer.

Finally, in relation to the FTP and subsequent to this report, the Committee held a public hearing where it questioned the T&R Minister and States Treasurer principally on the legacy of the programme and lessons learnt. More particularly on the transformational aspects.

I would like to thank the Minister for his openness at that hearing and I would recommend that the Hansard record be read by those involved in the Public Service Reform, both politicians and officers. I want to see public service reform work. I think we have a great opportunity to make it work but we need to understand lessons learnt.

Much of the Committee’s work as, by necessity, to be undertaken behind the scenes, this has included developing a more robust annual audit and accounts production process, providing greater value for money for the taxpayer as well as providing advice and recommendations which have considerably improved the States of Guernsey’ financial and resource management policies and procedures.

The last are I would like to focus on is post implementation reviews. Sir, recent headlines implied that projects undertaken by this States has been wasteful. However, I think it is important  to make clear that several projects we looked at took place in the previous term and one, the airport terminal , over a decade ago. There has been a significant improvement in the management of projects since then. However, it is true that lessons do still need to be  learnt and money is still being spent unnecessarily. It is for that reason that the Committee recommended that the Policy & Resources Committee in the next term look at placing PIRs in the public domain.

Before ending, I would like to leave a message for the future SMC.

 

  1. Firstly, work together as a team. It has been a pleasure working with a bunch of intelligent people who have worked together, can have robust conversations, but listen and respect each other’s views and come to a consensus. The PAC has certainly demonstrated that it can be done. We live in a consensus system and it is as important for the SMC as it is for every other Committee of the States. I just hope that continues in the next term.
  2. Secondly, don’t follow your own personal agenda. This will be even more important to be aware of where the whole scrutiny function is concentrated in just 3 Deputies and 2 Non-States Members; and
  3. Thirdly, Remember that what you want is to make government perform better. That can mean a balance between making a quick headline and working behind the scenes to make things happen. A recent report into the effectiveness of Westminster select committees in the last term stated that whist some committees took the big bang approach, they did not necessarily produce long term improvements. In fact it can lead to the bunker syndrome. A balance needs to be struck.

 

Sir, finally, and without wanting to make this sound like an Oscar acceptance speech, I would like to thank all those members of the Committee during this term. It has been a realtievely stable committee with changes only arising from the untimely death of Alderney Rep Paul Arditti and the departures of Deputies James and Le Clerc for an easier life on HSSD. I thank everyone for the positive contribution they have all made.  I have been honoured to represent you in this Assembly.

There is an old adage that says, It should be noted that if you have something to note, then note it. Do not note that the item you wish to note should be noted. With that in mind, I ask members to note this report.

Increasing the Powers and Resources of Scrutiny

The Public Accounts Committee and Scrutiny Committee laid a joint policy letter to the States at the February States meeting. This was very important to me as I had wanted to increase the powers and resources of the scrutiny function before I was elected and everything I have witnessed since I was elected as Chair of the Public Accounts Committee demonstrated to me why this was necessary.

I am pleased that the policy letter was passed, with an amendment on funding that we did not oppose. This means that the new Scrutiny Management Committee will be better placed under the new machinery of government. Below is my speech.

 

Sir

This policy letter arises from an amendment placed by myself and the Chair of the Scrutiny Committee to ensure that the powers and resources of the new SMC were agreed before the end of this term. We could have decided to go with the original proposals in the SRC report, stating that this should be left to the new Committee to consider. However, we believed that it was important that it should be able to hit the ground running and get changes put in motion as soon into the new term as possible.

It is important to stress at the outset that this States has already agreed the structure of scrutiny that it wants for the future and that it should have more powers and resources. This policy letter is therefore following the direction of the States in setting out what it believes those powers and resources should be.

It is also important to make it absolutely clear that what we propose is not a pick and mix; our proposals set out the minimum requirement to give effect to the new scrutiny structure and reflects our 4 years of experience and more in some cases, of the current system.

We have concluded that specific areas require significant strengthening to ensure that effective scrutiny can be provided.

I am not going to go over all these now, they are clearly set out in the report, but I will focus on some key points.

Firstly, the power to compel, or to use the standard term, ‘the power to send for persons, papers and records’. A power that is standard in the UK and other Crown Dependencies.

The  appropriate legal infrastructure will need to be in place to ensure the enforceability and legality of the proposed approach. Powers to send for papers and records are already vested in various statutory bodies today, such as the GFSC, Children’s Convenor and CICRA. In our view, therefore, the drafting of such legislation should be relatively straightforward.

Secondly, rights of privilege should be extended to any person giving evidence to scrutiny panels and hearings.

At the moment a person attending to give evidence, or producing any document to the Scrutiny Committee or the Public Accounts Committee is entitled to the same immunities and privileges as if they were a witness before the Royal Court, whereas a Deputy enjoys absolute privilege. This may have been an error in the drafting of the legislation as it was intended to be provided for in the original Billet.

This will allow witnesses to be able to speak freely to their elected representatives, a fundamental democratic right.

Thirdly, in terms of  visible impartiality we  recommend that a memorandum of understanding should be in place between the Principal Scrutiny Officer and the Chief Executive that guarantees the operational independence of the former whilst providing him or her with the appropriate management support.

To provide the necessary balance, the Principal Scrutiny Officer must ensure that, any review undertaken complies with the SMC mandate, provides value for money, and is in the public interest. Where a review does not meet these tests, in the opinion of the Principal Scrutiny Officer, the Principal Scrutiny Officer can be formally instructed to proceed by the Committee through a written direction.

Now, we turn to a recommendation in this report that is certainly very timely. That is the ability, in certain contexts, to be able to be review the internal legal advice provided to Departments and Committees.

This is a complex area. However, at Westminster, legal advice has been questioned by Select Committees in certain circumstances. To allow for this to happen, UK Ministers, in effect, waive their insistence on the confidentiality of the legal advice their departments receive.  In the UK, the decision to disclose the Attorney General’s advice on the legality of military action in Iraq, has created a high level precedent which will make it difficult for governments to hide behind the claim that ‘we never make public the advice of our Law Officers’. To those who argue that this was an exceptional case, I would respond that the only thing that was exceptional about it was the level of political pressure which forced eventual disclosure.

Something to consider in light of recent events.

It is clear to both current Committees that the content and rationale of the advice provided to politicians and staff by the officials within St James’s Chambers, should be subject, when appropriate, to review by Parliament. And, standing here occupying the place he used to take I am reminded that this is something that the Late Alderney Representative Paul Arditti felt very strongly about it. I do think it is sad that he can’t be taking part in this debate.

 

Yes, the mechanisms need to be thought through carefully. However, a complete bar on the ability to scrutinise legal advice, is inconsistent with the principles of openness and transparency that lie at the heart of good government. The scrutiny arrangements and perhaps as importantly, the culture within government, must allow for parliamentary oversight of this type of material when it is appropriate.

Both Committees have also expressed a desire for additional clarity in situations where there is uncertainty as to whether advice is legal advice, or rather advice from a Law Officer on a non-legal matter. We believe that guidance on this matter should be clearly drawn to avoid a situation where appropriate parliamentary scrutiny is blocked by the refusal to release advice from a law officer on a non-legal matter.

Legal advice given to States Departments and Committees is primarily provided by the Law Officers of the Crown and lawyers working under their direction at the Law Officers Chambers. Where advice is given by a lawyer to a private or commercial client, that client could decide to “waive” privilege at their discretion and disclose the contents of the advice. However, different considerations arise in relation to advice given by, or on behalf of, a Law Officer to Departments, Committees and other public office holders.

However, as was demonstrated in the disclosure of Lord Goldsmith’s advice on the legality of the war in Iraq and of Jeremy Wright’s own recent advice on the legality of RAF drone strikes on British ISIL targets, there are “exceptional” circumstances when at least the fact of giving advice is disclosed. For the reasons set out above, it is suggested that the situation in Guernsey should mirror that described in England and Wales and, as that approach changes, so should ours.

The key point here is that in certain circumstances it should be possible to view the advice that led directly to decisions being made. This may be very rare but it is also essential. Advice is just that – advice; Boards take the decisions. And if political scrutiny is to mean anything, it has to be able to test the judgements which Boards have made based on the advice they have received.

 

So, last, but by no means least, we get onto the sticky matter of funding. It is very difficult for me, as Chair of Public Accounts Committee to come here and request extra money, but I knew that would inevitably be the case at the start. I would hazard a guess that all members would have expected that, more powers and resources would come at a cost. But, remember, it is not about cost, rather value for money. It will not mean more of the same, but the ability to undertake urgent hearings and respond faster than is possible at present. We are only going to get a stronger scrutiny function if we allocate more resources to it.

 

If this assembly wishes to have effective political, financial and legislative scrutiny then it will cost more money. If members believe that this level of additional expenditure is unjustifiable then so be it, but please do not then constantly reprimand the new SMC for not addressing the numerous areas of public concern that arrive throughout the next political term. This month and next we will be debating areas of huge strategic importance: the alphabet soup of SLAWS, CYPP, SCIP as well as Waste, perhaps CHP and dare I say education?

As things stand the current resources are woefully inadequate. From a financial scrutiny perspective alone, we have just 3 staff to scrutinise 1/2bn of States general and SSD annual expenditure. That’s when no one is ill or on holiday. Compare that with Jersey with spends nearly £800k on the Auditor-General’s office, £311k on Scrutiny, excluding staff costs which are probably a conservative £500k, plus a dedicated building and all that excludes the child abuse enquiry for which £20m has been set aside. Yes it has a ministerial system, but that doesn’t mean that scrutiny should be funded any the less. And in the next term, with a more powerful centre and fewer Deputies, a stronger scrutiny function will become even more important.

It’s not as if what we are asking for is unreasonable. It represents 3 more staff, one of which is for legislation, which currently has no resource and £150k for specialist advice which will be necessary as the SMC focuses on complex areas, where generalist knowledge will be inadequate.

And don’t forget the Deputy resources that will be lost from scrutiny as a result of the new machinery of government. In fact, we have calculated that the loss in terms of Deputy and Non-States members’ time comes to the equivalent of £191k.

Also, remember that in the last budget we agreed to pay an extra £900k for SCIP programme and £200k for additional Policy Council resources. Why is that OK, but not the resources to scrutinise it?

 

As William Gladstone famously pointed out – ‘Men are apt to mistake the strength of their feeling for the strength of their argument. The heated mind resents the chill touch and relentless scrutiny of logic.’

Gladstone correctly identified that many well-meaning politicians cannot see the weaknesses in their own arguments – this is why Scrutiny is so important

And, In the words of Arthur Conan Doyle’s famous fictional detective, Sherlock Holmes “It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”

This is where Scrutiny comes in – no individual member has, or will have, the time or supporting resources to fully investigate a significant portion of government policy.

Independent political scrutiny is essential and a properly-resourced scrutiny system empowers the individual Deputy as a member of a scrutiny panel.

The recommendations made to the States in this Policy Letter provide for a future scrutiny function with greater capacity, powers and resources to ensure Committees and their agents can be effectively held to account by the SMC.

I believe we have provided an appropriate balance in the context of the changing machinery of government and therefore ask that all members fully support increasing the powers and resources as set out in this policy letter.

SRC – 3rd Policy Letter – SMC powers

I was delighted that an amendment I laid against the policy letter, seeking to extend the powers of the new Scrutiny Management Committee to agents of government, was approved in November. This will definitely strengthen scrutiny in the next term. My speech is below.

Sir,

In a nutshell this amendment seeks to ensure that the scrutiny function’s powers are not weakened, but enhanced, in the next term.

Paragraph 6.1.3 states that the States Review Committee was reluctant to impose too many qualifications on what and whom the Scrutiny Management Committee should scrutinise. However, the duties and powers  of the Scrutiny Management Committee as set out in Appendix 1 only enable it to scrutinise legislation, policies, services and the use of money and other resources for which committees are responsible.

However, under section 9.4.4 of the Stares Review Committee’s second policy letter it states that ‘the powers of the Scrutiny Management Committee would be strengthened further by affording it the right to scrtuinise, and to call in witnesses ane evidence from a greater range of roganisations where are in receipt of public funds or which has been established by legislation.

This amendment merely seeks to replicate that statement.

Without this amendment the powers of scrutiny will be weakened as, to some extent the Public Accounts Committee has powers to scrutinise the spending of public funds provided to other bodies and an example is the review of the contract with MSG in 2011. The powers must explicitly state that the Scrutiny Mgt Committee can continue to investigate public bodies in receipt of states funds, such as SJARS, GHA and other providers.

However, this is not just about money. Members will be all too aware how the government service model is moving to a concept of a partnership with outside bodies. Indeed, the public sector reform document we approved recently makes that clear;

 

‘Civil service must enable government to involve the community in developing policy. A good example of this is SOG’s formal partnership for working with the 3rd sector through the Association of Guernsey Charitieis, the Social Compact signed in Autumn 2014’.

Of course, with policy development with external parties will come outsourcing of those services to those bodies.

The agencies and organisations involved in delivering government policy have evolved significantly since the original mandate was agreed in 2004 when the Public Accounts and Scrutiny Committee were created.

Since 2004 the methods of delivery of government programmes have diversified to encompass third sector organisations, private sector providers and a number of other agents of government, where agents are defined as organisations created or commissioned by government to undertake functions or supported by government to supply services but are not Departments or Committees. In 2012 the government provided grants and subsidies totalling over £30 million to such organisations in Guernsey.

The reviews undertaken by the current Committees have highlighted the problem that agencies and organisations essential to the delivery of government policy or services, which the Committee is mandated to review, are beyond the current remit. As a consequence democratic oversight is curtailed.

A number of agencies and public offices have been created to minimise the risk of political interference in certain types of decision-making. Where agencies have been set up with a governance structure created to minimise the risk of political interference, it should  not be the intention of the Scrutiny Management Committee to introduce it. The changes suggested are not intended to limit the autonomy to act independently or curtail the commercial freedom of any agencies or organisations.

BUT organisations of this type are granted operational independence whilst operating under the direction of government at a policy level. Many of these agencies do undertake functions that should be subject to appropriate scrutiny. In the UK, select committees regularly question government agencies, regulators, and commercial organisations (and their legal advisors) on their activities. This is seen as an essential part of Parliament’s retrospective oversight of the work of these agents of government.

We only have to remember the recent revelations over the charity Kids Company, something that the PAC in the UK recently described as a failed 13 year experiment.

Now, that doesn’t mean what happened there wil happen here, and under our system of government  it would be very difficult to see how that same exact scenario could be repeated. BUT if SMC is to be and I quote from policy letter, ‘be empowered to shape scrutiny as it sees fit, it needs to be able to do so with as much flexibility as possible.

That is why the powers as set out in the report are insufficient and why I urge memebrs to support this amendment.

Aurigny recapitalisation

I made the following speech about the recapitalisation of Aurigny in November 2015. The reference to running an airline arose out of a comment made by Deputy Lester Queripel who said anyone could do it, to which other Deputies responded that it was not so simple.

Sir,

I don’t profess to know anything about running an airline but what I will focus on is something I do know more about and that’s finance and accounting. I agree with Deputy Harwood that we have no choice but to support this report BUT, as Deputy Domaille would say….

The T&R Minister has frequently made the point that we should be making the right decision in the right order. I would question whether we are doing that in supporting the capitalisaition now. Given the issues raised by the Scrutiny Committee report and specifically the need to determine a strategic way forward – should we be investing £25m into this venture above other worthy Capital projects?

 

We are all aware that a number of key social and environmental strategies have been and are going to be laid at this meeting seeking ‘revenue’ funding. In addition, the Budget debate last month highlighted that the ‘Capital Reserve Cash Flow’ is under pressure from numerous commitments.

 

The decision to invest £25m of public money, is a major decision and must be done so based on a strong evidence-based rationale that provides a convincing argument.

With regard to this specific SCIP project, the investment of ‘capital’ into a wholly-owned subsidy could quite frankly be perceived as a somewhat academic accounting exercise given that the ‘liabilities’ are effectively already held by the States.

However, the advantages to the Company of an influx of capital to address its insolvent position are obvious. Certainly ‘refinancing’ unattractive / uncompetitive overdraft and loans would certainly appear to be sensible. And if that is the purpose, I’m not entirely sure, even though the T&R Minister tried to explain this in his opening speech, quite why the Bond can’t be used.

The problem is that the management of the Capital Reserve is a complex balancing act involving £100s of millions of public money and the Policy Letters of this nature MUST provide clear rationale presented with ABSOLUTE clarity but it really doesn’t seem to be the case here.

Sir, prior to the debate I did ask the T&R Minister and CEO of Aurigny what the accounting treatment would be should this policy letter be approved. It was unclear from the States accounts, which is probably not a surprise, and it was difficult to ascertain when we did not have the accounts of Aurigny. The publication of the latter has helped, although it is still not completely transparent. Presumably the provision for accumulated losses of £19.9m within the States accounts will be reversed and a benefit will be seen in the general reserve where the provision has been posted to date. Interestingly, the provisions haven’t gone through the revenue account; this would be the expected normal accounting treatment and would have the effect of reducing surpluses or increasing deficits. It will be interesting to see how future losses are treated.

Furthermore, the ‘Return on investment’ is NOT clearly stated within the Policy Letter. In many ways, less would have been more in this Report; less background and more specifics on the rationale for this investment.

Whilst the recapitalisation course of action may be reasonable there is a lack of a coherent convincing argument presented within the Billet why this spending should be prioritised. I attended the Deputies’ briefing given by Aurigny and it wasn’t very clear from that. So I guess where I am on this policy letter is I want to support it, but that the authors to this report have hardly done their best to make a convincing case. Disappointing to be perfectly honest, especially given the sums involved.

I do welcome the review that will come out of the amendment we have just approved. It was something that I was pushing for when I was on Commerce & Employment.

So whilst I do have reservations over the recapitalisation I will support the report, as amended.

SRC – 3rd Policy Letter – annual uprating report

My third successful amendment against the SRC report set the same restrictions on amendments to the SSD annual uprating report as the budget. My speech is below.

Sir, a minor amendment, but it is important nevertheless. Basically this requires that amendments to the annual uprating report have to follow the same rules as the budget and be submitted in advance. I suppose the need for this report crystallised itself for me last month, when we debated both the budget and uprating report at the same sitting, but that budget amendments has to be submitted 7 clear working days before the debate, whereas there was no such restriction for the uprating report and we received these right up to a day or 2 before the debate.

But that does reflect the inconsistency of treatment between revenue managed by T&R and that managed by Social Security. We only have to see how in the secondary healthcare debate how HSSD has to come to the States for funding for its half of the costs to negotiate the contract, whereas SSD does not. Perhaps that is for another day, but this amendment at least provides some inconsistency whenit comes to 2 important annual financial policy letter that come to this Assembly.

I urge members to support this amendment.

SRC 3rd Policy Letter – States’ accounts

I laid a successful amendment against the policy letter to ensure that specific time is set aside every year to debate the States’ accounts. My speech is below.

Sir,

I think it would be useful to clarify the effect of this amendment. It is not to set aside a whole day to debate the accounts, unlike the budget. All it does is ensure that the first item of business on the last States meeting before the recess is the debate on the States accounts. That is why, unlike for the budget, it does not refer to the ordinary business starting on the next day. It is presumed that ordinary business will follow on from that debate.

 

It will come as little surprise to members that I have laid this amendment, certainly given in the September meeting I expressed my and the Public Accounts Committee’s dissatisfaction at debating the 2014 accounts in September, the day in fact that the budget for 2016 was published!And it was pigeonholed between other States business.

This meant the numbers were less important than our ability to judge the T&R Minister’s ability as a fortune teller by comparing the foreword to the accounts and budget at the same time.

The effect of this amendment is to ensure that what we experienced this year, and last is not repeated and a specific slot is set aside for the States accounts.

Public Sector Reform – personal comment

I made the following speech on public sector reform during the debate in September 2015.

Sir, speaking personally, normally I have to say that my natural scepticism could have kicked in and I would say that it is a lot of nice, fancy words – ‘motherhood and apple pie’ – but little substance. However, I have already seen the Chief Executive practice what he preaches. The support that he has given the board of HSSD, over the last 10 months, demonstrates that quite clearly and gives me the confidence that this document will not gather dust.

I totally concur with paragraph 6.6. We Deputies should have less day-to-day involvement in the delivery of public sector services, but that public servants need to provide appropriate financial management and performance information to provide assurance to the boards – committees, I suppose we are meant to call them in the future – that those services are being run effectively and efficiently and in accordance with all relevant legislation and professional standards.

Now, that is all very well and good, but when it goes wrong we get the brickbats. Just witness the sea front changes. This is not an area of high level strategy and policy; it is about where lines are painted on a road.

Under this scenario, we should have been seeing officers dealing with the complaints, not the Ministers of Environment or PSD. Whether that will ever happen, I am far less certain, but to enable it to happen there needs to be trust. That does not mean that we, as politicians, should not continue to challenge and, despite what some might think, every Deputy with whom I have been on a board or committee these last few years has challenged management and should continue to do so. That is how positive change will happen, so long as the challenge is constructive, of course.

Finally, I would like to touch on the need to embrace technology. I believe that the appointment of a Chief Information Officer has already resulted in positive change through an expert ‘can do’ mind-set that gives me hope good things will happen. We only scratch the surface of what can be done with new technology at the moment, but it has the potential to provide real transformation, from telemedicine and telehealth, to enabling people to access services 24/7.

So will this work? After all, it is an immense programme. It is going take a leap of faith but, frankly, I do believe that is what we have to do. The key is leadership. Change will come from a change of culture at the top, with the engagement of those below. It is a mighty difficult job to do but, from this document and what I have witnessed in the last 10 months, I do believe that it is a risk that has to be taken and I, for one, hope that it succeeds.

Public Sector Reform – PAC comment

I made the following speech on behalf of the Public Accounts Committee during the debate on public sector reform in September 2015.

Sir, I will begin by speaking on behalf of the Public Accounts Committee and then I have a few comments speaking on my own behalf.

Sir, on behalf of the Public Accounts Committee, I would first like to pay tribute to those who have enabled this paper to be brought forward before the Assembly today. The Committee appreciates their endeavours and would wish to publically acknowledge that the Chief Executive has kept the Committee informed of progress, which has been very much appreciated.

The Committee supports the inclusion of the value for money work-stream as one of the central pillars of this programme and I can confirm that the current PAC and, I hope, the new Scrutiny Management Committee will be keeping a close eye on the effectiveness of this element of the programme.

I do think it is excellent in demonstrating how value for money does not mean cost. Many times, I am asked to investigate expenditure because of the cost. Last month there was a call on the bus service, on how much it had cost the taxpayer. However, as I pointed out to those people, cost is only one element of value for money. You need to think of need and quality. By way of example, the bus service subsidy was cut, but you could question whether that resulted in better value for money.

The Committee notes with interest that the Report states that the FTP made every public sector worker cost-conscious. We need to be reassured that this programme will now empower each and every worker to take the actions necessary to improve value for money. We also note that the consultation on this work-stream starts in the quarter four of this year, with the establishment of a value-for-money team in quarter one of next year. Now, this is a positive step and the Committee is willing offer its full support.

We have just spoken about the need for internationally-recognised accounting standards and, again, I will say that the Committee believe this in integral to enabling the calculation of the true cost of service provision.

Just to pick up on Deputy Gillson’s comments, this morning, regarding financial training for Deputies, I think it should be extended to the public sector and that such training for non-financial managers is essential for those with budgets they are expected to manage.

Now, once the value-for-money work-stream is established, the consultation completed and the framework developed, we would call upon the Chief Minister to support the production of a report to be brought forward for consideration by the States as soon as is practicable.

Learning lessons: the Committee’s rallying call has been that the States of Guernsey must learn the lessons – good as well as those not to be repeated – from the various initiatives undertaken. The Committee looks forward to such lessons related to change management, being fully embedded into the processes, culture and psyche of the Public Service, as it moves forward with the implementation of these reforms.

To answer Deputy Laurie Queripel, I can say that Public Accounts Committee has been pushing for a post implementation review for SAP from T&R and we want it by the end of this term. We have recently been sent draft terms of reference so things are moving but, like Deputy Queripel, I would like assurance from the Minister that the review can be completed within this term.

States of Guernsey Accounts 2014

Below is the speech I made on behalf of the Public Accounts Committee in September 2015.

Sir, speaking on behalf of the Public Accounts Committee, I would like to state up front that whilst the Committee does have a query surrounding the numbers, from the Committee’s perspective a big issue is not the numbers, rather the process around them.

For the third year running, the audited accounts overran the proposed internal timetable and a financial penalty is likely to be imposed by the external auditors. The Committee believes that the audit needs a greater level of support to ensure slippage from the timetable does not occur again and incur financial penalties – appropriate people, not volume of staff, push individuals in the correct fashion to enable them to achieve deadlines. Due to this slippage, the accounts were signed three weeks after the Committee was formally notified that they were going to be and, despite requests, no updates were forthcoming.

However, once they were signed they were circulated to the media but not to the Committee, the States’ financial watchdog. This is unacceptable. The Committee has written to the Minister expressing its dissatisfaction with this process this year and hopes that the Minister will ensure that this will not happen again.

I would like to continue by again covering some areas that the Committee has highlighted in previous years. The Committee is still concerned that there is no specific time set aside to consider and debate the States’ financial affairs, apart from within the agenda of the scheduled monthly States’ Meeting. The fact that the accounts are delayed two months and are once again being shoehorned into a packed agenda is unacceptable.

As an aside, although I am aware that the original intention was to submit the accounts to the June States’ Meeting, had the audit been completed in a timely manner this would have been achieved and Members would have been able to debate the accounts in a rather less busy meeting.

The Committee feels that the States’ financial affairs should have more priority within the Assembly and I will be making the submission to SACC, in addition to including this as one of the proposals in the upcoming policy letter on how the Scrutiny Management Committee should operate moving forward.

Deputy St Pier expects me to speak about the structure of the accounts and I am pleased I am not going to let him down again. Within the balance sheet on page 9 it once again states it is, and I quote:

‘not the policy of the States to capitalise fixed assets.’

– and –

‘The States made a decision in 2012 to adopt International Public Sector Accounting Standards and the intention is that this will be incrementally introduced commencing with fixed asset valuation and accounting.’

– but no comment as to when or how the Department intends to do so.

Although the Minister recently informed the Assembly that the plan for moving to a new set of standards was already underway, the Committee, through the work of its audit panel, does not believe that there has been any tangible response to its enquiries in this regard and does not have confidence that it is being given the priority it deserves.

In addition, the Minister stated in his response to me last year in this same debate that it was the Department’s expectation that, as a minimum, the trading entities would be FRS 102-compliant this year. This has not happened and the Committee would like the Minister to confirm that there will be substantial movement on this issue within the coming months, and keep the Committee informed of progress.

In terms of presentation, there is still no clear explanation as to the rationale for the uplift from Original Budget column to Total Authorised column within the main Income and Expenditure section, despite the Minister agreeing last year to consider some changes for this year’s accounts.

In fact, the overall clarity of the content within the accounts is still poor and does not appear to have improved. For example, within pages 3 and 6 there are three paragraphs giving explanations for the increase in both income and expenditure as relating to the revision to the funding arrangements for the corporate housing programme. This is very opaque and does not help the reader to understand what has actually occurred. This lack of transparency within the accounts prompted the Committee to conduct a review of how similar jurisdictions and large organisations produce their annual accounts, with recommendations for improvement to be published later this year.

For the last three years the external auditors have supported the Committee’s concern that the States of Guernsey does not have a current comprehensive set of financial directives in place. This was also highlighted in the Committee’s report on Financial Controls which was published in July. This issue has been raised to the Treasury & Resources Department by the Committee on a regular basis, as the Committee believes that this should be a fundamental priority for any organisation, but especially one that has gone through the transition to centralising the finance function as the States did in 2013. Whilst the Committee has been informed that that this is in hand, it would like confirmation that this is a priority of the Department and will be completed with some expediency and certainly before the end of this term.

The total authorised budget for routine capital expenditure in 2014 was £14.759 million but actual costs were just over £8 million; therefore over £6 million was authorised for departmental usage but not spent. The Committee questions whether this means that the departments are initially over budgeting or not maintaining the properties under their care, as scheduled to do. However, the Committee is also concerned that departments are unclear what actually constitutes maintenance or routine capital expenditure, and feel that the clarity of accounting standards would help rectify this uncertainty.

Also in respect of capital generally, the Committee is concerned that although £36 million was transferred to the Capital Reserve, the level of capital expenditure was only £18 million and falls woefully short of the fiscal policy framework parameter of 3% of GDP. The level of GDP at approximately £2.2 billion, that figure should approximately be about £66 million.

Looking at pay costs, and more particularly the Senior Employees Gross Cost Analysis on page 25, the 2013 analysis and total number of employees shown are different from what appeared in the 2013 accounts. These accounts show a reduction of 16 new employees compared to the 2013 comparative. However, taking the 2013 figure, there has actually been an increase of two. The Committee would appreciate some clarification on this, in respect of… the Committee believes that there should be much more detail in this area and that the higher paid posts should be identified in the accounts, as the States of Jersey details theirs.

As mentioned in my speech on the GFSC accounts earlier this year, the Committee wrote to the organisation last year on this very issue and is grateful that it has taken on the Committee’s comments and made improvements.

In closing, the Committee would like to comment on the bond issue. The Investment Panel of the Committee met with the State’s Treasurer to discuss the governance arrangements around the bond issue and to try to comprehend returns anticipated in both the lending and investment of the surplus funds.

The Committee also wrote to the Department for further clarification on particular concerns it had and, although a reply has been received, feels that it needs to highlight some of its concerns to the Assembly.

Firstly, the Committee finds it surprising that there was no commitment from the trading bodies as to amounts intended to borrow before the bond was finalised, as this would surely have helped to determine how much the States would need to raise.

The external auditors informed the Committee that as of May 2015 no external borrowings have been repaid, nor have any loans been made by T&R to the respective States bodies to utilise the monies raised. It said the proceeds had been invested in the short term in the general investment pool.

The Department, in its response to the Committee’s recent enquiry, advised that approximately £100 million of both internal – that is Cabernet, JamesCo and HSSD – a combination loan, an external GHA £52.9 million borrowings have been, or are in the process of being, transferred to be funded from the bond issue proceeds.

However, some States entities still have external borrowings guaranteed by the States where it would not be cost effective to break existing arrangements and utilise the bond issue, and others where the timing of funding arrangements have changed and the funds are not now required.

A major concern of the Committee is that the States may now have found itself in a position where the overarching debt limit, as detailed in the current fiscal policy framework, has been reached, whilst there is also additional external borrowing on behalf of some of the trading bodies.

The Committee is therefore disappointed that there is no narrative included in the accounts regarding post balance sheet events and would appreciate an up-to-date position being given to the Assembly, as soon as practically possible.

Secondly, the Department informed the Committee – again in response to the Committee’s recent enquiry – that there was no direct benefit to the States in having issued a bond; rather lowering the cost of capital to the entities to which loans are made could result in a significant downstream saving to their customers. But this is in contrast to the Minister’s Budget speech last October when he stated that the States would be acting like a bank:

‘We will borrow on the one hand and then we will lend on with a small mark up on the other. The taxpayers will have obtained a small return in the process and the entities and their customers will be better off.’

Finally, information given to the Committee has resulted in some uncertainty over the returns currently being made on the bond proceeds and we would welcome confirmation from the Minister that these do at least match the costs of finance.

GFSC Accounts 2014

The GFSC’s 2014 accounts were debated in July 2015. My speech is set out below.

 

Sir, Before commenting on these accounts, which incidentally have been prepared in accordance with recognised accounting standards and are accompanied by an audit report that gives a true and fair view, I would like just to thank the Commission for the informative sessions that they have held for Deputies over the last couple of months. I think those of us, small  in number that we were, were impressed by the tone of the meetings and the greater approachability that seems to have developed.

For years the Commission has been focused on instituationsl investors and large international businesses. However, it is evedent that there is a strong realisation of the need to protect to the smaller, local investor. Sadly, this will not help those who have suffered through a lack of focu in the past. However, with a FSO and new rules setting minimum qualifications for investment advisers, as well as helping in the campaign to make people aware of scams, I think this is changing.

In terms of the accounts, I should ike to inform this assembly that the PAC did contact the Commission last year regarding disclosures in their accounts relating to pay bandings. I am thankful to the Commission for taking note of our comments which has resulted in an improvement in the disclosure this year.

Finally, I admire the the Commission in the way it has restrained their costs, but note that I believe it  likely, from the meeting we had with GFSC, that we will receive a request for an increase in fees later this year. Whether the savings in 2014 ae sustainable, therefore remains to be seen.

Having said that, the Commission should be commended for listening and taking action at a time of increasing pressure of work from beyond our shores.



Mobile: 07781 139385

Email: heidi@heidisoulsby.com