Machinery of Government – amendments

I laid successful amendments against the States Review Committee’s proposals for changes to the machinery of government. These focused around the new proposals for the scrutiny function, which I did not believe would be effective. In particular, one dealt with the financial scrutiny function requiring a standing committee and the other instructed the States Review Committee to consider the necessary power and resources that the new scrutiny function should have. My speeches reflect the frustrations experienced over the previous 2 years in working with an under-resourced Committee that also has limited powers in the current structure. I was delighted that fellow members understood this and the amendments were unopposed.

Sir, before I begin I would also like to thank the SRC for not opposing these amendments and in particular would like to thank Deputies Conder and Fallaize for their time and effort over the last week in enabling us to get to that position.

Now, I would like to say at this point that I am very aware who the last incumbent of this seat was and how it is sad that the late Paul Ardiiti is not here with us today to participate in this debate. However, I’m sure he is looking down on us today and critically reviewing what we are saying. After last week I’m just glad that I’m not  up there with him. Though I do wonder whether this chair might be jinxed.

Members will be aware of a letter I sent as Chair of PAC to the Cm as Chair of SRC earlier this week. As those of you who read it may have guessed, it  was borne as much out of the increasing frustration that the PAC has experienced in trying to fulfil its mandate over the last 2 years as it was the proposals in the report.

I will go into more detail when we debate my amendment relating to powers, resources and impartiality, but I thought it important that I make that point at this stage.

So, with regard to the amendment before us now, I would like to endorse what my colleague Deputy Rob Jones has  said and would just like to make some additional comments.

Speaking as Chair of PAC and Vice Chair of Scrutiny, like Deputy Jones, I do believe the concept of a Scrutiny Management Committee is a good one. This was a Belinda Crowe proposal that made a lot of sense.

 

The current Committee structure does not support rapid response to issues as they happen.  Certainly, it makes a joint review next to impossible where you have to get agreement from what can in theory be 18 members.  No, I always supported this aspect of the Crowe report. Indeed, in my speech when I sought election as Chair I said how I would like to see the functions merged.

 

This has already happened at staff level, with a joint Principal officer and works very well.  An example being the public hearings held by Scrutiny, which required the input of all staff to ensure they ran smoothly.

 

BUT, as I stated in my letter,  the Committee believes that it is essential that the financial scrutiny function is led by a member of the States who then has the opportunity to speak in the States of Deliberation, challenge financial matters on the floor of the Assembly and is genuinely accountable to the people of Guernsey. It is our belief that the real value of scrutiny is realised when interventions are timely and, given the inadequate professional financial resources at the Committee’s disposal, these methods have been used by this Committee to influence debate and raise matters of urgent concern. I would refer to questions and comments made about the budget, accounts, FTP, risk management and financial controls and more recently the waste and transport strategy debates. These have led to government action with far greater focus on risk management, the action plan for the ITO and improved reporting of FTP.

 

I should also like to make it clear that the Committee is not opposed to ‘task and finish’ panels. Indeed, we operate such a system now. And we also like the idea of co-opting members and non-states members to such panels.

But, our concerns relate more to the fact that all panel members will have to be recruited for each review. Not only will this mean that it will be harder to build up skills and expertise but also, increase the administrative burden, without necessarily adding value.

 

Although we did consider alternatives to resolve these issues, such as 3 member 2 nsm combinations, it became apparent to the Chair of Scrutiny and myself  that it was too soon to be able to determine the exact make up and structure of the SMC until we knew the future shape of government. Setting out the detail of the scrutiny structure at the same time as govnerment in 2004 led to the problems we have now.

In addition, the make up of such a Committee needs to be considered in terms of how technical resources are made available. I won’t go into detail now on resources, I will leave that for the specific amendment that deals with it. But, it is my view that you can’t look at the membership structure without knowing what support they will get.

The fact we can agree basic principles now is the important thing. That is why we have this amendment before us that enables the SRC to consider scrutiny in light of what is agreed this week and in the context of having the basic structure agreed. I will be happy working with SRC to ensure that we get a structure that does work and that we have a scrutiny function that matches the system of government that we want and is fit for purpose. Working together I believe we can make it happen.

 

 

 

 

Financial scrutiny

Sir,

This amendment reads…..

To add the following to the end of proposition 9b:

“but also to acknowledge that some tasks which are currently undertaken by the Public Accounts Committee require continuous scrutiny and will need to be organised and co-ordinated by the Scrutiny Management Committee on that basis and the most appropriate structure for fulfilling such functions will be determined in Stage 2 of the Review;”

 

This amendment relates to a lesser known, but no less important aspect of the work currently done by the PAC and whilst I don’t want to take up a lot of Members’ time I think it is worthwhile that I highlight aspects of it given what is being proposed. Whilst many only think of scrutiny committee work  in terms of reports and hearings ie what they see, an invaluable part of the mandate of PAC relates to its interaction with and questioning of both internal and external audit.

 

Members will be aware that this Assembly elects the external auditors on the recommendation of the Committee every 5 years.  The Committee is then responsible for agreeing the contract with the auditors. However, this is only where our involvement starts. The Committee has appointed an audit panel which is in regular contact with the auditors throughout each year as they prepare for and then undertake the annual audit. In reality, the audit of an organisation of the size and complexity of the States is a year round job.

The Committee has a crucial role to play in the process as, not only can it inform  auditors of potential  areas that they may wish to focus on, but also learn from the auditors areas of concern to follow up with Officers and Political boards. It also has a duty to monitor the performance of the auditors and to inform this Assembly should it believe that they are not performing their duties adequately.

It is a part of its role that this Committee has taken very seriously from the moment it took office and made significant improvements ,  ensuring we get value for money from the external audit process.

This role has taken on even more importance over the last 18 months as a consequence of the SAP implementation on 18 December 2012. It would be an understatement to say that the implementation didn’t go entirely smoothly and this had knock on effects for the audit. In this regard, the Committee has taken a very active role as part of fulfilling its mandate to ensure States’ bodies operate to the highest standards in the management of their financial affairs.

We haveregularly called in the States Treasurer to panel meetings to seek assurance that issues raised by the auditors were being resolved and probed the auditors on their findings from their audit closure report. We have also this year introduced a detailed questionnaire sent to finance directors in each department to obtain their feedback on their experience of the audit and how the auditors conducted their work. The responses have been invaluable and will be used to follow up on issues and further improve the process.

This work and specifically the monitoring of risk management  and controls is one of the most important roles PAC actually undertakes. And if anyone here doubts that, I would like to remind them that the States of Guernsey was defrauded of £2.6m in June 2012 and the subsequent report by E&Y made it clear that this was an incident waiting to happen. I make no apologies for the fact this Committee has  focused on risk management during this term. Indeed, we will be releasing details of our review into financial controls since the SAP implementation shortly. After all a major reason advocated for spending  £7.9m on the Shared Services model in 2011 was that it was expected to lead to better information governance through strong internal  process controls and States wide application of policies, processes and procedures.

 

And this leads to the PACs role viz a viz internal audit. The Committee meets the Head of Internal Audit and Assurance on a regular basis and we also receive an annual report of activity during the previous years as well as planned reviews for the next 12 months. I will speak more about our relationship with internal audit in my other amendment, but what I would say here that this interaction is extremely important, especially where the head of internal audit also shares the role of head of assurance where there is a potential for conflict of interest. It also informs the Committee of areas that it may wish to review or follow up where concerns have been raised.

Now I know Deputy Fallaizesaid on the phone-in on Sunday that theOrganisation of the States’ Affairs wasn’t a sexy subject and I’ll readily accept that talking about internal and external audit probably confirms it, after all auditors make economists seem exciting, although not actuaries.

However, I hope this gives a flavour of why the Committee believe this amendment is necessary and why we believe consideration needs to be given to this work when finalising the new scrutiny structure. I thank the SRC for not opposing it and hope all members will be willing to support it.

 

 

 

 

 

Power and resources

Sir, ‘no system of government guarantees effective scrutiny and without the proper culture, organisation, systems and processes in place, scrutiny will not be effective in any form of government.’

These aren’t my words, this is a quote from the report on Financial Scrutiny by Jim Brooks Consulting, published in early 2012.

Now a lot of publicity has been given to the Belinda Crowe report of 2012 into the Scrutiny Committees. However, less attention, wrongly in my view, has been given to the Brooks report that dealt specifically with financial scrutiny. In many ways I think it was superior as it considered the scrutiny role in the round whereas the Crowe report was focused far more on the structure.

It is this quote that sets the background for this amendment, which reads as follows;

To insert a new proposition between Propositions 9 and 10 as follows:

“9A.     To note that the effectiveness of the States’ scrutiny function depends in part on the powers, resources and impartiality of the scrutiny committees and panels, and to direct that, prior to implementation of the improved committee system in 2016, the States’ Review Committee shall propose to the States ways of strengthening the powers, resources and impartiality of the scrutiny committees and panels.”

 

Now, when I became Chair,  back in May 2012 when the sun was shining and the Sarnian Spring was starting to blossom (Yes it seems a long time ago now) I knew that not everything in the PAC garden was rosy  – 2 reports into the scrutiny function and a motion of no confidence in the last term  made that clear.

However, I started to realise there were real underlying issues that need resolving when a certain Deputy said to me on the steps of the Royal Court right after my appointment that I really didn’t know what I had taken on. I then went to PAC offices at SCFH at let’s just say it was quite apparent that it had not been a happy ship.

Then, to cap it all, I got the run down from a previous member of the committee about his experiences that didn’t exactly fill me with the joys of spring. So, it didn’t take long for me to realise that change was needed.

BUT things began to look up. Firstly, I managed to persuade a fantastic bunch of people to join the team. I know Deputy Le Clerc’s arm took time to recover after I bent it so much. Seriously, I am very lucky to have such excellent group of people with me. With minimal technical support, the members have been very hands-on and contributed to making positive change in the States – much of which has happened out of the public eye and more on that in a minute.

Secondly, the Berlin wall between the PAC and Scrutiny committees was knocked down and staff were together in one room.

And finally, we heard all the right noises about getting more staff. At this stage we had 2 staff and an acting principal officer.

And it is resources I wish to cover first.

2 years on and we just have 3 FTE staff. And it hasn’t been for the want of trying on the part of the  Vice Chair and myself. Heads and brickwalls come to mind and it certainly led to a few headaches.

However, we are in many ways in a better place than we were in May 2012 and I would like to thank the staff for their perseverance and support over the last 2 years. The Crowe report advocated producing reports in-house rather than always using outside consultants, which had been done before. We published our first internally produced report on HSSD financial management earlier this year and staff are working on 2 reviews as we speak. The foundations are there BUT we still have a long way to go.

The first paragraph of our mandate states that PAC’s role is to ensure proper scrutiny is given to the States assets, expenditure and revenues to ensure that States’ bodies operate to the highest standards in mgt of their financial affairs – with 3 staff? It is not about relying on staff to do all the work, members roll their sleeves up and get involved above and beyond the call of duty, but practically can’t do it all themselves. This is particularly the case for non-States members who also hold down jobs.

I look on enviously at the PAC in Westminster which is basically fed reports everyday by the 800 strong workforce at the National Audit Office, but I know we need a solution that fits a small Island of 60,000+, not 60m+.

Am I proposing an Auditor General? No. I think it will be another expensive office that is created which, if it’s like any other similar quango created by the States, it will cost upwardsof  half a million pounds to run a year.  All we really need is technical expertise supporting a Scrutiny Management Committee, enabling it to operate in a timely and efficient  manner.  Any solution also needs to consider the relationship with Internal Audit as I believe there are opportunities to simplify and streamline and enhance the current processes. However, that’s the detail and is not for now but I will be happy to work with the SRC to ensure we get the support structure that works for Guernsey, as it certainly doesn’t at the moment.

 

I will now explain why the powers of the Committees need to be reviewed.

As a member and now Vice Chair of Scrutiny I’m delighted that the Committee has undertaken public hearings and think that, whilst we can learn how we can improve how they operate, it’s a fantastic start. It also required co-ordination with PAC as all hands were needed on deck to run them which also meant PAC work was put on hold as a result. Now,  we will be holding a public hearing later this year in relation to the budget and possibly combining this with the PTBR. However, we have been trying to hold one before now, at every turn we have been prevented from doing so,  due to issues surrounding disclosure of financially sensitive information.

It is no coincidence that all 3 Scrutiny Chairs opposed the new Code of Access to Public information when it was debated last year. It is basically a list of reasons why not to disclose information. One such excuse relates to commercial confidences. We will in the next few months be issuing a report that links to the work being done on the States Capital Investment Portfolio, in advance of the debate on funding for a new school building at La Mare de Carteret  . However, we are told we can’t make references to issues on specific capital projects due to matters of commercial confidentiality. How can that be right? It’s not. It is completely unacceptable.

The Committee believes that a future financial scrutiny function would benefit from the following changes:

–          be able to compel witnesses to attend;

–          be able to enforce requests for information; and

–          be able to release confidential information where appropriate.

 

The financial scrutiny function is different from the political scrutiny function in that it may be inappropriate to review certain topics in a public forum, therefore it is essential that the above powers are available.

 

I will now briefly refer to the final issue of concern to the Committee – impartiality.

This does not relate to dealing with conflicts of interest. I believe these are handled very well. No this is more about staff reporting lines. We currently are in the ludicrous position that our Principal Officer has a reporting line to the Head of Internal Audit and Assurance and ultimately the Chief Exectuive. Now I would like to make it very clear that all parties do act with the utmost integrity and I don’t want members to think I am implying otherwise. However, the perception it gives is not good, particuarly, when the internal audit function reports to the PAC!

I could go on but would like to end on a positive note.  As I said earlier today, the letter we sent to the Chair of SRC was borne out of frustration and hopefully Members have now got a better picture of where that frustration came from.

I believe the role of a financial scrutiny function is to act as a critical friend. Like a good teacher, we should highlight good practice as well as areas that can be improved and provide recommendations on what those improvements could be. This has been the approach taken by the committee over the last 2 years. BUT, as I’ve hopefully made clear, we are limited in how much help we can give which ultimately slows down how quickly government can improve and demonstrate to the Guernsey people that the services they pay for really do represent value for money and that extravagance and waste have been eradicated.
By supporting this amendment, therefore, we are a step nearer to not only improving our scrutiny function but also government as a whole. A win-win situation that I hope all Members will support.

 

However, now we have a real chance of doing something about it and I really do believe that if we can can work together as well as we did last week, we really can put in place the foundations for an effective and efficient scrutiny function . Now Disraeli states that a fool wonders and a wise man asks. Now I’m not a man and whether or not I’m wise I will leave others to judge but I am asking you all to support this amendment that will give us a chance of removing the shackles that bind the current scrutiny function in its job of ensuring good corporate governance in the States of Guernsey.



Mobile: 07781 139385

Email: heidi@heidisoulsby.com