The Public Accounts Commission Ninth Report



Areas where wider access powers are needed

Why are wider access powers needed

How could wider access powers be most simply secured?

Access to Housing Associations

The C&AG has no access to housing associations, other than occasional visits at the discretion of the relevant Department which must be subject to the agreement of individual housing associations themselves.

Without a right of access, the C&AG cannot ensure that housing associations spend the over £1 billion of Government grant they receive each year in line with Parliament's intentions and with the proper conduct of public business. Housing associations are intrinsically relatively high risk areas.

All grants to housing associations could be made conditional on the C&AG having access to see how the money was spent.

Access to Railtrack and the train operating companies

The C&AG has no access to

Railtrack and the train operating companies

In 1996-97, OPRAF made payments of £1.8 billion to train operating companies. The C&AG needs access so that he can verify the data which the rail regulator, OPRAF, uses to ensure compliance with franchise agreements, to make incentive payments and to levy penalties.

Full scrutiny could be ensured if the Government required OPRAF to negotiate an independently guaranteed right of access for the C&AG in contracts with Railtrack and the train operation companies.

Access to private bodies providing public services under contract

The C&AG does not have an independently guaranteed right of access to relevant records in the hands of private firms providing public services under contract. This applies also to the final recipients of Government and European Community Grants. A particular case where access is required - Railtrack and the train operating companies - is described below. The Government has recently announced that it will amend the National Lottery Bill to give the C&AG access to Camelot.

Many functions previously undertaken within government or central to delivering public services are now provided by private firms. The value of contracts awarded or pending award to the private sector (including those under the Private Finance Initiative) is some £13 billion. If access is not provided in the contracts, the C&AG may be unable to check that public funds have been used as Parliament intended, and with due concern for regularity and value for money.

Treasury could require departments to provide a contractual access clause for the C&AG in all cases, including Private Finance Initiative deals. At present, the guidance on contracted out functions and Private Finance Initiative deals is equivocal on the inclusion of such clauses in contracts. The guidance could be strengthened by establishing a presumption that they will be included in all contracts with providers of public services of this kind.



Why are wider audit powers needed?

How could wider audit powers be most simply secured?

The audit of companies

The C&AG is not eligible under the Companies Act to audit companies. There are more than 280 publicly owned companies. Some executive NDPBs, such as Remploy and the Student Loans Company, have been set up as companies. And some other executive NDPBs, such as the Environment Agency, which are not companies, are required to be audited by Companies Act auditors.

The relevant Secretary of State or sponsoring body appoints the auditors and sets the terms of the audit, which reduces their accountability to Parliament. In addition, there is duplicated effort for subsidiaries of bodies audited by the C&AG. The Supreme Audit Institutions in Ireland and Sweden are already able to audit companies.

A straightforward option would be a one-clause bill amending the Companies Act. The C&AG already employs staff who have the qualifications and experience to audit companies.

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Prepared 10 July 1998