APPENDIX 1
THE MILLENNIUM DOME—CONTINGENT LIABILITIES
(PAC 00-01/184)
Copy of a letter to the Chairman of the Committee
for the Comptroller and Auditor General
I agreed to let you have a note on the question
of contingent liabilities and in particular how this had been
reported to Parliament.
There are three separate contingent liability
elements.
DIRECTOR'S
INDEMNITY
1. Following the Neill Committee report,
the Treasury proposed, in a Minute laid in Parliament in December
1998, that board members of NDPBs should be offered indemnity
from personal civil liability when acting as board members, save
where acting recklessly. DAO(GEN)2/99 promulgated this provision
to departmental Accounting Officers.
2. The Comptroller and the Auditor General's
report on the Dome, paragraph 2.44, refers to the indemnity given
by the Department's Accounting Officer to the Dome Company's directors
in June 2000. It is noteworthy that the indemnity was only given
as a result of the Directors voicing their concern about their
personal positions, rather than this being a general exercise
to give indemnities to board members of all NDPBs. Nonetheless,
giving the indemnity was in accordance with the provision described
above, and the Department had obtained advice from Treasury and
Treasury Solicitor.
3. Government Accounting section 26.3 covers
Parliamentary reporting procedures. Indemnities should be given
until 14 days after a Minute on a specific case is laid before
Parliament. Liabilities arising in the normal course of a department's
business need not be reported to Parliament in this way unless:
(i) they arise as a result of a specific
guarantee, indemnity or statement of comfort; or
(ii) expenditure at a later date may be of
such a nature or size that Parliament should be given notice.
4. Government Accounting goes on to say
". . . that the test is what Parliament can be expected to
regard as normal course of business in the light of the activities
which it has authorised." (Emboldening as per Government
Accounting 26.3.4).
5. The Department's view was that the indemnity
was in their normal course of business and did not need to be
notified separately to Parliament. The National Audit Office's
arguments against that view are that:
(i) the Department itself can only give support
based on Exchequer funds. They have no powers to offer lottery
funds in support, only lottery distribution bodies can do that.
This was the first time that Exchequer funds were committed to
the Dome;
(ii) the circumstances in which this indemnity
was given were far from the Department's "normal course of
business" and no comparable cases are apparent;
(iii) expenditure at a later date ".
. . may be of such a nature . . ." that Parliament should
have been given notice, in terms of paragraph 3(i) above;
(iv) this indemnity fails the test set out
in the paragraph 4 above.
THE SHAREHOLDER'S
STATEMENT TO
THE SELECT
COMMITTEE ON
CULTURE, MEDIA
AND SPORT,
12 JULY
6. Paragraph 2.45 of the C&AG's report
quotes the Shareholder's evidence to the Select Committee. The
Company has drawn comfort from this evidence, the meaning of which
is quite clearly that insolvency of the Company would be a matter
for the Government to resolve. This has not been stated explicitly
to be the acceptance of a contingent liability, and has not been
reported to Parliament as such.
CAPPING THE
SEPTEMBER GRANT
OF £47 MILLION
7. Paragraph 2.68 of C&AG's report,
second bullet, refers to the fact that the £47 million grant
in September was subject to the Government agreeing to cap the
Commission's commitment at this amount. The Government's agreement
to this has not yet been received by the Commission but if and
when it is, it will represent a new contingent liability.
I hope you will find this helpful.
John Bourn
15 November 2000
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