Select Committee on Public Accounts Minutes of Evidence



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.


  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.


  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.


  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

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 12 September 2001