House of Commons - Revised Green Book and audit of Members' allowances

Revised Green Book and audit of Members' allowances - Members Estimate Committee Contents

2 EXTERNAL AUDIT

13. Any system for the provision of Members' allowances has to be capable of being administered and audited. WE CONSIDER THAT IT SHOULD BE A PRINCIPLE OF THE AUDIT SYSTEM THAT MEMBERS' ALLOWANCES SHOULD BE SUBJECT TO THE SAME DEGREE OF EXTERNAL AUDIT AS OTHER SECTORS OF THE PUBLIC SERVICE, NO LESS BUT ALSO NO MORE.

14. In this connection there is an important difference between Members and other public sector staff, namely that Members are independent and not part of any organisational hierarchy. Expenses claims by employees would normally be counter-signed by a line manager or director, giving an element of control and assurance which is absent in the case of Members. In other respects however we consider that the principle mentioned above can be applied effectively to Members.

15. External audit of the Members Estimate is currently carried out by the NAO. The NAO provide the House with an audit opinion based on a set of financial statements explaining the use made of public funds, prepared against an agreed framework. We consider that independent audit by the NAO offers the benefit of consistency and comparability with the external audit of other public sector organisations, in particular central government. WE RECOMMEND THAT THE HOUSE SHOULD CONTINUE TO ASK THE NAO TO ACT AS ITS EXTERNAL AUDITOR.

16. We believe that the phrase "going behind the Members' signature" has led to some confusion. It is essential therefore to clarify our understanding of it. Historically, the extent of the audit the NAO undertake has been restricted by a "limitation of scope", meaning that the NAO does not "go behind the Member's signature". In the NAO's terms "going behind the Member's signature" would mean looking at adequate supporting evidence submitted by Members with their claims to be paid, rather than relying on the Member's signature as a guarantee of the validity of the transaction. A valid transaction would be a request for the reimbursement of allowable expenditure against the appropriate allowance. The level of evidence required to demonstrate a valid transaction is set out by the Green Book and associated Resolutions of the House, varies for each allowance, and is ultimately adjudicated by the Standards and Privileges Committee.

17. If the limitation of scope of the NAO audit was removed then the NAO would be able to carry out a "full scope audit" which would include assessment of the adequacy and appropriateness of the information submitted in support of Member's claims as paid by the House administration, as required by the Green Book and associated Resolutions of the House. This possibility was explored in the Leader's Paper:

The NAO already carry out an audit of [Members'] allowances, but… the scope of their engagement is limited. Now that the rules around allowances have changed, there is an opportunity to broaden the scope of their audit engagement. The NAO would extend their external audit to cover all four of the dimensions set out by the Comptroller and Auditor General and reflected above.^[[12]^] His checks would include, as now, random sampling of transactions under each of the allowances. With a full audit trail of supporting evidence, however, he would, in future, be able to determine whether claims were not only for an apparently valid purpose, but were also supported by receipts and vouchers.[13]

EXPENDITURE NOT REQUIRING RECEIPTS

18. When undertaking a full scope audit, auditors would look for "assurance", that is substantive evidence that a transaction was accurate and valid. The furnishing of a receipt provides greater evidence of a transaction than just a simple claim signed by a Member. On 10 March the MEC reduced the threshold at which receipts were required to accompany claims for most expenses from £250 to £25, with effect from 1 April 2008. The Leader's Paper said that the Comptroller and Auditor General believed that this "would give an opportunity to strengthen significantly the assurance that public money had been properly spent."[14] In its Review of Allowances the MEC recommended "that, from the start of the 2009-10 financial year, the receipt threshold should be reduced from £25 to zero and that all claims, however small, will have to be backed by receipts."[15]

19. We understand why the MEC suggested that receipts should be provided for all transactions. We consider however that this change would not add significantly to the assurance which could be gained in relation to spending on Members' allowances. It has been argued that it would be excessively burdensome for Members to have to provide receipts for all transactions and that the additional costs incurred by the Department of Resources to process these would be likely to be disproportionate to the assurance gained. WE CONSIDER THAT A £25 LIMIT FOR EXPENDITURE WITHOUT RECEIPT IS A SENSIBLE WAY FORWARD.