48. The SSRB report recommended that the House
request the NAO to audit the expenses of a representative sample
of MPs each year. The NAO already looks at samples of claims for
each allowance type. Due to the size and random nature of these
samples, a significant proportion of MPs have some form of check
every year. The NAO and others have suggested that one way of
augmenting their work in auditing individual transactions might
be to assess, and provide assurance around, the way MPs administer
their own office arrangements and manage their claims.
49. Many professions, such as solicitors, accountants
and surveyors, have in place arrangements to ensure that firms
of professionals and individual practitioners comply with the
framework of rules and regulations set out in their professional
standards. This is commonly known as "practice assurance"
and takes various forms ranging from arrangements geared to spreading
and developing best practice and upholding standards, through
to rigorous compliance checks, which can lead to disciplinary
action against those who have seriously transgressed the rules.
Most practice assurance regimes embody elements of both.
50. In most instances the practice assurance
is undertaken by a dedicated independent team, who provide three
types of report:
- a regular global view of the
general level of adherence to the framework of rules and regulations
- reports to the individual on gaps in their practices
and how they might be improved
- reports to the relevant disciplinary body within
51. We believe that this model would be highly
appropriate for adapting to the House of Commons. Applying a similar
approach to Members' allowances would require the creation of
a practice assurance team either set up within the Department
of Resources, or provided by external professionals under contract
to the House. The merits of involving external professionals are
that they would:
- be seen as independent by the
public, working to recognised professional standards
- be seen as independent by Members, so perhaps
as more acceptable to them
- be more robust in challenging Members.
52. The practice assurance team would have access
to the Members' records held by the Members themselves. They would
initially report to the Member, advising on any problems they
found during the assurance; they would assess the reliability
of the Member's office systems for ensuring he or she was meeting
their Green Book responsibilities, by interviews with Members
and office managers and staff, and by sample checking of records
at Westminster and in the constituency.
53. Reports to individual Members by the practice
assurance team on internal controls systems and procedures should
be supportive but challenging. They might include comments on
matters such as examples of where public finance has been well
used; the evidence base and adequacy of record-keeping; any inadvertent
or unknowing failures against the standards; any intentional,
reckless or repetitive failures against the standards; and whether
failures have been remedied adequately.
54. If the House adopted a scheme of this kind,
the advantages would be:
- to help Members compile and
record better evidence of their claims
- to check on the uses to which parliamentary resources
have been put rather than (as now) verifying only the initial
- to clarify rules and guidance
- to set a standards framework
- to improve office systems and avoid errors
- to support both internal and external audit.
55. A scheme of practice assurance would be made
effective by revisions to the Green Book. The aim would be to
ensure that in claiming parliamentary allowances MPs should comply
with the Code of Conduct for Members and Green Book rules; ensure
that they are equipped to do so; and ensure that the quality and
verifiability of claims is monitored. Checks on usage would be
integral to such a regime.
56. There is a further aspect of internal controls
that merits attention in the light of recent controversies: MPs'
employment practices and the keeping of records about staff employment.
We address this is more detail in paragraphs 99 to 103 below,
but we simply record here that this area should also be included
in the process of practice assurance and audit.
57. The suggested inspection and advisory system
need not be too onerous and should have flexibility to match the
different working practices in Members' offices. The aim would
be to maintain a constant dialogue with all Members but also to
conduct detailed practice assurance visits to roughly 25% of MPs'
offices each year (aiming to cover every MP over a Parliament)
in order to ensure that expenditure is proper and regular, achieves
good value and is verifiable.
58. The practice assurance team would make a
general report on a regular basis to a House committee charged
with oversight. Furthermore, the assurance team might report individual
cases to the committee where a Member had made serious intentional
or reckless failures against the standards; or over a period of
time had not improved his or her administrative arrangements.
59. A sliding scale of measures would be available
to the committee to enable a proportionate response to be made
to individual lapses. For example, these might include the practice
assurance team assisting a Member in improving office practices,
critical review by the oversight committee, withholding allowances
until practices are improved, or instructing repayment. Beyond
this would lie reference to the Parliamentary Commissioner for
Standards and consideration by the Committee on Standards and
Privileges, who have a full range of sanctions at their disposal
for ultimate submission to the House.
60. The advisory aspect of the work of the practice
assurance team is vital to achieving consistency and high standards
of practice. But practice assurance teams will not be in Members'
offices every week, and MPs will still need to draw timely and
consistent guidance from the Department of Resources. It is important,
therefore, that there are mechanisms in place to ensure that there
is complete consistency of advice as between the Department and
the practice assurance team. This points towards the Department
and the assurance team working closely together. One option would
be for the practice assurance team to be made up mainly of external
professionals, but to include a specially-trained member of the
Department to provide the necessary link.
61. The findings of the practice assurance team
will need to feed back into the House's formal system of internal
control, which is the subject of audit by the NAO, and lessons
learned from practice assurance will need to feed back into the
Department of Resources' rules, guidance and administrative arrangements.
62. The detailed operation of this new practice
assurance system will need to be developed by the end of this
year and piloted in the spring of 2009 before being brought into
effect from the start of the 2009-10 financial year. We believe
that such practice assurance, new oversight arrangements combined
with more extended advisory service and the spread of best practice,
will provide Members with the evidence to justify their spending
and significantly improve public confidence in the integrity of
63. We recommend that there should be a robust
new system of practice assurance involving regular financial health
checks on records kept and processes used in Members' offices
with outside professional teams covering about 25% of Members
each year and every Member each Parliament.
STRONGER EXTERNAL AUDIT
64. The SSRB report recommended that the House
request the NAO to audit the expenses of a representative sample
of MPs each year. At present the NAO looks at a number of claims
against each allowance every year as part of their audit of the
Members Estimate Resource Accounts. While this is structured to
validate the correct payment of each individual allowance rather
than the total picture for individual MPs, the effect has been
an audit down to receipt level where required of a sample of payments
made by over 100 MPs each year.
65. We recognise that the concept of random audit
of MPs' expenditure claims by independent auditors is vital to
building public confidence in the system of parliamentary allowances.
Extending the audit approach offers a way of meeting the spirit
of the SSRB's recommendation and the scope of this important work
must now deepen. The NAO have pointed out that, as receipts will
now be available for a much more extensive range of MPs' claims,
this in itself will extend the depth and scope of their audit.
They are also prepared to increase the size of the sample of claims
they examine, and we propose that they should do this.
66. We are committed to strengthening and clarifying
the rules and guidance for MPs' expenses, enhancing the framework
of controls to ensure compliance with these rules, and enhancing
the audit function by allowing both House Authorities and external
auditors to look behind the Member's signature. These developments,
together with the decision to require receipts for all items of
expenditure, would enable the House to remove the current limitation
on the scope of the NAO's audit engagement and put the Members'
Estimate Resource Account on a basis which is consistent with
the audit that is applied to other bodies in receipt of public
funds. This would offer the public the same assurance as they
receive for those other bodies.
67. While recognising the C & AG's right,
as independent external auditor, to determine his approach to
the audit of the financial statements, we also believe that the
House wants greater assurance. In addition to an expanded audit
engagement, the Committee would like the C & AG's audit of
Members' claims to ensure that an agreed proportion of Members
is covered by sample testing each year.
68. We recommend that the House extends the
scope of the audit engagement so that it is the same as for other
public bodies. The NAO expects that their sampling of claims paid
will include one or more transactions relating to at least 20
per cent of MPs each year.
REVISION OF THE GREEN BOOK
69. A feature of the current allowance system
is the lack of detailed rules and the concomitant use of discretion
exercised within a set of broad principles. A new system might
require a Green Book which describes in more detail what may or
may not be claimed and a more standardised process for claiming.
There is a balance to be struck, however, because no system of
rules can predict every eventuality. There is therefore a trade-off
between flexibility and certainty.
70. Members claim for different things, in different
ways, at different times within the existing rules. There are
probably hundreds of different recording and accounting systems
operating in MPs' offices. The benefit of a practice assurance
team visiting every MP's office in the course of a Parliament
is to gradually bring standardisation to the way claims are made
without imposing a central control on what paperclips may be purchased.
The more standardisation there is in the claiming process the
less likely it becomes that mistakes will be made and the easier
it is for auditors to spot them.
71. We recommend that the Green Book (setting
out the rules on allowances for Members) be revised to specify
more detailed rules and that the new version be brought into effect
by 1 April 2009.
9 Following implementation of the Tebbit review, the
Audit Committee will have three MPs and three external members. Back
CSPL principles, 13, 14 and 16. Back
Independent Review of Parliamentary Allowances-Report to the
Scottish Parliamentary Corporate Body on the Reimbursement of
Expenses for members of the Scottish Parliament-March 2008-chaired
by Sir Alan Langlands. Back