Jersey's Overseas Aid - Comptroller and Auditor General - Accountability of the JOAC - Submission -

REPORT BY THE COMPTROLLER & AUDITOR GENERAL

OVERSEAS AID COMMISSION

MARCH 2007

Introduction

1. The purposeofthispaperisto review thearrangementsforthefinancialadministrationofthe Overseas Aid Commission (the Commission) and, in particular, an apparent conflictbetweenthelaw which establishedthatCommission(the Jersey Overseas Aid Commission(Jersey)Law2005)andthelaw which controlstheadministrationof the financesofthe States of Jersey (PublicFinances(Jersey)Law2005).

The Overseas Aid Commission

2. On 23rdJuly2002,the States adopted an amendmentoftheOverseas Aid Committeetoproposalsconcerningthefuture systemof ministerial governmentand agreed that an Overseas Aid Commissionshouldbeestablishedinthefollowing terms:

"An Overseas Aid Commission reporting directly to the States will be established outside the executive structure of government to manage the overseas aid functions. The Chairman of the Commission will be a member of the States appointed by the States. There will be six other members appointed by the States, three of whom shall be members of the States and three of whom shall be non-States' members.

Funding for overseas aid will be agreed by the States and reviewed every five years to ensure that appropriate funding is provided for the Commission.

Detailed proposals and terms of reference for the commission will be brought forward by the Overseas Aid Committee during the transitional period".

3. The reasonsforbringing forward this amendment were setoutinthe following terms inthe report accompanyingtheCommittee'samendment:

"The Overseas Aid Committee is of the strong view that the current form of administration is positive, able to react quickly to appeals for emergency aid and is extremely thorough in its allocation of Funds for grant aid and community worked projects.

In simple terms, it sees no purpose in changing the current administration and fears that its purpose, focus and sympathetic approach will not be so readily available in the bureaucracy of ministerial government notwithstanding the desire of a Minister or of the Chief Minister to be so focussed. The demands, particularly in the early years, of ministerial government will not, in the estimation of the Overseas Aid Committee allow this."

4. Subsequently, a draft lawimplementingthisdecision was lodgedon25January2005[1]and,subjectto certain amendments,wasadoptedbythe States on16March2005.

Public Finances Law 2005

5. By anotherlawadoptedbythe States during2005, the systemfortheadministrationofpublic finances was reformed. Among other reforms, the new law provided that theadministrationofthepublicfinancesin each departmentshouldbethepersonalresponsibilityof an AccountingOfficer who inparticularshouldensuretheproperimplementationwithintheirdepartmentsofthe2005lawandof anyFinancial Directionsissuedbythe TreasuryMinister.
6. The FinancialDirections which havebeenissuedprovide,interalia,thatmoniesshouldnotbepaidtoindependentorganisationsby way ofgrantunlessthoseorganisationshaveprovided clear undertakingsin respect oftheuseto which that money is to be put andhaveundertakentocomply with alloftheStates'FinancialDirections.

Conflict

7. The conflict which has arisen betweentheadministrationof the publicfinancesandthemanagementoftheCommissionhasthefollowingelements:

1. The Commission was established "outside the executive structure of government"becausethatis what the States decidedshouldhappen. The consequence is that theCommissionisnot a departmentofthe States whichwould fall withinthePublicFinancesLawandsodoesnothave an Accounting Officer ofitsown.
2. This meansthatanymoneypaidtotheCommissioninaccordance with thedecisionofthe States has to be paid from a States' Department under the authority of an Accounting Officer who haspersonalresponsibilityforensuringthatrecipientsof the money will comply with theStates'FinancialDirections.
3. Sincethe States decidedthattheCommissionshould report directlytothe States (i.e.not a States'DepartmentorMinister)anyAccounting Officer approving a paymenttothe Commission has no way of discharging his or her personal responsibility forensuringthattherecipientofthefunds will complywiththe normal requirementsfortheadministrationoftheStates'publicfinances.

8. The consequenceofthisisthatnoAccounting Officer has been ableto accept thattheCommissionshould fall withinhisorherareaofresponsibility.

Does this matter?

9. The States havedecidedthat a particularsystemofpublicfinanceadministrationshouldbecreated.Itsrequirementshave been made a matter ofpersonalresponsibilityfortheAccounting Officers who have been appointed. On occasion,the States havecriticisedstronglyAccounting Officers who havenotdischargedtheirfunctionsappropriately. In thecircumstances,itwouldbefoolishforthe States toignoreanysituationin which an Accounting Officer assertsthatheorshecannotdischargehisresponsibilities.
10. It wouldalsobefoolishtotolerate a situation in which a significantamountofmoney is passedto an organisation(ietheCommission)in a waythatavoidsthebasicrequirementsofthe system for public finance administration especially as that has arisen as a result of a decisionoftheStates.
11. Such shortcomingsriskthesystemtofallingintodisreputeand may bethoughttoimplythatthe States doesnottakeseriouslytherequirementsofthereformedsystemforpublicfinanceadministration.

Possible solutions

12. All ofthesolutionsthatmightbeconsideredshould aim at removingtheconflictbetweenthe law which created the Commission and the Public Finances Law. By far the moststraightforward way ofdoingthiswouldbetoreformtheOverseas Aid CommissionLawtoprovidethattheCommissionshould report to a Minister. The grantfortheCommissionwouldthenbepayableundertheauthorityoftheAccounting Officer forthedepartmentto which theMinisterisconnected.Thereisnoreasonwhy,byagreementbetweentheMinisterandtheCommission,thepresentdecision-makingprocessoftheCommission,andinparticulartheabilitytorespondquicklytodisastersandemergencies,couldnotremainlargelyunchangedunderthisnewarrangement.

13. Whilstinstitutionallystraightforward,there may some concern thatthiswould lead tothepoliticalcontroloftheCommissionby ministers which I understandthe former Overseas Aid Committeehad wished toavoid. It might therefore be necessary tofindsomearrangementby which theoverseasaidprogrammeissafeguardedinsomeway.Ifthiscouldnotbeachievedwithin a ministerial arrangement, then consideration might be given to re-constituting theCommission as a committeeoftheStates. It isnot my purposetospecify what this arrangementmight be. It isthe principle with which I am mainly concerned.  This arrangement would,nevertheless,runtotallycontrarytothedecisionsofthe States since2001tomoveawayfrom a committeesystemofgovernmentanditmightstillbedifficult,underthisarrangement,toidentifyanyofficer who wouldhavesufficientpersonalinvolvement with thecommitteetofulfiltherôleofAccountingOfficer.
14. If forsomereason an approachofthissortdidnotappearappropriate,orifitcannotbeimplementedimmediately,then a differentortransitionalarrangementwouldbeneeded which wouldpermittheoverseasaidprogrammetocontinuebutwithintheproperpublicfinancecontrolframework.
15. One approach mightinvolvetheCommissionindecidingvoluntarilythatitshouldcomply with alloftherequirementsoftheStates'FinancialDirections. Assumingthatthiscouldbedone,someofthedifficultyforAccounting Officers inmakingfundsavailabletothe Overseas Aid Commission would have been avoided and it should be possible to persuade an Accounting Officer totakeresponsibilityforpaymentstotheCommission(e.g.the Greffier oftheStates). If thisapproach were adopteditwouldneverthelessbenecessarytoacceptthatthelevelofpersonaloversightthattheAccountingOfficerwouldbeconsiderablylessthanthatexpectedofallotherAccounting Officers andthiscouldbe seen as underminingtheimportantprincipleofpersonalaccountabilitythatunderliesthewholeAccounting Officer structure.
16. It wouldhavetobe accepted thatiftheCommission were subsequentlytodecidenottocomply with FinancialDirections,orit were discoveredthattheCommission were generallynotsocomplying,thentherelevantAccountingOfficerwouldhavetorefusetoadvancefundstotheCommission. This could,ofcourse,placetherelevantAccounting Officer in a difficultpositioninrelationtotheCommission which consistsof elected membersofthe States andnon-Statesmembers who areappointedbytheStates.
17. This approach might serve as a transitional arrangement but would not be a propersubstituteformakingclearinstitutionalarrangements.

Conclusion

18. It is unsatisfactory for significant amounts of expenditure to fall outside the normalarrangementsformanagingpublicfinances. That thishashappened as a resultof an expressdecisionofthe States islikelyinthelongruntodamagethereputationofthe States andalsooftheOverseas Aid Commission. I trustthatoneoftheapproachescanvassedinthisnotemight offer a basisforeliminatingtheconflictandtheuncertainty which ithascaused.

C Swinson

Comptroller & Auditor General Morier House

St Helier

Jersey JE1 1DD.