Auditor-General's inquiry into certain types of expenditure in Vote Ministerial Services
On 2 March 2010, the Auditor-General, Lyn Provost, released terms of reference for an inquiry into certain types of expenditure in Vote Ministerial Services that provide or have the potential to provide private benefit to a Minister. The inquiry was initiated by the Auditor-General after separate requests from the Prime Minister, Mr Phil Heatley MP, and the Department of Internal Affairs.
The purpose of the inquiry was to:
- audit the expenditure incurred by Mr Heatley's ministerial office from when he became a Minister in November 2008 until he resigned from his ministerial portfolios for Housing and Fisheries on 25 February 2010;
- review the rules, policies, and procedures to see whether they are appropriate and effective, and identify any improvements that can be made; and
- consider any other matters that the Auditor-General considers relate to, or arise from, the above.1
This report addresses the first part of our inquiry's terms of reference. We summarise the general principles that apply to public expenditure where there could be private benefit and our overall findings and conclusions, followed by a detailed report about our audit of Mr Heatley's ministerial office's expenditure. We intend to report separately on the remaining parts of our terms of reference.
General principles: public expenditure where there could be private benefit
The public rightly expect all those who spend public money to recognise that it is public money. There is heightened sensitivity when public money is spent on items that have the potential or can be seen to give private benefit to a person. There is even greater sensitivity for Ministers and members of Parliament, who must manage the line between ministerial, parliamentary, party political, and personal spending.
The expenditure needs to be reasonable and managed with extra care so that it can withstand public scrutiny. That means considering how an outside observer may reasonably perceive the expenditure. It is sensible to take a conservative approach in managing these boundaries and to apply careful judgement.
It is also important that the rules and administrative processes supporting the rules are clear, practical, and align with common sense.
Although the sums of money involved in such issues and discussed in this report are often small, the principles involved are important and the consequences of mistakes can be significant.
Overall findings and conclusions
Mr Heatley's overall ministerial office expenditure was reasonable compared to expenditure incurred by other ministerial offices for the period we looked at. We found that a total of $1,402 of Mr Heatley's expenditure – $608 in Vote Ministerial Services and $794 in Vote Parliamentary Service – was outside the rules. In all cases, Mr Heatley thought that the expenditure was within the rules, but he did not understand the rules correctly. In the case of the expenditure in Vote Parliamentary Service, the Parliamentary Service was also administering a rule incorrectly for members of Parliament, and Mr Heatley is not the only member who will have been affected.
We found that Mr Heatley generally took care to account for his expenditure appropriately. His Senior Private Secretary took her responsibilities seriously in managing the ministerial office expenditure. On occasion, Mr Heatley's ministerial office received a reminder from Ministerial Services to submit a late reconciliation of his expenses or invoices or receipts; these were standard reminders that are sent by Ministerial Services to many ministerial offices. The problematic expenditure that we discuss in this report was approved by the relevant officials and was never queried with Mr Heatley or his Senior Private Secretary. For some items of expenditure, it was not clear from the supporting documentation provided that it was outside the rules, but it was for others.
We accept that the expenditure outside the rules was not deliberate on the part of Mr Heatley or his ministerial office, and that he had repaid a sum of money before we started our inquiry. He has also personally paid for expenses that are allowed under the rules.
Mr Heatley's incorrect understanding of the rules suggests that the rules may not be clear or clearly understood by those who incur expenditure. We intend to explore this matter further in the remaining parts of our inquiry. We note that the expenditure that was outside the rules was for relatively small amounts. However, small amounts add up, and even mistakes involving small sums can have major consequences. The rules need to be clear and the way they are administered needs to support Ministers to make good judgements about expenditure.
Notwithstanding deficiencies in rules or the systems for administering them, everyone spending public money – in this case Mr Heatley – has a personal responsibility to manage their expenditure appropriately with good judgement. In our view, even though Mr Heatley was sometimes operating under an incorrect understanding of the rules – for example, when his wife and family accompanied him on ministerial business – a more conservative approach that took greater account of how others might perceive his use of public money would have served him better.
Appropriation issues
All public spending must be authorised by Parliament through an appropriation. In the particular circumstances of the Vote Ministerial Services and Vote Parliamentary Service appropriations, any breach of the rules results in unappropriated expenditure. The expenditure outside the rules is unlawful and requires remedial processes to correct the problem and validate the expenditure.
Some lessons from our inquiry
Our inquiry highlights the need for careful decision-making and good judgement when public money is spent on items that have the potential or can be seen to give private benefit to a person.
The boundaries between business and personal expenditure need to be well understood and managed. For Ministers and members of Parliament, the boundaries between parliamentary, ministerial, party political, and personal expenditure may be difficult to manage in practice. This places an even greater responsibility on Ministers and members of Parliament to manage their expenditure with care and appropriately. Any accusation of inappropriate spending by a Minister or member of Parliament, no matter how small the amount, can undermine the public's trust in the integrity of government and Parliament.
From the work we have done in the first part of our inquiry, we consider that there are some general lessons to be learned by the administering agencies about how the knowledge and understanding of rules and policies, and their implementation in practice, can be improved.
As we have said in our previous reports on parliamentary and ministerial entitlements, in our view, the rules are not simple to understand or administer. The rules need to be able to be understood not only by those administering the system and receiving entitlements, but also by the public who fund the entitlements. The rules also have to be able to work in practice, and to align with common sense. We will explore these matters further when we address the remaining parts of our terms of reference.
Acknowledgements
We acknowledge the co-operation we received from Mr Heatley and his Senior Private Secretary and the openness with which they responded to our enquiries. We would also like to thank Ministerial Services and the Parliamentary Service for the information and assistance they provided.
We will not be commenting further publicly until we publish our report on the remaining parts of our terms of reference.
1: Our full terms of reference can be found on our website.