Department accused of basic abuse of financial procedures

The Comptroller and Auditor General has accused the Department of Health of a "fundamental abuse" of public financial procedures in failing to bring a £20 million transaction to account in 1997. Mr John Purcell told the Committee of Public Accounts yesterday that "a coach and four" was driven through normal public financial procedures by the Department. The chairman of the Committee of Public Accounts, Mr Jim Mitchell, said the Department of Health's behaviour was "as big an exercise in cooking the books" as he had seen in a while. The £20 million was paid to the Central Bank by the British health authorities in December 1997, under a reimbursement agreement by which the State was repaid for health care it provided to people who had health insurance in the UK.

The previous month, the Department requested the British authorities to delay the payment of the advance until early 1998. The Department also guaranteed to indemnify the British authorities against any currency exchange loss which might occur due to rescheduling of the payment. Mr Purcell said these were "extraordinary lengths" for the Department to go to in its attempts to ensure the payment did not arrive during 1997, an "obsession" he did not understand.

He also had "serious doubts" about the Department's authority to give assurances that it would compensate the British authorities for any currency fluctuations.

On December 16th - the day the money was lodged by the British authorities to the Central Bank - the bank requested accounting instructions from the Department on the lodgement of the funds to its account.

However, the accounting instructions from the Department were not issued to the Central Bank until January 1998 and as a result the £20 million was not credited to the Department's account until January 5th.

The delay in the transfer of the money had the effect of changing the surplus for the Department to surrender to the Exchequer on the 1997 appropriation account from £21 million to £1 million.

When asked by the Comptroller and Auditor General to clarify the circumstances in which the delay occurred, the Secretary General of the Department, Mr Jerry O'Dwyer, told him that the net liability of the British authorities was "somewhat uncertain" in 1997.

The situation was further complicated by the fact that changes in the calendar for the public finances brought about by the Government in 1997 required the Department to determine its appropriations figures earlier than would normally have been the case. That did not leave it enough time to clarify for how much the British authorities were liable. He said the offer to indemnify the British authorities against any currency exchange loss was made "in an effort to achieve some movement on this issue".

Mr Purcell said the Department of Health had not informed or consulted the Department of Finance on the matter. In his opinion, the £20 million received by the Central Bank in 1997 should have been brought to account that year. The failure to do so meant that the appropriation account for the health vote "did not reflect the full receipts proper to 1997" and he qualified his audit certificate accordingly.

Mr O'Dwyer told the committee that if the same situation arose again, the Department would seek to have a further supplementary estimate taken at the last minute. However, it did not consider this a likely prospect at the time.

The other option would have been to surrender the £20 million to the Exchequer from a vote "already severely under pressure". However, there was "serious political criticism" of the Department when it last ran a surplus. In the end, the money was brought to account "transparently and through established procedures" in 1998.