Accountability, Integrity and Administration: A Rock-Solid Framework for the House of Assembly in Newfoundland and Labrador
Kim Hawley George is Clerk Assistant (A) and Law Clerk of the House of Assembly in Newfoundland and Labrador. She has been appointed Queen’s Counsel.
Following a series of audits in 2006 that discovered spending irregularities and resulted in fraud charges against several MHAs, a House of Assembly employee and an external supplier, Newfoundland and Labrador’s House of Assembly put into place a new framework for accountability and oversight. In this article, the author outlines this framework and other accountability mechanisms designed to restore public confidence in their legislature’s operations.
A discussion of audit practices in the Newfoundland and Labrador Legislature first requires a journey back to the (not-so-distant) past. After all, who we are today is inextricably tied to the events of yesterday.
In 2006, a series of audits and subsequent reports from the Auditor General showed poor financial controls at the House of Assembly. As a result of those audits, four Members (involving the three political parties represented in the House at the time), an employee of the Legislature and an external supplier were charged with various criminal offences including fraud over $5000, fraud on government/influence peddling and breach of trust. Individuals were convicted and served jail time.
Subsequent to the reports of the Auditor General, Chief Justice Derek Green was appointed to conduct a review of the Legislature. In June 2007, Chief Justice Green issued a report entitled “Rebuilding Confidence: Report of the Review Commission on Constituency Allowances and Related Matters” (“Green Report”). 1
The Green Report included 80 recommendations as well as a proposed Bill and subordinate legislation. The House of Assembly Accountability, Integrity and Administration Act (“HOAAIAA”) and accompanying Members’ Resources and Allowances Rules (“the Rules”) were passed unanimously by the House and came into force in June 2007. They established a statutory framework to improve controls within the Legislature; to provide greater oversight; and to improve accountability with respect to the use of public funds by elected officials.
The Executive Summary of the Green Report concludes as follows:
Reform must include a reform of attitude and the creation and maintenance of an institutional culture of responsibility. Transparency and accountability are the building blocks of public confidence. There must be visible checks and balances in the system if there is to be any hope of rebuilding confidence in it. The technical implementation of specific institutional reforms will not by itself restore public confidence. Rather, that confidence will be restored by the willingness and constant dedication of our leaders to foster and maintain, by example, the standards expected of those who discharge the critically important and difficult responsibilities of public office. 2
It is upon this foundation that the House of Assembly operates today. In this article, I will outline the comprehensive accountability structure recommended by the Green Report and subsequently adopted by the House of Assembly. I will also provide examples of associated structures which support and enhance the culture of transparency and accountability in the administration of the Newfoundland and Labrador Legislature.
Administration and Management Structures
The House of Assembly Management Commission (“the Commission”) is the group of elected officials with fiduciary responsibilities for the administration of the Legislature. It is required to act in a non-partisan manner to establish and implement financial and administrative policies for the House of Assembly Service and the Statutory Offices. The Commission is constituted at the beginning of a new General Assembly, and continues when the Assembly dissolves until the new membership is constituted. Its complete range of responsibilities is outlined in Part III of the HOAAIAA. Specifically, the Commission has a duty and a responsibility to:
- oversee the finances of the Legislature, including its budget, revenues, expenses, assets and liabilities;
- review and approve the administrative, financial and human resource and management policies of the House of Assembly Service and its Statutory Offices;
- implement and periodically review and update financial and management policies applicable to the House of Assembly Service and its Statutory Offices;
- give direction respecting matters that the Commission considers necessary for the efficient and effective operation of the House of Assembly Service and its Statutory Offices;
- make and keep current rules respecting the proper administration of allowances for Members and reimbursement and payment of their expenditures;
- submit an annual report to the House of Assembly respecting the Commission’s decisions and activities; and
- exercise other powers given to the Commission and perform other duties imposed on the Commission.
Audit Committee: The HOAAIAA requires the establishment of an Audit Committee (“the Committee”) to assist the Commission in fulfilling its financial and compliance oversight responsibilities. The Committee reviews the financial statements and other financial information of the House to ensure the transparency and integrity of the House’s systems of internal and disclosure controls and published financial information. The Audit Committee is also charged with fostering adherence to, and encouraging continuous improvement of, the House’s policies, procedures and practices. It maintains effective working relationships with the Commission as well as internal and external auditors.
The Audit Committee is a committee of the Commission, but ultimately the Commission’s responsibilities are not delegated to it. The primary responsibility for financial and other reporting, internal control and compliance with policies, ethics and legislation still rests with the Commission. The Committee may, however, draw the Commission’s attention to any strengths and weaknesses in controls and make suggestions for how they may be addressed.
The Committee consists of two members of the Commission chosen by the Commission, at least one of whom must not be a Member of the government party; and two persons, chosen by the Chief Justice of Newfoundland and Labrador, who are not Members of the House of Assembly but who are resident in the province, and who have demonstrated knowledge and experience in financial matters and are suitable to represent the public interest.
The Committee must corporately possess an appropriate skillset to allow it to carry out its overall functions. All members of the Audit Committee must have a working familiarity with basic finance and accounting practices as well as the compliance environment in which the House operates. At least one member of the Audit Committee must have accounting or related financial management expertise.
The HOAAIAA contains specific duties and responsibilities of the Audit Committee. The committee must:
- provide assistance to the Commission in fulfilling its oversight responsibility to the House and the public with respect to stewardship of public money;
- make recommendations to the Commission respecting the choice of and terms of engagement and compensation of an external auditor appointed under section 43 of the Act;
- review the audit plans of an auditor appointed under section 43 of the Act, including the general approach, scope and areas subject to risk of material misstatement;
- review the financial statements, audit report and recommendations of the auditor and give advice about them to the Commission, including – where the Committee considers it appropriate – recommending that the Commission approve and sign the financial statements;
- review the compliance report issued and recommendations, if any, provided by the Auditor General as a result of a compliance audit conducted under subsection 43(9) of the Act and give advice on that report and those recommendations to the Commission;
- review internal audit reports and make recommendations to the Commission as required in respect of matters arising from those reports and generally make recommendations with respect to internal audit procedures of the House and Statutory Offices;
- review with the Clerk the effectiveness of internal control and other financial matters, as well as compliance with legal requirements respecting accountability, record-keeping, tendering and conflict of interest in the House of Assembly service and the Statutory Offices;
- review the Code of Conduct for Employees applicable to the Clerk and staff of the House of Assembly service and Statutory Offices, and make recommendations for improvements to the Commission;
- establish procedures for the receipt and treatment of complaints regarding accounting and internal controls, and the confidential submission by staff of the House of Assembly service and Statutory Offices and by members of the public service of concerns regarding questionable accounting or auditing matters;
- use reasonable efforts to satisfy itself as to the integrity of the House and Statutory Office’s financial information systems and the competence of accounting personnel and senior financial management responsible for accounting and financial reporting;
- review disclosure practices of the Commission to ensure full, plain and timely disclosure of its decisions respecting financial matters;
- advise the Clerk with respect to the exercise of their responsibilities as accounting officer; and
- act on, advise and report on other matters relating to the financial affairs of the House and Statutory Offices as may be required by the Commission.
The Audit Committee is required to review its performance regularly, usually in the form of a self-assessment. The results of this assessment must be made available to the Commission. The Committee must also review its terms of reference at least once during its term.
Comprehensive Auditing Framework
The House of Assembly is subject to a comprehensive oversight and auditing framework to ensure that the Legislature remains transparent and accountable with respect to its operations and to the expenditure of public funds. The following are the core auditing structures as established in legislation further to the Green Report.
Management Certification: Section 20 of the HOAAIAA requires the Clerk to annually certify to the Commission that the House of Assembly and Statutory Offices have appropriate systems of internal controls in place, and that those systems are operating effectively. Consultants are engaged annually to enable the Clerk to meet these requirements. The services include a review of the design effectiveness and existence of internal controls, identification of any control gaps and recommendations for remedial action. This measure of accountability is rare for Canadian public entities and may be unique to the Legislature among public entities in the province.
Annual Financial Audit: An annual financial audit of the Legislature is also required under the HOAAIAA. The Auditor General has historically been appointed to perform this auditing role, but the Management Commission could appoint an external auditor further to advice by the Audit Committee. The financial information to be audited includes the Schedule of Assets and Liabilities, the Schedules of Expenditure and Related Revenues, and gross expenditures and unexpended balances of the Legislature for that fiscal year.
Compliance Audits: In accordance with the HOAAIAA, the Auditor General must also complete a compliance audit once during each General Assembly. This audit evaluates the Legislature’s compliance with statutory requirements for the life of that particular General Assembly. This audit is in addition to the annual financial audit conducted by the Auditor General or other appointed external auditor.
Internal Audit: The Audit Committee relies on the internal audit function to fulfill some of its required duties. The Audit Committee defines internal auditing as “an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.”3 Internal audits are performed by the Professional Services and Internal Audit Division of the Office of the Comptroller General (“the Division”). External resources may be employed to perform internal audits, but such resources must work under the direction of the Division.
The Division has no direct reporting relationship to the Committee or the Commission. Therefore, the mandate or audit plan of the Division does not require the approval of the Committee or the Commission. The Division may initiate internal audits of the House and its Statutory Offices at the discretion of the Comptroller General of Finance. As well, the Committee may request specific internal audit services from the Division. Under the Financial Administration Act and the HOAAIAA, the Comptroller General has access to all books, documents, accounts and other financial records of the House and its Statutory Offices. The role of the Committee in relation to internal audit is to advise the Commission on the assurance needs of the Commission (i.e., recommending areas to be examined by internal audit) and to review reports provided by internal audit as well as the Commission’s responses to these reports. It may also provide recommendations regarding reports to the Commission.
Internal Audit Procedures: Committee members may identify an area in which an internal audit project should be completed. The Chair circulates a copy of the member’s request to all Committee members and the Committee decides whether a formal request is to be made to the Office of the Comptroller General. The Chair then liaises with the Comptroller General on the matter.
The Comptroller General has authority to determine the priorities of the Internal Audit Division. As such, the decision to action formal requests for internal audit work from the House is at the discretion of the Comptroller General based upon available resources and other priorities. In addition, the Comptroller General has authority to proceed with an internal project they have been made aware of even if the Committee decides not to proceed with a formal request.
The Chair, on behalf of the Committee, may discuss the scope of specific internal audit projects with the Comptroller General to offer suggestions for consideration. In addition, in determining the scope of work to be performed by the Division, the Comptroller General may seek input from the Chair of the Committee through informal discussions. In order for the Comptroller General to fulfill their duties in an efficient manner, the House must respond to all requests for information from the Office of the Comptroller General in a timely manner.
Where reports identify the need for corrective action, the Clerk of the House must submit to the Committee plans for corrective action to be taken to address all issues identified and may be required to meet with the Committee regarding the status of those plans. The Clerk of the House may also make a request for internal audit where an issue is identified. If taken up by the Comptroller General, such audit reports would subsequently be distributed to the Audit Committee for review.
Other Accountability Mechanisms
Clerk of the House of Assembly as “Accounting Officer”: The Clerk of the House of Assembly has been designated as an “accounting officer” in the UK tradition. Section 31 of the HOAAIAA provides that the Clerk of the House of Assembly, as an accounting officer, is directly accountable before the Public Accounts Committee (“PAC”) of the House of Assembly for the authorities and responsibilities assigned by law or delegated to the Clerk by the Commission. The Clerk appears before the PAC and answers questions from the Committee regarding:
- measures taken to organize the resources of the House of Assembly Service to deliver the programs in compliance with established policies and procedures;
- measures taken to implement appropriate financial management policies;
- measures taken to maintain effective systems of internal control;
- certifications that are made under the Act; and
- performance of other specific duties assigned under the HOAAIAA or another Act in relation to the administration of the House of Assembly Service and the Statutory Offices.
Code of Conduct for Members: The HOAAIAA requires the development of a Code of Conduct for Members and requires compliance with it. Members commit to following the Code upon being sworn or affirmed in office, and are also required to review and commit to following it on an annual basis. A process is outlined in the Act for non-compliance with the Code, which could result in discipline being imposed by the House of Assembly. There is also a Code of Conduct for House of Assembly Service employees and Statutory Offices. Appropriate human resource policies would be applied for non-compliance by an employee.
Pre-audit Practices: While formal audits and Management Certification ensure controls are in place, the Corporate and Members’ Services Division of the House of Assembly Service ensures effective and consistent application of controls on a day-to-day basis. All transactions and expenditures are pre-audited by staff to ensure compliance with applicable legislation, Management Commission policies, directives and so forth. Pre-audit also serves to highlight the importance of financial systems and controls for Members and to emphasize the importance of Members’ adherence to applicable financial standards.
Separate Whistleblower Powers, Clerk of the House of Assembly: The HOAAIAA provides whistleblower powers and protection to the Clerk which are distinct from other public interest disclosure provisions of the Act. Should the Speaker or Commission direct the Clerk to take actions which are contrary to established policies and rules, subsections 31(3) to (6) provide that the Clerk must seek guidance in writing on the matter from the Comptroller General or the Deputy Attorney General. Where guidance is provided but the matter remains unresolved, and the Speaker or Commission, in writing, requests action by the Clerk in accordance with their direction, the Clerk is required to comply with that direction but is also required to immediately notify the Auditor General, the Comptroller General and the Attorney General of the direction and their disagreement with that direction. The Clerk is also given protection under the statute from punishment or retaliation should such action be necessary.
Enforcement of duties under the HOAAIAA: The HOAAIAA gives express statutory recognition to a right of a member of the public to seek an order of the court to enforce a duty under the Act. A writ of mandamus may be issued by the court requiring the Management Commission, the members of the Commission as well as Members of the House of Assembly to fulfil a duty under the Act where the member of the public, acting in good faith, believes that a statutory duty has not been complied with and no other action to enforce it has been or is being contemplated.4 A member of the public seeking such an order is not denied standing on the ground that they are not affected by the alleged failure to perform the duty to any greater degree than any other person, and cannot have costs ordered against them for bringing such an application if acting in good faith.
Members’ Review and Compensation Committee (“MCRC”): An MCRC must be appointed at least once in each General Assembly to review and make recommendations on the salaries, allowances, severance payments and pensions paid to Members. Once an MCRC has concluded its review, its report and recommendations must be presented to the Management Commission for consideration. As outlined in subsection 16(6) of the HOAAIAA, the Commission has the power to modify the recommendations, but does not have the authority to exceed the maximum amounts recommended by the MCRC.
Review of Members’ Allowance Use, Speaker’s Request: Under section 52 of the HOAAIAA, the Speaker is authorized to institute a review to determine whether a Member’s use of an allowance, disbursement, payment, good, premises or service provided under the Act complies with the purpose for which it was provided or the purpose of the Act, the Rules or the directives of the Commission. A Member may appeal any findings to the Commissioner for Legislative Standards, and the Speaker may make an order, with terms and conditions, respecting a Member’s use of such benefits.
Special Procedures for Rules Amendments Regarding Reimbursement or Payment of Expenses: Section 15 of the HOAAIAA provides for a special procedure where the Commission proposes to amend or add to the levels of or provisions respecting reimbursement or payment of expenses of Members. A draft containing the amendment must be tabled at a Commission meeting, but a notice of the tabling of the draft rule must also be given by the Speaker and read in the House of Assembly. It is also required to be posted on the House of Assembly website,after which the draft rule can be voted on at a subsequent meeting of the Commission. This process results in increased public visibility of any such changes.
Publication Scheme: The HOAAIAA requires that certain types of information created, prepared, managed or under the oversight of the Commission be open and accessible in a standardized and systematic fashion. Such access allows for public scrutiny and consideration of the work of the Management Commission in its oversight role, and by extension, the expenditure of public funds. Section 49 of the Act refers.
Other Related Statutory Provisions: With exceptions respecting caucus and constituency matters and matters relating to parliamentary privilege, the Access to Information and Protection of Privacy Act, 2015 and the Transparency and Accountability Act apply to the House of Assembly. The House of Assembly is also subject to a duty to document in relation to Commission matters under section 21.1 of the HOAAIAA.
The broader purposes of rejuvenation of public confidence in our political institutions, and of the institutional culture in which our politicians work, cannot be achieved solely as a result of technical implementation of specific institutional reforms, no matter how comprehensive and far-reaching; rather, they depend in the last analysis on the willingness and continual dedication of our leaders to foster and maintain, by example, the high standards expected of those who discharge the critically important and difficult responsibilities of public office.5
Since 2007, the House of Assembly in Newfoundland and Labrador has been subject to a prescriptive accountability regime. While this has been a source of frustration to some Members from time to time, it also protects Members and insulates the institution from previous vulnerabilities. As noted in the excerpt from the Green Report above, continued success of these reforms is necessarily based on the willingness and dedication of Members and employees to maintain the standards which sustain confidence in our democratic institution.
Seven years after the spending scandal, the House of Assembly is a very different place. The secretive and unaccountable Internal Economy Commission is gone. It has been replaced by the House of Assembly Management Commission, which meets in sessions that are broadcast live on province-wide television. The financial staff is more significant and robust. The auditor general has full and unfettered access to MHA expense claims. Financial integrity doesn’t exist simply as a rhetorical device. It exists in structure and in form. At the intersection where politicians spend money for professional use this all ensures it can’t be used for personal gain. The spending scandal was an embarrassing and painful time for the legislature. But the institution has been strengthened as a result.6
- Rebuilding Confidence: Report of Review Commission on Constituency Allowances and Related Matters, Hon. J. Derek Green, Commissioner. May, 2007 https://www.assembly.nl.ca/business/electronicdocuments/mainreport.pdf; Public report available at: https://www.gov.nl.ca/publicat/greenreport/mainreport/mainreport.pdf
- Ibid., Executive Summary, https://www.assembly.nl.ca/business/electronicdocuments/execsummary.pdf
- Source: Canadian Institute Internal Auditors https://chapters.theiia.org
- House of Assembly Accountability, Integrity and Administration Act, section 53
- Green Report, c. 13-5 https://www.assembly.nl.ca/business/electronicdocuments/mainreport.pdf
- David Cochrane, “Where Ottawa should look for Senate scandal remedies,” CBC News, 25 May 2013. https://www.cbc.ca/news/canada/newfoundland-labrador/cochrane-where-ottawa-should-look-for-senate-scandal-remedies-1.1313342