No one will question your integrity if your integrity is not questionable.
As auditors we are often asked why we “waste time” auditing the expenses of management when there are – supposedly – more important and material matters of business over which we should be providing assurance.
The British Parliament’s expense scandal IS the reason.
Honestly Lay Bare is of the school of thought that the most important aspect of an internal control environment is the tone at the top.
As we have seen in Britain over the last month once there are doubts as to the honesty or integrity of those that we have either elected or have been appointed to lead then the faith that the led (or the shareholders) have in the leaders is irreplaceably damaged.
How did the reputation of one of the most prestigious establishments in the world become so tarnished?
**
The most widespread abuses relate to the Additional Costs Allowance, which exists to reimburse Members of Parliament (MP) for the cost of running a second home, either in their constituency or in London.
Dozens of MPs switch their “second” home from London to their constituency, and sometimes back again, to enable them to carry out extensive renovations or buy household goods for both properties.
Although parliamentary rules state that a second home should be the one where an MP spends the least time, officials in the department that signs off expenses were powerless to prevent members arbitrarily nominating different addresses at different times. Because all addresses were censored when the expenses claims are published, there was no way of knowing that such apparent abuses were going on.
Jacqui Smith, the Home Secretary, nominated her main family home as her “second” home so she can charge the taxpayer for her household bills and mortgage interest payments while living cheaply in flats or even the spare rooms of friends or relatives in London.
In some cases, MPs appear to be guilty of profiteering by spending thousands of pounds doing up flats or houses, charging the taxpayer for “repairs” then selling them on, before starting the whole process again at a new address.
Parliamentary rules forbid MPs from charging for work which “enhances” a property and makes it more saleable, but the details of some claims suggest otherwise; they range from a £14,000 claim for a wet room to £8,000 worth of fitted bookcases.
The London Daily Telegraph discovered numerous cases of MPs buying furniture, including beds, wardrobes and armchairs, which are delivered to their “first” home and then claimed as expenses for their “second” home. In some cases the claims are queried, before being paid when MPs make assurances they have shifted the items to the other address.
Accountants in the Department of Finance and Administration appeared unable or unwilling to query the MPs’ integrity, even when invoices for thousands of pounds of building work are submitted with the wrong address on them — raising questions about not just MPs, but also about those who police the system.
Because MPs can claim up to £24,222 each year for their second home, some MPs appear to go on spending sprees at the end of the financial year to “use up” what they have not already claimed.
Some also appear to take advantage of rules which allowed them, until recently, to claim up to £250 in any category without submitting a receipt, resulting in a rash of claims for cleaners, gardeners and repair bills which came in at £249 per month. And because MPs can claim up to £400 per month for food, with no need for receipts, some put in claims for precisely that amount every month, even during the recess when they are not expected to live at their “second” home.
Other tricks of the MPs’ trade come into play when they decide to step down from Parliament, with some arranging expensive building work on their homes just prior to leaving the Commons before selling them on at a profit. Others are thought to avoid capital gains tax when they sell their “second” homes by telling HM Revenue and Customs that the property is, in fact, their main home and hence is exempt from tax.
**
As disturbing as this account is it struggles to matches the wrongdoings of Sir John Trevor in the service of the interests of his King and Country.
Today, Honestly Lay Bare travels back in time 300 years to meet Sir John.
Sir John was a Welsh judge and lawyer, who was found guilty of "a high crime and misdemeanour" for accepting a bribe in 1695.
He became Speaker of the English House of Commons (the lower house of the English Parliament) in 1685, briefly losing it before being reappointed in 1690. He was also Master of the Rolls.
(Apparently Sir John was severely cross eyed and it was said to affect his ability at times to identify people on the floor of the House. It has led to the modern tradition of the Speaker naming the MP before he speaks).
In the 17th Century, the Speaker had control over the House of Commons agenda and could authorise private member's bills.
His downfall came when the City of London asked Sir John if he could put through a bill on their behalf, and he agreed to do it for 1,000 guineas (equivalent to around £1.6 million in 2009).
But he was found out and efforts were launched to remove him from the post for bribery.
Sir John initially resisted the moves to throw him out but he finally had to go in March 1695.
He was the only Speaker of the Commons to be forced out of the post in the last 300 years.
That is until the Daily Telegraph started reporting on the expense reimbursement practices of British politicians – leading to the resignation of the current speaker, Michael Martin and in the eyes of many a generational decline in the respect for the institution of governance that is the British Parliament.
**
It would be a wise man to suggest that the British Parliament and the Members that serve her have learnt the lessons of 300 years ago or the lessons of the last month.
For the sake of Britain’s reputation, let’s hope they have.
The British Parliament’s expense scandal IS the reason.
Honestly Lay Bare is of the school of thought that the most important aspect of an internal control environment is the tone at the top.
As we have seen in Britain over the last month once there are doubts as to the honesty or integrity of those that we have either elected or have been appointed to lead then the faith that the led (or the shareholders) have in the leaders is irreplaceably damaged.
How did the reputation of one of the most prestigious establishments in the world become so tarnished?
**
The most widespread abuses relate to the Additional Costs Allowance, which exists to reimburse Members of Parliament (MP) for the cost of running a second home, either in their constituency or in London.
Dozens of MPs switch their “second” home from London to their constituency, and sometimes back again, to enable them to carry out extensive renovations or buy household goods for both properties.
Although parliamentary rules state that a second home should be the one where an MP spends the least time, officials in the department that signs off expenses were powerless to prevent members arbitrarily nominating different addresses at different times. Because all addresses were censored when the expenses claims are published, there was no way of knowing that such apparent abuses were going on.
Jacqui Smith, the Home Secretary, nominated her main family home as her “second” home so she can charge the taxpayer for her household bills and mortgage interest payments while living cheaply in flats or even the spare rooms of friends or relatives in London.
In some cases, MPs appear to be guilty of profiteering by spending thousands of pounds doing up flats or houses, charging the taxpayer for “repairs” then selling them on, before starting the whole process again at a new address.
Parliamentary rules forbid MPs from charging for work which “enhances” a property and makes it more saleable, but the details of some claims suggest otherwise; they range from a £14,000 claim for a wet room to £8,000 worth of fitted bookcases.
The London Daily Telegraph discovered numerous cases of MPs buying furniture, including beds, wardrobes and armchairs, which are delivered to their “first” home and then claimed as expenses for their “second” home. In some cases the claims are queried, before being paid when MPs make assurances they have shifted the items to the other address.
Accountants in the Department of Finance and Administration appeared unable or unwilling to query the MPs’ integrity, even when invoices for thousands of pounds of building work are submitted with the wrong address on them — raising questions about not just MPs, but also about those who police the system.
Because MPs can claim up to £24,222 each year for their second home, some MPs appear to go on spending sprees at the end of the financial year to “use up” what they have not already claimed.
Some also appear to take advantage of rules which allowed them, until recently, to claim up to £250 in any category without submitting a receipt, resulting in a rash of claims for cleaners, gardeners and repair bills which came in at £249 per month. And because MPs can claim up to £400 per month for food, with no need for receipts, some put in claims for precisely that amount every month, even during the recess when they are not expected to live at their “second” home.
Other tricks of the MPs’ trade come into play when they decide to step down from Parliament, with some arranging expensive building work on their homes just prior to leaving the Commons before selling them on at a profit. Others are thought to avoid capital gains tax when they sell their “second” homes by telling HM Revenue and Customs that the property is, in fact, their main home and hence is exempt from tax.
**
As disturbing as this account is it struggles to matches the wrongdoings of Sir John Trevor in the service of the interests of his King and Country.
Today, Honestly Lay Bare travels back in time 300 years to meet Sir John.
Sir John was a Welsh judge and lawyer, who was found guilty of "a high crime and misdemeanour" for accepting a bribe in 1695.
He became Speaker of the English House of Commons (the lower house of the English Parliament) in 1685, briefly losing it before being reappointed in 1690. He was also Master of the Rolls.
(Apparently Sir John was severely cross eyed and it was said to affect his ability at times to identify people on the floor of the House. It has led to the modern tradition of the Speaker naming the MP before he speaks).
In the 17th Century, the Speaker had control over the House of Commons agenda and could authorise private member's bills.
His downfall came when the City of London asked Sir John if he could put through a bill on their behalf, and he agreed to do it for 1,000 guineas (equivalent to around £1.6 million in 2009).
But he was found out and efforts were launched to remove him from the post for bribery.
Sir John initially resisted the moves to throw him out but he finally had to go in March 1695.
He was the only Speaker of the Commons to be forced out of the post in the last 300 years.
That is until the Daily Telegraph started reporting on the expense reimbursement practices of British politicians – leading to the resignation of the current speaker, Michael Martin and in the eyes of many a generational decline in the respect for the institution of governance that is the British Parliament.
**
It would be a wise man to suggest that the British Parliament and the Members that serve her have learnt the lessons of 300 years ago or the lessons of the last month.
For the sake of Britain’s reputation, let’s hope they have.
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