The Public Accounts Committee (PAC) plays the role of watchdog over public expenditure. It is heavily armed with formal statutory powers. PAC ensures that the findings contained in the Director of Audit's (D of A) reports on the accounts and the results of value-for-money audits of the Government and any organisations which receive income from public moneys are properly considered.

PAC was established by a LegCo resolution on 10 May 1978. It is a standing committee consisting of a chairman and six members appointed by the President upon nomination by LegCo's House Committee. LegCo members, through a process of internal lobbying and election ensure that PAC is representative of all parties.

PAC then elects its own Chairman and nominates him to the President for appointment. As you are probably aware, your LegCo representative is the current Chairman of PAC. This is perhaps a reflection that LegCo holds the professional of accountants in high esteem.

The D of A submits three reports to the President of LegCo each year. The first tabled in April relates to value-for-money audits; the second and third, tabled in November, relate to the audits of the Government's annual statements of accounts and value-for-money audits.

Value-for-money audits usually draw immense media and public interest. Public hearings on value-for-money audits are a crucial part of PAC's work. The purpose of these public hearings is to explore the back-ground and the facts surrounding the issues raised in the D of A's report. The proper approach should be fact-finding and problem-solving rather than merely laying blame or expressing opinions.

Under LegCo Standing Order 60A, the practice of procedure of the Committee should be determined by the Committee'. In practice, value-for-money audits are carried out under a set of guidelines tabled in LegCo on 19 November 1986. The guide-lines were agreed between the PAC and the D of A and were accepted by the Administration. In essence, the D of A is given great freedom in presenting his reports though he must not question the merits of Government's policy objectives. He may however, question the economy, efficiency and effectiveness of the means used to achieve them.

If he reasonably believes that at the time decisions were made and policy objectives were set, that there may have been a lack of sufficient relevant and reliable data, financial or otherwise, available upon which to base such decisions and policy objectives and that the critical underlying assumptions are not explicit, he may carry out an investigation as to whether his beliefs are well founded. If it appears that they are, he should bring the matter to the attention of LegCo with a view to further inquiry by PAC.

The agreed guidelines were put to a serious test recently due to an assertion in one of the D of A's reports that Hospital Authority (HA) staff received more housing benefits than their civil servant counterparts. This assertion was disputed by the Administration and the HA.

During the course of PAC's investigation, it transpired that the process of formulating the HA package may have lacked clarity and precision. If that was the case, both the D of A and the HA could quite legitimately adopt different assumptions in interpreting the open-ended 'cost comparability' principle and thus come up with very different cost projections.

PAC decided that it was not its proper role to decide or adjudicate Government policy objectives where the Administration's own policy is silent. However, it is clearly our role to make further inquiries into what data, financial or otherwise, the Executive Council (Exco) based its policy objectives on and whether the disputed underlying assumptions were made explicit.

The subsequent public hearings held to investigate the matter drew equally conflicting evidence. In particular, both the D of A and the Administration selectively cited authorities from Exco papers which PAC did not normally have access to PAC members felt the only way of knowing the 'truth' was to read the Exco papers ourselves. I therefore entered into correspondence with the Chief Secretary to request the relevant Exco papers on behalf of PAC.

In my letters to the Chief Secretary, I stressed that

1. The essential function of PAC is to carry out an independent evaluation of the D of A's reports and that the scope of our investigation must not be constrained by selective evidence and secondary information provided to us

2. PAC will accept the Government's reason for non-disclosure if the requested documents are classified confidential on specific security or diplomatic grounds, ie a'content objection', and

3. it is not PAC's wish or intention to make Exco papers public and that we believed that the Exco papers requested only relate to a policy with little political sensitivity.

The request however was rejected by the Administration on the grounds that in the overall public interest, the proceedings of Exco should remain confidential and that Exco papers and records of discussions which are the equivalent of cabinet papers should not as a class be made public.

PAC members were naturally dissatisfied that the Administration could alone decide what and how much information and documentation we need to perform our statutory duty.

Although we could in theory, invoke the PAC's special LegCo powers to summon a Government official to produce such documents, the idea was dropped as counter-productive. Our in-house legal advice supported the view that the official would almost certainly come up empty-handed and any subsequent punitive action (contempt of order under-Chapter 3812 of the Legislative Council (Power and Prioilege) Ordinance taken against him or her would simply escalate the political conflict between the Legislature and the Administration.

The 'truth' was to remain hidden. Subsequently, PAC decided to support the well-publicised motion debate I sponsored on 24 April 1996 to condemn the Government for its lack of co-operation in this matter. The motion was passed by LegCo with an over-whelming majority.

This matter may be over for the time being but the real problem is still unresolved, I have no wish personally to devalue the reputation of our Government and, in reality, valid criticism cannot possibly damage its authority.

However, I still firmly believe that since our Government is not an elected institution and therefore irreplaceable, it is very important for it to remain highly transparent and accountable on a voluntary basis.