"Naval Administration" by Sir Vesey Hamilton, G.C.B. (1896)
THE ACCOUNTANT-GENERAL OF THE NAVY.
The Royal Commission on Civil Establishments, 1887, remarked with truth in its Report that the subject of the financial control of the great spending departments of the State is one of great difficulty and of high importance; and it proceeded to deal with the recent financial changes at the Admiralty as serving to elucidate the whole problem. I cannot do better than follow a similar course in order to illustrate the development of naval financial control. When I dealt in an earlier chapter with the constitution of the Board of Admiralty, I showed that the Parliamentary and Financial Secretary is responsible for the Finance of the Department, for the estimates, and for expenditure generally, the accounts, and the purchase and sale of stores, as well as for questions involving reference to the Treasury financially, and connected with the Exchequer and Audit Department, with other kindred matters. For the practical work of his Department he has under him the Accountant-General, who acts as his assistant, and the Director of Navy Contracts, who is also under the several Lords for whose departments purchases are made. The duties of the latter officer will be explained in the next chapter.
The position of the Accountant-General of the Navy, and the powers he exercises, have undergone successive changes, and have been the subject of much discussion and of inquiry before several committees, Some have regarded him as an officer who should exercise financial control over the estimates, in the sense of criticising policy or holding economical authority and responsibility. Others have maintained that, as the head of an Admiralty Department, he could not exercise efficient control over Admiralty expenditure, and that he necessarily does not possess sufficient technical knowledge to criticise professionally the various causes of expenditure. From this manner of regarding the position of the Accountant-General arose the view that he should be a bookkeeper, and his Department one of clerical work. Mr. Childers, on the other hand, held that the Accountant-General should be in a position to advise the First Lord, through the Financial Secretary, on all financial questions, and that his advice and control are almost essential parts of good administration. Lord Northbrook, too, was of opinion that the Accountant-General should be quite free to offer any criticism or opinion that he was pleased to give upon Admiralty finance, broadly speaking, both relating to estimates and expenditure.
When the Civil Deportments were reorganized in 1832, the Accountant-General of the Navy was one of the five Principal Officers then placed under the authority of the Board, and his duties were defined as consisting in keeping all books and accounts connected with the receipt and expenditure of the Navy, including those relating to the victualling and marine services, in seeing that all accounts were examined and supported by proper vouchers, that all stores supplied were in conformity with the terms of contract, and in preparing bills for the payment of claims by the Paymaster-General. In other words, the Accountant-General was yet a bookkeeper. His duties were limited to the examination of accounts, the payment of bills, and the recording of expenditure. He had no authority to keep a watch upon the expenditure or estimates of other Departments. The duties of the office were, however, enlarged by the Order in Council of January 14th, 1869 - that which made the Parliamentary Secretary, with the Civil Lord as his assistant, responsible for the finance of the department. As a consequence of this Order, as I have already explained, the store accounts, both naval and victualling, which before had been in the hands, of the Storekeeper-General and the Controller of Victualling, were concentrated in the Department of the Accountant-General, who was vested with the power of criticising these accounts financially. But, although a farther enlargement of that officer's duties in relation to records of liabilities and expenditure was made in 1876, he was as yet placed in no better position in regard to effective financial control. It was not the intention, said the memorandum of instructions, by the new arrangements of 1876, "that any check should be placed upon the individual action of the several departments in bringing under their Lordships' notice for decision any questions arising in the course of the preparation of those votes which are under their control."
The first definite step towards placing financial control in the hands of the Accountant-General was taken in 1879, when a memorandum, dated December 31st, laid it down that "the Accountant-General is to be consulted before any expenditure is incurred which is not provided for in the estimates, or before any money provided for in the estimates is applied to any purpose other than that for which it was so provided," and further that he was to be consulted on all proposals for altering pay or allowances, as regarded "the financial effect" of those proposals. From the conditions thus set up, considerable friction not unnaturally ensued, as was, indeed, shown in the report of a Departmental Committee, dated February 20th, 1884. Without creating friction, the Accountant-General, under these orders, could, in fact, scarcely have carried out his instructions; and the financial arrangements of the Admiralty remained unsatisfactory. When Lord Northbrook left office in 1885 he left a memorandum, indeed, to the effect that under the then existing conditions he had felt the need of "permanent financial assistance," which frequent changes of Financial Secretaries had not given him. It had been his purpose, therefore, to make the Accountant-General assistant to the Financial Secretary, thus raising him from the position of an officer of account to that of a permanent officer of finance.
Some change seemed to be called for, since, no record of liabilities being kept, or furnished to the Accountant-General, it was a matter of exceeding difficulty to find out what Admiralty liabilities were. A Select Committee of the House of Commons appointed to report on this subject stated that "both the late and present occupant of the office concur that the Accountant-General has no financial control over the other departments," and that "the evidence before them proves the necessity of a much severer financial control, even when operations have to be conducted directly by the First Lord," and further, that "the position of the Accountant-General does not enable him to exercise any sufficient general supervision over expenditure, while there is no permanent high official especially charged with finance." The outcome of this criticism was the appointment of a Departmental Committee, which reported on September 23rd, 1885, that it was desirable that permanent assistance should be given the Parliamentary and Financial Secretary, in the direction of financial criticism and control, by placing the Accountant-General in closer relationship with him. The recommendations of the Committee were embodied in an important Order in Council, dated November 18th, 1885. The effect of the new disposition thus made, which took its effect from January, 1886, was to add largely to the Accountant-General's powers. Under the Financial Secretary, he was formally entrusted with a direct share in the preparation of the estimates, his written concurrence being necessary before the final approval of the individual votes, and each vote was to be referred to him in sufficient time, with explanations, for his concurrence or observations. He was to exercise a financial review of expenditure, and was to be consulted upon expenditure not provided for in the estimates, and before money voted could be applied to any purpose other than that for which it was provided. He was to see that expenditure was properly brought to account, and was to be regarded as "the officer to be consulted on all matters involving an expenditure of naval funds." In the office memorandum which accompanied the order, the Board remarked that, "in recognizing the Accountant-General themselves, and in calling upon the spending departments to recognize him to the fullest possible extent, as the financial officer who shall be referred to in regard to all proposals involving expenditure, a security will be given for the economical administration of naval funds which does not now exist."
Not all the advantages sought for by the Order in Council of November 18th, 1885, were attained. The opinion grew that good results could not be secured by subjecting the professional officers to the supervision of a permanent financial officer, implying the submission of their proposals to inexpert criticism, which would weaken their sense of responsibility. Mr. Main, Assistant Accountant-General, told the Royal Commission on Civil Establishments, 1887, that the effect of the Order in Council had been to give rise to friction, and that the result was far from satisfactory. "The tendency to withhold information, or to give partial information, coupled with the tendency to friction when questions affecting expenditure are raised accompanied by protests, even in cases where these questions are manifestly of a legitimate character, has been most discouraging, and has done much, in my opinion, to weaken financial control of the really effective character contemplated by the Order."
Meanwhile, other causes had been operating to affect the new position and increased authority of the Accountant-General. Since 1870, as appears above, the examination of the naval and victualling store accounts had been entrusted to him; but, in March, 1886, three months after he had assumed his new powers, the Admiralty Board re-transferred the examination of the store-keeping accounts to the departmental officers, leaving merely a power of "review" with the Accountant-General. In the same way the newly instituted Dockyard Expense Accounts, as I remarked in a previous chapter, were ultimately transferred to the Controller of the Navy. At about the same time (November, 1886) the Treasury issued a minute that an independent audit of store accounts should be conducted by the Parliamentary Comptroller and Auditor-General; and this minute - I quote the Report of the Royal Commission on Civil Establishments - "was regarded by the Board of Admiralty as enabling them to dispense altogether with the Accountant-General's 'review,' and that officer ceased to have any further knowledge of, or power over, the stores." (In Chapter IV. of this Part I showed that a Treasury committee in 1889 approved the new arrangement made, and in the last chapter I gave the objections put forward by the several Departments to the principle of a "review" of store accounts by the Accountant-general intermediate between the departmental accounts and the audit of the Comptroller and Auditor-General). Sir Gerald FitzGerald, however, the Accountant-General, who had concurred in the re-transfer of the stores accounts to the Director of Stores, the Director of Victualling, the Director-General of the Medical Department, and others, told the Royal Commission that he considered the change a very good one. "The work of my office is not store work, and it is much better that it should be restricted to finance." He further stated that the Order in Council of November 18th, 1885, had given him the control he would have thought desirable for his Department. The Royal Commission reported that in its opinion the Accountant-General of the Navy should be "the permanent assistant and adviser, on all matters involving the outlay of public money, to the Financial Secretary," and that the view of his duties embodied in the Order in Council was substantially just and wise; and further, that it could see no good reason for the abandonment of the intermediate "review" of store and expense accounts by the Accountant-General. Much evidence was also taken by the Select Committee on the Navy Estimates, 1888, before which the Accountant-General maintained that the audit of the Comptroller and Auditor-General weakened his financial control, and that the Order in Council of November, 1885, had for eighteen months been "practically a dead letter," while, on the other hand, the Parliamentary Secretary maintained that the provisions of the Order in Council were properly and duly observed, and that the Accountant-General was as well able to carry out his authorized duties as before the audit was undertaken by the Comptroller and Auditor-General. In the final disposition of affairs the stores accounts were left, as I have shown in previous chapters, with the departmental officers, and the Accountant-General ceased to exercise any check.
The instructions under which the Department of the Accountant-General of the Navy is conducted are contained in the Order in Council of November 18th, 1885, and an office memorandum of December 10th in the same year. By the first of these the Accountant-General is authorized to act as deputy and assistant of the Parliamentary and Financial Secretary.
"With this object he should be charged under the Parliamentary and Financial Secretary with the preparation of the Navy Estimates; with financially reviewing the expenditure under those estimates; with advising or deciding as to any redistribution of votes or transfers which may from time to time be found necessary; with satisfying himself that such expenditure is properly allowed and brought to account; with advising on all questions affecting Naval expenditure; and that he should not only be made acquainted with expenditure after it has been incurred, but be regarded as the Officer to be consulted on all matters involving an expenditure of Naval funds."
The office memorandum which followed the Order in Council precisely defined the Accountant-General's duties as: (1) To criticise the annual estimates as to their sufficiency before they are passed, and to advise the Parliamentary and Financial Secretary as to their satisfying the ordinary conditions of economy; (2) to financially review the progress of liabilities and expenditure under the estimates; (3) to consider, in regard to dockyard expenditure, the proposed programme of construction, etc., that is, in regard to labour, material, and machinery; (4) to review the current expenditure or employment of labour and material, as distinguished from cash payments, at the yards; and (5) to review proposals to spend money on new work, or repairs of any kind, for which estimates are currently proposed. At the same time a Finance Committee was created within the Admiralty to assist the Financial Secretary, himself being president, and the Accountant-General vice-president. It was to bring into harmony the general financial policy of the Admiralty Department with the particular policy which might be adopted by the Board of Admiralty for the time being, and to secure to the Financial Secretary the possession, continuously, of the fullest information as to the progress and character of the financial operations of the department (A statement of the course pursued in the preparation of the several votes of the Navy Estimates will be found in Appendix III).
The Accountant-General's Department is one of the most considerable under the Admiralty. For its complex and detailed work it embraces three principal divisions -the Estimates Division, the Navy Pay Division, and the Invoice and Claims Division, occupied chiefly with clerical work. The Ledger Branch of the Estimates Division is charged with the great work of bringing all expenditure to book under the several votes and sub-heads of votes, and with preparing the all-important Navy Appropriation Account. In the Estimates and Liabilities Branch the Navy Estimates generally are prepared, after having been compiled and worked out under the immediate responsibility of the heads of the Executive Departments, who are responsible also for the administration of the several votes. The Ships' Establishments Branch keeps and furnishes records of establishments for estimate and other purposes, and prepares certain of the estimates; and the work of the Salaries Branch is sufficiently indicated by its title. The Navy Pay Division includes several branches. Its Full and Half Pay Branch, with a Registry Section, is charged with all matters relating to the pay of officers, and has its share in the preparation of estimates and returns. The Seamen's Pay, etc., Branch, exercises a Wages Audit on ships' ledgers of wages, and deals with the whole business of seamen's wages. There are also a Victualling Audit of payments or allowances in lieu of victualling, subsistence allowances while travelling, and field allowances; an examination of ships' ledgers, with related business; a Central Registry, which records the services, characters, ages, etc., of petty officers and seamen, and conducts other like business; and an Inquiry Office. The other branches of the Navy Pay Division are the Allotment Branch and the Naval Pension Branch. The Invoice and Claims Division conducts in several branches the examination and passing for payment or allowance of claims for material supplied and work done, travelling, and subsistence expenses, and other like matters, with the audit of naval accountants in that regard. Finally, it deals with the wills of seamen and marines, the management of Naval Savings Banks, and questions relating to prizes and bounties.
It will be seen that the office of the Accountant-General of the Navy as permanent financial adviser to the Parliamentary Secretary, and the large share which he has in the final shaping of the Navy Estimates, give him a position of high importance in the conduct of Admiralty business, and that the influence which he is able to exercise in the direction of wise economy must be salutary, and of direct benefit both to the service and the country.