National Audit Office (United Kingdom) 574414 219687893 2008-06-16T12:32:09Z Bluegrouper 1792318 [[WP:UNDO|Undid]] revision 219516816 by [[Special:Contributions/212.183.134.65|212.183.134.65]] ([[User talk:212.183.134.65|talk]]) remove unbacked-up, POV assertion {{otheruses3|National Audit Office}} [[Image:Naologo.jpeg|right|212px|]] The '''National Audit Office''' (NAO) is an independent Parliamentary body in the [[United Kingdom]] which is responsible for [[Financial audit|auditing]] [[Departments of the United Kingdom Government|central government departments]], [[Executive Agency|government agencies]] and [[non-departmental public body|non-departmental public bodies]]. The NAO also carries out Value for Money (VFM) audit into the administration of public policy, although not into the merits of policy objectives themselves. The NAO reports to the [[Comptroller and Auditor General]] who is an officer of the [[British House of Commons|House of Commons]] of the [[Parliament of the United Kingdom]] and in turn reports to the [[Public Accounts Committee]], a [[Select Committee (Westminster System)|select committee]] of the House of Commons. The reports produced by the NAO are reviewed by PAC and in some cases investigated further. The [[Audit Commission]] performs a similar function for [[local government in England]], the English [[NHS Trust]]s and some other public agencies in [[England]]. [[Audit Scotland]] performs both the roles of the Audit Commission and the NAO in [[Scotland]], including auditing the [[Scottish Executive]] and its [[Scottish public bodies|public bodies]]. The [[Wales Audit Office]] is responsible for auditing the [[Welsh Assembly Government]], its public bodies and local government in Wales. The [[Northern Ireland Audit Office]] performs similar functions in [[Northern Ireland]]. ==Types of audit== The NAO has three main streams of work: *Financial Audits *Value For Money (VFM) audits *Good Governance ''Financial audit'' The NAO’s financial audits give assurance over three aspects of government expenditure: the truth and fairness of financial statements; the regularity (or statutory validity) of the expenditure, and; the propriety of the audited body’s conduct in accordance with parliamentary, statutory and public expectations. Financial audits are carried out in much the same way as private auditing bodies and the NAO voluntarily applies the International Standards of Auditing (ISAs). ''Value for Money'' (VFM) audits are [[Performance audit|non-financial audits]] to measure the effectiveness, economy and efficiency of government spending. Roughly sixty of these reports are produced each year, the most notable from recent years being the reports on [[Methicillin-resistant Staphylococcus aureus|MRSA]], which led to an increase in public interest in the topic, the report on the rescue of [[British Energy]] and the report in the [[Public-private partnership|Public Private Partnership]] to maintain the [[London Underground]]. The remits of the NAO and the Public Accounts Committee do not allow them to question the policy itself and so VFM reports only examine the implementation of policy. The responsibility for questioning policy is left for other select committees and debating chambers of Parliament, but this has not prevented the PAC being named committee of the year in 2006. ''Good Governance'' is a smaller but increasing area of work for the office and is somewhere in between VFM and financial audit work. The work tends to produce shorter, quicker reports than VFM and includes briefing documents and papers for select committees. The work also includes ''Section 2 Reports'' which examine the collection of taxes by [[Her Majesty's Revenue and Customs|HM Revenue and Customs]] and the DVLA. ==Parliamentary Links== The NAO produces a number of briefings for select committees, but its key audience is the Public Accounts Committee. It also has a strong relationship with the Public Accounts Commission that overseas the work of the NAO and approves its budgets. ===Public Accounts Committee=== The NAO and Public Accounts Committee (PAC) form the key links of the Public Audit Circle which has the following sequence: *The NAO performs financial and VFM audits and makes its reports public *The PAC has hearings based on NAO reports wherein failures in meeting regularity or propriety requirements are apparent. *The PAC provides a report with recommendations based on PAC hearings. *The Government responds to the PAC report in a Treasury Minute. *The NAO publishes a reply to the minute and there may be an NAO/PAC follow-up study. ===Public Accounts Commission=== The Public Accounts Commission (TPAC) annually approves the NAO's corporate plans and budgets. It also receives value for money reports on the operation of the NAO. These are written by private sector audit firms in much the same manner as the NAO reports on Central Government. ==History and establishment== Established as the [[auditor]] for [[central government]] (including most of the externalised agencies and public bodies) in [[1983]] as part of an “appropriate mechanism” to check and reinforce departmental balance and matching of quantitative allocation with qualitative purpose (as set out by public policy). The existence and work of the NAO are underpinned by three fundamental principles of public audit:<ref>“The Audit Commission” by Couchman V. in Sherer & Turley: ''Current Issues in Auditing'', Paul Chapman Publishing (1997)</ref> *Independence of auditors from the audited (executives and Parliament) *Auditing for: regularity, propriety and VFM (Value for Money) *Public reporting that enables [[democracy|democratic]] and managerial [[accountability]] [[Image:National Audit Office - NAO Logo - Victoria - London - 020504.jpg|thumb|320px|right|The National Audit Office building, built originally as the Imperial Airways Empire Terminal. The statue, "Speed Wings over the World" is by Eric Broadbent"]] The basic need for the NAO arises from these three fundamental principles, in that, as Parliament votes on public expenditure of various activities by public bodies, they need auditors that are independent of the body in question, the government and/or opposing political parties; while auditing for compliance and legal spending by departments on the activities voted for by Parliament, in a transparent and public forum. ==Developments== The campaign for [[New Public Financial Management]] (NPM) has been the driving force behind the technological and functional development and change in the scale and scope of the NAO’s work. Determined to emulate the managerial efficiencies of the private sector, which is driven by profit-maximisation goals, NPM provided public sector audit with the moving goal that is VFM-maximisation: which is achieved by maximising economy, efficiency and effectiveness (3Es). VFM/performance audits have widened the scope of audit work beyond financial concerns and provided the “customer-based” approach that was lacking in the public sector. The research methodology referred to in the appendices of most VFM studies (carried out by the NAO) reflects on the use of a wide-range of market-research techniques such as focus groups, customer-interviews, expert panels, commissioned research, longitudinal studies. The NAO uses these to measure and verify the results and effectiveness of service provision, and to better understand customers and competitors, in order to evaluate performance and to provide relevant and constructive recommendations. Having predominantly taken what Pollit & Suma (1997) call the “managerial” approach to self accountability, the NAO has tended to put an emphasis on the benefits it provides as justification for its existence.<ref>“Reflexive Watchdogs? &ndash; How Supreme Audit Institutions Account for Themselves” Pollit & Suma, ''Public Administration'', Vol. 75, (1997)</ref> And this is possibly explained by two things, the first and more positive view, is that the NAO is applying similar VFM criteria to itself as an example and form of assessment; the second view is that the NAO being financed by public funds is also under a pressure to exhibit a need for its existence and the derived usefulness. The NAO works under pressure to meet statutory and public expectations, playing multiple roles: as auditor, evaluator and guide. ==Criticisms== Some of the criticisms that have been levelled at the NAO include the following: *'''It is not sufficiently accountable.''' Although the NAO publicly scrutinises other public bodies, the scrutiny that it is subjected to is not fully transparent. Its reports are subject to external review both before and after publication by teams of academics from [[Oxford University]] and the [[London School of Economics]]. These reviews consider whether the methods, findings and conclusions of the reports are sound, and have on occasion found the intellectual basis of the reports to be thin. The results of the reviews are not, however, made public. *'''Its reports are neutral and cautious.''' This criticism stems from the normal way in which the reports are written. Initial drafts of reports are shared with the department(s) about which they are written. This begins a process of 'clearance', during which all facts are agreed between the NAO and departments. The reason for this is to give the PAC a mutually agreed report on which to base its later hearing; the hearing would be pointless if the departmental witnesses were able to disagree with the findings of the report. In practice, the clearance process is said to lead to a watering down of the initial draft, with the most contentious early findings removed at the behest of the department (and never, therefore, made public). *'''Failure to publish.''' In extreme cases where information is too politically sensitive, a report is not published. The often quoted case is their 1992 investigation into the [[Al Yamamah]] arms deal where due to ongoing legal investigations the report has not been released. It refused to release a copy to investigators during the [[Serious Fraud Office investigation into the Al Yamamah corruption allegations]] in 2006 as to do so would have required a special vote by the House of Commons. *'''Its savings are not robustly calculated.''' The NAO claims to save the taxpayer £9 for every £1 it costs to run. These savings, include reductions in public expenditure and quantifications of non-financial impacts of the NAO's work. The latter includes expenditure being better targeted and, in some cases, ''increased'' expenditure. (For example, the NAO published a report on how the [[Department for Work and Pensions]] was making the general public aware of state benefits to which they might be entitled. Any increase in the take-up of benefits that could be shown to be directly attributable to the report would be counted as a 'saving' by the NAO.) If the definition of 'savings' were restricted to reductions in public expenditure, the amount of savings that the NAO could claim to have made on behalf of the taxpayer would be significantly reduced. The argument used to support this practice is that the NAO's remit is to examine the effectiveness and efficiency of public spending as well as economy. *'''Some of its reports are insufficiently strategic.''' The NAO produces a wide range of reports on all aspects of central government expenditure, but many of these deal with marginal topics like government leaflets, countryside rights of way and railway stations. As David Walker notes,<ref>[http://politics.guardian.co.uk/tax/comment/0,,524584,00.html Summed up] - David Walker - The Guardian, Friday [[July 20]] [[2001]]</ref> the NAO does not and cannot examine major strategic issues such as the underlying principles of the [[Private Finance Initiative]] and the effect of class sizes on educational attainment. *'''Its reports do not deal adequately with the issue of value for money.''' The NAO uses a broad brush definition of 'value for money' to plan and carry out its reports. The reports do not, as might be expected, focus purely on detailed financial analysis of whether or not a particular scheme or initiative is value for money. Instead, they include qualitative analysis of costs and benefits in order to give a more comprehensive assessment. In 2005, an NAO report on NHS Local Investment Finance Trust (LIFT) was criticised by one of the PAC members at the time, [[Jon Trickett]], for its focus on qualitative analysis of the benefits of LIFT schemes and the paucity of its financial analysis.<ref>[http://www.publications.parliament.uk/pa/cm200506/cmselect/cmpubacc/562/56202.htm House of Commons Public Accounts Committee - Forty-Seventh Report]</ref> The NAO has recently published a report about the use of consultants in the public sector.<ref>[http://www.nao.org.uk/publications/nao_reports/06-07/0607128.pdf Central Government's use of consultants] - NAO</ref> Critics identify that this report did not directly answer the question of whether consultants employed by the public sector give good value for money. However, as the report highlights as one of its findings, this was not possible because insufficient information is gathered by departments. Furthemore, the report did not consider the quality of the advice given to departments by consultants. ==Offices== The NAO has occupied buildings on Buckingham Palace Road, near [[London Victoria station|Victoria coach station]] in London, built originally for [[Imperial Airways]] as their "''Empire Terminal''". The central part of the building is listed and the entire building has been undergoing a £60m restoration and refurbishment since November 2007. An open-plan office on the same road will be playing host to the many workers until July 2009. There are currently smaller offices based in [[Blackpool]] and [[Newcastle upon Tyne]]. However the Blackpool office is being closed and the Newcastle office expanded to carry out c.10% of the NAO's audit work, primarily on the Department of Work and Pensions and Defra. == Internal Structure == The head of the NAO is the Comptroller and Auditor General, Tim Burr, who replaced his predecessor [[John Bourn|Sir John Bourn]] on 1st February 2008. Under him there are seven Assistant Auditors General (AAGs) who have responsibility for overseeing the VFM, Financial Audit and Good Governance work in the different public spending areas covered by the NAO. Beneath the AAGs are Directors. There are roughly 60 Directors and they have a similar status as partners in private sector audit bodies. Each Director has several Audit Managers who manage a portfolio of audits. Individual audits are planned/carried out by Audit Principals, who are similar to Audit Seniors at a private sector audit body. == Press Coverage == Some of the work done by the NAO receives widespread press and parliamentary attention. In May 2007, ''[[Private Eye]]'' released information obtained under the [[Freedom of information in the United Kingdom|Freedom of Information Act]] detailing the travel expenses of the then head of the NAO, Sir [[John Bourn]]. These included tickets on [[Concorde]] and stops at luxury hotels.<ref>[http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/05/24/nbourn24.xml Auditor General's luxury hotel bills under fire] - The Telegraph.</ref> In one instance, Sir John and his wife attended a three day audit conference in [[The Bahamas]]. The conference was Wednesday to Friday. Sir John arrived on the Friday and he and his wife stayed on the island Saturday and Sunday. The NAO was also accused of hampering a police investigation into the [[Al Yamamah]] deal by ''[[The Guardian]]'' newspaper in July 2006. It would however have been a breach of parliamentary privilege, and hence illegal, for the NAO to have handed over the requested information.<ref>[http://www.guardian.co.uk/armstrade/story/0,,1828253,00.html Parliamentary auditor hampers police inquiry into arms deal] - The Guardian.</ref> ==See also== *[[Australian National Audit Office]] *[[Chamber of Accounts (Greece)]] *[[Cour des Comptes]](France) *[[Government Accountability Office]] (US) *[[National Audit Office of the People's Republic of China]] ==References== {{reflist}} ==Sources== * ''Audit, Accountability and Government'' White & Hollingsworth, Oxford University Press (1999) == External links == *[http://www.nao.org.uk/ National Audit Office] *[http://www.naodefencevfm.org/ National Audit Office - Defence Value For Money (VFM)] [[Category:Public bodies and task forces of the United Kingdom government]] [[Category:Government audit]]