National Audit Office
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The National Audit Office (NAO) is an agency based in the UK, independent of the government. The role of the NAO is 'to audit the accounts of all government departments and agencies as well as a wide range of other public bodies, and report to Parliament on the economy, efficiency and effectiveness with which government bodies have used public money.'
The Auditor General and Comptroller is Sir John Bourn. The NAO currently occupies buildings on Buckingham Palace Road, near Victoria railway station in London, built originally for Imperial Airways as their "Empire Terminal".
Established as the auditor for central government (including most of the externalised agencies and public bodies) in 1984 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[2] of public audit:
• independence of auditors from the audited (executives & Parliament)
• auditing for: regularity, propriety and VFM
• public reporting that enables democratic and managerial accountability
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, 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.
The NAO is headed by the Comptroller & Auditor General who is an officer of the House of Commons (HOC) thus independent of political parties; its target audience is the HOC and the Committee of Public Accounts (PAC) – but other stakeholders in public-services also hold an interest in their work, such as special interest groups, businesses, media, and the general public.
The NAO and PAC form the key links of the Public Audit Circle which has the following sequence:
• NAO performs financial and VFM audits and makes its reports public
• PAC has hearings based on NAO reports wherein failures in meeting regularity or propriety requirements are apparent.
• PAC provides a report with recommendations based on PAC hearings.
• Government responds to the PAC report.
• To which there may be a NAO/PAC follow-up study.
The NAO’s financial audits feature three sub-audits: a certification-audit of the agency’s financial statements, a regularity audit of the statutory validity of the agencies expenditure, and a propriety audit of the agency’s public business conduct in accordance with Parliamentary, statutory and public expectations.
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) while minimising cost.
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 marketing-research techniques (such as focus groups, customer-interviews, expert panels, commissioned research, longitudinal studies) by the NAO to measure and verify, the results and effectiveness of service provision by agencies, 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)[3] call the “managerial” approach to self accountability, the NAO has and tended to put an emphasis on the benefits it provides as justification for its existence. 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.
References
- [1]“Audit, Accountability and Government” White & Hollingsworth, Oxford University Press (1999)
- [2]“The Audit Commission” by Couchman V. in Sherer & Turley: “Current Issues in Auditing”, Paul Chapman Publishing (1997)
- [3]“Reflexive Watchdogs? – How Supreme Audit Institutions Account for Themselves” Pollit & Suma, Public Administration, Vol. 75, (1997)
External links
- National Audit Office (http://www.nao.org.uk)