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Maintaining and Extending Audit Access

By the 1990s the provisions in the 1983 Act to protect the C&AG's rights of access and inspection to publicly funded bodies where he was not the appointed auditor were coming under increasing strain. Pressures were coming from two directions: first, to maintain in full the rights already in existence and, second, to ensure that similar rights were secured for the diverse range of new bodies involved in the growing disengagement and dispersal of departmental functions, including developments in such areas as contracting out. Different forms of support and partnership were in some cases blurring what constituted 'public' funds and resources.

Throughout the 1990s there was continuing departmental concern over the widening range and penetration of the C&AG's examinations and reports, particularly on economy, efficiency, and effectiveness. These were moving into programmes, projects, and issues that were close to the heart of key departmental operations and were raising important criticisms. Changes in the relationships between departments and some of the bodies they supported, and in the status, responsibilities, objectives, and management of the bodies themselves, were being used by the Treasury or departments to question whether it was still appropriate to accept the full scope of examinations envisaged under previous access agreements, with some attempts to withdraw existing rights of access. Different types of organizations, in both the public and private sector, were becoming involved in spending programmes and with varied relationships with the relevant departments. There were questions about whether the C&AG should be the appointed auditor of some of these bodies, or what degree of audit access was appropriate in these varying circumstances. This in turn brought further complications where bodies or their subsidiaries were operating under the Companies Acts, where the C&AG was not at that time eligible to audit.

Examinations were regarded by some Accounting Officers and Principal Finance Officers as pushing beyond what they and the Treasury had originally expected to be the boundaries of the NAO's statutory remit under the 1983 Act. The spectre of the NAO questioning policy was again being raised as departments found that NAO reports were able to focus on and identify significant areas and issues. In particular, they did not like the higher press profile of the reports nor, most especially, the enthusiastic and, at times, aggressive PAC follow-up. It was known that such issues became at times a regular item for anguished discussion at the weekly meetings of Accounting Officers.[1]

The NAO initiated a number of measures to tackle these emerging worries and to allay Treasury and departmental concerns. Regular meetings were held between NAO senior management and groups of Principal Finance Officers from the larger departments, together with the Treasury. These were designed not only to respond to emerging departmental concerns but also to give early warning of developments in the NAO's work and to obtain departmental views. Meetings were also held with individual Accounting Officers and their finance staff to discuss the forward programme of work in their area, including the rationale underlying the scope, content, and timing of proposed examinations. Further discussions at the outset of individual studies explained the objectives and methods of the main stages of the work, and issues and findings were cleared periodically as the examination progressed. Throughout these different levels of discussion a careful line had to be drawn between responding positively to departmental concerns, suggestions, and counterproposals, and maintaining the NAO's independence and freedom of action.

There could be no question of seeking departmental approval for the NAO's programme of work, or the nature, scale, or content of individual examinations and the content of the resulting reports.

A more specific departmental worry was how far and in what detail they were expected to 'agree' the C&AG's reports before publication. For many years departments had been asked to confirm that E&AD reports were 'a fair summary of the relevant facts'. This had caused few difficulties since these reports were generally brief and factual, and contained little overt analysis or conclusions. The position was much more complicated with the newer style of C&AG's reports, which dealt with wider-ranging and more complex subjects. The reports also analysed issues where evidence and findings could be less clear-cut and where there was scope for different interpretations or conclusions. The PAC had always expected Accounting Officers to have fully agreed the reports with the C&AG in order to avoid significant and time-wasting disputes over wording when the Committee was attempting to complete its examination within a normal two-hour session. Departments felt, however, also with some justification, that it was unrealistic to expect them to agree to virtually every detail of the different kinds of reports now being produced. These concerns were highlighted by the 'Hancock' affair.

When appearing before the PAC in 1986 Sir David Hancock, Permanent Secretary at the Department of Education, mentioned at an early stage in the proceedings that he did not accept a particular passage in the C&AG's report. He was immediately challenged by PAC Chairman Robert Sheldon on whether he had or had not agreed the report when it was being prepared. Hancock maintained that the passage concerned was expressing the view of C&AG Sir Gordon Downey and was not therefore something that the Accounting Officer was required to comment upon or correct. Irritated by what he saw as an evasion and a suspicion that Hancock was 'playing to the Whitehall gallery', Sheldon immediately suspended the session and instructed Hancock and Downey to clarify the position in a further paper to the Committee. An agreed joint note was submitted to the Committee at a subsequent session and the examination of the report was completed without further trouble. The exchanges at the PAC, and the Committee's insistence that Accounting Officers should not question the accuracy of the C&AG's reports when giving evidence, meant that departments immediately began to look even harder at the detailed wording of draft reports being cleared with the NAO. The resulting delays in clearance were to become a significant problem, with some complex reports taking many weeks to clear. Despite these difficulties, clearance nevertheless remained an important contribution to making reports better by considering legitimate departmental views, not only on accuracy and completeness but also on fairness and balance in presentation.

  • [1] Private conversation with an Accounting Officer.
 
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