Further supplementary memorandum submitted
by the BBC
THE BBC'S POSITION ON THE DAVIES PANEL'S
RECOMMENDATIONS ON THE NATIONAL AUDIT OFFICE
At the BBC session with the Committee on 25
November, two members of the Committee asked the BBC for its response
to the Davies Panel's "suggestion that (we) should be audited
by the National Audit Office". For the avoidance of doubt,
I want to clarify the BBC's response to the specific Davies recommendations
regarding the role of the NAO.
The Davies Panel made two sets of recommendations
concerning the NAO. The first in Chapter 3 concerned the BBC's
arrangements for ensuring fair trading and financial transparency:
The Government should request the National
Audit Office to carry out, within the next 12 months, two separate
reviews of the BBC's accounts and processes: the first should
concentrate on how the BBC ensures compliance with fair trading
policy, both internal and external; the second should examine
the transparency of the BBC's financial reporting culminiating
in its Annual Reports and Accounts.
As I stated on 25 November, the BBC has no objection
to being very closely scrutinised on both counts; if the Secretary
of State thinks that the NAO is the best body to carry these out
then we would have no objection. This echoes the position stated
in the BBC's published response to these recommendations.
The second Panel recommendation (in Chapter
5) regarding a role for the NAO was not as clearly defined as
that in Chapter 3, namely:
The Government should amend the Royal Charter
to give the National Audit Office inspection rights to carry out
periodic financial audits of the BBC's accounts and its fair trading
arrangements.
The BBC has three broad objections to a role
for the NAO in auditing the BBC's accounts on a similar basis
to the financial audit currently conducted by KPMG.
— The NAO would at best duplicate,
and at worst replace, the BBC's existing audit arrangements which
have developed over time into a sophisticated set of arrangments
involving a leading professional audit firm and review by a Parliamentary
Select Committee expert in broadcasting issues. The NAO's expertise
is well known and respected, but they would be the first to agree
that it does not include broadcasting, nor extensive experience
of bodies which combine public service, commercial and international
activities.
— The NAO is not organised or staffed
to take on the kind of audit that KPMG carry out for the BBC.
— The NAO's involvement would risk
eroding the BBC's editorial and managerial independence from the
political process—as Parliament itself recognised in the
passage of the National Audit Act in 1983.
My response to the Select Committee member's
question on the NAO restated these three objections—though
not necessarily in exactly the same language as the BBC's written
response.
I hope this clears up any confusion. I would
be grateful if you could pass this to members of the Committee
before our second session with them tomorrow.
December 1999
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