Memorandum from the National Audit Office
This Memorandum responds to the written questions
put to us by the Environmental Audit Committee as part of their
inquiry into the accountability of government for environmental
performance. We have grouped our replies to the Committee's questions
under the principal headings contained in the Annex attached to
the Chairman's letter to the Comptroller and Auditor General of
Section 1. Theory/Model of accountability
1.1 The key principles governing public
audit were set out in a statement in October 1998 by the Public
Audit Forum, which comprises all the major public audit bodies
in the United Kingdom, as well as representatives from government
departments and other bodies.
A credible public audit framework depends on the independence
of the auditor, the scope of the auditor's work and the ability
to make the results of the work public.
Independence. The auditor
must be independent so that he cannot be improperly influenced
by those whose work he audits, and can exercise discretion in
carrying out his work within the context of statutory requirements,
client expectations and professional standards. Auditors must
also have access to information in the custody or under the control
of the audited body.
Scope of audit. The effectiveness
of public audit depends on its scope. In the context of financial
audit, for example, this means the power to look at the propriety
and regulatory of expenditure as well as reaching an opinion on
the view presented by the financial statements.
Adequate reporting arrangements.
Public auditors should be able to report the results of their
work to the representatives of the public responsible for funding
the activities concerned, or directly to the public themselves.
It is also essential that the auditor has a
thorough understanding of the activities being audited and appropriate
skills to evaluate data and other evidence, and draw conclusions
1.2 In our view these principles are equally
applicable to the audit of environmental issues. The independence
of the auditor is critical to objectivity in his or her work,
and the auditor's remit must be sufficient to support production
of meaningful, value added reports for the body under review and
the auditor's stakeholder.
1.3 As the Committee has noted, in February
2000, the Chief Secretary to the Treasury announced a review of
audit and accountability for central government. The terms of
reference for the review have yet to be announced formally. However,
the Chief Secretary to the Treasury's statement on 28 February
2000 noted that:
"The study will cover the issues raised
by the Committee of Public Accounts converning the role and powers
of the Comptroller and Auditor General in their recent report
on the Government Resources and Accounts Bill (9th Report 1999-2000,
HC 159). It will also cover other relevant issues, such as the
role of audit in modernising government, including performance
validation, the audit of joined-up activities, and attitudes to
risk-taking. It will look at the implications of devolution, the
wider European context, with particular reference to European
directives affecting audit arrangements, possible models from
other countries and the relationship with other audit and regulatory
bodies. All this must have regard to the importance of Parliamentary
scrutiny and accountability, the costs and burdens of regulation
and the mechanics of change".
The review will cover performance validiation
and joined up activities, both of which have relevance to the
audit of environmental and sustainable development topics.
Section 2. Past activity
2.1 Our value for money work is intended
to assist government departments and agencies to improve their
performance. Our work has included studies of a broad range of
environmental programmes, and programmes with an environmental
impact. Such studies have been part of our programme for over
10 years, and have ranged from, for example, energy efficiency
programmes to the decommissioning of nuclear power stations.
2.2 From time to time we may undertake more
limited reviews to assist departments. For example, in 1998, we
reviewed the progress made towards meeting the targets for sustainable
development falling within the remit of the Department of Environment,
Transport and the Regions. We looked in particular at the extent
of progress revealed; the extent to which progress towards targets
could be monitored; and the arrangements for reporting progress.
The report was sent to the Department and used by them to assist
the preparation of a completely new indicator set, which was published
in December 1999.
2.3 Over the last five years we have published
nine reports focusing on environmental programmes. Details of
the nine reports are provided in the Table belowa synopsis
of each report is at Annex 1. In addition, we have published reports
on government programmes with non-environmental objectives, but
with significant environmental impacts. Last year, for example,
we published a report on the part played by English Partnerships
in assisting local regeneration, including its role in reclaiming
vacant or underused land, thereby facilitating the use of brown-field
|Vehicle Emissions Testing, HC 402||1999
|The Home Energy Efficiency Scheme, HC 556
|Office of Electricity Regulation: Improving Energy Efficiency Financed by a Charge on Customers, HC 1006
|A Case Study of Stores Management in the Ministry of Defence, HC 951
|Ministry of Agriculture, Fisheries and Food: Protecting Environmentally Sensitive Areas, HC 120
|Ministry of Defence: Management of Utilities, HC 177
|Department of Transport: Freight Facilities Grant in England, HC 632
|The Protection of Scottish Fisheries, HC 28
|National Rivers Authority: River Pollution from Farms in England, HC 235
2.4 Studies covering environmental issues are identified
as part of our annual planning process, and hence the number of
reports will vary from year to year, as the Table above demonstrates.
On average around 5 per cent of studies are likely to address
directly environment topics but other studies may consider issues
which have potential environmental implications. Whilst we do
not have a team dedicated to environmental audits, in selecting
staff to work on particular studies we match skills to the demands
of the subject under review. In addition, we supplement internal
skills with specialist expertise drawn from the private sector.
As at any point in time a broad range of our work may deal with
topics having environmental implications, it is difficult to say
with any precision how many of our 130 value for money specialists
will be allocated to such work in a year but it is likely to be
between five and 10 staff.
2.5 On the wider front, we are involved in international
developments in environmental audit. We are an active participant
in the INTOSAI Working Group on Environmental Auditing, which
prepares guidance for state audit institutions world wide. For
example, we are one of the co-authors of the Working Group's "Guidance
on Conducting Audits of Activities with an Environmental Perspective".
We are also a Member of the EUROSAI Working Group, similarly established
to share and disseminate good practice amongst European state
audit institutions, which is scheduled to hold its first full
meeting in October 2000. Environmental audit is also a frequent
topic for discussion at liaison meeting with the other national
Section 3. Modernising government
3.1 As the Committee will be aware, the Government's
White Paper on Modernising Government, published in March 1999,
set out a programme of reform in the way government conducts its
business. The focus of the White Paper is on improving the quality,
co-ordination and accessibility of public services for citizens.
Departments and other public bodies with overlapping responsibilities
for the delivery of public services are expected to seek new ways
of working together, and working with the sector and voluntary
service deliverers to give the better value for money. As part
of these reforms, the Government intends to make better use of
information technology, to shift the thinking from inputs to outcomes,
and to reward innovation.
3.2 Our response to the Modernising Government agenda
was set out in a booklet sent to all government departments last
summer. In addition, in April 1999, the Public Audit Forum published
a report "Implications for Audit of the Modernising Government
the challenges posed by the new agenda for public audit, including
the need for new forms of accountability, the readiness of auditors
to embrace change, and the challenge of assessing value for money
where more than one body is involved.
3.3 We have established a central team to undertake reviews
of issues which span the work of many departments. For example,
we have already published a report on "Modernising Procurement"
(HC808, Session 1998-99) and are currently working on studies
of "Modernising Construction" and "Business Risk
Management". Much of the work on cross-cutting issues is
undertaken by teams shadowing specific departments. For example,
the recent report on "Criminal Justice: Working Together"
(HC 29, Session 1999-2000) looked at the joint administration
of criminal justice by the Crown Prosecution Service, the Home
Office and the Lord Chancellor's Department.
3.4 We are also developing our work on performance measurementfrom
providing advice on the data needed to underpin performance measures,
to helping departments' evaluate their actual performance. For
example, we recently published a report "Good Practice in
Performance Reporting in Executive Agencies and Non-Departmental
Public Bodies" (HC272. Session 1999-2000).
3.5 To ensure that we have the right skills and experience
to undertake this range of work as effectively as possible and
to add value we have recruited staff and developed new training
courses and other ways of learning. As external auditors of government
departments we have a key role to play in continuing to support
and encourage worthwhile change and innovation. We seek to do
this by encouraging and broadcasting successful initiatives, examining
the factors behind success, and disseminating good practice. Where
issues cross the boundary between central and local government,
we work with colleagues in the Audit Commission to identify opportunities
for public bodies to work more effectively together.
Section 4. Auditing the sustainable development strategy
4.1 The Committee will be aware that in May 1999, the
Government published "A strategy for sustainable development
for the United Kingdom". The strategy sets out the Government's
main aims for achieving sustainable development and identifies
priorities for action. In December 1999, the Government also published
"Quality of life counts", which identified the key indicators
it intends to use to measure progress against the strategy.
4.2 Whilst the concept of sustainable development is
complex and inevitably involves the interaction of many interconnecting
policies, aspects of the strategy are, in our view, auditable.
With regard to the strategy as a whole and progress towards
the objectives: A significant part of the strategy is concerned
with setting policy aims, objectives and the instruments to be
used to achieve the government's intentions. The scrutiny of much
of this falls within the purview of the new Sustainable Development
Commission, an independent body set up by Government to monitor
progress on sustainable development and to help build consensus
on action to be taken to accelerate its achievement.
The National Audit Office can review key elements feeding
into the strategy. As part of our response to Modernising Government,
for example, we are looking currently at the development of the
National Air Quality Strategy. The study will consider how well
the Department of Environment, Transport and the Regions has worked
with others in government, industry and elsewhere to prepare a
robust framework for improving air quality. Other aspects of the
sustainable development strategy could be subject to similar scrutiny.
With regard to the sustainable development indicators and
associated targets: it would be possible for us to examine
sustainable development indicators and progress against targets.
Usually the setting of targets is ultimately a matter for the
Government, and we would not therefore question whether, for example,
a particular target had been set at the right level. Also, generally
we would not seek to examine issues which are primarily a matter
for scientific judgement. In other respects we have considerable
experience in examining how performance targets across government
are measured and reported, and this would provide a foundation
for any work on specific environmental topics. As noted in paragraph
6 above, in 1998 we reviewed progress made towards meeting the
targets for sustainable development falling within the remit of
the Department of Environment, Transport and the Regions.
With regard to the "greening" of government operations:
we have already published reports tackling various aspects
of "greening" government, for example on the management
of utilities and the management of hazardous stores within the
Ministry of Defence. In general, however, our strategy for value
for money studies has been to focus more on performance in terms
of the outputs and outcomes of main environmental programmes,
rather than government's internal management processesalthough
the latter do fall within our remit.
4.3 Progress made by government in implementing the sustainable
development strategy is one of the areas which we keep under review
when planning our study programme. We have in our current programme
major studies which are likely to tackle key sustainability topics,
or topics with an environmental impact. Work currently in progress
includes a study of the Environment agency's work on Inland Flood
Defences and, as already mentioned, development of the National
Air Quality Strategy. Planned studies include Waste Management,
and Recycling Land for Development.
4.4 In our view, there is no substantial obstacle in
current legislation to us undertaking work on environmental topics
or the sustainable development strategy. Our approach to value
for money audit is governed by the National Audit Act 1983 which
empowers the Comptroller and Auditor General to carry out examinations
into the economy, efficiency and effectiveness with which public
money has been spent. We are not empowered to question the merits
of policy objectives. Where government has set environmental objectives,
we have used our powers under the "effectiveness" criterion
to examine the extent to which those objectives have been met.
4.5 In general, we have encountered no particular obstacles
or barriers to developing or carrying out audits of environmental
or sustainable development topics. In practical terms, environmental
and sustainable development issues can raise specific challenges,
for example, a lack of reliable data or disagreement amongst experts
about the underlying scientific processes. With regard to UK performance
against international commitments, there is no obstacle to our
reviewing and reporting on progress, although we would not wish
to cut across established mechanisms, such as international commissions,
for reviewing progress.
Section 5. An environmental auditor
5.1 We believe the current statutory audit framework
provides a flexible means of responding to the priorities that
emerge, including those relating to the environment and sustainable
development. Our current position allow us to look at environmental
topics in a joined-up way, helping to minimise the audit burden
on the audited bodies. It also enables us to take account of the
wider context of policy making in government, and the interactions
between environmental and other objectives which government may
pursue. We note too that the new Sustainable Development Commission,
an independent body which the Government proposes to monitor progress
on sustainable development, is due to be set up during the Summer
5.2 Environmental issues, like other aspects of our work,
are likely to raise issues which require specialist technical
kowledge. On our environment focused reports, we have, for example,
used the services of consultant engineers, environmental scientists,
statisticians and other experts. Thus private sector expertise
has a valuable contribution to make in the audit of government's
performance in pursuit of environmental and sustainable development
objectives. The ability to put in place study teams which combine
specialist private sector knowledge with skilled auditors knowledgeable
about the public sector environment has, in our experience, proved
Section 6. Environmental issues in the National Audit Office's
6.1 The extent to which we consider the environmental
costs and benefits in our consideration of value for money will
depend on the nature of the policy objectives behind the programme.
Thus if an expenditure programme is primarily environmental in
nature or its policy objectives recognise environmental impacts,
environment costs and benefits will be an important consideration
in assessing value for money. For example, our current study of
Inland Flood Defences is examining, amongst other issues, how
the Environment Agency has set about considering the environmental
impact of its network of defences. Other reports considering environmental
costs and benefits in this way include the "Department of
Transport Environmental Factors in Road Planning and Design"
(HC389, 1994). Where the objectives of expenditure are not primarily
environmental, and the environmental issues are marginal, we would
be unlikely to look at the environmental costs and benefits of
6.2 The effectiveness of many environmental programmes
often depends on how well a variety of public bodies work together.
As noted above, we are continually enhancing our approach to the
audit of joined-up issues and, by using a broader range of analytical
methods, we expect to provide a deeper insight into the effectiveness
of government programmes including those with an environmental
impact, focusing in particular on outcomes achieved.
The Principles of Public Audit: Statement by the Public Audit
Forum, October 1998 (www.public-audit-forum.gov.uk) Back
Available from the Group's web site www.rekenkamer.nl/ea Back
Implications for Audit of the Modernising Government Agenda, April
1999, Public Audit Forum. Back