Mr Edward Leigh

Mr Andrew Tyrie

1.  ADOPTION OF MINUTES AND DRAFT AGENDA

  The Commission approved the Minutes of the meeting on 12 July 2001.

  The agenda was adopted.

2.  CONSIDERATION OF THE NATIONAL AUDIT OFFICE'S DRAFT ESTIMATES FOR 2002-03

  Relevant documents: National Audit Office (NAO) Corporate Plan for 2002-03 to 2004-05, NAO draft Supply Estimate for 2002-03 and NAO memorandum on the draft Estimate.

  Pursuant to section 4(3) of the National Audit Act 1983, Mr Leigh, in his capacity as Chairman of the Public Accounts Committee, reported that the Committee had, at its meeting on 11 March 2002, recommended that the NAO's draft Estimate for 2002-03 should be approved.

  The Chairman reported that, in a letter to the Secretary of the Commission, the Treasury had indicated that it had no comment to make on the NAO's draft Estimate.

  Sir John Bourn (Comptroller and Auditor General); Mr Tim Burr (Deputy Comptroller and Auditor General); and Ms Caroline Mawhood (Assistant Auditor General), National Audit Office, were examined.

  In introducing the NAO's draft Estimate, the C&AG confirmed that it requested authority for net resource expenditure of £51.629 million in 2002-03, an increase of just under 6 per cent compared with the projected outturn for 2001-02. He pointed out that this was in line with the proposed rise of 6 per cent in government expenditure in the next financial year. Pressure for additional resources arose partly from the extra costs attached to Resource Accounting (RA), and partly from the increased demands of providing a service to Members of Parliament and the public. C&AG added that RA, although a more complicated system, would act as a spur to the more efficient use of resources by government departments.

  In response to the Chairman Sir John said that he believed the 2 per cent efficiency savings assumed for the NAO to be an ambitious enough objective; he saw the need for a challenging but achievable figure with a rationale which was understandable to staff. The NAO had looked at all available levers of greater efficiency such as investment in further technology, recruitment policies and planning of work. Other efficiency savings were possible and would be pursued.

  The Chairman asked how the C&AG decided priorities for VFM studies, and how far the number of such studies was contingent on the expected number of PAC meetings. The C&AG confirmed that the number of VFM studies conducted arose from the concept of aligning them with the number of PAC meetings. In the context of VFM studies the C&AG thought that the selection of subjects as far away from the policy nexus as possible, with an emphasis on management and implementation, had been instrumental in avoiding threats to the NAO's independence or clashes with other Select Committees. These studies were a specialised operation concentrating on particular programmes, not studies in the round of, for example, entire services such as the NHS. The C&AG said he could double the number and still produce useful work, although this would depend on their handling by both the PAC and by government. In reply to Mr Leigh he said that he believed that VFM studies would have value whether taken up by PAC or not—although in the latter case the impact would be reduced. Those not taken up at present were passed on to departments to be put into effect, although there was no doubt that PAC involvement was a significant factor in bringing about change. The C&AG agreed that he would look at the difference in responses as between those NAO reports taken up by PAC and those not the subject of a further report, and come back to the Commission.[4]

  In response to Mr Tyrie, the C&AG told the Commission that the £10-11 million receipts figure was due to income from fee-paying audits, and from overseas contracts. There was a £1,750,000 million yield from overseas work, some of which involved former eastern bloc countries. The NAO continued to be engaged in contracts in Africa, where, unfortunately, the countries most in need of NAO assistance could often least afford it. UK Departments were not always sufficiently knowledgeable about auditing matters and could help the NAO secure more work in this area, thus promoting accountability in developing countries. The C&AG agreed that a more proactive involvement by the Government would be helpful. He would let the Commission have a paper on how he thought this could best be achieved, and agreed to Mr Tyrie's request for an additional paper on the global market in public sector audit work and NAO's share in it.[5]

  Asked about the resource implications of the Sharman Report, so far as the NAO was concerned, the C&AG explained that the major impact would be the audit of NDPBs, which would be phased in as existing contracts expired, but significant additional resources from Parliament would not be required in the short term, since this work would be carried out on a fee-paying basis. Additional funding would, however, be required for the examination of the information systems underlying public service agreements; the initial first year estimate was in the order of £1 million. Sir John did not envisage any difficulties over the Report's recommendation that VFM studies of the NAO by its own auditors should be made public.

  The Chairman asked the C&AG to consider how the VFM area of its work could be expanded. Mr Tyrie pointed to the Public Administration Committee Report on Quangos, which involved large sums of money, and suggested that the NAO's paper should be revolutionary in promoting a culture change.

  The Chairman raised the matter of the recommendations of the recent Modernisation Committee Report[6], which had called for greater support to select committees other than PAC in carrying out financial scrutiny. The House of Commons Commission would consider the implications of these proposals at a meeting on 29 April. The C&AG said that he hoped to be able to respond to any request by the House for two or three secondees to help to man the proposed new Scrutiny unit. He accepted that the risk of bunching of requests from Committees would require careful handling. No provision had been made in the Estimate for the extra staff which might be needed and he might therefore have to come to the Commission later in the year to seek additional resources in the NAO's next Corporate Plan. He warned of the risks of brigading evidence from the NAO as criticism of government policy and of the temptation to replicate the PAC. These risks were real but they could be managed, he said.

3.  THE SHARMAN REPORT'S RECOMMENDATIONS AFFECTING THE PUBLIC ACCOUNTS COMMISSION

  The Commission accepted in principle the Sharman Report's recommendation designed to increase public awareness of its work.

  It was agreed that the means of implementing these recommendations should be:

(a)  to report to the House the outcome of its regular consideration of the NAO's draft Estimates and Corporate Plan;

(b)  to publish the outcome of Value for Money studies into the NAO, carried out by its own auditors; and

(c)  to publish the Commission's own minutes.

  It was further agreed that a draft report embodying these conclusions would be considered at a future meeting of the Commission.

4.  DATE OF NEXT MEETING

  The next meeting will be on a date to be fixed by the Chairman.

5   See pp. 11 and 12. Back

6   First Report of the Modernisation Committee (Session 2001-02) Select Committees, HC 224-I. Back