PUBLIC ACCOUNTS COMMISSION
Minutes of meeting held on Tuesday 12
Members of the Commission present:
Mr Alan Williams, in the Chair
Mr Edward Leigh
Mr Andrew Tyrie
1. ADOPTION OF
The Commission approved the Minutes of the meeting
on 12 July 2001.
The agenda was adopted.
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
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 notalthough
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.
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.
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,
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
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
(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
4. DATE OF
The next meeting will be on a date to be fixed
by the Chairman.
4 See p. 11. Back
See pp. 11 and 12. Back
First Report of the Modernisation Committee (Session 2001-02)
Select Committees, HC 224-I. Back