Examination of Witnesses (Questions 20-40)
NATIONAL AUDIT
OFFICE
27 FEBRUARY 2006
Q20 Greg Clark: But you have not
validated the figures that have been published, have you? You
have high standards and I would have given them as reassurance,
and they would no doubt have given the nation reassurance in the
figures that were published if they had had your imprimatur, but
they have not.
Sir John Bourn: You are quite
right. I am not the auditor of the Gershon programme. That
responsibility lies with Mr Oughton who is coming before the Committee
when our Report comes out. Although we are not the people who
will say, "Yes, all these savings have been achieved",
of course, what we are looking at, as in the first report we have
done, is how reliable the claims are that they have got there
and, of course, what we are saying now is that the claims are
not reliable and at the present time the savings claimed can only
be seen as provisional.
Q21 Greg Clark: Can you confirm,
Sir John, that you have enough resources available in the 2006-07
estimate to validate in an ongoing way the efficiency savings
that the review will produce?
Sir John Bourn: We certainly have.
Implicit in the bid that I have put forward will be the resources
to enable me to do that, yes.
Q22 Greg Clark: Do you think you
will be able to do it in a similar way to the approach you take
to validating performance against the PSA targets?
Sir John Bourn: Yes, and I shall
do it in a very detailed and proper way.
Q23 Greg Clark: Will it better than
it has been done in the last year, and I say this because at various
points during the last year figures were produced by the Treasury
that turned out to be—I was going to say bogus, but certainly
misleading?
Sir John Bourn: It will still
be their business to produce the figures and it will be my business
to audit them effectively and skilfully and draw to your attention
the degree to which the figures back up the claims that they are
used to make.
Q24 Greg Clark: In terms of departmental
capability reviews does the 17% increase in resources for review
of systems include additional support for these reviews?
Sir John Bourn: Yes, it does.
When Sir Gus O'Donnell announced that he wanted to set these reviews
up he spoke to me about this. I seconded some staff to the Prime
Minister's Delivery Unit to plan it but I made clear that my support
for the initiative was allied with the fact that I would audit
it and report to the PAC on how well it was going.
Q25 Greg Clark: It does concern me
that various parts of government seem to escape the rigorous scrutiny,
and Sir Michael Bichard, talking about the DCR, said, "I
find it difficult to understand how a civil service which has
supported the reform of the public service on the back of external,
independent assessment of performance still seems unable to accept
that in its own back yard". Is that an assessment you share,
Sir John?
Sir John Bourn: I would not share
it across the board in the way that Sir Michael was speaking because
I think that the arrangements for both the financial and the value
for money audits that the NAO discharges mean that there is more
available than what Sir Michael was talking about. I think his
particular concern was that there was no equivalent in central
Government of the comprehensive performance assessments that you
had in local government. Sir Gus O'Donnell made it clear that
central Government did not think that you could compare, shall
we say, the Foreign and Commonwealth Office, with Defra in the
way that you could compare the standard of service between, say,
York and Lancaster Councils, so the idea of capability reviews
is to look in an objective way at the ability of the different
departments to carry out the responsibilities that they have.
Q26 Mr Williams: You show for 2006-07
a 22% increase in consultancy costs. Is it entirely or predominantly
attributable to the anticipated or hoped for earlier closing of
resource accounts?
Sir John Bourn: It is connected
with that but it is also connected with the half million pounds
which the Public Accounts Commission decided that they would support
at the meeting in December for the planning of the refurbishment
of the office.
Q27 Mr Williams: So what proportion
of it is due to the early closures? Instead of 22% what would
the figure be if you had not had the half million pounds request
from the Commission?
Mr Whitehouse: It is difficult.
We can give you a note of the precise figures but I would say
about a third of the increase in consultancy spend is probably
going towards the financial audit. The other percentage is going
towards value for money work and the value for money work increase
reflects the—
Q28 Mr Williams: So in the 7%, 8%
area?
Mr Whitehouse: Yes, and the value
for money work focusing on increasing complexity in the work that
we are doing to generate more independent analysis.
Q29 Mr Williams: So it is not as
big as one feared because of the resource accounting?
Sir John Bourn: No.
Q30 Mr Williams: Last year, the financial
year 2004-05, was very late for the closures and we were very
disappointed about that. Mary Keegan envisages that the 2005-06
figures will be late. Does this mean that you will be able to
make some economies on your consultancy costs because they will
not have the accelerated accounts to cope with?
Sir John Bourn: It is certainly
true that, as the accounts are prepared in good time and are prepared
in an accurate way, we will not need the same resources to look
at them. Inadequate accounts come in and the auditors can see
that they are wrong or misleading. I do not want just to qualify
them like that. In the way that auditors properly and professionally
do, you discuss with the auditee and point out the defects that
the auditee has got to get right. When you get a perfect set of
accounts, properly prepared, which the auditors can immediately
start to examine, then you are able to do it with fewer resources,
but if you get defective accounts which require reference back
in order to get them into a proper form you need the resources
to do it. As the departments get better, as they will under the
financial management initiative, so the resources requirement
will decline.
Q31 Mr Bacon: Sir John, did I hear
you say earlier that you are satisfied that 12% increase in value
for money resources is adequate to provide you with what you need
for effective and credible reporting on the Gershon savings?
Sir John Bourn: Yes.
Q32 Mr Bacon: Might I ask one other
question, and that is about the report that your office is preparing
on the national programme for IT in the Health Service, now known
as Connecting for Health? We have already had from you and taken
evidence on the small proportion of the programme in a separate
report, the one on patient choice at the point of delivery, which
was specifically about the "choose a book" element of
the programme. You are doing a wider study on the entire programme,
which is the largest civilian IT programme in the world with a
contract value of £6.2 billion. It was originally said that
it would be published last summer and then that it would be published
during February of this year, this month, and it has been delayed
again and apparently now will not be published until this summer.
I have been following this issue for some time and I am very concerned
about it because it exhibits all the classic signs of a huge IT
failure, rather along the lines of Wessex Regional Health Authority
where it was ordained from the centre, there was no consultation
as to what local people wanted and yet the old-style district
health authorities locally were required to pay for it, and in
the same way the PCTs are effectively going to have to pick up
most of the bill for implementation without actually wanting it.
There is not a single one of the 32 foundation hospitals that
has yet hooked up to this thing because it is overwriting good
data with garbage. Every GP you speak to spits blood when you
talk about it. I was meeting with all the hospital consultants
in my area on Friday morning and they said the same thing and
that the money would be largely wasted. Could you say what is
happening to your Report and when we may expect it?
Sir John Bourn: The Report is
developing and essentially there are two main points in it. One
is in relation to technical expertise, the design of the system
and the contracting for it. The other one has to do with all the
things that you say, which is the failure to take the people in
the National Health Service with the system. I have been very
keen that the report that I produce will make clear the failure
to take the people in the National Health Service with them. All
the things that you say, the idea of having it wished on them,
the idea of having to pay for something they do not want, are
there. I think in some way it has become a focus of dissension
in the National Health Service on the part of GPs and consultants
and so on. A lot of this dissension is focused around the IT but
it does not take away the fact that it has not won the hearts
and minds of those who are being required to use it and we shall
say that as well as describing what the department is doing about
it.
Q33 Mr Bacon: May I ask when you
are expecting to publish it?
Sir John Bourn: In the early summer
of this year.
Q34 Mr Williams: Risk management
is something you and we have preached repetitively about to the
departments. Why is the sermon not echoed very frequently in your
own memorandum about your own activities? I had hoped that just
before you go off on your great property boom it might be more
prevalent in your thinking.
Sir John Bourn: It is certainly
there in that there is a series of risks that we discuss every
month at the management board of the NAO, going through such risks
as the ones that you would expect us to look at: are we going
to audit the 469 accounts that we have to do next year; are we
going to produce the 60 value for money studies; are we going
to produce savings equal to eight times the cost of the office;
what reputational risks are we running? The risks are there and
I would be very happy, if the Committee and the Commission were
interested in this, to give you an account of what they are because
we do discuss them every month.
Q35 Mr Williams: The lesson on the
matter of risk management we have emphasised as a key priority.
How far do you feel we still need to keep on emphasising that
or do you think the departments now have the message fully on
board?
Sir John Bourn: I think the departments
have got much better and I think the requirement in the annual
statement of internal control that the accounting officer has
to sign, in which he or she has to sign that the statement does
cover the full range of risk, not only the financial ones but
the other risks as well, has helped with that, and, of course,
it is part of our audit to see that there is nothing in our knowledge
of the department that undermines that. I think that understanding
is growing, but I think this leads into a point that members of
the committee have raised. This way of looking at it is much more
akin to the way in which the professionally qualified finance
director looks at it than to the way in which the traditional
civil servant looked at it. Traditional civil servants' risks
have tended to be the risks as the secretary of state saw them,
political risks, rather than risks of the performance of the department,
although that is perhaps a rather general statement. I think that
the coming of professionally qualified people—and that will
mean professionally qualified people on the staff as well as the
finance director—will enhance that risk appreciation, so
although I think it has got better I would not advocate that the
committee should think it is all okay and you do not have to think
about it. It will be my business to draw your attention to how
it is developing.
Q36 Mr Williams: So what are you
doing in practical terms to bring about this intellectual conversion
from political risk to financial risk? What practical help and
support are you providing?
Sir John Bourn: There are the
reports that we have produced. There is the annual audit of the
statement of internal control in which we draw defects to the
attention of the accounting officer.
Q37 Mr Williams: And these are nailed
on a wall of each permanent secretary's office, are they, so that
they are never forgotten?
Sir John Bourn: I would like to
think they are nailed on the wall in the same sense that mine
are nailed on my wall, and I am encouraging them to get there
and working with the Treasury because the development of the financial
management initiative will again mean that a greater appreciation
of risk is embedded into the whole way in which money is secured,
dispersed and accounted for. Progress is being made but we still
have to keep at it. There are also conferences. This time last
year we had a conference attended by many permanent secretaries
that the Chairman himself spoke at about the appreciation of risk
and also reiterated the Committee's concern that they wanted well-thought-out
risk taking. It did not mean to say that you were against departments
taking risks but you wanted the risks to have been thought out
rather than just risks embarked upon without thought and carelessly.
Q38 Chairman: Lastly, in January
2005 the Chief Secretary asked for a nominal increase in the costs
of department financial audits. You are exceeding the level of
funding that the departments have got. How much difference do
you actually make to their working, do you think?
Mr Whitehouse: I think we are
making a significant difference. I think the thing the committee
can take confidence in is the Government's response to the omnibus
report that the committee published on the scope for improving
value for money where the Government recognised and welcomed the
value of working with the National Audit Office and the Committee
of Public Accounts.
Sir John Bourn: I would just say
that the Government did ask us to do extra work, and this will
be the first financial year in which it comes out to extend our
role on regulatory impact assessments and to carry out reviews
of the performance of regional development agencies. That was
a request we had from the Government that we will undertake during
the course of 2006-07.
Q39 Chairman: We have got this NAO
Report Managing Resources to Deliver Better Public Services.
What evidence do you have that the departments are making progress
on this?
Sir John Bourn: They are delivering
better services, in one sense financially, because they are doing
it with less resources and our Reports identify the savings that
generate this. Also, of course, a number of reports do describe
and make further reference to the way in which services can be
delivered better. One that is coming up before the Committee quite
soon is electronic tagging, which is a way of providing a service
for the maintenance of prisoners in a way that saves resources
but also provides an opportunity for the earlier re-integration
of prisoners into local communities.
Q40 Mr Bacon: Sir John, looking at
the Northern Ireland Corporate Plan, which we are doing next,
it says that the Department of the Environment in Northern Ireland
designates the Northern Ireland Audit Office as local government
auditors, which brings me to the question of yourselves and the
Audit Commission. There is plainly one disadvantage in the separation,
which came out in the education hearing we just had, which is
that the shutters come down on the ODPM block grant and there
are things you simply cannot look at, even if they involve hundreds
of millions or billions of pounds, although there are arguments,
I suppose for having the Audit Commission separately so that local
government feels that it has got its own body. How strong are
those arguments and do you see a case for moving towards the merging
of the two bodies at some point or not?
Sir John Bourn: I think to some
extent there is a case for having in England, with something like
50 million people, two sets of people, who just like in other
walks of life, engage in some competition. I think the knowledge
that we have that the Audit Commission are there and that they
are developing new approaches is an advantage, and that there
should be two of us, as it were, in the business. Of course, to
the extent that central Government supervenes and the extent to
which the position of local authorities, as some commentators
say, is eroded, some of that case tends to evaporate, but at the
moment I think perhaps more is gained from, as I have put it,
having two people in the business who learn from each other and
in a way at the staff level compete with each other. It does not
rule out co-operation, as in the studies that we have just done
on delivery chains; it does not rule out secondments between us;
it does not rule out having Audit Commission people on our teams
to do things and vice versa. In a way you could say the same thing
perhaps in the private sector. We have got four big auditors.
Would it be a good idea if they all came together? I think probably
the answer is no and to some extent I feel that about the Audit
Commission and myself.
Chairman: Thank you very much, Sir John.
That concludes the public session on the National Audit Office
Estimate for 2006-07.
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