Appendix 3: Draft Explanatory Notes prepared
by the National Audit Office
INTRODUCTION
1. These draft explanatory notes relate to the
draft National Audit Bill, prepared by the National Audit Office's
legal advisers[Appendix 2]. The draft Bill is designed to give
effect to changes arising from the report of the Public Accounts
Commission on the Corporate Governance of the National Audit Office
(Fifteenth report, Session 2007-08). The draft notes have been
prepared by the National Audit Office in order to assist the reader
of the draft Bill, and do not form part of the draft Bill.
OVERVIEW OF THE BILL
2. The draft National Audit Bill has 11 clauses
and 5 schedules. Commentary on the clauses and schedules is set
out below.
COMMENTARY ON CLAUSES
Clause 1: Office of Comptroller and Auditor General
3. Clause 1, subsection (1) provides for
the continuation of the office of C&AG.
4. Subsections (3) to (5) provide that
the C&AG will continue to be appointed by The Queen on an
address from the House of Commons. The Prime Minister will move
the motion for the address, with the agreement of the Chairman
of the Committee of Public Accounts.
5. Subsections (6) and (7) provide for
the person appointed as C&AG to serve for a single term of
ten years.
6. Subsection (8) provides that if a C&AG
is in post on the day that the Act comes into force, he or she
will continue in post. He or she will serve a term of not less
than ten years in total (see clause 11(5)).
Clause 2: Status of Comptroller and Auditor General
7. Clause 2 provides for the C&AG
to continue to be a corporation sole (subsection (1)) and
an officer of the House of Commons (subsection (2)), as
at present.
8. Subsection (3) provides that the Comptroller
and Auditor General is not to hold another position where the
appointment is made or recommended by or on behalf of the Crown,
nor be a member of the House of Lords.
9. Subsection (4) provides that the Comptroller
and Auditor General does not act as a servant or agent
of the Crown or enjoy any status or privilege of the Crown.
10. Subsections (5) and (6) provide for
the C&AG to have complete discretion in carrying out his or
her functions, subject to taking into account the strategy and
any advice of the NAO, and, in relation to deciding a programme
of value for money examinations, any proposals of the Committee
of Public Accounts.
11. Subsection (7) introduces Schedule
1 which makes further provision about the office of C&AG.
Schedule 1: The Comptroller and Auditor General
12. Paragraph 1 provides for the C&AG's
remuneration package to be determined by the Public Accounts Commission.
No element of the C&AG's remuneration is to be performance
related. For his or her first year in office, the C&AG's
remuneration must not exceed the maximum remuneration received
by a Civil Service Permanent Secretary for the same period, and
thereafter the C&AG's remuneration may be increased with reference
to an index.
13. Paragraph 2 provides that the C&AG
may delegate any of his or her functions in accordance with a
scheme of delegation approved by the Public Accounts Commission.
14. Paragraph 3 provides for arrangements
in the event that the office of C&AG is vacant or the Speaker
of the House of Commons has certified that the C&AG is unable
to carry out his or her functions due to ill health. In either
circumstance the NAO, with the approval of the Public Accounts
Commission, may authorise a member of its staff to carry out the
C&AG's functions for a period of no more than six months.
15. Under paragraph 4, the C&AG may
resign by giving written notice to the Prime Minister and may
be removed from office on an address to The Queen agreed by both
Houses of Parliament. This follows current arrangements.
16. Paragraph 5 provides for restrictions
on the employment of a former C&AG. For [n years]
after leaving office, a former C&AG may not work for, or provide
consultancy services to, the Crown nor any body audited or inspected
by the C&AG.
17. Under paragraph 6, expenditure relating
to the C&AG, other than his or her remuneration package, is
treated as expenditure of the NAO.
Clause 3: Incorporation of the National Audit
Office
18. Clause 3 provides for the NAO to be a body
corporate and introduces Schedule 2 which makes provision about
the NAO.
Schedule 2: The National Audit Office
19. In Part 1, paragraphs 1 and 2 provide
for the NAO to have nine members, with a non-executive majority
of one, and for their status. The C&AG is a member, with
three employee members.
20. Part 2 is concerned with the non-executive
members. Paragraph 3 provides for one of the non-executive
members to be the chair of the NAO. The chair will be appointed
by The Queen on an address from the House of Commons. The Prime
Minister will move the motion for the address, with the agreement
of the Chairman of the Committee of Public Accounts. Under paragraph
4, the other non-executive members are appointed by the Public
Accounts Commission on the recommendation of the chair.
21. Paragraph 5 provides that the non-executive
members are appointed for a term of no more than three years,
and may serve one further term.
22. Paragraphs 6 to 9 make provision for
other terms of appointment of non-executive members and provide
that the chair may be removed on an address to The Queen agreed
by both Houses of Parliament, and other non-executive members
may be removed by the Commission on certain grounds.
23. Part 3, paragraphs 10 to 14 deal with
the employee members. These are appointed by the NAO on the recommendation
of the C&AG. They cease to be members if they cease to be
employees of the NAO, and they may be removed by the NAO on certain
grounds.
24. In Part 4, paragraph 15 provides that
the C&AG is to be the chief executive of the NAO but not an
employee. Under paragraph 16 the NAO may appoint staff.
25. Under Part 5, paragraph 17, the NAO
must prepare a strategy for the NAO, review the strategy (and
revise as appropriate) every year, and have regard to the strategy
in carrying out its functions. In preparing, reviewing and revising
the strategy, the NAO must consult the Public Accounts Commission
and have regard to the code of practice and any advice given by
the Treasury.
26. Under Part 6, paragraphs 18 to 23,
the NAO must make standing orders governing its internal procedures,
which may provide for committees, a quorum and delegation of its
functions.
27. Part 7, paragraphs 24 to 30 deal with
ancillary matters, including the preparation of resource accounts
by the NAO and their audit, and the making of an annual report
on the NAO's functions.
Clause 4: Expenditure of the National Audit Office
28. Subsections (1) and (2) provide for
the NAO's expenditure to be met by funds provided by Parliament,
except for the remuneration of the C&AG and certain liabilities
of the C&AG and the NAO (see Clause 6).
29. Subsections (3) to (8) specify the
arrangements for preparing and considering an annual estimate
of the NAO's use of resources. The chair of the NAO and the C&AG
are required jointly to present the estimate to the Public Accounts
Commission, and the Commission will then lay the estimate before
the House of Commons subject to any amendments they think appropriate.
Clause 5: Code of practice
30. Clause 5 introduces Schedule 3 to
provide for there to be a code of practice which will make provision
concerning the governance of the NAO.
Schedule 3: Code of practice
31. Paragraphs 1 to 3 require the NAO
to prepare the code of practice for approval by the Public Accounts
Commission, dealing with the governance of the NAO, the relationship
between the C&AG and the NAO and other matters. The NAO is
required to consult the Treasury in preparing the code of practice.
32. Paragraphs 4 and 5 specify the matters
that the code of practice must deal with, which include the way
in which resources are to be allocated for the C&AG's 'statutory'
audits and examinations, the way in which the C&AG obtains
the approval of the NAO to carry out 'non-statutory' work, and
any requirements for a former C&AG to consult a specified
person before taking up positions which he or she is not prevented
from taking up by paragraph 5 of Schedule 1.
Clause 6: Liabilities of Comptroller and Auditor
General and National Audit Office
33. Clause 6 provides for any liabilities
incurred by the C&AG or the NAO in the carrying out of an
audit or examination to be met from the Consolidated Fund. This
reflects similar provision at present in section 4(6) of the National
Audit Act 1983.
Clause 7: Transfers of property, contracts of
employment etc
34. Subsections (1) to (6) provides for
the property, rights and liabilities of the C&AG and the 'old'
NAO (established under the National Audit Act 1983) to transfer
to the 'new' NAO being established under this Bill, including
contracts of employment of existing staff of the 'old' NAO. The
transfer of contracts of employment does not break the continuity
of employment of the staff.
35. Subsection (7) provides an exception
to this transfer, so that rights and liabilities under agreements
for 'non-statutory' audits and examinations will continue to be
held by the C&AG.
Clause 8 and Schedule 4: Consequential amendments
36. Clause 8 introduces Schedule 4 which
makes amendments to other legislation which are consequential
on the Bill.
Clauses 9 to 11 and Schedule 5
37. Clauses 9 to 11 make supplementary
provision about interpretation and introduce the repeals in Schedule
5, and provide for commencement and the short title.
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