4 Objectives of the governance framework
13. In my assessment of the extent to which the governance
of the NAO complies with best practice and in framing my proposals
for improvement, I have taken account of the unique characteristics
of the NAO which make it central to the accountability of the
public sector.
14. I set out below three objectives which I believe
the future governance arrangements should satisfy (I recognise
that to some extent these conflict with the current legislative
requirements, but propose that new legislation be introduced to
give effect to my proposals).
15. A cornerstone of a democratic and open society
is the responsibility of government departments and other authorities
to use public money in an economic, efficient and effective way
and to be accountable, through Parliament, to the public. The
House of Commons Public Accounts Committee (PAC) is the parliamentary
body through which this accountability is exercised in the United
Kingdom. The PAC is informed in fulfilling this role by the work
of the C&AG, as head of the NAO. It follows that the C&AG
and the NAO which supports him should be completely independent
of Government ministers and their departments.
16. The first objective of the governance framework
is:
The C&AG must have the authority to form completely
independent judgements about the audits and value for money and
other studies conducted by the NAO and the presentation of these
to Parliament.
17. The NAO is a critically important institution
in Parliament's control and supervision of expenditure of public
money. It derives its authority, currently via the C&AG, from
Parliament and, consistent with its independence from government
and its critically important role, it should buttress this formal
authority with the moral authority which comes from leading by
example in its systems of governance, internal and financial controls
and principles of transparency. All management and staff of the
NAO should be subject to such systems, including the head of the
Office.
18. The second objective of the governance framework
is:
The NAO must maintain systems of governance and
internal controls consistent with best practice, applied in ways
which do not fetter its independence from Government, and report
publicly on these systems in its Annual Report.
19. The National Audit Act 1983 confers complete
discretion on the C&AG in the discharge of his functions and,
in particular, in determining whether to carry out any examination
under Part II of the Act and the manner in which any such examination
is carried out. As far as the manner in which audits are conducted,
I consider that the NAO should be obliged to follow relevant auditing
and other professional standards together with prevailing best
practice and that any conscious departure from these should be
referred to when issuing reports and further summarised in the
NAO's Annual Report.
20. The third objective of the governance framework
is:
The NAO must conduct its work according to relevant
auditing and professional standards and prevailing best practice.
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