Select Committee on Public Accounts Commission Report

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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