7 Relationship between the NAO and
the Audit Commission
90. The NAO and the Audit Commission have distinct
mandates. The NAO is responsible for supporting the C&AG in
his audit of central government departments, whereas the Audit
Commission appoints auditors to audit local government with the
appointed auditors having powers independent from the Commission.
91. However, as national and local government bodies
work more closely on the delivery of public services it is evident
that these mandates will become less distinct and the NAO and
the Audit Commission will need a greater degree of collaboration
and partnership. There are an increasing number of examples where
this is happening:
- NAO participation on the Audit
Commission's Comprehensive Area Assessment Strategy Board.
- Joint audit reports on areas such as the finances
of the NHS and the delivery chains for Public Service Agreements.
- The coverage of the recent report "Staying
Afloat" which dealt with local authority costs related to
the floods last summer, but also addressed the value for money
of different government grant schemes.
92. In addition, as the government accounts move
to International Financial Reporting Standards (IFRS), it is essential
that the responsible audit bodies are able to reach common views
on the interpretation of IFRS.
93. It has been suggested that consideration should
be given to merging the two audit bodies. The arguments I have
heard for and against include:
For
- Cost savings secured through
the benefits of scale and synergies.
- A single identity for the organisation responsible
for the audit of public money in the UK (I am told there is much
confusion between the NAO and the Audit Commission, even among
the better informed).
- A single, unambiguous approach to policy development.
- Improved consistency and quality through better
sharing of knowledge and intellectual capital.
Against
- There is no empirical evidence
which suggests the current divide in responsibilities is operating
against the public interest.
- The constitutional background and the lines of
accountability for the audit of central government and local government
are, properly, quite different and could become unclear if one
body was responsible for both.
- There will be a substantial challenge for the
leaders of a merged organisation in bringing together the different
cultures and professional backgrounds of the people in the two
organisations, which might divert focus from its formal responsibilities.
94. The question of whether a merger of the two bodies
should be pursued is beyond my Terms of Reference. I support the
need for closer collaboration both at a working level and board
level and I have proposed an exchange of Board/Commission membership.
It seems to me that pursuing a merger now would slow down the
governance reforms necessary at the NAO while the public policy
case for a merger is formulated and what would most likely be
complex legislation passes through the parliamentary process.
My personal view is that it would be better to put the structure
of the NAO on a firmer footing, continue to strengthen relationships
between the two organisations and then evaluate in (say) 6 years
the cost effectiveness of maintaining the divided structure against
moving to a single body.
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