The Nationwide Audit Workplace (NAO) is now over 40 years previous, however it has its origins within the nineteenth century. Of their new e book, Henry Midgley, Laurence Ferry and Aileen Murphie supply an outline of the constitutional, political and human legacies of the NAO’s predecessor, the Exchequer and Audit Division, adopted by a detailed examination of the NAO’s management and decision-making since its inception in 1981. They conclude that any debate concerning the organisation’s future is actually a query about how the UK needs to be working to make sure democracy and good authorities.
The Nationwide Audit Workplace (NAO) was established in 1983. It’s the authorities’s auditor: because of this it has two foremost duties. The primary is to audit the federal government’s accounts: the accounts are revealed monetary information of the whole lot {that a} authorities division or company has spent throughout a 12 months, the whole lot they owe and the whole lot they personal. The second is that the NAO audits the worth for cash of public providers: because of this it examines the economic system, effectivity and effectiveness of presidency spending. The NAO’s worth for cash stories go to the Home of Commons the place they grow to be the premise for hearings by the Public Accounts Committee (PAC) whereas the accounts are primarily meant for the departmental choose committees to make use of of their work scrutinising the federal government.
Audit is usually misunderstood at Westminster as one thing that’s technical and uninteresting. Its origins give us a clue that it isn’t. Audits have been performed of the UK authorities for the reason that Center Ages with the primary occurring within the reign of Henry IV in 1406. The primary fashionable audit arose within the 1860s. Because the ‘Superb Revolution’ in 1688, the English after which the UK Parliament had asserted that the Crown should submit each its plans for taxation and its plans for expenditure to the Home of Commons for annual approval. Within the nineteenth century, the main Liberal politician, William Gladstone, thought that this technique of parliamentary approval for spending required extra enamel. Gladstone proposed to create a brand new officer, the Comptroller and Auditor Normal (C&AG), who along with their employees in a brand new audit workplace would do two issues to make parliamentary management actual. Firstly, as Comptroller, this new official would test that every one moneys which the federal government had requested from parliament have been launched to the Treasury from the Financial institution of England just for the needs that parliament had authorised. Secondly, as Auditor Normal, this new officer would test whether or not cash had been spent in accordance with parliament’s intentions when it granted the cash. The Auditor Normal would report again on whether or not the cash had been spent in keeping with parliament’s intentions in a report connected to the division’s personal accounts (which set out its spending for the earlier 12 months). Gladstone’s proposals for this new place and new workplace fashioned the premise of the Exchequer and Audit Departments Act 1866 which created the Comptroller and Auditor Normal and his workplace, the Exchequer and Audit Workplace. Considerably, within the early twentieth century, parliament added on a brand new obligation: the auditor ought to report on waste in addition to illegality in expenditure. Creating this new officer and his employees, in Gladstone’s view, closed the circle of parliamentary management over cash.
By 1983, the UK state was very completely different: it was a lot bigger, after combating two world wars and the creation of the welfare state. The state itself was pivoting away from defence spending and in the direction of spending on well being and welfare. The arrival of recent public administration – a set of reforms designed to make the state extra environment friendly and extra just like the non-public sector – underneath Margaret Thatcher led to modifications in what Whitehall considered pretty much as good administration. The previous Gladstonian auditor was changed due to this fact by a brand new auditor, the NAO, after an extended wrestle with the Treasury, which wished to protect the established order. The brand new NAO retained its Gladstonian perform as a test on authorities energy – however now had new duties. The ability to analyze waste was codified as an influence to report on the effectivity, effectiveness and economic system of public coverage (collectively known as worth for cash within the UK). The C&AG’s independence was formalised by making them an Officer of the Home of Commons. The C&AG now reported on to the Commons, fairly than appending their stories to authorities accounts. Since 1983, the legislative framework for the NAO has remained largely unchanged.
However this doesn’t imply that the best way that the NAO has interpreted its position has remained unchanged. There have been vital alterations through the years and in our e book, Holding Authorities to Account: Democracy and the Nationwide Audit Workplace, we chronicle how this position has developed. Worth for cash has not meant the identical factor throughout time. For John Bourn, C&AG from 1988 to 2008, this meant that the NAO needed to dig into the effectiveness of public providers. Bourn’s NAO performed unique analysis concerning the ways in which individuals’s lives have been impacted by the best way that colleges, hospitals and the police power have been organised. NAO stories inaugurated new approaches to stroke care and developed scripts for 999 operators to make use of to reply calls. Amyas Morse (C&AG 2009-2019, now Lord Morse of Aldeburgh) had a really completely different strategy. Morse didn’t view this analysis functionality as audit: he redirected the NAO’s efforts to inspecting the interior administration of departments. Morse, presiding over the NAO’s response to austerity, wrote stories about how managers inside authorities struggled to match the expectations of ministers relating to service provision and the budgets that they had been assigned. His stories took the angle of a rational particular person attempting to find the failings which lay behind the failures of the federal government to attain its personal goals.
The viewers for these stories has additionally been seen in several methods by completely different C&AGs. Gordon Downey (C&AG 1983-1988) noticed his position as predominately a parliamentary one. He dominated out in public being a marketing consultant to the general public sector. As his deputy, David Myland, made clear in a letter despatched out to departments within the mid-Nineteen Eighties, the NAO’s position was essential no matter whether or not public providers improved or not. This accountability position endured: through the pandemic, the NAO continued to audit authorities providers although different inspectors paused their work, nonetheless it grew to become much less essential. John Bourn, to forestall New Labour attacking the NAO, argued that the NAO was the federal government’s advisor, figuring out issues within the public sector for decision. Bourn was annoyed to search out repeated errors in public administration and the NAO pivoted to engaged on these issues fairly than simply discovering and reporting about particular person providers to parliament. Amyas Morse and Gareth Davies (the present C&AG, appointed in 2019) constructed on Bourn’s tactical feint and turned it into an organisational goal. Each developed thematic work, round IT and authorities contracting for instance, for use by the federal government. These twin mandates battle inside the organisation.
This battle between administrative rationality and constitutional accountability involves the floor most clearly across the accounts. Gladstonian accounts have been designed to test the legality of public spending. From the early Nineteen Nineties onwards, strikes to reform authorities accounts developed. These adopted a industrial mannequin for the accounts. The NAO insisted that no matter resulted from these strikes was according to the rules of the 1688 settlement and Gladstone’s imaginative and prescient for public sector audit. Nevertheless, over time, this goal grew to become much less clear even within the minds of the auditors. More and more, the audit centered increasingly more on compliance with industrial reporting requirements and fewer and fewer on the previous rules of regularity and even newer extra rules of transparency. The brand new accounts have been criticised by a collection of parliamentary committees as a result of they don’t show the knowledge that MPs require to judge public providers, however the NAO has stood as a defender of the accounts, and an ally of the Treasury in rebutting this criticism. Moreover, over time the audit of the accounts has grow to be increasingly more central to the NAO’s exercise: with most employees and most of its cash spent on conducting these audits and worth for cash turning into increasingly more marginalized.
The dialogue about all three of those modifications (and others mentioned within the e book) has largely proceeded behind the scenes in parliament and authorities. The C&AGs themselves, as we present in our e book, have performed a key position however they’ve been joined by governments and MPs. Governments from New Labour onwards have been involved at instances to clip the NAO’s wings. MPs have performed a supportive position: the NAO solely exists due to a backbench revolt to safe a extra highly effective auditor within the Nineteen Eighties. Margaret Hodge (now Baroness Hodge of Barking), who chaired PAC from 2010 to 2015, reshaped the NAO’s remit, pushing Morse and the NAO into inspecting tax evasion and beginning a nationwide dialog about how HMRC treats the likes of Google and Amazon. Chairs of PAC or the Public Accounts Fee corresponding to Robert Sheldon, David Davis, Alan Williams and Edward Leigh fought lengthy battles to assist the NAO and its rights and powers. Geoffrey Clifton-Brown (a long-standing PAC member, who has chaired the committee since September), Richard Bacon (Chair of the Public Accounts Fee since 2020) and former PAC chair Meg Hillier (who now chairs the Treasury Choose Committee) helped the organisation by the political swirls of Brexit and Covid-19.
What points does this depart us as residents of the UK to think about? One factor that our e book exhibits is that audit shouldn’t be a timeless, unchanging factor however evolves in keeping with the political circumstances of the time. Typically it expands – to incorporate inexperienced points, for instance – (firstly underneath Bourn and much more extensively underneath Davies), generally it contracts (from the research-intensive focus of Bourn to the managerial mindset of Morse) and generally it refocuses (away from Gladstonian rigour and in the direction of industrial accounting in its monetary audit), however it’s by no means fixed. The NAO is a key constitutional instrument of the Home of Commons: the auditors are the one individuals who work for the Commons who can see any authorities doc they need, who’ve sizeable sources dedicated to scrutiny and have the day-to-day contact with the individuals who ship authorities coverage crucial to grasp what mechanisms underlie that coverage. The form of public sector audit, whether or not you are taking a ‘Downey’ parliamentary accountability, a ‘Bourn’ analysis pushed view or a ‘Morse’ managerialist view, actually issues. Gladstone’s promise that the circle of parliamentary management was closed by the creation of a state auditor within the 1860s is a promise that is still solely partly achieved and its actual which means is, because it has been ever since Gladstone mentioned the phrases, disputed.
Holding Authorities to Account: Democracy and the Nationwide Audit Workplace is out there now.
Concerning the authors
Dr Henry Midgley is Affiliate Professor of Accounting at Durham College, he beforehand labored from 2008 to 2021 on the Nationwide Audit Workplace and on secondment on the Home of Commons the place he suggested MPs on the constitutional position of presidency accounts and audit.
Professor Laurence Ferry is Professor of Accounting at Durham College (UK) and Senior Distinguished Visiting Fellow at Rutgers (USA). Lately, his analysis underpinned the Rio Declaration on public audit that influences round 200 supreme audit establishments internationally. He additionally served on the Redmond Assessment steering panel for Native Authorities Audit and Monetary Reporting preparations having beforehand as a Parliament Fellow/Adviser authored a report on this space for a UK Parliament Choose Committee.
Aileen Murphie is an Honorary Professor at Durham College. She labored on the Nationwide Audit Workplace from 1983 to 2021 after which as an advisor to the Native Authorities Choose Committee from 2021 to 2024.
