NAO in the Parliamentary Debate, Dissertation Example

Introduction

The National Audit Office (NAO) refers to an autonomous Parliament body in the UK that audits central government agencies, departments, and non-departmental public bodies. In addition, the NAO carries out the audit of Value For Money (VFM) for the public administration. Members of the British parliament have utilized the National Audit Office of the United Kingdom in various academic and parliamentary debates. The NAO is charged with the task of scrutinizing public spending by Parliament in order to hold the UK government accountable for improving public services (National Audit Office). There is a burgeoning cognizance of the critical role that audit institutions at the macro level play in certifying good governance and accountability (Pope). Good connections and linkages between parliament and the audit process are integral for its efficacy (SIGMA). Like other so-called Parliamentary agencies, the NAO operates external to the regular Treasury and civil service control processes. The NAO is given a budget that Parliament sets and it remains autonomous, as the nine hundred employees working for the NAO are not considered civil servants despite the fact that their pay is commensurate with civil servants. It is important for the NAO to be present in parliamentary debates because they are charged with holding the government accountable, so the role of parliament in the audit of public accounts is critical in understanding public administration and finances in the United Kingdom. The following sections examine the relationship between the NAO and members of parliament in light of the various functions of the auditing office and how it navigates the political landscape within a particular paradigm of autonomous functioning. Members of Parliament (MPs) utilize the NAO proportional to the financial pressure approximately. The NAO has forged new relations with the Public Accounts Committee, which has profoundly changed the relative pertinence of UK’s public institutions in the last few years. As such, within parliament a new culture and tradition of public scrutiny has germinated predicated on the NAO’s evaluation of public functioning and performances, which is evident in a more improved and prominent role for parliament itself within public life.

History And Establishment Of The Nao

The etiology of the NAO burgeoned from the department founded in 1866 called Exchequer and Audit Department during 1983 as the auditing agency for the government in the United Kingdom, which included all public bodies and externalized agencies in order to reinforce and check government department balance while pairing the qualitative purpose as delineated by the public purpose with its quantitative allocation (National Audit Office). The creation of the NAO was predicated on three rudimentary principles that underpin public audit principles: the autonomy of auditors from the executives and Parliament that are audited; public reporting that facilitates managerial accountability and democracy; and auditing for the purposes of propriety, regularity, and value for money (Couchman). The fundamental need for the NAO emanates from these principles because Parliament votes on how public funds are used for activities engaged in by public bodies. As such, autonomous auditors from the government or public bodies in question are necessary and critical compliance and transparency within the public forum. The creation of the Committee of Public Accounts dates back to the nineteenth century in the House of Commons when a standing order was passed stating:

There shall be a Standing Committee of Public Accounts; for the examination of the Accounts showing the appropriation of sums granted by Parliament to meet the Public Expenditure, to consist of nine members, who shall be nominated at the commencement of every Session, and of whom five shall be a quorum (Committee of Public Accounts). 

Since 1983, the main role and function of the PAC has been to examine the Value For Money reports created by the NAO in addition to taking written and oral accounts from the Permanent Secretaries and Accounting Officers. In 2009, the Constitutional Reform and Governance Bill asserted that the NAO was rendered a corporate body and required board members to specialize in government efficiency and savings. There would be four executive directors including the Comptroller and Auditor General and five other non-executives that also includes the Chairperson.

Types Of Audit Institutions and Audits of The Nao: Function

To fully comprehend how members of parliament utilize the NAO, it is necessary to understand at a fundamental level the types of audit institutions that are in use and the different types of audits that take place. Two basic types of audit institutions are in use by the NAO: the auditor-general model and the court model. The auditor-general paradigm is predicated on close linkages and constant interaction between auditors and MPs while the traditional court model eschews such frequent contact. While other countries employ various auditing paradigms, the NAO follows the auditor-general model in which an autonomous body is responsible for frequently reporting to parliament. Comprised of technical experts and professional auditors, the NAO devises and submits reports periodically on the operations and financial statements of various government agencies and entities. While it lacks any judicial agency or function, the NAO retains the capacity, when warranted to use its findings for legal purposes by disseminating them to appropriate legal officials for future actions or ramifications. The etiology of this auditing model stems from the Exchequer and Audit Departments Act of 1866, which stipulated that all government departments produce yearly appropriation accounts so that the Auditor General and Comptroller could analyze and assess them. The Comptroller and Auditor General (C&AG)-often called “the Boss” and is appointed by the Queen herself–refers to a very powerful officer who is a member of the House of Commons in the UK Parliament and has the responsibility to report to the Public Accounts Committee, which is a branch of the House of Commons. The Exchequer Section in the NAO administers the Comptroller, which focuses on recording any and all transactions that take place back and forth from the Consolidated and National Loans fund. Money can never be paid from either fund without the approval of the C&AG’s approbation, which is granted every business day through “the credit,” an important mechanism and function of the C&AG. While the Queen appoints the C&AG, she also retains the prerogative to dismiss the Boss prior to the termination of his or her term if both Houses of Parliament agree to premature termination. The C&AG also retains the ability to resign by writing a letter to the Prime Minister. This particular section of the NAO is accountable for agreeing to payments made from the Consolidated Fund to certain political bodies including the Queen herself vis-a-vis the civil list along with MP’s salaries, judicial salaries, and the European Commission.

The commissioning body for the NAO is called the Public Accounts Commission (PAC), which is chaired by the most senior member of parliament who functions as a counterpart to the Chair of the PAC’s opposition. The role and function of this little-known Commission is to look over and approve of the finances of the NAO and to inspect and supervise its governance. This Commission, according to the statute, consists of the Chairman, the Leader of the House of Commons, and seven other House-appointed members from the House of Commons, excluding any ministers. This Commission essentially supervises the auditors, or audits the auditors, and approves of the budget, although the C&AG maintains statutory discretion over all of the auditing work. As such, the PAC never becomes involved in the quotidian operations and administration of the NAO. The PAC thus possesses limited agency with regards to its oversight powers, yet it can still inquire about the budget of the NAO, which the Treasury and the Office discuss and come to an agreement about.

Various types of audits exist, the most traditional and common one being the financial audit in order to certify that government spending is legal and authorized for purposes approved by the rightful authorities. The financial audit centers on government accounts and renders judgment regarding the fairness, equity, and accuracy of the financial statements provided by respective government organizations. Knowledge of accountancy represents the critical skill necessary for the financial audit in the NAO. Ultimately, the financial audit grants the NAO assurance over three parts of government spending: the statutory validity, or regularity, the truth and fairness of financial statements, and the propriety of audited government body’s conduct with the public, statutory, and parliamentary expectations (National Audit Office). These financial audits are done in the same manner as private audits, and the NAO appropriates International Standards of Auditing in order to comply with common standards because it is liable to inspection by the Financial Reporting Council’s Audit Quality Review team. While the NAO lacks judicial agency, legal skills are necessary when a financial audit is conducted. Furthermore, the NAO conducts value for money audits in order to assess the economy, efficiency, and effectiveness of government spending, also known as the three E’s. Minimizing the monetary costs of various inputs such as buildings and staff encompasses the economy branch. The efficiency facet revolves around the output of a certain good or service achieved for various inputs. Finally, effectiveness renders whether or not outputs yield the desired outcomes with regards to how they directly impact society at-large (National Audit Office). As such, financial audits call for parliament to spend less and spend wisely.

So-called Value for Money (VFM) audits refer to non-financial audits that are conducted to measure these aspects of the government, and approximately sixty reports are created annually. The most noteworthy reports are those that cover the Methicillin-resistant Staphylococcus aureus (MRSA), a bacterium that has been attributed to various infections that are difficult to treat because they are resistant to antibiotics, which has fomented increasing public interest over the years. Other areas of interest include funding for the maintenance of the London Underground as well as the rescue of the British Energy report (National Audit Office).  It is important to remember that VFM audits only investigate the implementation of policy because the remits of the Public Accounts Committee and the NAO hinder them from questioning and/or undermining policy itself. Other chambers in parliament and select committees are charged with the responsibility of questioning any and all policies that are in place.

An output suspended between VFM audits and financial audits, “Good Governance”  formerly represented a central component of NAO work, although the organization has since reoriented its focus towards other functions, Nonetheless, the NAO makes a concerted effort to publish public guidance guidelines for public sector organizations. These governance statements–which used to be called Statement on Internal Control–were create and disseminated to help those organizations manage public money and give advice on internally controlling public administration (“Governance Statements”). The NAO’s role in the governance statement is to enforce that the support and challenge offered by non-executive board members to any and all management is preserved throughout any change in the reporting stipulations. As mentioned previously, the NAO exists in order to articulate its autonomous evidence and opinion in order to help Parliament hold the UK government accountable to the public.

Example Return Scheme

The relationship between the NAO and parliament is a nebulous one, yet it is clear that parliament does not pass any votes based on the findings of the NAO but rather creates recommendations for parliament regarding how to improve public spending. Parliament thus functions as the main audience of the NAO. Audit reports directly address parliament, and parliament often asks for comments or advice on particular issues that are under consideration. The UK parliament depends on good audit reporting in order to effectively scrutinize its public administration, and the auditor general needs a well-functioning and effective parliament in order to make sure that government departments and agencies address and response to pressing issues and concerns. Such mutual dependency between the audit institution and the UK parliament  is underscored by the fact that many times the auditor general has been appointed an officer of parliament via government statute.

In the United Kingdom, parliament created the Public Accounts Committee as a component of the Gladstonian Reforms passed in 1861 (Martin et al. 522). This committee became fully functional when the first set of accounts was drafted, presented, and assessed in 1870. The Gladstonian Reforms created an audit paradigm based on the close linkage and interaction between the auditor general and an audit committee which all of the Commonwealth nations have hitherto adopted (McGee). Traditionally, as mentioned previously, the chairperson of the PAC is a member who comes from the opposing political party in power so that nonpartisanship remains as part and parcel of the national tradition of  the auditing tradition, thereby signaling the willingness of the UK government to propagate transparency. The auditor general provides a report in order to catalyze the Public Accounts Committee process.

Evaluative Information of The NAO

Audit institutions vary quite little from other public agencies and bodies, and they also must justify their existence and utility to the public at large. They feel more pressure because of their role and function as a catalyst for other public bodies–including the UK parliament–to constantly improve. In 2010, the UK government abolished its local government auditors known as the Audit Commission because it was not rendered “sufficiently successful” (Nielson et al.). As such, auditing institutions such as the NAO must deploy evaluative data in order to develop, propel, and enhance its auditing performance and efficacy. Information must be developed and used in order to provide corrective mechanisms when weaknesses in the process are pinpointed and criticized. Despite the fact that it is virtually impossible for two members of the NAO to be completely objective about the organization’s success, there is sufficient evidence that the NAO remains a well-developed and successful audit institution that plays an integral role in the UK as well as worldwide within the audit community; that senior members of Parliament support the NAO’s work and render it valuable, thereby lauding it and pushing for the NAO’s deep involvement in parliamentary debates; that it has time and again met various targets that members of parliament have set, which autonomously appointed auditors have attested to; and that it has a storied record of assisting the UK government save money and improve how public services are run (Nielson et al.). As such, the evaluative information and cognitive data used to enhance the performance of the NAO accounts for the changes made within the NAO over the past four decades.

Various aspects of the NAO have gradually changed and have been studied extensively by political scientists and scholars. Such alterations include the subjects investigated; burgeoning relationships with a vast array of stakeholders, which has reshaped the contours of how a VFM  audit is conducted; changes in methodologies deployed in the performance audit; quality assurance developments; and endeavors to spread learning vis-a-vis audit work(Lonsdale, as cited by Nielson et al.). The NAO continues to deploy a variety of methodologies in order to procure information on its performance so as to stimulate government mechanisms to spend money much more wisely. External reviewers and so-called auditors have been hired to investigate and evaluate the majority of the reports devised by the National Auditing Office since the 1990s. In turn, during this protracted period of time, the NAO had hitherto made public reports regarding its goals to save government funds vis-a-vis stimulation of its own costs as well as government costs for over two decades. The NAO had also reported on for several years on the total amount of recommendation for a certain change that departments were willing to accept. More recently, the number of  propositions  for alterations that departments actually accepted was reported on by the National Audit Office. More recently, the reports covered various of other kinds of effects including improved quality of service and alterations in fiscal accountability (National Audit Office, as cited by Nielson et al.).  The National Audit Office has expounded on the manner in which it deploys data in order to manage and comprehend its overall performance. It stated in a 2010 public report that, “achieving success requires [the NAO] to meet…current performance measures and evolve these measures so that they are progressively more challenging and better fitted to our strategic aims and objectives. We have translated our objectives into a detailed Corporate Delivery Plan and will monitor progress against this plan throughout the year” (The National Audit Office, 2010, as cited by Nielson et al).

Table 1.1 provides a summary of the primary sources used to evaluate information regarding the performance and success of auditors procured by the National Audit Office in 2012. The NAO deployed in the information in various ways at the micro and macro levels of the organization itself: at the senior management echelon, either within the quotidian activities of how the organization was running and functioning or the Board itself vis-a-vis strategic guidance and leadership; and accountable for both technical development and for quality assurance (Nielson et al.). This data further contributes to processes related to business planning and preparation where decisions are rendered over the amount of finds that should be used for certain kinds of labor and where it is best to invest the funds for development and cognitive learning. Various sources of information and the manner in which they are deployed is further expounded on in meticulous detail in the chart below.

Table 1.1: Summary of the Evaluative Information used by the NAO for Performance Audits

Source: Nielson et al.

According to Nielson et al., there are a litany of systemic lessons that the NAO can learn from and provide correctives in the future in order to experience more agency and efficacy within parliamentary debates. These systemic lessons (Nielson et al.) include the following: strengths and weaknesses of deployed methodologies with regards to the technical external reviews conducted over the NAO reports and the meticulous investigations of certain facets of Value For Money work in order to facilitate the identification of strengths and weaknesses in areas that require further alterations and developments. From a general perspective, the reviewers  have noted that there is ample evidence that methodologies have been carried out in a positive and beneficial manner, and studies remain designed well with sufficient approaches to the collection of data and analysis of the information. However, the deployment of quantitative evidence and financial analysis remain lacking and thus necessitate further attention vis-a-vis a data stream (Nielson et al.). External reviewers who provided scores for the reports have time and again exhibited these aspects to be the weakest facets that have hitherto been examined. Another lesson that the NAO can benefit from in order to provide corrective mechanisms include closing the epistemological gaps with regards to the department feedback and the external reviews. Indeed, there are areas where the knowledge base of the National Audit Office remains quite weak, including the necessity for better and amplified comprehension of the pressures placed on the UK government. An investigation into the broader context within which they operate is necessary for corrective measures to be effectively carried out.  Beyond epistemological chasms, gaps in skills also remained glaring. The data has assisted the National Audit Office take into consideration the skills base it currently has at its disposal. The NAO scored below average  for the manner in which it uses its qualitative data in addition to the methods it utilizes for stimulating various efforts to recruit employees with the skills necessary to “complement accountancy, such as economics and operational research” (Nielson et al.).  Finally, relationships between the NAO and clients remain an issue of immense importance for the NAO. Departments have provided feedback on projects undertaken at the micro level in addition to interviews that were carried out regarding broader relationships. Such interviews have assisted in the identification of areas in which audited agencies and bodies render able to be improved with regards to responding to necessities as well as expectations.

Criticisms

A litany of criticisms of the NAO have proliferated since its inception, which has shaped and reshaped the contours of the institution. Many government officials charge that it is not accountable enough despite its public criticisms of various public bodies and agencies, as critics believe the NAO is not truly transparent. The reports remain subject to external review prior and subsequent to publication by academics working for the London School of Economics and Oxford University These external reviews take into consideration whether the methodologies, results, and conclusions of the NAO reports are valid and sound. As such, the intellectual bases of the respective reports are often fickle, yet the findings or the discussions that take place within these external review meetings are never made public (Gunvaldsen and Karlsen 463). Another criticism is that the reports are both cautious and quite neutral, which manifests in the manner in which the reports are penned. Department officials have access to the initial drafts of the report concerning how they are written, which catalyzes the “clearance” process. During clearance, the departments and NAO must agree on all of the facts therein. Clearance is necessary so that the PAC receives a report that is mutually agreed upon  to base its subsequent hearing on. If there were a lack of concordance amongst the department heads, the PAC meeting would be futile to hold. Clearance in practice has been criticized because it usually results in tampering of the first draft, with the most contentious conclusions elided at the request of a certain department. As such, the public is never apprised of the information, and transparency is yet again non-existent. Blunting the NAO’s initial criticism is looked down upon by many British politicians who argue against the necessity and utility of the NAO in parliamentary debates (Dunleavy et al. 4). The NAO, per its mission statement, is supposed to make Parliament accountable to the British people, yet neutrality merely sustains a status quo that is endemically flawed, hence the existence of the NAO in the first place.

In addition, if the information contained in a report is rendered too politically sensitive, then the NAO will not publish it. One example of this case happening is the investigation of the Al Yamamah arms deal that took place in 1992, and because of persistent legal investigations, the public was never given access to the report. Two decades later, the NAO still refused to give investigators the report into a fraud scandal related to it. Releasing it over to authorities would have required the House of Commons to take a special vote on it (Leigh and Evans). Many of the reports have also been found to be non-strategic. Despite the fact that the NAO produces and disseminates a vast array of reports covering almost every facet of the central government’s expenditure, the majority of them confront minor issues such as railway stations and government leaflets rather than dealing with issues at the macro level. As such, the NAO has proved unable to analyze and assess strategic matters at the macro level, such as the impact of class sizes on educational currency and attainment or the undergirding precepts of the Private Finance Initiative (Walker).

Perhaps one of the most significant criticisms waged against the NAO is that the reports do not do not sufficiently deal with the issue of VFM. It deploys a broad definition of value for money in order to devise and implement its reports. Because of such a broad-brushed definition, the reports often do not solely focus on a meticulous financial analysis and assessment regarding whether or not a certain initiative is value for money. Rather, the reports consist of cost benefit analysis and other types of qualitative analysis that provide a far more comprehensive assessment rather than considering issues at the micro levels. One example is a report published in 2005 in which the NAO analyzed and assessed the Local Investment Finance Trust (LIFT), which at the time had been excoriated by a PAC member for its insufficiency. Jon Trickett, the PAC member, decried how the report focused on the cost benefit analysis of LIFT schemata rather than actually providing a financial analysis of it (House of Commons, “Forty-Seventh Report”). This paucity of substantial financial data has time and again incurred the ire of PAC members and parliament officials. Another report investigated how consultants were being used in the public sector, yet it failed to directly address the question over whether or not consultants give a good VFW. The report states that departments failed to provide sufficient findings and evidence in order to make such an assessment. In addition, the advice proffered by the department heads lacked any real currency regarding the issue being discussed. This criticism underscores an endemic flaw in how the NAO is run and its role in parliamentary debates: there are far too many influences–many of them biased–that skew the findings and conclusions of the reports that are then released to the public. The chart below visually stresses this complex matrix of influences that impede the ability of the NAO to fully participate in enacting change and holding the government accountable due to the intersectionality of so many interests and external reviews.

Conclusion

National audit institutions have profoundly evolved according to epochal contingencies and various traditions. The auditor general and audit court paradigms are the two main kinds, but hybrids and variations have also germinated. Public audit maintains its focus on the financial component, although recently the NAO has increasingly become concerned value or performance for any and all audits related to money. The autonomy of the NAO remains a core, rudimentary facet of effective audits that take place in the United Kingdom parliament. NAO auditors interact with members of parliament in a variety of ways according to national values and political traditions. Public account committees and auditor generals retain the closest relationship, although there are many paradigms for the involvement of parliament committees in the national audit process. Formulating effectual follow-up mechanisms is critical for MPs to make sure that audit findings and the recommendations proffered are fully implemented in order to better the public administration and expenditure as a whole. The NAO currently deploys outsourcing contracting for its various audits and VFM studies far more frequently than it has in the past for a variety of services.

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