The countdown to a merger between the National Audit Office and the Audit Commission has begun. That’s what you might think, after reading the review of NAO corporate governance penned by former City watchdog chief John Tiner.

Tiner is no stranger to corporate governance, having once run the Financial Services Authority, and his suggestions for the NAO are bound to be taken seriously by the MPs who are seeking a solution to the controversy that erupted around the expenses claimed by former NAO head Sir John Bourn.

But just as Tiner gets started on to what should change at parliament’s financial fact checker, he veers into uncharted territory. An area that the civil servants at both institutions might not thank him for.

While recognising that a merger was not what he was asked to look at, Tiner also says it would be worth examining in around six years once the NAO has been banged into shape.

Work on NAO first

‘My personal view is 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) six years, the cost effectiveness of maintaining the divided structure against moving to a single body,’ he says.

The idea of merging the two bodies is not new, experts say, but the fact it cropped up in Tiner’s report may have taken some by surprise.

At the NAO the response was to provide no response, saying that it was up to MPs on the Public Accounts Commission to comment. Audit Commission chief executive Steve Bundred, was more vocal.

‘We thought the report provided a balanced account of the key issues and recognised that, while there may be merits in bringing the two organisations together (as in Scotland and Wales), there would also be substantial practical and constitutional obstacles to doing so.

‘He recommends that no action be taken at this stage but the position be kept open for review at some future point, and we think this is sensible,’ he said.

In many ways though, Tiner’s comments on a merger are loaded, even though he seeks to maintain a neutral position.

Pros and cons

For a start there’s the fact that he addressed it when he wasn’t asked to ­ an admission that it does need dealing with. Then there’s the terms in which the pros and cons are couched.

Take the arguments against. They amount to either passive problems or obstacles to overcome, not really a list of disadvantages.

Or to put it another way, they don’t amount to a list of reasons why things would be worse under a merger.

So, the arguments against are that there is no evidence that the current arrangement is against the public interest; lines of accountability in both organisations are both quite different and a suggestion that integrating the cultures of both organisations could be a challenge.

Meanwhile, the arguments ‘for’ are active, providing positive outcomes. These include cost savings, a single identity clearing up confusion, a single approach to policy development and improved consistency and quality of outcome through sharing of knowledge.

On those arguments alone, an overwhelming case against merger would be difficult to build.

Add in this: Tiner identifies that the two bodies are already working closely together and implies that they will continue to get closer.

If that is the case there comes a point when the proximity of the two makes a difference almost impossible to discern.

If they do come together there will be job losses as systems and departments ­ mostly back office ­ integrate. And those add up to savings, something the Gershon report on efficiencies in Whitehall has given government a taste for.

After all, if departments as diverse as Customs and the Inland Revenue can come together, what’s so difficult about the nation’s two audit bodies?

Firm footing

One thing John Tiner does make clear is his belief that the National Audit Office should put its house in order before a merger with the Audit Commission is attempted.

In brief, Tiner proposes new governance structures to manage and supervise the work of the chief executive of the NAO, or comptroller and auditor general (C&AG), as he would be known.

He also proposes establishing the NAO as a corporate body with a new board consisting of executive and non executive roles. The chairman would be a Crown appointment emerging through a proposal from the Public Accounts Commission of the House of Commons.

The board and chairman would not however, form judgements on which engagements the NAO should take on. This would remain the responsibility of the C&AG.

Currently there is no separation between chief executive and chairman at the NAO, and no formal board either.

Tiner says his discussions with current board members reveal that it does not function as a classic board and 'make limited contribution in a practical sense to effective corporate governance.'

Tiner also wants the board to undertake formal annual evaluations of the board itself and individuals. No such arrangements for evaluation currently exist.