The countdown to a merger between the
National Audit Office and
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?
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
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
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
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