Increased powers for the NAO

Looking after the pennies

By Derek Brownlee

The business community regularly complains about the level of interference from government in the way companies run their business. The Institute of Directors is no exception; indeed it is often more vocal than most.

So when the Treasury grants extra powers for a public sector body to delve into details of some of our leading private sector companies, the IoD must be opposed, right? Wrong.

The decision to allow the National Audit Office to audit private sector companies who undertake government business is long overdue.

The NAO has a simple, but challenging, remit – ‘to help the nation spend wisely’. Of course, its real aim is not to help the nation spend wisely – you’re unlikely to find a hapless NAO trainee outside your local telling you that you’ll get more pints to a pound if you nip across to the continent.

The real aim of the NAO is to make sure that the government spends wisely – or, more to the point, that government spends our money wisely. And it is as taxpayers that businesses welcome the extension of the NAO’s powers. Better value for money might – just might – lead to lower taxes.

In practice, most companies who deal with the government have given the NAO access to their records when requested, so there may be some who feel an automatic right of access is unnecessary. However, a guaranteed right helps the NAO get on with the job and recognises that the taxpayer can get bad value for money in the private sector.

So far, so good. But will the government be as cooperative in giving the NAO access to the accounts of private sector companies which are paying tax credits, as recommended by the House of Commons Public Accounts Committee?

The committee discovered that there was no way of checking whether the amount of tax credits authorised by the government was the amount paid by employers. Will the NAO be allowed to ‘help the nation spend wisely’ on tax credits too?

  • Derek Brownlee is a member of the IoD Policy Unit

NAO powers need strengthening
By David Corner

One of the consequences of the events surrounding the collapse of Enron has been to focus attention on the issue of auditor independence in the private sector.

But the need to guarantee strong independent audit of the public services is just as, if not more, important.

A robust system of accountability, based on independent external audit and parliamentary scrutiny, is essential for the maintenance of the highest standards of financial propriety and value for money in the public services.

An increasing proportion of these services are delivered outside central government by a range of bodies within the private, independent and voluntary sectors. And the public has a right to know that public services delivered by such bodies are subject to the same high level of financial scrutiny as those provided in more traditional ways.

But, until now, the National Audit Office’s statutory rights of access have largely been confined within the walls of government departments, which means we have to negotiate our right to see information in other bodies.

Recipients of grants and private contractors are in practice already required by the government to provide us with access through the terms of their grant or as part of their contract.

But the orders passing through parliament will strengthen the independence of the audit function by replacing these administrative rights with automatic statutory rights. We shall not undertake ‘fishing’ expeditions in private sector companies.

The orders provide for us to see only information relating to the public money being handled by the bodies concerned and do not extend to the wider affairs of such bodies.

They will be used to hold central government to account, not the bodies themselves.

Our new powers are a necessary consequence of the changing landscape of public service delivery.

They will help to ensure that the NAO can continue to provide independent assurance that public funds are being spent properly and wisely.

  • David Corner is director of corporate policy at the NAO.

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