Comptroller and Auditor General and National Audit Office
The absence of a written constitution in the United Kingdom means that the SAI is established by Act of Parliament/Legislative body. The National Audit Office's (NAO) independence derives from the unique position of the Comptroller and Auditor General (C&AG - the head of the SAI). All statutory powers and rights governing the audit of central government finances are vested in the C&AG personally; the NAO has no independent corporate status - the NAO are the staff of the C&AG, and the C&AG himself is part of the NAO. The C&AG is appointed by HM The Queen, the Head of State, on an address from the House of Commons moved by the Prime Minister after agreement with the Chairman of the Public Accounts Committee. The C&AG can only be removed from office by HM The Queen on an address from both Houses of Parliament. The appointment of the C&AG is "without limit of time"; the officeholder cannot be a Member of Parliament, a Lord or hold any office under the Crown. The C&AG's salary is paid directly from the Consolidated fund rather than from a Departmental Vote. The staff of the NAO are not civil servants, and the C&AG, within certain guidelines, determines their salaries and conditions of service. The C&AG has ultimate discretion as to his work programme and how it is executed.
The various conditions of service of the C&AG to secure independence are:
- Special procedure for appointment
- Special procedure for removal
- Unlimited tenure
- Control over resources/budget
- Immunity/protection from the actions of others in the performance of his duties
- Independence to frame workplans
By virtue of his office the C&AG is an Officer of the House of Commons, and is independent of the Executive and the Judiciary; he has no relationship with investigating agencies. The independence of of external audit from the Executive is a key principal of Parliamentary accountability in the UK. The NAO has financial independence. The budget of the NAO is determined by the Legislature on a recommendation from the C&AG. The Public Accounts Commission, a committee of Members of Parliament established in 1983, considers the NAO's plans and budget. The Commission then makes a recommendation to the House of Commons to accept the budget. Accountability is through the Parliament - the Committee of Public Accounts and the Public Accounts Commission - and through independent auditors appointed by the Commission
The C&AG's audit remit extends to the audits of the accounts of central government and a wide range of other public bodies. He has a wide range of inspection rights at some 3,000 other public bodies. He has specific powers to carry out examinations of economy, efficiency and effectiveness (Value for Money examinations/performance audits). In summary:
- Central Government
- Bodies substantially funded by Central Government
- Audit of Receipts of the Government
[NB: The audit of the expenditure of local government authorities and the health authority accounts in England and Wales and Scotland is subject to other audit arrangements.]
The C&AG has comprehensive rights of access to the bodies that fall within his audit remit. The terms of the C&AG's access for financial audit are set out in Section 8 of the Government Resources and Accounts Act 2000 and for Value for Money examinations in Section 8 of the National Audit Act 1983. The C&AG has no powers to disallow expenditure, to impose surcharges or to take punitive action, or to follow public money wherever it goes. The terms of Section 6(2) of the National Audit Act 1983 explicitly prevent the C&AG from questioning the merits of policy objectives (but not their implementation).
Audit Procedures And Functions
The C&AG prescribes Financial, Compliance, Value for Money (Performance) and IT (EDP) audit in its scope of audit. The powers to perform these audits are mandated by the statutes governing the SAI - the Exchequer and Audit Departments Acts 1866 and 1921, the National Audit Act 1983 and the Government resources and Accounts Acts 2000. There is no express power to carry out IT (EDP) audit but its is implicit.
The NAO carries out financial audits designed to form an independent opinion on the financial statements of central government bodies and agencies. Each audit is planned to obtain sufficient, appropriate evidence on which to base the audit opinion. The form of the opinion depends on the basis on which the financial statements are produced. For financial statements produced on an accruals basis a "true and fair view" opinion is normally given. For all of the C&AG's opinions also explicitly state whether the money has been applied for the purposes intended by Parliament and whether the financial transactions conform to the authorities that govern them. The C&AG does not discharge any judicial functions.
During audit work the NAO perform a variety of procedures, depending on the judgement of the audit staff and the nature of the account. Audit policy is to comply in all respects with the Statements of Audit Standards issued by the Auditing Practices Board of the Consultative Committee of the Accountancy Bodies in the UK, particularly the guidance in Practice Note 10: Audit of the Financial Statements of Public Sector Entities in the United Kingdom. NAO staff are also guided by a Code of Conduct (ethical standard). The NAO also takes cognisance of guidance issued by INTOSAI Auditing Standards Committee and other bodies such as the International Federation of Accountants' Public Sector Committee. All reports on his work are made by the C&AG to Parliament, where they are considered by the Committee of Public Accounts. The C&AG has specific powers under Section 3 (2) of the National Audit Act 1983 which give him full discretion in appointing staff, including firms, to assist him exercise his functions.
The C&AG can collaborate with other countries' SAIs and with international organisations on matters relating to audit participating in INTOSAI, EUROSAI the Conference of Commonwealth Auditors General, UN Audit Panel and Technical Group and the Global Issues Working Group. The C&AG does not require any fraud or embezzlement to be reported statutorily to him by auditees, but may report to Parliament on cases of fraud, serious loss and waste. The C&AG has the power to share his audit reports with the public and the media. Such reports are publicly available. The NAO provides independent advice to Parliament and other audited entities as appropriate.
The NAO is constituted as an audit office with monocratic status, headed by the C&AG. The C&AG is empowered to engage external auditors/agencies/consultants as required.
Administrative Functions And Miscellaneous
There are no express powers for the C&AG to expend resources budgeted independently; such expenditure is governed by the general administrative rules covered in the Accounting Officer's Memorandum and Government Accounting. The C&AG has full independence in forming his work-plan, subject to consultation with the Committee of Public Account under Section 1 of the National Audit Act 1983. Under Section 3 (2), (3) & (4)of the same Act the C&AG has powers to recruit and appoint staff and, within certain guidelines, to determine their salaries and conditions of service. The Public Accounts Commission, under Section 4 (5) and Schedule 3 of the 1983 Act, is empowered to appoint an auditor for the NAO to carry out both financial and Value for Money examinations. Although there is no express requirement, the C&AG makes an Annual General Report to Parliament on the financial audit work undertaken by the NAO.
The C&AG's Comptroller function makes him responsible for control of the Consolidated fund and the National Loans fund. The consolidated Fund was originally set up in 1787 as "one fund into which shall flow every stream of public revenue and from which shall come the supply of every service". The C&AG is required to give authority for treasury requisitions for issues from this and from the National Loans fund which covers government borrowing and lending. When authorising issues the C&AG (in practice NAO staff acting on his behalf) must assure himself that credits are requested for purposes having proper statutory authority and within amounts authorised by Parliament.