The Public Accounts Commission - Press Notice 17

Press Notice

PN17 6th March 2008

11.00 am

Corporate Governance of National Audit Office (NAO):

Commission responds to Tiner Review

The Commission is today publishing its response ( HC402) to the review, which it warmly welcomes.

The main changes the Commission is proposing to the NAO's corporate governance are as follows:

NAO Board and Chairman

There would be a statutory NAO Board with a Chairman. The Chairman would have only an internal role, and would speak in public only on governance matters. The Comptroller & Auditor General (C&AG) would continue to have absolute discretion in audit judgments and in deciding what to audit, would act as Chief Executive and would be the public face of the NAO.

The Chairman would have access to the Commission, and would appoint the Chairman of the NAO's Audit Committee and Remuneration Committee. He or she would be appointed in the same way as the C&AG - by agreement between the Prime Minister and the Chairman of the Public Accounts Committee (PAC). The term would be three years, with one renewal possible.

The Board would have seven members: three executive members (including the C&AG), four non-executive members (including the Chairman), and the Chairman of the Audit Commission as an observer (to promote co-operation between NAO and Audit Commission). The C&AG would appoint executive members (subject to Board approval); the Commission would appoint non-executives on a recommendation from the NAO Chairman.

Role of Board

The C&AG would continue to control use of NAO resources for statutory purposes. The Board would set the overall strategy but would not be able to prevent or require a particular audit. Inclusion of non-statutory work (e.g international work) in the NAO's strategy would require the Board's agreement.

Terms and conditions for C&AG

The C&AG would be appointed for a single non-renewable term of 10 years.

The current appointment process for the C&AG (by the Prime Minister and the PAC Chairman) would continue, but the principles in the Commissioner for Public Appointments' Code of Practice would be followed.

The C&AG's salary would be linked to that of the Treasury's Permanent Secretary. There would be restrictions on subsequent employment.

Chairman's statement

The Rt Hon Alan Williams MP, Chairman of the Commission, said, "The Commission has acted to remedy the weaknesses in the NAO's corporate governance revealed by events last year, first by setting up the review by John Tiner and now by making these proposals, which closely follow his recommendations. The proposals modernise the NAO by creating checks and balances, but without undermining the absolute freedom of the C&AG in carrying out audits and making audit judgments. The NAO will be much better-equipped to carry out its vital task of ensuring integrity in the public finances."

NOTES FOR EDITORS

The Commission set up the review following the controversy over the then C&AG's expenses. The review was carried out by John Tiner, former Chief Executive of the Financial Services Authority, and was published as the Commission's 14th report ( HC 328, 2007-08). The terms of reference centred on the role of the C&AG and his relationship with the NAO. The C&AG currently has, by statute, "complete discretion in the discharge of his functions".

The review's terms of reference did not cover the question of expenses because the Commission had already established a new framework for these: see its 13th report ( HC 915, 2006-07).

The Government has agreed to implement through the planned Constitutional Renewal Bill any proposals arising from the review with which it agrees.

The Commission is appointed under the National Audit Act 1983 to oversee, and, if satisfied, lay before the House of Commons, the annual Estimate for the National Audit Office. It also examines once a year the NAO's Corporate Plan, which covers a three-year period.

The Commission's members are:- Rt Hon Alan Williams (Chairman) (Labour, Swansea West), Mr Richard Bacon (Conservative, South Norfolk), Rt Hon Harriet Harman QC (Labour, Camberwell and Peckham), Mr Edward Leigh (Conservative, Gainsborough), Dr William McCrea (DUP, South Antrim), Mr John McFall (Labour, West Dunbartonshire), Mr Austin Mitchell (Labour, Great Grimsby), Dr Nick Palmer (Labour, Broxtowe) and Mr Andrew Tyrie (Conservative, Chichester).

CONTACT FOR THE COMMISSION: The Secretary to the Commission, Mr Dorian Gerhold, may be contacted on: 020 7219 6257.