National Audit Office (United Kingdom)

The NAO is the auditor of bodies funded directly by the Parliament of the United Kingdom.

The NAO reports to the Comptroller and Auditor General who is an officer of the House of Commons of the Parliament of the United Kingdom and in turn reports to the Public Accounts Commission, a statutory body established under section 2 of the National Audit Act 1983. The reports produced by the NAO are reviewed by the Public Accounts Committee, a select committee of the House of Commons, and in some cases investigated further.

The NAO has two main streams of work: Financial Audits and Value For Money (VFM) audits.

The NAO's financial audits give assurance over three aspects of government expenditure: the truth and fairness of financial statements; the regularity (or statutory validity) of the expenditure, and; the propriety of the audited body's conduct in accordance with parliamentary, statutory and public expectations. Financial audits are carried out in much the same way as private auditing bodies and the NAO voluntarily applies the International Standards on Auditing (ISAs). The NAO is subject to inspection by the Audit Quality Review team of the Financial Reporting Council.

Value for Money (VFM) audits are non-financial audits to measure the effectiveness, economy and efficiency of government spending. Roughly sixty of these reports are produced each year, the most notable from recent years being the reports on MRSA, which led to an increase in public interest in the topic, the report on the rescue of British Energy and the report in the Public Private Partnership to maintain the London Underground. The remits of the NAO and the Public Accounts Committee do not allow them to question the policy itself and so VFM reports only examine the implementation of policy. The responsibility for questioning policy is left for other select committees and debating chambers of Parliament, but this has not prevented the PAC being named committee of the year in 2006.

"Good Governance", an output somewhere between financial and VFM audits, was previously a strand of NAO work, but is no longer a focus of activity. The NAO does, however, publish best practice guidance for public sector organisations. An example includes the fact sheet on governance statements. In addition, the NAO undertakes fast-paced and more narrowly focused work called investigations.

The NAO received new powers under the Local Audit and Accountability Act 2014 to provide an end-to-end view of policy implementation, and produce reports aimed at the local government sector.

The earliest known mention of a public official responsible for auditing government expenditure is a reference made in 1314 to the Auditor of the Exchequer.

The NAO is based in London and Newcastle and has a staff of 800. Part of the NAO's London Office is a listed building, originally built for Imperial Airways as their "Empire Terminal". The building underwent a £60m restoration and refurbishment, completed in 2009. The NAO rents part of its offices to tenants, generating income of £1.1m in 2019–20.[5] The building is a modern, open plan office and the refurbishment enabled the NAO to introduce many environmentally friendly features, such as rain-water harvesting.

The NAO is structured into Directorates, each with a responsibility for a government department (for instance, the Home Office or Department for Culture, Media and Sport). Each Directorate contains 20–30 staff, many of whom are qualified accountants or in training for qualification with the Institute of Chartered Accountants in England and Wales (ICAEW). Within Directorates, staff will be split between Financial Audit and Value for Money work and include staff of the following grades:

• Analyst: Junior researcher on a value for money engagement;
• Assistant Auditors: auditors employed on a three-year training contract, leading to a qualification with the ICAEW;
• Auditors: auditors that have completed their ICAEW exams but have not yet obtained the full qualification;
• Senior analyst: Oversees value for money studies;
• Audit Principals: senior auditors, with responsibility for leading a financial audit engagement;
• Audit Managers (Civil Service equivalent Grade 7): oversee a portfolio of audit engagements or a value for money studies;
• Director: (Civil Service equivalent Grade 5/SCS 1): responsibility for a directorate.

Above director grade, Directors General have responsibility for specific cross NAO functions (such as Audit Practice and Quality, and Finance and Commerce) and Executive Leaders (previously Assistant Auditors General) support the Board.

The NAO has finance, human resource and ICT functions to support its operations.

Some of the criticisms that have been levelled at the NAO include the following:

• Strategic nature of reports: the NAO produces a wide range of reports on all aspects of central government expenditure, but many of these deal with marginal topics like government leaflets, countryside rights of way and railway stations. David Walker of The Guardian argues that the NAO does not and cannot examine major strategic issues such as the underlying principles of the Private Finance Initiative.[6]
• Treatment of value for money in reports: the NAO uses a broad brush definition of 'value for money' to plan and carry out its reports. The reports do not focus purely on detailed financial analysis of whether or not a particular scheme or initiative is value for money. Instead, they include qualitative analysis of costs and benefits to give a more comprehensive assessment. In 2005, an NAO report on NHS Local Investment Finance Trust (LIFT) was criticised by one of the PAC members at the time, Jon Trickett, for its focus on qualitative analysis of the benefits of LIFT schemes and the paucity of its financial analysis.[7]
• Expenses: in May 2007, Private Eye released information obtained under the Freedom of Information Act detailing the travel expenses of the then head of the NAO, Sir John Bourn. The Daily Telegraph subsequently reported that Bourn spent £365,000 for travel and £27,000 in restaurant bills over three years, as well as a potential conflict of interest by accepting hospitality from BAE Systems.[8] After initially rebuffing criticisms of these issues, in October 2007 Sir John Bourn announced that he would step down in January 2008.[9][8]
• The NAO was accused of hampering a police investigation into the Al Yamamah deal by several MPs in July 2006.[10]

• Whole of Government Accounts
• Other "Supreme audit institutions" (for a full list, see International Organization of Supreme Audit Institutions):
• There are several other public sector auditing bodies in the United Kingdom:
  • Wales Audit Office
  • Audit Scotland

• Media related to National Audit Office, London at Wikimedia Commons
• Official website

51.49159°N 0.1485°W / 51.49159; -0.1485