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Financial Auditing And Reporting: 1999-2000 General Report of the Comptroller and Auditor General

Sir John Bourn, head of the National Audit Office, has reported to Parliament on the outcome of financial audit work undertaken by the NAO in central government over the past year. During the year Sir John qualified his audit opinion on 11 accounts and reported on a further 11.

Today’s report examines the progress made by government departments in a number of important areas – most notably the development of corporate governance and the introduction of resource accounting.

Corporate governance

Sir John recognises that government departments face a major challenge in responding to the application of the principles of the Turnbull Committee. These cover, in particular, the extension of statements on the systems of internal control to cover operational as well as financial controls. The NAO will continue to work closely with government bodies to advise on the development of corporate governance and risk management processes.

Resource Accounting

The report examines the progress made by departments in producing the first published resource accounts for 1999-2000, following the dry run accounts prepared for 1998-99. A total of 39 accounts for 1999-2000 had been certified by 31 January 2001, of which four received qualified audit opinions. This represents a welcome improvement over the dry run accounts, and has been realised following substantial work by departments and the NAO. But Sir John adds that there is still much progress to be made – and ten departments received ‘dispensations’ from having to produce certified resource accounts by 31 January 2001, the statutory target. These accounts will now be produced on a non-statutory basis, with a target date of 31 March 2001 for certification.

Sir John expresses concern in his report at too much reliance in departments on too few personnel and a lack of staff who are technically competent to prepare accounts. This has contributed to a continuation of the trends, which he has highlighted previously, of the late submission of accounts for audit and some of them being of poor quality.

Sir John also welcomes the publication in February 2001 of Lord Sharman’s report on audit and accountability arrangements in central government, and the recognition that this report gives to the importance of strong and comprehensive accountability regimes for public money. Sir John supports the report recommendations designed to ensure that the most is made of audit findings and to provide enhanced scrutiny of the cost and quality of the NAO’s work: for example, through a commitment to accepting the inspection regime of the Joint Monitoring Unit.

Other matters

Other matters highlighted in the report include:

  • the role of performance measurement and the validation of performance information in achieving better accountability; and the work of the NAO in developing a strategy to assist in improving the public sector’s management and use of performance information and in reviewing the ways by which government departments measure their performance; and
  • the NAO’s continuing work in the wider auditing and accounting profession, including its contribution to the work of the Auditing Practices Board and the Public Audit Forum.

"My General Report sets out the progress made by departments in a number of key areas, including the development of corporate governance and resource accounting. These are significant challenges for them. The National Audit Office and I will continue to support them as they meet these challenges."

Sir John Bourn

Notes for Editors

  1. The Comptroller and Auditor General’s General Report is published annually with the Appropriation Accounts, which show expenditure by government departments and agencies from funds voted by Parliament. The 1999-2000 report draws the attention of Parliament and others concerned to the outcome of the Comptroller and Auditor General’s audit of accounts for that year, and to current financial audit and accounting issues in the central government sector.
  2. A resource account is designed to show the true cost of a department's activities, in the style of a commercial account. It thus takes account of a department's assets and liabilities, as well as cash spent and received.
  3. Corporate governance refers to the way in which an organisation’s board (or equivalent) sets strategic aims, provides the leadership to put them into effect, supervises the management of the business and reports to stakeholders on its stewardship. In the public sector, this has particular reference to the propriety demonstrated by organisations over the funds that they control. The Cadbury Committee (1992) made recommendations regarding the role of board members and the establishment of audit committees. The Rutteman Working Group (1994) subsequently introduced disclosures in financial statements regarding systems of internal financial control, and the Turnbull Committee (1999) recommended extending this to all systems of internal control. The Treasury issued guidelines at the end of 2000 on implementing the Turnbull Committee recommendations in central government.
  4. Lord Sharman’s report on audit and accountability arrangements in central government, Holding to Account, was published on 13 February 2001. It puts forward a range of recommendations to improve the ability of Parliament to hold the executive to account, in part through updating the Comptroller and Auditor General’s powers to audit or providing him with formal access to a range of public bodies outside of his current remit.
  5. The Joint Monitoring Unit is responsible for monitoring the quality of audit work undertaken by member firms of the Institutes of Chartered Accountants in England & Wales, in Scotland and in Ireland.
  6. The National Audit Office is on the Internet. Press notices and reports are available from the date of publication. These can be accessed through the National Audit Office home page at
  7. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office employing some 750 staff. He and the National Audit Office are totally independent of Government. He certifies the accounts of all government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

PN: 25/01