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Sir John Bourn, head of the National Audit Office (NAO), has reported to Parliament on the outcome of financial audit work undertaken by the NAO in central government over the past year.

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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 and budgeting. It also welcomes the Government’s recently published response to the Sharman Report.

2000/01 saw the final year of cash based accounts, first introduced by Gladstone 135 years ago as a means of recording public expenditure and reporting it to Parliament. For the last two years, accrual based commercial style accounts have been prepared by government departments in parallel with cash accounts. From 2001/02 resource accounts become the sole reporting mechanism to Parliament.

Sir John adds that there is still progress to be made both in terms of the timeliness and quality of resource accounts produced by government departments. And some departments are too reliant on a few key players and lack technically competent support staff.

Sir John recognises that government departments face a major challenge in responding to the application of the principles of the Turnbull Committee, and he notes that many have made good progress. In particular, some have included in their Accounts for 2000/01, statements on the systems of internal control to cover operational as well as financial controls, two years ahead of the Treasury deadline for this. However, many other departments have some way to go, particularly in ensuring that control systems are embedded into their management and operations. The NAO will continue to work closely with these bodies to advise on the development of corporate governance and risk management processes.

Sir John welcomes the recent Government response to Lord Sharman’s report on audit and accountability arrangements in central government. In particular, he welcomes the Government’s acceptance of Lord Sharman’s recommendation that the C&AG should be the auditor, on behalf of Parliament, of all non-departmental public bodies. He also notes the Government’s commitment to ensure that he has statutory access to the growing number of bodies outside the public sector which help to deliver public services. The Government also invites the C&AG to validate the information systems underlying departmental Public Service Agreement targets. Taken together, these developments strengthen the Executive’s accountability to Parliament.

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.



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