Increasing the relevance of SAIs in the 21st Century 1Tuesday 17 June 2014 Round 2 workshop

Increasing the relevance of SAIs in the 21st Century – the experience of the UK National Audit Office

Martin Sinclair – Executive Leader Nick Lacy – Head of Policy & Legal

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If your audit Office was a football team what type of team would it be and why?

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Context• Across the EU governments continue to face a

climate of austerity and rising demands for public services. All public bodies are having to rethink fundamentally how they operate.

• UK austerity programme: public sector environment continues to change in the context of austerity and cost reduction and as a result of the UK government’s reform agenda.

• Cost reduction: Protection to some budgets such as health, education and overseas aid - requires greater reductions in other areas, for example local government and policing. The financial constraints combined with rising demand present real risks to financial sustainability.

• Societal change: how to maintain and increase the relevance of SAIs as an interpreter of data in the world of changing demographics, open data, the rise of the ‘armchair auditor’. This raises questions about how we manage our people and places a sharper focus on the relevancy of our work for the public, Parliament and wider stakeholders.

• SAIs have an important role to play in safeguarding public money, ensuring transparency and accountability in the use of public funds, upholding proper standards of conduct in the provision of public services and helping achieve value for money.

• With open data how can SAIs use their professional knowledge and insight to add value?

This workshop provides a forum:

• to explore how SAIs have innovated in response to the changing environment;

• to discuss key opportunities and challenges for SAIs

• to explore how SAIs have responded to show their relevance to their stakeholders

• and to provide insight into the complex issues of the day.

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We recognised that we needed to change

Both play football which one adds more value?

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Brazil were a great team – why?

Perhaps the lasting appeal of this Brazil team is linked to new technology at the time which allowed the 1970 World Cup to be beamed around the globe in colour – allowing viewers a first glimpse of the iconic yellow shirt.

It was the first global World Cup. People sat in front of the television and watched it properly. Few remember 1962 and outside of England most don't really remember 1966!

It was easier for people to see it. Open football?

Outcome – they won with style

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The NAO’s Transformation ProgrammeTransformation programme launched in 2013 to achieve a significant increase in our contribution to improving public services - ‘better to transform than to be transformed’

Why ?• Austerity• Structural challenges for government (social welfare budget, smaller state,

citizen centric state, internet penetration, digital, public services akin to private sector)

• Demographics of our people (shorter careers at NAO, wider skills, digitally connected)

• An SAI cannot just be about producing audit certificates and reports it needs to add value…………

The transformation programme has put us in a better position to deliver sustained value to those we audit, and improved assurance to Parliament by:

• identifying risks and weaknesses

• patterns and systemic issues risks and

• be more forward looking.

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What have we done?

• Work that adds value to the traditional role of audit to hold public bodies to account by:

• Focused our work on the strategic issues facing government to develop deep expertise on the strategic challenges facing government

• Improved our insight into our clients business • Adopted an integrated audit approach delivered

through a broader range of outputs to provide more expert, proportionate and integrated assurance

• People: Restructured our audit teams into groups so we are more efficient & developed the skills and expertise of our people (examples in investigations, in data analysis, in commercial expertise see work on Royal Mail –http://www.nao.org.uk/report/privatisation-of-royal-mail-plc/)

• Efficiency: Made use of technology to reduced our costs to make financial savings and become more data led

Interventions are used to maximise our impact and add value

How does our work add value?

Holds the Department to

account

Influence change in the department

Influence stakeholders

Build expertise

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Evidence-based assurance informed by our client insight

Operational plan

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Our work is more relevant, responsive and in depth

Our work meets the test of supporting Parliament by holding departments to account and is focused on adding value by intervening earlier to prevent failures from escalating.

By providing assurance earlier in the lifecycle of a project or programme we can limit the impact of administrative failures, preventing them from increasing into significant value for money failures, or highlighting risks that need to be managed. For example, we have reported early on the business case for the High Speed 2 rail line, and on the implementation of Universal Credit, a key element of the government’s welfare reforms.

Is it externally focused for example we have strengthening our investigative capability to report on emerging risks and respond to public concerns.

We have completed 13 investigations and have further 16 underway, or about to commence), including Confidentiality Clauses –a topic that wouldn’t ordinarily have been looked at, it was delivered at pace and has opened a broader debate about the use of such clauses – and their link with whistleblowing.

More work cutting across traditional boundaries for example

• A programme of work to look at how to deliver better services through digital channels such as HMRC and DWP’s progress in transforming their operations to digital services.

• Work on contractors: using the skills across the NAO on a topic of high public interest, communicating clear messages about how improvements can be secured which the Public Accounts Committee can draw upon and departments implement

• Working on a range of comparative work : for example on commissioning of services in detailed comparisons within and across sectors such as health, local government. Also on the financial sustainability of local authorities, including the effect of the reduced funding on local authority service levels, how this varies across local authorities and the implications for service users.

We have reorganised so our work is focused on the strategic issues facing government

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What does the transformation programme mean for our audit teams and how they work together?

• Structures - each audit group has an integrated plan with a wider mix of assurance, focusing on common themes and strategic issues for example

– Against the background of difficulties with a number of contracts for outsourced services (such as for asylum seeker accommodation, interpreter services in courts and the electronic tagging of offenders) this year we are examining the progress made by departments (the Home Office and Ministry of Justice) in strengthening their ability to manage the work of providers.

– The study is being conducted in parallel with other NAO work on contract management across central government, including Cabinet Office and the Crown Commercial Service.

– Also reports on managing government suppliers and the role of major contractors in public service delivery have broke new ground regarding the transparency of private sector service delivery by placing information on supplier revenues and the profitability of contracts into the public domain for the first time.

• Financial Savings - savings have been achieved under transformation (£1.3m in 2013-14, and £2.5 million in 2014-15) staff changes, voluntary exit programme in 2013.

• Staff Engagement/ Culture - and new ways of working with an in depth sector knowledge and expertise, financial, VFM and investigations but audit remains the core audit skill

• Processes - shift towards a ‘business partnership model’ for corporate services

• Building skills: Audit groups have dedicated Directors, e.g. people DIRs/ knowledge and influence Directors. Different ways of working. Communities of practice. New people in.

• Greater impact through audit which adds value

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The NAO’s transformation programme is closely linked to some of the principles outlined in ISSAI 12 - making a difference to the lives of citizens

· Strengthening the accountability, transparency and integrity of government and public sector entities

· Principle 1: Safeguarding the independence of SAIs

· Principle 2: Carrying out audits to ensure that government and public sector entities are held accountable for their stewardship over, and use of, public resources

· Principle 3: Enabling those charged with public sector governance to discharge their responsibilities in responding to audit findings and recommendations and taking appropriate corrective action

· Principle 4: Reporting on audit results and thereby enabling the public to hold government and public sector entities accountable

· Demonstrating ongoing relevance to citizens,

Parliament and other stakeholders

· Principle 5: Being responsive to changing environments and emerging risks

· Principle 6: Communicating effectively with stakeholders

· Principle 7: Being a credible source of independent and objective insight and guidance to support beneficial change in the public sector

· Being a model organisation through leading by example

· Principle 8: Ensuring appropriate transparency and accountability of SAIs

· Principle 9: Ensuring good governance of SAIs · Principle 10: Complying with the SAI’s Code

of Ethics · Principle 11: Striving for service excellence

and quality · Principle 12: Capacity building through

promoting learning and knowledge sharing

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to increase our influence on the key challenges faced by government and the way that policies are implemented;

to develop and apply our knowledge by building our expertise and focusing on the strategic issues that public bodies face; and

to deliver high performance by transforming the NAO and practising what we preach.

Our objectives remain the same

Supporting Parliament to hold entities to account

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What is different?

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Workshop exercise: UK NAO

• The workshop: break into four groups to consider some high level questions (20 minutes)

• Nominate a Rapporteur for each group • Report back on the key issues identified in your group to the rest of

the workshop group for wider discussion (5 minutes each group) • Provide a summary for the later plenary sessions (15 mins)

• Any questions?

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Workshop exercise: UK NAO

• Key questions to consider in your group discussion:

• Impacts: How can SAIs develop to add more value and optimise the benefits from audit?

• People: How can SAIs increase influence with key stakeholders by showing awareness of the issues they face?

• Fit for purpose: How can SAIs be more efficient, by adopting modern business practices (time, cost and quality – right subject at the right time)?