Are National Audit Office “Value for Money” Audits Themselves Value for Money?

Topics: Financial audit, Audit, Auditing Pages: 3 (1287 words) Published: April 17, 2013
The National Audit Office (NAO) is responsible for the financial and “value for money” audits of central government expenditure, as well as other publicly related bodies. Although there is no single definition for what a value for money audit is, the most widely accepted definitions connect value for money audits with the review of the three E’s (Lecture 2, AC340 Lent Term, Liisa Kurunmakii): •Economy – providing the intended service at the lowest cost possible, with regards to maintaining the quality of service •Efficiency – gaining the maximum output from a given level of inputs •Effectiveness – the extent to which these public bodies achieve their policy objectives

With this in mind, it is clear that in order for a “value for money” audit (henceforth denoted as VFM audit) to provide value for money it must also adhere to these three E’s; a VFM audit must be minimal in terms of cost, it must be effective in terms of finding areas for improvement, and it must make the most of resources used. The VFM audit’s benefits must outweigh its costs. Throughout this essay I will explore and demonstrate with examples the conditions under which VFM audits do provide value for money, as well as when they don’t. Ultimately a VFM audit is only value for money to the extent that it leads to improvements in the way the audited bodies can improve their processes, with regards to the three E’s. Without this, the VFM audit is an unnecessary and costly extension of the financial audit. However, if the VFM audit itself is in possession of the three E’s, then it should provide value for money. In 2011, the NAO’s recommendations generated savings of £1.1 billion off the back of an outlay of £67.8 million (NAO Annual Report 2012). From this, it is easy to see that the NAO’s work overall yields significant benefits over costs. A 1997 paper by Summa and Pollit also shows that 95 per cent of the NAO’s recommendations were taken on board by the Public Accounts Committee (PAC) in 1994,...
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