Government should merge the Audit Commission and National Audit Office (NAO) to create a “super audit agency” according to a new report from NLGN.

It points out that with councils facing fewer performance targets under CAA and with performance indicators being more closely aligned with PSA targets, it makes sense to merge the two organisations and just have one body responsible for local government inspection.

The imminent departure of Sir John Bourn as auditor general of the NAO creates an ideal opportunity to combine both agencies, whom the report argues “share similar goals and values”. The report argues that the merger would reduce red tape and improve cost-efficiency. It also points out that the two bodies have merged in Wales to create the Wales Audit Office and that there is no reason why the same cannot take place in England.

The report estimates that bringing the two organisations together – to create a new organisation under the banner of Audit UK – would save around £20million in cashable savings for the public purse.

Combining the skills of each organisation would also help to raise the profile and importance of accounting for public spending. The report finds that currently “public understanding of the NAO and Audit Commission is low and public scrutiny and understanding of their output is more limited still”.

Whilst the NAO currently focuses on accounting for government spending and the Audit Commission stresses a heavy focus on auditing local spending, the report finds that much of their work overlaps in many areas. An analysis of the 2006 reports from both organisations found significant similarities in what they covered, with both organisations investigating spending on health services and effective governance.

Justifying calls for the merger in the report, Expecting more from Inspectors?, author Anthony Brand argues:

“Merging the two entities completely should lead to further increases in efficiency, best practice and operational effectiveness as well as a more holistic view of public services. In this way integrating the two bodies may lead to a more responsive and flexible inspection system”

He also points out that as the Government is moving towards a ‘light touch’ method of regulation, coupled with a reduced number of targets for local government, so there is the need for a more streamlined public auditing agency:

“There is widespread recognition that regulation has become burdensome, particularly for high performing local public bodies. The local government white paper implementation has reduced over 1000 performance indicators to just 198. This reduced inspection role will require a different assessment process and a new set of skills as well as potentially a reduction in the resources necessary”.

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Subject Index: Publications, Accountability and governance, Regulation, Inspection and Audit.