National Audit Office set to replace EY as BBC auditor

The government has announced plans to appoint the National Audit Office as auditor of the BBC to replace the incumbent EY as part of plans to overhaul the broadcaster’s charter, subject to final agreement

The current auditor is Big Four firm, EY, who took over the audit from KPMG in 2015. At the time, the BBC signed a three-year contract with EY, with the option to extend to a further two years. The BBC audit is worth around £1.6m including audit of the BBC’s annual accounts, the audit of subsidiaries of the BBC and audit-related assurance services.

In total, EY earned £1.9m in total fees from the broadcaster as per the 31 March 2015 group financial statements. This was substantially down on the previous year, when total fees paid were £2.5m. The accounts for 2015/16 are due to be published in July after they are laid before by parliament.

When the BBC switched auditors it ended a 10-year audit relationship with KPMG who had been auditor since 1995.

The proposal is to appoint the National Audit Office as auditor in line with other public sector bodies, although any plans to audit the BBC World Service and any other international subsidiaries has not been decided.. However, the BBC has expressed concerns about the impact on its editorial independence as a result, something which the government and NAO strongly refute.

Commenting on the government’s plan to appoint the NAO as auditor, in a statement the BBC said: ‘The White Paper calls for the NAO to be the BBC’s auditor. The NAO is already able to conduct value-for-money studies, and any further expansion of their role must include an explicit exclusion for editorial decision-making; and nor is it appropriate for the NAO to assess the value for money of the BBC’s commercial subsidiaries, as they do not spend any public money.’

An NAO spokesperson told Accountancy: ‘After the White Paper, there will be consultation, then debate in parliament. The deadline for finalising the Charter is the end of the year.

‘One of the issues left open was whether we would audit BBC World Service as well – this is still under discussion.’

With the EY contract still in place, the timing for any new auditor appointment is unclear.

‘There is no way we can say from when we will do it. They have to agree a charter by the end of the year but the government won’t commit themselves to a timetable. Maybe by the summer, maybe by the autumn. Nothing will happen until after the EU referendum.’

One of the BBC’s concerns about this is about their editorial independence, which the government states will be enshrined in the Charter and would not affect any relationship with the NAO as auditor.

The NAO already produces two or three annual reports into the BBC, including the latest report into Management of critical projects, released earlier this week.

The NAO spokesman added: ‘We have done values for money reports on the BBC for the last ten years, ie, the digital media project where £100m was wasted. In light of what we said two years ago, they really strengthened their oversight of big projects, like the project for the new Welsh BBC broadcast centre and even the new Eastenders’ set.’

In the BBC Deliver a stronger role for the National Audit Office to scrutinise BBC spending and value for money. The National Audit Office will become the BBC’s financial auditor given the £3.7 billion of public money that it spends. The scope of its value for money investigations will be explored further

The government plans to change the Charter to ‘enshrine greater public scrutiny of BBC spending and value for money through the National Audit Office (NAO) by making it the financial auditor of the BBC, reflecting that the BBC spends almost £4bn of public money each year.

‘The government will explore further the merit of giving the NAO powers to conduct value for money investigations of the BBC’s commercial subsidiaries.’

The government white paper states that ‘past NAO scrutiny for the BBC has been shown to work well and to be compatible with the BBC’s editorial independence. The NAO is uniquely placed to scrutinise public bodies, including the BBC, from a fully independent perspective: the Comptroller and Auditor General [Amyas Morse], the head of the NAO, is an officer of the House of Commons, and the NAO does therefore not report to any minister’.

It also stressed the NAO’s independence and oversight role, and its ability to challenge the government over policy delivery. However, the NAO’s recommendations are not binding.

The Charter will establish the Comptroller and Auditor General as the BBC’s financial auditor, in line with the normal arrangements for public bodies such as the BBC.

In 2014/15, the NAO audited 442 accounts196 for 344 public bodies, ranging across central government departments, independent regulators and arm’s length bodies operating in a commercial setting such as Network Rail.

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