Public Accounts Commission

The NAO’s evidence panel reviewed the 2026-27 Main Estimates, emphasizing a budget that remains tight in real terms despite expanding responsibilities and audit complexity. The NAO seeks to protect audit quality and impact while pursuing efficiency measures, including a major insourcing programme that shifts work from external firms in order to reduce costs. They are planning substantive investment in governance for AI and digital tools (notably Copilot) and anticipate a future where AI augments, rather than replaces, human auditors, with a forthcoming executive director to lead on digital and AI. The NAO expects to maintain output (over 60 value-for-money reports for the PAC), strengthen financial/risk management, and explore more modern, accessible outputs (infographics, mobile-friendly formats) to broaden public understanding. They also highlighted risk factors, such as inflation spikes that could necessitate supplementary estimates, and governance considerations (data security, “human in the loop”). Several questions touched on small-body reporting regimes, the potential future scope of NAO work (including aid spending), and the balance of in-house versus outsourced audits, including geographic staffing considerations (Newcastle vs London).“

The NAO committee session scrutinised the NAO’s progress on audit quality following a multi-year investment in methodology, technology, and culture, and examined governance around audit quality and board capabilities. Witnesses described improving audit quality, supported by FRC findings and internal reviews, while noting that small FRC samples should not be over-interpreted. The discussion covered: (1) the Apex system and new auditing software as central to quality improvements, (2) ISQM 1 quality-management requirements and the need for ongoing risk-based enhancements, (3) balancing timeliness with quality, (4) the role of senior leadership in embedding quality across the organisation, (5) outsourcing versus in-house audits and plans to reduce external work to about 15%, and (6) increasing use of IT and AI to raise efficiency and insight. The committee also pressed NAO on take-on risks from new rail-operator audits, governance, and external vs internal quality reviews. In the second session, the chair and committee considered Alistair Conner’s re-appointment, noting his digital-transformation expertise and the board’s need to broaden IT skills. Overall, the evidence signalled ongoing commitments to sustain quality, invest in tools and training, and evolve governance to address digital and data priorities.

The NAO briefing and questions focused on the scale and cost of bringing eight train operating company audits in-house, the planning and staffing implications, and the NAO’s broader strategy to modernise auditing with new technology. Witnesses outlined resource gearing, outsourcing considerations for specialist work, and changes to how financial impact is measured, while Parliament scrutinised governance around exit payments, cyber security, and staff wellbeing. Key positions include the NAO’s intent to hit a higher financial-impact target (15:1), leverage data analytics and AI tools to improve efficiency, maintain a trainee pipeline, and plan to reach a 70% audit-sign-off target by the next summer recess; ongoing parliamentary activity and election timing were noted as influencing workload and governance expectations.

The National Audit Office (NAO) set out a five-year strategy prioritising productivity, resilience, and innovation in government, while outlining budgetary pressures tied to new audit responsibilities, insourcing vs outsourcing decisions, pay awards, and staff recruitment. The NAO emphasised using audits to drive positive lessons from innovation, and to understand and manage key risks (climate, cyber, public-health threats) across government. It also detailed reforms to local-government auditing, increased engagement with Parliament and Select Committees, and a transformative data-analytics capability enabled by a secure data-portal. The committee scrutinised delivery risks, budgetary contingencies, workforce dynamics (graduate recruitment, retention, and pay), and the NAO’s evolving role in verifying value for money across a changing public-service landscape.