warwick funnell, keeping secrets, performance auditors,.pdf

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Critical Perspectives on Accounting 22 (2011) 714721

Contents lists available at ScienceDirect

Critical Perspectives on Accounting

journa l homepage: www.e lsev ier .com/locate /cpa

Keeping secrets? Or what government performance auditors might not

need to know

Warwick Funnell

School of Accounting and Finance, University of Wollongong, NSW, Australia

a r t i c l e i n f o

Article history:

Received 13 August 2009

Received in revised form 27 January 2010

Accepted 4 February 2010

Keywords:

Performance auditing

Public secrets

Public sector auditors

a b s t r a c t

Thispaperexamines the claims made in a recentpaper in Critical PerspectivesonAccounting

by Vaughan Radcliffe about the way in which public sector auditors report their findings.

Drawingupon thework ofTaussig,heargues thatwhile public sectorauditorsmayknowthe

truth, as may others, they choose not always to tell the truth in their reports and instead

to treat what may be publicly unpalatable as a public secret. They modify their findings

to ensure that these will be more acceptable to governments and, thereby, enhance their

opportunity to influencegovernment.Theseclaimsare shown in this paper to overstate the

public sector auditors responseto difficult issues. Rather thankeeping secrets, the contents

of the auditors reports may instead reflect the constitutional and institutional limitations

in which they must work. Most importantly in mostjurisdictions they are not to comment

on matters ofpolicy which are the domain ofthe government.

2010 Elsevier Ltd. All rights reserved.

1. Introduction

Ina recentpaperRadcliffe (2008)argued thatpublicsector auditorsmaybeeffectivelycolludingwith governments tohide

uncomfortable facts and provide reports that are knowingly biased. He notes that they are constrained both by themselves

and others from making observations that may be publicly unpalatable (p. 99). There are things that are known but are

equally known to be things that cannot be said, or cannot be seen to be known, especially in the context of an audit report

(p. 99). Most especially, Radcliffe believes that auditors must work within a given set of discourses, rather than challenge

them, and to be strategically wise in presenting their work if they wish to be effective. They police themselves to say only

certain things and in certain ways to ensure that their findings have a greater chance of being accepted and, thereby, be

seen to be successful (p. 100). These limitations constitute efforts to maintain public secrecy about some matter. In effect,

Radcliffe argues that public sector auditors are prepared to sacrifice the truth to ensure influence and standing, that they

are prepared consciously to subvert the intention of their mandate and are complicit in providing a more acceptable, less

threatening account of the Executives1

performance. The auditor internalizes the need to preserve the public secret andthereby it becomes a self imposed, powerful and limiting force (p. 124).

This response toRadcliffewill arguethat theseviewsof public sector auditors2 are overly pessimisticaboutthe responses

of auditors and, of most concern, give insufficient credence to the constitutional and institutional context in which public

sector auditors operate and how this determines the auditors mandate and the matters upon which they are authorised

E-mail address: [email protected] The term Executive will be used to refer to the elected representatives who form a government.2 The position of public sector auditor primarily refers to the statutory head of the office established by the legislature to conduct audits of the public

sector. Other terms used include government auditor and state auditor. In Westminster jurisdictions they are usually known as Auditors-General and in

the United States the Comptroller General. Audits are conducted of behalf of the Auditor-General or the Comptroller General by staff who are appointed

independent of the Executive.

1045-2354/$ see front matter 2010 Elsevier Ltd. All rights reserved.doi:10.1016/j.cpa.2010.02.007
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W. Funnell / Critical Perspectives on Accounting22 (2011) 714721 715

to comment. Most especially, the conclusions reached in Radcliffes paper do not recognise sufficiently that the form of

independenceprovided forpublicsectorauditorshasrequiredthatthey areexcludedmainlyfromcommenting uponmatters

ofpolicywhenconductingperformanceaudits. Theyare expectednot toquestionthepriorities andobjectivesofgovernment,

only the manner in which these may be achieved. The former are the responsibility of other constitutional bodies, most

importantly committees of the legislature such as public accounts committees. Also disputed here is the implicit intention

of Radcliffes paper, in the absence of any reference to or evidence from other national audit jurisdictions, that the findings

drawn from one case in Ohio are applicable to other public sector auditors, that the behaviour that they allegedly evinced is

endemic to the role of public sector auditors. There is also an almost exclusive reliance upon the authors own work when

referring to studies of performance auditing and no reference to the experiences of auditors-general in Canada,3 Australia

or Britain, all of whom experienced considerable difficulties in the implementation of performance auditing.

2. The power of not knowing: keeping secrets

The conclusions and argument of Radcliffes paper are primarily informed by Michael Taussigs provocative work pub-

lished in 1999 as Defacement: Public Secrecy and the Labor of the Negative. Taussig suggests that all societies rely upon

individuals to collude in keeping secrets to managethecontradiction andcomplexity which characterise all societies. With-

out needing a formal explicit agreement between individuals, members of society instinctively know that there are some

things that they must notopenlydiscuss or acknowledge, sometimes to ensure their physical safety. A particularlyarresting

example providedby Taussig is Columbia in theearly 1980s when citizenswere only tooaware that the terrorists whowere

said to threaten their lives were not the people taken off buses or taken from their homes by the military in the early hours

but the police and the military. To openly acknowledge this, however, would be to place oneself in great peril. Thus, notes

Radcliffe (p. 103), all know the truth, but all know not to know it, possibly to the extent of denying any knowledge of this

secret. As knowledge may be the source of power, so not knowing was also a form of power. In addition, those party to the

secret, which could be the social collective, are aware that the enormity of the social consequences of exposing the public

secret, or its defacement as Taussig refers to it, might be so great that it becomes impossible not to maintain it.

Using insights from Taussig, Radcliffe (p. 106) then argues that public secrecy provides a map to professionals social

agreement as tohow toconduct their work, that is what to say and what not to say. Extending this topublic sector auditors,

he argues that there is a ready adherence by government auditors to keeping public secrets, resulting in an attendance to

those inpower . . . through . . . provisionof a reliablestreamof managerial diagnosesand anabrogation ofpoliticaldebate (p.

106). This is supposedly demonstrated by a performance audit by the Auditor of State for the Cleveland City School District

(CCSD) in Ohio.

WhileTaussigswork is provocativeandprovidesa dramaticwayof understanding society, andpossibly audit, this paper

will argue that the manner in which it has been applied by Radcliffe to performance auditing by public sector auditors

creates a deceptive impression of the way in which public sector auditors conduct performance audits, but more especially

report their findings to favourgovernments. Certainly, theareas investigatedwith performanceauditinganditsmalleability

(see Guthrie and Parker, 1999), in contrast to the more traditional financial audits conducted by public sector auditors,

ensure that it is inherently political in nature and in its possible effects. The heightened potential for political exposure

whichperformanceauditing would make possible waskeenly appreciated by governments,when introducing performance

auditing,whowere consequentlydetermined not to give thepublic sector auditor a newweapon which would make things

unnecessarily difficult for them.

Consistentwith otheraccounting technologies, public sectoraudit isanartefactwhich is a response tosocialand political

pressures (Lowe and Tinker, 1977, p. 266). The work ofCooper and Sherer (1984) has shown that accounting practices, of

which auditing is a prominent component, can never be merely technical instruments. Rather, they need to be recognised

as being consistently partial; that the strategic outcomes of accounting practices consistently . . . favour specific interests

in society and disadvantage others (Likierman, 1989, p. 626). However, as will be demonstrated later in this paper with

reference to a controversial reportby theBritish National AuditOffice in late 2009, thehighlycontentious natureof many of

the subjects that are the focus of performance audits does not mean, as suggested by Radcliffe, that this will cause auditors

necessarily to moderate and modify their responses to ensure that they do not raise the ire of the Executive and, thereby,

enhance their ability tohave theirfindings acceptedas legitimate.Norhasthecase been made in Radcliffes paper, following

Taussig, that it is important for public sector performance auditors to uphold public secrets to ensure the future of society

(p. 107).

3. The nature of performance auditing and auditor independence

The significance of the contributions of public sector auditors to a vibrant, robust democratic state is undisputed in the

literature and in practice (Recommendations of the 9th INCOSAI 1977, 30 Years ofINCOSAI, 1983, p. 85; AAA, 1973, p. 13).

Who says democracy, declare Day and Klein (1987, p. 6), also says accountability. A vibrant democracy and an informed

3

Radcliffe has written about the experiences of Canadian auditors-general but these are not given any prominence in the paper (see Radcliffe, 1998,1999).


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716 W. Funnell / Critical Perspectives on Accounting22 (2011) 714721

publicaremutuallydependent, for access to information isvital to theknowledge of onesowninterestsandthebroader life

of the community (Starr and Carson, in Rose, 1991, p. 690). According to Prewitt, democratic society is preserved when the

publichasreliable ways of knowing whetherpoliciesarehavingtheannouncedpromisedeffect. . . . Numbers, . . . contribute

to theaccountability of a democracy (quoted in Geist, 1981, p.4; Rose, 1991, p. 690). In Britain,which hasprovidedthebasis

for most public sector auditing in Anglo-American states, some form of financial audit conducted by public sector auditors

has been a feature of government for centuries (Funnell, 1994; Glynn, 1987; Hopwood and Tomkins, 1984). The modern

form of public sector financial audit developed from the late 18th century, but mainly in the latter half of the 19th century.

Performance auditing, in contrast, only began to appear in the second half of the 20th century and was accorded legislative

recognition in Britain, Canada and the United States from the 1970s.

The accountability enacted by the public sector auditor until comparatively recently has traditionally been directed to

fiscal accountability, which the Canadian Royal Commission on Financial Management and Accountability (1977) referred

to as the essence of our democratic form of government . . . (quoted in Cousins, 1988, p. 89; see also Asian Association of

Supreme Audit Institutions (ASOSAI) 1985 in Tokyo Declaration of Guidelines of Public Accountability). Fiscal accountability

wasalmostexclusively concerned with thelanguage of financial accounts and, thus, with financial stewardship, legality and

regularity. Thesenarrow, fiduciaryaims of public sectorauditwere consistent with theform ofgovernance at thetimewhich

did not have as its central concern the good management of public funds, although consideration of this was never entirely

absent. Audit was governedby a very formalised, objectivemandate which kept thepublicsectorauditor outof policy issues

and, thus, was less threatening to governments. Audit was concerned with clear, definable and ascertainable criteria of

assessment which limited the auditorsmandate to relatively contentious-free concerns andensured that the independence

of the public sector auditor from the Executive was more easily prescribed. While ever the public sector auditor respected

these requirements the potential for problems with the Executive could be limited.

Restricting public sector audit to narrow financial and administrative codes of accountability and their accompanying

legal, economic and technical rationalities precludedor impaired other values, discourses and rationalities from being pro-

moted, in particular those derived from economic and political rationalities which are now associated with performance

audits (Gray and Jenkins, 1985, pp. 180181). Performance auditing differs significantly from the more traditional, consti-

tutionally based financial audit in its subject matter and the way in which the audit requires of the public sector auditor a

greater elementof judgement and, thus, itsgreatercapacity togeneratecontroversy. This flexibility inpracticemayallowthe

auditors theopportunity tobe selective when choosingwhat todisclose.Whereas theconcerns of financial auditsareclearly

established and generally less contentious, the concerns of performance audits can be more difficult to either circumscribe

or isolate.

Movementof thepublic sectorauditors intoperformanceauditing, andthereforeinto theuseofnewlanguagesofaccount-

ability, hasbrought them into therealmsof contentiousandcontestedjudgement. Performance auditing questionswhether

the best decisions were made in using the resources available to the Executive. Performance auditing, therefore, questions

higher level management skills, not accounting prowess. This is not to deny that an unfavourable financial audit could also

embarrass governments and threaten ministerial careers, or that themanagement of programmes and the implementation

of policies by the Executive were immune from criticism from the public sector auditor. However, when the mandate of the

public sector auditor was extended to include performance auditing the nature of the public sector auditors relationship

with the Executive and, therefore, the quality of his4 independence became problematic as the public sector auditor began

to move his questioning gaze to matters of policy implementation. Performance auditing might provide greater latitude

when dealing with public secrets, if they exist, but it must also be conducted within a given, prescribed mandate which

characteristically provides for the public sector auditor a high degree of independence.

Independenceis themostessentialconstitutional requirementifpublicsectorauditorsaretochampionthepublic interest

by providing a powerful means by which the Executive can be held to be accountable to the legislature and to the public.

Mosher (1978, p. 235) recognises that independence in the context of public sector audit

concerns the freedom of an individual or agency from outside pressures or influence in the reaching of its decisions

and carrying out its activities. In this sense, independence is nearly synonymous with objectivity, freedom from

hierarchical, political, special interest, personal, or other partial bias.

Without a strong, independent public sector audit function there canbe noguarantee that other accountability measures

will have any value. The presence of a public sector auditor whose actions are protected by a high degree of independence

from Executive influence has the potential to be a powerful means of monitoring the Executive and, where necessary,

exposing its actions to public criticism (Loeb, 1978, in Likierman, 1989, pp. 11920; Mosher, 1978; Normanton, 1966). For

Heinig (in Normanton, 1966, p. 402) a crucial element in the preservation of democracy is a public sector auditor who is

independent of the Executive and other interests. Pois (1981, p. 70) in his study of the United States General Accounting

Office (GAO), observedthat thereis suchwidespread acceptance of independenceasa sinequa nonof public sector audit that

there seems tobe littlepointtoengage in theacademicexerciseof marshalling theargumentsin support of this proposition.

Thus, the independence of the public sector auditor is the essential quality of his post which guarantees the value of his

4 In all Anglo-American states the state auditor has been male.


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work (Levin, 1976, p. 41; Nichols and Price, 1976, p. 335). Knighton (1979, p. 6) stresses that nothing is more important in

the establishment of an audit system . . .in government than the laws enacted to secure and protect audit independence.

In the absence of independence it is claimed that the opinion and the value of the audit function itself is questionable (St.

Pierre, 1984, p. 257).

Independence for thepublic sector auditor is dependentupon legal andfiscal protections which aredesigned to identify

and proscribe behaviour by the Executive, or others, which could be construed as interfering with the duties of the public

sector auditor. Indeed, the public sector auditors independence in all Anglo-American jurisdictions is guaranteed by legis-

lation. His statutory independence results from the quasi-judicial method of his appointment, remuneration and dismissal

andhis powersof investigation and reportingwithout Executive interferenceor direction. At thesame time, fiscal indepen-

dence is achieved when he is free from Executive financial control, primarily in relation to staffing matters. In 1983 when

Britain established the National Audit Office as a separate parliamentary body, the independence of the Comptroller and

Auditor General (C&AG) was strengthened by firstly reaffirming his complete discretion in the discharge of his functions

(National Audit Act, 1983, s.1(3)) andallowing himunfettered control over his staff. Operational independence was further

strengthened by providing for a separate budget for the National Audit Office under the watchful and protective eye of the

Public Accounts Commission, a parliamentary body formed under the auspices of the Committee of Public Accounts, the

ComptrollerandAuditorGeneralsprovenhistoricalally. Toconfirmfurther theindependentstatus of thenewly corporatised

National Audit Office, the Comptroller and Auditor General was made an officer of the House of Commons.

Independence is a fragile quality, something which may be professed in the legislation but if it is not widely believed

to exist in practice then the public sector auditor is liable to be cast as a partisan participant in government. This would

seriously undermine public confidence in the public sector auditor for to question thepublic sector auditors independence

is toquestion his integrity and the very institution of public sector audit itself. Hence, it is crucial for the credibility of public

sector auditors that they carry out their duties in a manner which inspires confidence in the independence of their office

and in their individual ability to resist pressures to modify reports to ensure that they are more favourable to the Executive

or to avoid investigating politically sensitive areas (Shockley, 1981, pp. 126, 139). Recognition of this, however, is missing

from Radcliffes paper. He fails to acknowledge the fundamental requirement that public sector auditors are expected to

be independent of the Executive and that this should promote a fearless determination to protect and promote the public

interest. Radcliffe (p. 106) instead accuses public sector auditors of complicity . . . in maintaining public secrets, a feature

which has been essential to its appeal in the public sector. He, therefore, accuses not just one but all public sector auditors

of subverting their hard fought independence.

At one point Radcliffe claims, without citing any evidence beyond one of his own papers or without indicating in which

jurisdictions these might be located, that performance auditors said what they thought their audiences were ready to hear,

. . .. Certainly auditors areaware that if they aretoocombativewith theExecutive that this mayhave a very significant effect

on their ability to be effective, to have their reports accepted and acted upon. However, an examination of the history of

performance auditing indicates that, while this may not be an impossibility, many auditors-general have established repu-

tations as fearless, highly combative interrogators of government. This is clearly in evidence in the adversarial relationship

whichdeveloped between Auditors-General John Taylor in Australia andMaxwellHendersonin Canadaandtheir respective

governments (Funnell, 1998; Henderson, 1984; Macdonell, 1980; Sinclair, 1979; Sutherland, 1980). Despite knowing the

likelyconsequences of their zealous commitment to executive accountability these auditors,whoare far from unique, were

determined to do that which their mandate allowed them, indeed demanded of them, and not to be intimidated by possible

attacks from the Executive. They were also aware, however, that a particularly effective means of guarding against threats

to their independence which might emanate from theExecutivewas to avoid encroachingon theExecutives exclusive right

to pronounce on matters of policy.

4. Policy, secrets and the public sector auditor

With theestablishment of performanceauditing thestatutoryconcerns of theauditor were formally extendedto include

government measures designed to pursue the efficient and effective implementation of policies, although the auditor was

not to question whether the objectives to which the policies were directed were appropriate. The privileged and powerful

position of the public sector auditor had been granted on the understanding that he did not comment on the goals of the

Executive. Policywasaboutpolitics andwasto be takenasgiven(see Funnell,1998;Guthrie andParker, 1999). Governments

wereelectedandgiven thepower toenact theirpolicies.A constitutionalpacthadevolvedin Anglo-Americanstatesbetween

theExecutiveandpublic sectoraudit; thepublic sector auditor knew that theExecutive wouldonly toleratehimas long ashe

didnotpublicly criticise itspolicies. Anypublic sector auditor whomight be tempted to interpret their mandate tooflexibly

and comment on policy could find themselves publicly disciplined and attacked. Prior to performance audits this form of

Executivedefence wasnota recurrentfeature of therelationshipbetweenthepublicsectorauditor andtheExecutive. It was

notneeded because, as notedearlier, the legal provisions governingfinancial andcompliance auditingkept thepublicsector

auditorsworkcircumscribed.After confrontationswiththeExecutive in theearly daysof performance auditing, subsequent

Australianpublicsector auditors soughtto reassuregovernments that shouldany encroachmentson policyoccur thesewere

not intentionaland that theauditors respected theconstitutionalrightof elected governmentstodecideon matters of policy

(Australian Audit Office, Submission to the Independent Departmental Committee, Reviewof Efficiency Audits, April 1982, p.

5;SteeleCraik,April 1976, p.8). Similar assurances andconcernswere beingvoicedinBritain as theComptrollerandAuditor


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General (C&AG) grappled with value-for-money issues (Public Accounts Committee 1980, Appendix XLI, Memorandum of

the Comptroller and Auditor-General, p. 160) and in Canada by the Auditor-General (see Macdonell, 1978).

The potential for performance auditing to intrude on matters of policy was readily recognised by governments in the

United States, Canada, Britain and Australia from the 1970s when public sector auditing mandates were widened as part of

the newpublic management reforms. It was readily appreciated by governments that, by its very nature, without sufficient

constraints performance auditing has the potential to stray into matters of policy. Thus, concerted efforts were made when

forming the relevant legislation to ensure that this would be much less likely to happen with governments seeking to

identify asprecisely as possible thereachof performanceauditing (see theBritish NationalAuditAct1983, Canadian Auditor

General Act1987,Australian Auditor GeneralAct1998).Thepublic sector auditor wasto reportonly on theeffectivenessand

efficiencywith which policies were implementedby executive agencies.Most especially, auditors were not to overstep their

mandate and become involved in policy effectiveness issues as opposed to administrative effectiveness (for a discussion

of this difference see Parker and Guthrie, 1991 and Glynn, 1991). These concerns, in part, account for the long gestation

periodbetween conception and implementation of theenhanced audit mandate in most Anglo-American states, in the case

of Canada more than 15 years.

Despite the constitutional importance of public sector auditors not commenting upon and making judgements about

government policies, that is the aims and priorities of government, and the implications of this for their independence

should they do so, this is not given a presence in Radcliffes paper. Instead, he sees silence in policy matters as the public

sector auditor colluding with the Executive in keeping secrets. Nor does he recognise that should auditors exceed their

mandate in this way they are intruding upon matters which are meant to be addressed by other constitutional means, most

importantly investigations by committees appointed by the legislature. The most important investigations by legislative

committees which compliment the work of auditors-general are those conducted by standing committees such as public

accounts committees, special committees of inquiry and, in Westminster jurisdictions, royal commissions. In the United

States, congressional committees have long provideda powerful means to hold theExecutive to account. Thework of these

bodies is now supplemented by the work of statutory bodies such as Ombudsman and administrative appeals tribunals,

while the general public and the press are able to use freedom of information legislation to gain access to information.

Understanding the essentially complementary roles of public sector auditors and the legislature, for whom most imme-

diately the public sector auditor works, is critical to understanding why the auditor may make certain observations which

may seemto be telling only part of the story, interpreted by Radcliffe as keeping secrets. That part of the story told by state

auditors is that part of the story which they are given the authority to discuss, according to the form of audit. In Radcliffes

paper, apart from a brief reference to the possibility of exposure by others, there is no discussion of this complementary

natureof the workof the legislature,which can beheavily reliant in its workonthe reports of the public sectorauditor. Thus,

it is contended here that the manner in which Radcliffe portrays the work of public sector auditors is to overly stigmatise it,

to accusetheauditors of deficiencies whichareneither relevantnorconstitutionally valid.This canbe shown with reference

to a case cited in Radcliffes paper.

As a suggested example of the tension between audit mandate, theneed forperformanceauditors to be politically astute

andthefindingsthat areeventuallyreportedby theperformanceauditors, Radcliffe(p. 101) refersto a conversationbetween

three Canadian performance auditors who were expected to audit in areas which were strongly influenced by political

requirements. They felt constrainedby political pragmatism toprovide a reportwhichwasincomplete but less contentious

in its observations and recommendations. However, rather than as Radcliffe suggests this being a matterof keeping secrets,

instead it ismore that theauditors recognised that they were notto intrude inmatters of policy. This would certainlyexplain

why one auditor concluded it would havebeen impossible to say that . . . (p. 101). In thecase cited,Canadian auditorswere

discussing moving from a fee for service for doctors to a fixedpayment to limit their remuneration and, thus, to help ensure

that theCanadian healthcare systemremained viable. Fundamentally this wasa policydecision,nota matter for auditors to

comment upon while conducting their performanceaudits. It was self-editingby the auditors (p. 101) but only in the sense

of realising that performanceauditors were not to stray into matters whichwere clearly policyconcerns of government,not

that of performance auditors. It may be pragmatism but it is constitutionally legitimised pragmatism, not that which is at

the whim of a particular auditor or the circumstances. Certainly, as established earlier, if theauditors had strayed into clear

issues of policy they knew that they would become the target of attack by government. Auditors need to have more than a

knowledge of social reality garnered from newspapers, other media and legislativedebates (p.101). They must have a very

clear understanding of their constitutional mandate which determines the nature of their relationship with the Executive

and the legislature. Each has its own sphere of constitutionally and legislatively sanctioned influence which is meant to be

respected and used to the fullest to ensure the synergistic effectiveness of the constitutional means which have evolved to

ensure the political and financial accountability of the Executive in a liberal democracy. The importance of this enduring

characteristic of the work of public sector auditors, in concert with the sanctity of the auditors independence, was recently

confirmed yet again in a highly controversial and, for the British Government, deeply embarrassing report by the British

National Audit Office in late 2009.

In a performance audit report on the British Governments responses to the catastrophic failures which afflicted British

banks during the world financial crisis which began in 2008, the National Audit Office (NAO) disclosed to Parliament and

to the British public for the first time that the British Government had provided more than 62 billion emergency liquidityassistance beyond that which the government had previously disclosed (NAO 20092010; Daily Telegraph, 27 November

2009, p. B2). The NAO report revealed that the Government and the Bank of England had decided to subvert a long standing


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parliamentary convention andkeep secret from Parliament this additional financial assistance to thebanks. Theindemnity

provided by the Government, notes the NAO, would normally have been notified to Parliament as a contingent liability

before it was granted. Because of the considerable sensitivity of the support operation at the time, the Treasury judged that it

was not in the public interest to do so (NAO 20092010, p. 6, emphasis added). If, as assured by Radcliffe, there is a self-

interested proclivity of public sector auditors to be an active partner in maintaining secrets, to remain silentabout a matter

whichmaycreateserious embarrassment or political damage to thegovernment, then this would have surely applied to the

disturbing contents of NAOs report. The report, as noted below, also demonstrates the complimentary roles of the public

sector auditor and legislative committees in ensuring the accountability of the Executive.

That the disclosures were made by the NAO almost a year after the assistance was provided recognises that the govern-

ment may have never reported thepaymentsdirectly and that, possibly, only theNAOs resolute determination to carry out

its mandate without being intimidated by the predictable reaction that this would elicit from the government allowed the

information to be provided to Parliament and to the public. Contrary to the convention which required that the Treasury

inform, even if in a confidential manner, the Public Accounts Committee and the parliamentary Treasury Select Committee

of the type of action taken (NAO 20092010, pp. 2021), until the NAOs disclosures the chairmen of both committees had

been unaware of the very considerable loans which were needed to ensure the survival of the Royal Bank of Scotland (RBS)

and HBOS, both of which were now effectively publicly owned. Once aware of the NAOs findings both chairmen criticised

thegovernment fortheir blatant disregardof their responsibility tobeaccountable to theparliament,butespeciallyaccount-

able for the financial stability of the British banking system at such a critical time (Daily Telegraph, 27 November 2009, p.

B2). The chairmen also praised the NAO for not colluding with the government in maintaining the secret any longer (Daily

Telegraph, 27 November 2009, p. B2). The NAO as an independent office of Parliament with legislated access to all aspects of

government finances hadbeen able to achieve on this occasion that whichother constitutional bodieswere prevented from

doing or unable to do. In a similar manner, the alleged silence of the performance auditors in the case of the Cleveland City

School District performance audit used by Radcliffe as the major focus of his argument could be readily seen not as keeping

a secret but as another instance of public sector auditors recognising the limits and complimentarity of their mandate.

5. ClevelandCity School District performanceaudit

After a long period of serious financial problems, in 1996 the Ohio Auditor of State, in conjunction with private sector

auditors, was asked to conduct a performance audit of the Cleveland City School District (CCSD). The auditors mandate for

theperformance auditwhichcame from theOhioLegislaturerequired that The Auditorof Stateshall conduct a thoroughand

expedited audit of thefinanceof theClevelandPublicSchools . . .. Theperformanceaudit was to focus on financial practices

and controls, to make judgements about economy and efficiency (p. 109), although allowed to examine other matters. The

implication of the terms of reference was that these matters would be related to controls and financial procedures. In a

very large report, theauditors made numerous recommendations with respect to administrativedeficiencies,as requiredby

their termsof referenceandtheir mandate. As a criticism, Radcliffeobserves that thefindings of theperformance auditwere

in effect a managerial diagnosis of the Cleveland Schools and contained the implicit message that if the administrative

matters were corrected that all would be well, although, as party to the public secret, the auditors knew that the causes of

the problems were far more serious.

The auditors are criticised and condemned for not referring to other, far more serious social problems which most

observers are said to have known to be the real source of the financial problems and educational disadvantage which has

blighted the districts children. This, according to Radcliffe, has the effect of presenting its problems as essentially financial

ones amenable to managerial resolution (p. 112). The auditors know that updating CCSDs mainframe computers will not

alleviate the crushing poverty . . . and other burdens that Clevelands children face. But they know that they cannot say it,

least of all in an audit report to the Ohio Legislature. Yet, this is exactly what the terms of reference for the performance

audit required, irrespective that the real reasons for the problems experienced may be so disastrous and corrosive as to

make the auditors report an almost laughably futile response. Radcliffe concludes that as a result, the truth value of audit

findings in areas marked by public secrecy is questionable (p. 122).

Certainly, as suggested by Radcliffe, the new public management has provided governments with the ability to define

political problems as business problems (p. 107), thereby allowing governments to avoid the political consequences and

questioning of potentially embarrassing decisions. However, this is not the same thing as saying, as Radcliffe does, that in

every case auditors are colluding in creating this equivalence, that they see it as a good thing to collude and play by the

governments rules. It may simply mean that when the auditors carry out their work they have no choice but to evaluate

what they see as a business type problem. Performance auditing, as noted above, may be broad and sometimes uncertain

in its compass but its subject matter and objectives are normally well stated. Without any contrivance on the part of the

public sector auditor, bettermanagement techniques may indeed be the solution to the specific aspect of performance that

the auditors examine and criticise. As established earlier, at a much higher level of governance, certainly there may be the

opportunity to question thevery programmes, andhencepolicy, in which thepracticesare carried outandwhich mayhave

caused the programme to be delivered in a costly, inefficient, poorly managed manner. However, by definition, these are

policy issues and the concern of the Executive and Parliament. They are not the explicit concern of a performance audit. To

move beyond the mandate of the auditor, to act ultra vires, would not be an option. Further, as noted above earlier, that the


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auditors report did not have to be the only response to the problems experienced and their causesor a response that would

silence other possible responses.

If the problems in the Cleveland City School District were so great, it is inconceivable that opposition members of the

legislature and legislative committees or the hawkish scrutiny of the press had not already highlighted the real source

of the problems; racial and economic disadvantage. They, and others, had a political interest in drawing attention to the

very significant problems which underlay the financial disadvantage of the schools. Radcliffe (p. 113) does recognise that

the extent of the problems were well known to politicians and auditors, having been identified in countless reports and

experiencedin daily life, although auditing, concludesRadcliffe, does notprovide a space for theexpression of these truths.

6. Conclusion

Public sector auditors form part of an array of constitutional mechanisms which have developed to ensure that govern-

mentsaremade tobeaccountable for their actions.Unlikegovernments andlegislatures, publicsectorauditors areprovided

with the legislative authority to conduct audits with a high degree of independence or freedom from of government inter-

ference. Their independence is meant to ensure that they will be able to protect and further the public interest, to be the

meansby which thelegislatureas theelected representativesof thepeople isprovidedwith themeans tohold theExecutive

accountable. Theindependenceof theauditordoes notmean that noconsideration is given to theimpactthat theirwork will

have on the government. However, to suggest as does Radcliffe, that the auditor is prepared habitually and consciously to

misrepresentmatters under investigation toensure that their findings maybe morepalatable to government misrepresents

the extent to which this may be a consideration of the auditor. It also fails to recognise that the auditors mandate is not

unbounded, that each type of audit is tobeconductedwithin given termsof referenceconsistent with theauditorsmandate.This may mean, as in the case of performance audits, that only certain matters are examined and are found in the auditors

reports. To say that some matters are excluded from the report when they are patently of some significance and effect is

not, as Radcliffe suggests, the same as the auditor becoming party to a well known but unexpressed secret. The reality is

that these things, while known, may not be that which the performance auditor has a responsibility or the authority to

comment upon. This is especially so when they are matters of policy, matters which are the democratic right of the elected

government to determine not an unelected public servant.

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