It may be helpful if I first outline the role of the C&AG and the National Audit Office. The C&AG, and the National Audit Office (NAO), of which he is head, are completely independent of government. The C&AG has two main functions. The first is to certify the accounts of government departments and a wide range of other public sector bodies and to express an opinion on those accounts. The second is to carry out 'Value for Money' examinations into the economy, efficiency and effectiveness with which government departments and other public sector bodies have used their resources. In each case the C&AG has the statutory authority to report to Parliament on the outcome of his work.
The audit cited by the IPS in response to your letter is our annual statutory audit of the IPS accounts. The most recent audit was of the 2009-10 Accounts which were published in July and can be found on the IPS website at: http://www.ips.gov.uk/cps/rde/xchg/ips_live/hs.xsl/1717.htm. The C&AG gave an unqualified opinion on the Accounts (p26-27), certifying both that they give a 'true and fair view' of IPSs financial affairs for the year ended 31 March 2010 and also that the income and expenditure of the Agency had been spent, in all material respects, as intended by Parliament and that the transactions conformed to the authorities that govern them. In line with standard auditing practice, our audit does not examine every transaction but is conducted on a test basis, with our audit procedures designed to give us reasonable assurance that the accounts are free from material misstatement.
In order to reach the audit opinion, we carried out work to provide such assurance that each funding stream was, to a material degree, only used for the activities which Parliament had authorised, including that the passport fee was not used to subsidise the other activities of IPS. Note 3, on page 41 of the Accounts, sets out the income and expenditure of IPS by business stream; this shows that for 2009-10 the passport operation made a deficit of £4.2 million.
With respect to Value for Money Studies, the Comptroller and Auditor General produces an average of two reports on the activities of the Home Office and its associated bodies each year. The last on the activities of the IPS was the 2007 report on the introduction of e-passports, to which you refer in your letter. As such we have not undertaken any recent work on the value for money of the passport operation.
In choosing the areas to carry out a Value for Money audit we are ourselves required to have due regard to value for money. This means we have to focus our limited resources on the areas where we think the greatest risks to value for money lie. We take into account a number of factors including the likely impact on the accuracy of the bodys financial statements.
I hope this provides you with clarification on the work we have undertaken and I would like to thank you for bringing your concerns to our attention.