Interview: Amyas Morse

Auditing, in the narrowest sense of the word, means examining an organisation’s financial records to check their accuracy – and for many finance experts, this is an exciting topic. But when National Audit Office chief Amyas Morse (pictured above) gets excited about his work, his mind is on bigger things: he’s fascinated by the public sector’s attempts to reform itself, and by the challenges that civil servants across Whitehall are facing as they try to simultaneously rewrite policies, restructure organisations and reduce costs.

Given the level of change currently under way throughout the civil service, there’s plenty to keep Morse excited; his craggy, patrician face lights up as he explains just how privileged he feels to have a window on Whitehall. And the NAO provides, he says, a window with excellent views: his auditors often have better access to data than senior managers within the organisations they’re scrutinising. “If you’re there as an auditor, you can look at all of the information,” he explains. “If you’re in an organisation at a certain level, you get to see what you’re entitled to see at that level.”

Morse is clear about how he wants to use his position. “When I applied for this job, I said: ‘I’m very interested in the improvement agenda, as well as holding [departments] accountable. Please don’t appoint me if you don’t want someone to do that job’,” he recalls. Since taking over at the NAO two years ago, he’s adopted “a very clear strategy of identifying the common factors that repeat themselves across government again and again, and therefore developing an analysis that builds up an overall picture rather than taking on each new report individually.”

He’s also determined to dump the complex, often impenetrable language so common among accountants and consultants, and wants the NAO’s messages to be clear and simple: “There’s no point writing a report if people can’t decipher what you mean at the end of it,” he says. This approach carries risks for the subjects of NAO reports: the more plain-speaking a report, the more juicy the quotes it provides for journalists. But Morse emphasises that the NAO works closely with departments before publishing its reports, ensuring that officials have prior warning of the key messages. “We discuss all the findings with departments before reports are published, so it’s not a shock to them,” he comments. “And we always agree the facts, because there’s no point us having an argument in the select committee about facts.”

Ultimately, though, Morse says both sides know that the NAO is not responsible for any negative press coverage following a critical report – particularly because much of the coverage will be shaped by the approach taken by the Commons Public Accounts Committee (PAC), which conducts its own inquiries following NAO reports. “Our objective is to be firm but fair – and the fair is just as important as the firm,” he says; but while departments would “like to have as positive a press result as they can, to a degree that’s a matter that I’m not as much concerned with.”

Painting that big picture
In practice, Morse’s desire to examine organisational improvement and cross-Whitehall dynamics – and he acknowledges apologetically that “this sounds like management-speak” – involves focusing on departments’ progress towards “transformational change”. Facing budget cuts of around 20 per cent, he comments, government bodies have no choice but to undertake wholesale reform. “That’s not a haircut; it’s not possible to do that much by trimming,” he says, pointing out that the NAO itself has taken a cut of 18 per cent over the spending review period. “You may go for low-hanging fruit at the beginning, and that’s what’s happening in many departments – but to have sustainable cost reduction, you have to restructure the enterprise. You need to change the model.”

Where departments try to reduce costs “but carry on as usual in every other way, then the costs will pop back up again”, Morse continues. The only way to cut spending for the long term is by “changing most of the main components in the organisation – and you have to move them all together.” It is this challenging process that so fascinates Morse. The NAO, he says, is concentrating on analysing “how this coordinated approach takes place, and how it’s all brought together in an effective way, and how those programmes of change are driven coherently and effectively. I admit that’s quite managerial territory, but it’s territory where we can make a real contribution.”

Making change happen
For departments to successfully navigate this territory they need a number of skills and assets, including the intelligent and accurate use of data – and Morse explains that all the NAO’s assessments consider organisations’ capabilities in three fields of information management: “The use of information in government; the role of financial management in government, including whether it’s as influential as it should be; and does government know what it costs to do things?”

The use of the information theme “has probably turned out to be the most dominant”, Morse explains, “because across government now you’re seeing big changes in organisations and structures, all driven by using information differently”.

Good quality financial management is almost as important, though, and Morse notes that many departments have made rapid progress here – albeit from what he clearly thinks is a somewhat low base. “Where a department decides that it wants to lift its game, if it’s really sponsored from the top it can move forward very fast,” he says. “It’s not impossible for the public sector to do that. It doesn’t happen to have done it so much in the past, but now – because of pressure on resources – it’s become very much top of the agenda, just as it’s become top of the agenda to use information better to flatten out structures and so forth.”

As departments move to improve their management data, Morse argues, “it needs to be brought together and integrated well: that’s the challenge.” The civil service should be adopting common measurements for management information, enabling comparisons to be made between departments and services to be aligned more closely. “There’s no argument against it, in my view,” he comments. “It will inevitably come.”

A policy on business skills
As well as improving its management information, says Morse, the civil service needs to develop its business skills. If departments want to make investments – even those designed to produce savings relatively quickly – then “your management of the relationship with the Treasury is going to have to be pretty good”. Departments will probably have to show compensatory savings elsewhere to get approval for investments, he adds, and they’ll need to make a strong business case. This requires quite a different skill set from the civil service’s traditional strengths in policymaking; but in the current circumstances, improving these skills has to be a high priority.

Finally, Morse says, departments will need good personnel training if their change programmes are to be successful – “and not just for the junior people, but for the whole team”, he warns. “Otherwise, you introduce a new way of working and on day one the people who’ve been trained in it show up, but the senior people – who’ve excluded themselves from the training – say: ‘I don’t like that. I want my old-fashioned way of doing it’, and they clog up the change.”

Asked whether the recent reduction in the levels of external recruitment may leave the civil service short of some of the essential skills to improve information management and business planning, Morse – himself a relatively recent recruit to the civil service – argues that while “it’s fine hiring people in, when you do so you must squeeze their expertise out of them and transfer it to the people who are permanently going to be running things.”
“I really think that’s crucial,” he adds. “For these changes to really work, this way of running things needs to be metabolised by the civil service, taken into the civil service’s central culture, and led by the civil service.”

On PAC and perm secs
Running alongside the current set of “transformational change” programmes is the gradual shift towards greater local control over spending and public services. PAC chair Margaret Hodge has complained loudly that by weakening permanent secretaries’ control over their departments’ spending, localism also weakens the PAC’s ability to hold them to account for the use of public funds; and this challenge looms just as large for the NAO, which produces the research behind PAC inquiries.

Communities department permanent secretary Bob Kerslake, asked by the cabinet secretary to examine this conundrum, recently argued that rather than permanent secretaries being directly accountable for every pound of their departmental budgets, in future they should instead be accountable for creating a robust framework that ensures probity and good financial management among autonomous local providers. “I think it’ll be very helpful to have a statement of accountability produced by the department which says how the accounting officer is going to discharge their responsibilities,” comments Morse – but he adds that this statement “doesn’t take away from the overall responsibility of the accounting officer” for spending.

The NAO, he adds, will have “to examine whether that [framework] is working properly or not”; it may, for example, examine a sample group of local service providers. It’s clear, though, that the task of scrutinising public spending at a local level is set to get more complex. Where there are local elected bodies to hold accountable, says Morse, it’s “relatively straightforward” to find a way forward. “For the rest, there’s more to be determined and it’s a bit more challenging, there’s no doubt about that.”

A clear view on transparency
At a local level the picture is made more crowded by the transparency agenda; something about which Morse clearly has mixed feelings. The publication of a certain amount of data, he argues, is helpful – both because “everyone in public life then tends to conduct themselves on the basis of whether they’d be comfortable with what they’re doing becoming visible”, and because it enables observers to “pick up patterns” such as favouritism in the awarding of contracts.

However, he continues, “When you move up to wanting to publish high-quality information that lets people replicate management thought processes, that can require quite a big investment.” If organisations already have high-quality management data, then they should generally publish it: after all, “you shouldn’t object to people seeing how you’re making a lot of the decisions about how priorities are set.”

However, if the data has to be checked and ‘cleaned’ before publication, then “you’d have to be pretty sure that the benefit was aligned”, he says. “I wouldn’t get into creating an industry of cleaning up and raising the quality of data just to put it into the public domain for no apparent reason.”

On the publication of flawed data, Morse says he does “understand the government view: that by putting it out there it will be driven to get better”. But he still doesn’t like the idea of publishing inaccurate information in the belief that any data is better than none: “The risk is that you have a very messy debate, and people ask questions or draw conclusions based on not-very-good information,” he warns. “And that has a cyclic effect: you get drawn into handling that, denying it, and instead of becoming clearer things become more opaque. I’m supportive of the idea of transparency, but it needs to be effective transparency.”

There’s one more point to make here: data published by local service providers must be comparable and consistent – and that, Morse believes, requires someone to lay down the law on how it must be collected, processed and presented: “Does it have to be controlled by the centre? No. But if you’re going to live in an information-driven community, then someone has to say: ‘The quality standard must be X’. Otherwise, any comparisons you make aren’t valid.”

Looking ahead
One such data quality standard-setter, of course, is currently being slowly dismantled. Last summer, communities secretary Eric Pickles announced that the Audit Commission will be disbanded, and issued a press release stating that the NAO would be overseeing a statutory framework governing the quality of local authority audits; the NAO’s role in audit research, it added, would be strengthened.

However, the NAO is not under government control – it reports directly to Parliament, holding government to account for its spending of the money voted to it by MPs and lords – and Pickles may have jumped the gun. Asked what roles the NAO may add to its workload, Morse says that he’s discussing the possibility “that we might provide some guidance on overall audit standards and direction – not actually doing audits ourselves – and we’ll have a role in doing national studies of value for money; that means looking across the portfolio, not doing local studies”. These roles sound smaller than the DCLG’s plans, and Morse emphasises that even this is far from settled: “There’s quite a lot of miles to travel before we get there.”

So as an officer of Parliament, what is Morse’s responsibility in this situation? “Well, I’m not considering how to fill the gap left by the Audit Commission,” he replies. “What I’m doing is considering how I can fulfil my responsibility to Parliament in these new circumstances, and that’s a slightly different thing.” The loss of the Audit Commission “will have an effect on my ability to help Parliament to hold the executive accountable, and therefore I’m doing things in pursuit of that role. That’s the only motivation I have.”

As the auditing of local authorities passes wholly to private companies, Morse explains, “over time we’ll have to take account of the fact that there won’t be a single organisation that has been ensuring that those local audits are done with a degree of consistency, so it’s necessary for us to take assurance that that happens – and it may involve us in that role.”

The NAO’s comptroller and auditor-general is clearly reluctant to get too drawn into plugging the gaps that will appear as the Audit Commission disappears; but that shouldn’t be too surprising. After all, the setting of auditing standards and the process of checking spending figures is not what motivates him. Amyas Morse loves examining the difficult issues around how organisations change and develop, and picking out the common challenges emerging across government as civil servants try to enact ambitious reforms at almost unprecedented speed.

Throughout the civil service, he says, organisations are being restructured and processes re-engineered – “not necessarily with quite the level of strategic design and awareness that we’d like to see in every case, but it’s definitely happening, because there’s no other way to go.”

“That’s what gets me out of bed in the morning,” he says as he bids me goodbye in the NAO’s sweeping lobby – shared, as he points out proudly, with businesses which have moved in to sub-let parts of the building. Both at the front end of service delivery, and in back offices across Whitehall, “there’s a bigger change happening than we’re necessarily aware of in the way that government is organised”; and Morse, he says, loves having the opportunity to watch those powerful, complex forces at work.

So huge changes are under way across government – and the civil service, Morse thinks, will never be quite the same again. “Once we’ve started and gone significantly down that road,” he concludes, “I don’t think there will be any way back.”

Open questions at the Ministry of Defence
In 2006, Amyas Morse took over as the commercial director of the Ministry of Defence; a job he held until he joined the NAO in the summer of 2009. During that time – as we now know – the imbalance between the department’s financial commitments and future income grew.

Did Morse know at the time how overcommitted the department was? “It was clearly understood by most people in the MoD when I was there that there was some degree of imbalance in the budget,” he replies. “Exactly how much of an imbalance wasn’t very clear, or visible within the department, but it was clear that we were constantly having to make budgetary adjustments to stay within budget, and that was having an effect.”

However, Morse maintains that the depth of the problems were not obvious to him during his time at the department. “From the NAO’s point of view, because we’re there as auditors and we can request access to information, it’s possible to see that rather more clearly,” he says. “If you’re in an organisation at a certain level, you get to see what you’re entitled to see at that level.”