Agenda item

The Head of Risk and Assurance introduced this item. The Department of Communities and Local Government had launched a consultation on the future of local public audit in March. The background to the consultation was the need to establish alternative arrangements for the external audit of local public bodies after the planned abolition of the Audit Commission. However, the DCLG appeared to have underestimated the work necessary to revise the current audit framework and the consultation paper addressed wider issues, including the composition of the Audit Committee and the role of the Section 151 Officer. Officers had felt it was not possible simply to reply to the list of consultation questions on pages 56-59 of the consultation document, because of the interconnectedness of the issues. The draft response had therefore been structured in five sections:

(a)  general comments;

(b)  principles for local public audit;

(c)  the new role for local authorities in procuring their external auditor;

(d)  the new proposals for changing the membership and scope of the Audit Committee;

(e)  options on scope of audit work.

The consultation document proposed that Audit Committees should have a stronger independent element and might even consist entirely of independent members. It also proposed that Section 151 officers should have responsibility for procuring the external audit of small public bodies in their Council’s area. With regard to the latter proposal, the view of officers was that the existing system of national frameworks established by the Audit Commission should be continued in some form, for the reasons listed on page 3 of the draft response (page 99 of the agenda). These reasons included the need for common standards and the avoidance of additional costs.

The Director of Resources and Support Services commented that the DCLG might be trying to give more autonomy to local authorities, but they were doing so in a very unhelpful way. It was not a good idea to make the Section 151 Officer spend a large amount of time procuring external audit for other organisations, or to impose onerous functions on local audit committees. Colleagues in other authorities agreed that the proposals were over the top and bureaucratic. Several Members expressed their agreement with this view.

The Independent Member said that appointing auditors and regulating external audit were key functions. He thought that the Audit Commission performed its regulatory role well. Recruiting external auditors would be expensive; the proposals were likely to lead to increased, not reduced, costs. He did not think that the paper recognised the value of the local knowledge brought to audit committees by local elected members. He thought that there would probably be a second consultation in the autumn.

The District Auditor said that the views expressed by previous speakers were shared by the other local authorities with which he had dealings. The DCLG proposals probably went too far. He felt that one of the things the Audit Commission was good at was disseminating information and examples of good practice. He wondered how the proposals could lead to cost savings. He believed that they were a retrograde step, which would burden local authorities rather than liberate them. A Member questioned whether the Audit Commission was truly independent. It was seen by some as just a Government quango. There had to be more localism and independence for local authorities. The District Auditor responded that his role was independent of the Audit Commission and local authorities. He emphasised the variety of functions that the Commission performed, including inspection, regulation and research. The consultation paper focussed only on the audit role. A Member said that he believed that the Audit Commission had performed a valuable service by providing information about how the performance of the Council compared with that of other local authorities. The Director of Resources and Support Services said that he wanted to emphasise that the draft response was not a rejection of localism. Increased local choice was desirable, but under the current proposals the role of local elected members would actually be reduced. He would argue that local members were independent. Localism could exist within national frameworks. He was very concerned about the proposals for new duties for the Section 151 Officer, whom he would not wish to see burdened in the same way as the Monitoring Officer had been burdened by the local assessment of standards complaints. However, these were not meant to be understood as arguments for retaining the Audit Commission. The Head of Risk and Assurance said that in his opinion the effectiveness of the current system had increased in the past five years. The contribution made by the Independent Member was a valuable one. A Member suggested that the number of auditors who could carry out the work was very limited and that costs would rise as demand for their services increased.

RESOLVED to endorse the proposed response to the DCLG consultation paper on the future of local public audit.