Local Audit and Accountability Bill (HC Bill 101)

(6) The Secretary of State or the Board must—

(a) inform the clinical commissioning group of the intention to give a
direction or appoint an auditor under subsection (4) not less than 28
days before the direction is given or the appointment made, and

(b) 5consider any representations made by the group regarding the
proposed direction or appointment.

(7) But the Secretary of State or the Board may give a direction or make an
appointment under subsection (4) without having complied with subsection
(6) if the Secretary of State or the Board thinks it is likely that an auditor would
10have to exercise a function under this Act in relation to the clinical
commissioning group within the period of 60 days beginning with the day on
which the direction is given or the appointment is made.

14 Limitation of local auditor’s liability

(1) This section applies in relation to an agreement (a “liability limitation
15agreement”) that purports to limit the amount of a liability owed to a relevant
authority by its local auditor in respect of any negligence, default, breach of
duty or breach of trust occurring in the course of the audit of accounts, of which
the auditor may be guilty in relation to the authority.

(2) A liability limitation agreement must comply with regulations made by the
20Secretary of State.

(3) Regulations under subsection (2) may, in particular,—

(a) make provision about the duration of a liability limitation agreement;

(b) make provision as to the amount to which a local auditor’s liability may
be limited by a liability limitation agreement (which may be an amount
25that is specified in, determined under or described in general terms in
the regulations).

(4) Regulations under subsection (2) may—

(a) require a liability limitation agreement to contain provisions, or
provisions of a description, specified in the regulations;

(b) 30prohibit a liability limitation agreement from containing provisions, or
provisions of a description, specified in the regulations.

(5) Regulations under subsection (2) may provide—

(a) that a liability limitation agreement that does not comply with the
regulations is void;

(b) 35that a liability limitation agreement is effective only to the extent that it
complies with the regulations;

(c) that, in the circumstances specified in the regulations, a provision of a
liability limitation agreement that does not comply with the regulations
is to have effect as if it complied with the regulations.

(6) 40The Secretary of State may by regulations make provision requiring a relevant
authority that has entered into a liability limitation agreement to disclose such
information about the agreement as may be specified in the regulations in such
manner as may be so specified.

(7) A liability limitation agreement that complies with regulations under
45subsection (2) is not subject to section 2(2) or 3(2)(a) of the Unfair Contract
Terms Act 1977.

15 Further provisions about liability limitation agreements

(1) Before entering into a liability limitation agreement, a relevant authority other
than a chief constable or the Commissioner of Police of the Metropolis must
consult and take into account the advice of its auditor panel.

(2) 5Before entering into a liability limitation agreement, a chief constable for an
area must consult and take into account the advice of the auditor panel of the
police and crime commissioner for the area.

(3) Before entering into a liability limitation agreement, the Commissioner of
Police of the Metropolis must consult and take into account the advice of the
10auditor panel of the Mayor’s Office for Policing and Crime.

(4) If a relevant authority is a local authority operating executive arrangements,
the function of deciding whether to enter into a liability limitation agreement
is not the responsibility of an executive of the authority under those
arrangements.

(5) 15If a relevant authority is a local authority within the meaning of section 101 of
the Local Government Act 1972 (arrangements for discharge of functions), that
section does not apply to the authority’s function of deciding whether to enter
into a liability limitation agreement.

(6) A decision to enter into a liability limitation agreement between a local auditor
20and the Greater London Authority must be taken by the Mayor of London and
the London Assembly acting jointly on behalf of the Authority.

16 Resignation and removal of local auditor

(1) The Secretary of State may by regulations make provision about—

(a) the resignation of a local auditor of the accounts of a relevant authority
25from that office;

(b) the removal of a local auditor of the accounts of a relevant authority
from that office before the expiry of the term of that office.

(2) Regulations under subsection (1)(a) may, in particular, make provision
about—

(a) 30the steps that must be taken by a person who is a local auditor to resign
from that office;

(b) the time at which the resignation takes effect;

(c) the steps that must be taken in connection with the resignation by the
relevant authority;

(d) 35the role of the authority’s auditor panel or of a recognised supervisory
body in connection with the resignation;

(e) the steps that must be taken by the relevant authority after the
resignation.

(3) Regulations under subsection (1)(b) may, in particular, make provision
40about—

(a) the steps that must be taken to remove a local auditor from that office;

(b) the person or persons by whom those steps must be taken and the way
in which they must be taken;

(c) the steps that may be taken by the local auditor in connection with the
45local auditor’s removal from that office;

(d) the role of the relevant authority’s auditor panel or of a recognised
supervisory body in connection with the removal of the local auditor
from that office;

(e) the steps that must be taken by the relevant authority after the removal
5of the local auditor from that office.

(4) Regulations under subsection (1)(b) which make provision about the matter in
subsection (3)(b) may provide, in relation to a local auditor of the accounts of a
health service body, that some or all of the steps may be taken by the Secretary
of State.

(5) 10Regulations under subsection (1) may, in particular—

(a) make provision for the Secretary of State to appoint, or direct the
relevant authority to appoint, a replacement local auditor;

(b) make provision that permits or requires, or enables the Secretary of
State to permit or require, that appointment to have effect for a limited
15period or limited purposes only.

(6) Regulations under subsection (1) which make provision as mentioned in
subsection (5)(a) may apply section 12(3), (4) or (5) with modifications to a
direction given or appointment made by the Secretary of State under such
regulations.

(7) 20Regulations under subsection (1) that confer functions on a recognised
supervisory body may make provision about the supply to the body by a
relevant authority of documents or information relating to the resignation or
removal of a local auditor.

Part 4 25Eligibility and regulation of local auditors

17 Eligibility and regulation of local auditors

(1) Schedule 5 (eligibility and regulation of local auditors) has effect.

(2) The Secretary of State may by regulations amend that Schedule if the Secretary
of State considers it is appropriate to do so as a result of amendments made to
30Part 42 of the Companies Act 2006.

Part 5 Conduct of local audit

Codes of practice and guidance

18 Codes of audit practice and guidance

35Schedule 6 (codes of audit practice and guidance) has effect.

General powers and duties of auditors

19 General duties of auditors

(1) In auditing the accounts of a relevant authority other than a health service
body, a local auditor must, by examination of the accounts and otherwise, be
5satisfied—

(a) that the accounts comply with the requirements of the enactments that
apply to them,

(b) that proper practices have been observed in the preparation of the
statement of accounts, and that the statement presents a true and fair
10view, and

(c) that the authority has made proper arrangements for securing
economy, efficiency and effectiveness in its use of resources.

(2) Subject as follows, when a local auditor has completed an audit of the accounts
of a relevant authority other than a health service body, the auditor must enter
15on the statement of accounts—

(a) a certificate that the auditor has completed the audit in accordance with
this Act, and

(b) the auditor’s opinion on the statement.

(3) If, for any part of the period for which a relevant authority is required to
20prepare a statement of accounts, the authority is required to maintain a pension
fund under regulations under section 1 of the Public Service Pensions Act 2013
as they relate to local government workers (within the meaning of that Act), the
authority’s local auditor must give a separate opinion on the part of the
statement that relates to the accounts of that pension fund.

(4) 25A local auditor may enter an opinion on the statement of accounts on that
statement before the audit is completed if—

(a) the audit has not been completed because an objection has been made
under section 26 and that objection has not been disposed of, and

(b) the auditor thinks that, if the objection were resolved in the objector’s
30favour, this would not affect the accuracy of the statement of accounts.

(5) A local auditor must, in carrying out the auditor’s functions in relation to the
accounts of a relevant authority, comply with the code of audit practice
applicable to the authority that is for the time being in force.

(6) A local auditor must, in carrying out functions under this Act, have regard to
35guidance issued by the Comptroller and Auditor General under paragraph 9
of Schedule 6.

20 General duties of auditors of accounts of health service bodies

(1) In auditing the accounts of a clinical commissioning group, a local auditor
must, by examination of the accounts and otherwise, be satisfied—

(a) 40that the accounts present a true and fair view, and comply with the
requirements of the enactments that apply to them,

(b) that proper practices have been observed in the preparation of the
accounts,

(c) that the group has made proper arrangements for securing economy,
45efficiency and effectiveness in its use of resources,

(d) that money provided by Parliament has been expended for the
purposes intended by Parliament,

(e) that resources authorised by Parliament to be used have been used for
the purposes in relation to which the use was authorised, and

(f) 5that the financial transactions of the group are in accordance with any
authority which is relevant to the transactions.

(2) In subsection (1)(e) use of resources means their expenditure, consumption or
reduction in value.

(3) In auditing the accounts of special trustees for a hospital, a local auditor must,
10by examination of the accounts and otherwise, be satisfied—

(a) that the accounts present a true and fair view, and comply with the
requirements of the enactments that apply to them,

(b) that proper practices have been observed in the preparation of the
accounts, and

(c) 15that the special trustees have made proper arrangements for securing
economy, efficiency and effectiveness in their use of resources.

(4) When a local auditor has completed an audit of the accounts of a health service
body, the auditor must enter on the accounts—

(a) a certificate that the auditor has completed the audit in accordance with
20this Act, and

(b) the auditor’s opinion on the accounts, subject to subsection (5).

(5) A local auditor may enter an opinion on the accounts about the matter in
subsection (1)(c) or (3)(c) only if the auditor is not satisfied as to that matter.

21 Auditors’ right to documents and information

(1) 25A local auditor has a right of access at all reasonable times to every document
(an “audit document”) that—

(a) relates to a relevant authority or an entity connected with a relevant
authority, and

(b) the auditor thinks is necessary for the purposes of the auditor’s
30functions under this Act.

(2) This includes power to inspect, copy or take away an audit document.

(3) A local auditor may—

(a) require a person holding or accountable for, or who has at any time
held or been accountable for, an audit document to provide such
35information or explanation as the auditor thinks is necessary for the
purposes of this Act, and

(b) if the auditor thinks it necessary, require the person to meet the auditor
to give the information or explanation or (if the person holds or is
accountable for the document) to produce the document.

(4) 40Where an audit document is in an electronic form, the power to require a
person to produce the document includes power to require it to be produced
in a form in which it is legible and can be taken away.

(5) For the purpose of inspecting an audit document which is in an electronic form,
a local auditor—

(a) may have access to, and inspect and check the operation of, any
computer and associated apparatus or material which the auditor
thinks is or has been used in connection with the document, and

(b) may require a person within subsection (6) to give the auditor the
5reasonable assistance that the auditor needs for that purpose.

(6) A person is within this subsection who—

(a) is the person by whom or on whose behalf the computer is or has been
used, or

(b) is a person in charge of, or otherwise involved in operating, the
10computer, apparatus or material.

(7) A local auditor may—

(a) require any person to whom this subsection applies to provide such
information or explanation as the auditor thinks is necessary for the
purposes of this Act, and

(b) 15if the auditor thinks it necessary, require the person to meet the auditor
to give the information or explanation.

(8) Subsection (7) applies to—

(a) a member or officer of a relevant authority,

(b) where a relevant authority is a corporation sole, the holder of that
20office,

(c) a person elected or appointed—

(i) as an entity connected with a relevant authority,

(ii) to such an entity, or

(iii) to an office of such an entity,

(d) 25an employee of such an entity,

(e) an auditor of the accounts of such an entity, or

(f) a person who fell within any of paragraphs (a) to (d) at a time to which
the information or explanation required by the local auditor relates.

(9) A relevant authority or an entity connected with a relevant authority must
30provide a local auditor with the facilities and information that the auditor
reasonably requires for the purposes of the auditor’s functions under this Act.

(10) A statement made by a person in response to a requirement under this section
may not be used in evidence against that person in criminal proceedings other
than proceedings for an offence under section 22.

(11) 35Nothing in this section compels a person to disclose information in respect of
which a claim to legal professional privilege could be maintained in legal
proceedings.

22 Offences relating to section 21

(1) A person is guilty of an offence if, without reasonable excuse, the person—

(a) 40obstructs the exercise of any power conferred by section 21, or

(b) fails to comply with any requirement of a local auditor under that
section.

(2)
A person guilty of an offence under subsection (1) is liable on summary
conviction—

(a) 45to a fine not exceeding level 3 on the standard scale, and

(b) to an additional fine of not more than £20 for each day on which the
offence continues after conviction for that offence.

(3) The reasonable expenses incurred by a local auditor in connection with
proceedings for an offence under subsection (1) alleged to have been
5committed by a person within subsection (4) in relation to the audit of the
accounts of a relevant authority are recoverable from that authority so far as
they are not recovered from any other source.

(4) The persons within this subsection are—

(a) a member or officer of the relevant authority,

(b) 10a person elected or appointed—

(i) as an entity connected with the relevant authority,

(ii) to such an entity, or

(iii) to an office of such an entity, and

(c) an employee of such an entity.

(5) 15In subsection (4)(a) the reference to a member of the relevant authority, in
relation to a corporation sole, is to the holder of that office.

Reports and recommendations

23 Reports and recommendations

Schedule 7 (reports and recommendations) has effect.

20Public inspection etc and action by auditor

24 Inspection of statements of accounts etc

(1) A relevant authority other than a health service body must ensure that a local
government elector for its area may inspect and make copies of—

(a) the statement of accounts prepared by the authority,

(b) 25the local auditor’s certificate that the audit of the authority’s accounts
including that statement has been completed,

(c) the local auditor’s opinion on the statement of accounts,

(d) any public interest report relating to the authority or an entity
connected with it, and

(e) 30any recommendation relating to the authority or an entity connected
with it.

(2) A relevant authority other than a health service body must ensure that a local
government elector for its area may have copies of any document within
subsection (1) supplied to the elector at the elector’s request on payment of a
35reasonable sum for each copy.

(3) The relevant authority must ensure that a local government elector may
inspect a document within subsection (1) at all reasonable times and without
payment.

(4) This section applies in relation to a document only if the relevant authority has
40prepared the document or it has been made available to the authority.

(5) References in this section to copies of a document include a reference to copies
of any part of it.

25 Inspection of documents

(1) At each audit of accounts under this Act, other than an audit of accounts of a
5health service body, any persons interested may—

(a) inspect the accounting records for the financial year to which the audit
relates and all books, deeds, contracts, bills, vouchers, receipts and
other documents relating to those records, and

(b) make copies of all or any part of those records or documents.

(2) 10At the request of a local government elector for any area to which the accounts
relate, the local auditor must give the elector, or any representative of the
elector, an opportunity to question the auditor about the accounting records.

(3) The local auditor’s reasonable costs of complying with subsection (2) are
recoverable from the relevant authority to which the accounts relate.

(4) 15This section does not entitle a person—

(a) to inspect or copy any part of any record or document containing
information which is protected on the grounds of commercial
confidentiality, or

(b) to require any such information to be disclosed in answer to any
20question.

(5) Information is protected on the grounds of commercial confidentiality if—

(a) its disclosure would prejudice commercial confidentiality, and

(b) there is no overriding public interest in favour of its disclosure.

(6) This section does not entitle a person—

(a) 25to inspect or copy any part of any record or document containing
personal information, or

(b) to require any personal information to be disclosed in answer to any
question.

(7) Information is personal information if it identifies a particular individual or
30enables a particular individual to be identified (but see subsection (8)).

(8) Information is not personal information merely because it relates to a business
carried on by an individual as a sole trader.

(9) Information is personal information if it is information about an officer of the
relevant authority which relates specifically to a particular individual and is
35available to the authority because—

(a) the individual holds or has held an office or employment with that
authority, or

(b) payments or other benefits in respect of an office or employment under
any other person are or have been made or provided to that individual
40by that authority.

(10) For the purposes of subsection (9)—

(a) “the relevant authority” means the relevant authority whose accounts
are being audited, and

(b) payments made or benefits provided to an individual in respect of an
office or employment include any payment made or benefit provided
in respect of the individual ceasing to hold the office or employment.

26 Right to make objections at audit

(1) 5This section applies if, at an audit of accounts under this Act other than an
audit of accounts of a health service body, a local government elector for an
area to which the accounts relate makes an objection to the local auditor which
meets the requirements in subsection (2) and which—

(a) concerns a matter in respect of which the auditor could make a public
10interest report, or

(b) concerns a matter in respect of which the auditor could apply for a
declaration under section 27.

(2) The requirements are that—

(a) the objection is made is writing, and

(b) 15a copy of the objection is sent to the relevant authority whose accounts
are being audited.

(3) The local auditor must decide—

(a) whether to consider the objection, and

(b) if the auditor does so, whether to take action within paragraph (a) or (b)
20of subsection (1) in response.

(4) The local auditor may decide not to consider the objection if, in particular, the
auditor thinks that—

(a) the objection is frivolous or vexatious,

(b) the cost of the auditor considering the objection would be
25disproportionate to the sums to which the objection relates, or

(c) the objection repeats an objection already considered—

(i) under this section by a local auditor of the authority’s accounts,
or

(ii) under section 16 of the Audit Commission Act 1998 by an
30auditor appointed under that Act in relation to those accounts.

(5) Subsection (4)(b) does not entitle the local auditor to refuse to consider an
objection which the auditor thinks might disclose serious concerns about how
the relevant authority is managed or led.

(6) If the local auditor decides not to take action within paragraph (a) or (b) of
35subsection (1), the auditor may recommend that the relevant authority should
instead take action in response to the objection.

(7) The local auditor’s reasonable costs of exercising functions under this section
are recoverable from the relevant authority.

27 Declaration that item of account is unlawful

(1) 40If a local auditor carrying out an audit of accounts under this Act, other than
an audit of accounts of a health service body, thinks that an item of account is
contrary to law, the auditor may apply to the court for a declaration to that
effect.

(2) On an application under this section, the court—

(a) may make or refuse to make the declaration, and

(b) if it makes the declaration, may also order rectification of the statement
of accounts or accounting records.

(3) A person who has objected under section 26(1)(b) and is aggrieved by a
5decision of the local auditor not to consider the objection or not to apply for a
declaration under this section may, within the period of 6 weeks beginning
with the date on which the person was notified of the decision—

(a) require the auditor to provide written reasons for the decision, and

(b) appeal against the decision to the court.

(4) 10On an appeal under subsection (3), the court has the same powers in relation
to the item of account to which the objection relates as it would have on an
application by the local auditor for the declaration.

(5) On an application or appeal under this section, the court may make an order
for the payment by the relevant authority to which the application or appeal
15relates of expenses incurred in connection with it by the local auditor or the
person by whom the appeal is brought.

(6) The High Court and the county court have jurisdiction for the purposes of this
section.

(7) In this Act “item of account”, in relation to a relevant authority, means an item
20in the authority’s accounting records or statement of accounts.

Prevention of unlawful expenditure etc

28 Advisory notices

Schedule 8 (advisory notices) has effect.

29 Unlawful expenditure or activity of health service bodies

(1) 25A local auditor of the accounts of a health service body must take the steps set
out in subsection (2) if the auditor believes that the body or an officer of the
body—

(a) is about to make, or has made, a decision which involves or would
involve the body incurring unlawful expenditure, or

(b) 30is about to take or has begun to take a course of action which, if
followed to its conclusion, would be unlawful and likely to cause a loss
or deficiency.

(2) The local auditor must, as soon as reasonably practicable—

(a) refer the matter to the Secretary of State, and

(b) 35if the health service body is a clinical commissioning group, notify the
National Health Service Commissioning Board of the matter.

30 Power of auditor to apply for judicial review

(1) A local auditor appointed to audit the accounts of a relevant authority other
than a health service body may make an application for judicial review of a
40decision of that authority, or of a failure by that authority to act, which it is
reasonable to believe would have an effect on the accounts of that body.