Examination of Witnesses (Questions 100
- 119)
TUESDAY 1 FEBRUARY 2000
CLLR GORDON
KEYMER, MR
MATTHEW WARBURTON
AND MR
MEL USHER
Mr Olner
100. The Government likes that sort of activity
as well, does it not?
(Cllr Keymer) I could not possibly comment on that.
Mr Cummings
101. Why not; you are the LGA, not the Government?
(Cllr Keymer) I thought we were talking about the
Audit Commission.
102. Through the Chair, it does appear as if
a lot this morning is being said as if you were apologists for
the Audit Commission and apologists for the Government?
(Cllr Keymer) I can only say, I take the Audit Commission
as I find it. I am, in fact, leader of the opposition on my own
authority, so hopefully I can take a moderately objective view,
as oppositions always do, and, therefore, I hope that I am giving
a balanced view; but please ask any more questions, I am very
happy to try to deal with them.
Mr Benn
103. Just finishing this point, would you say
that, as authorities move to set up new management structures,
and scrutiny committees come into play, this is a rich seam of
information for scrutiny committees to use in their work?
(Cllr Keymer) I think that the whole question of scrutiny
committees is a completely separate subject and causes me a great
deal of worry, particularly in a very small authority, where it
is going to be difficult to get a really good balance between
scrutiny and execution. But, as far as the auditors' role in this,
there are major reports produced by the Audit Commission, and
I think of one in particular, which is "Retiring Nature",
which had a fundamental effect on the whole way in which early
retirement was regarded in local government, and the ripples from
that still continue. In those areas, their reports are very valuable,
and, certainly, if we had the scrutiny committee system up and
running when that report came out, I think in a lot of authorities,
the scrutiny committees would have fallen upon it and used it
to great effect to deal with the executive. So there are great
opportunities there, and actually, you have touched, if I may
suggest, on a very good point, in that I think the Audit Commission
ought to be encouraged to produce reports like Retiring Nature,
which deal with a subject which councils themselves find it difficult
to grasp, and the whole question of pensions is a difficult subject,
and, therefore, by producing a report like that, which put the
whole thing in simple form, I think it was a very helpful tool
to the scrutiny. Because I think it is going to be very difficult
for scrutiny members to get the sort of information they require
to carry out their scrutiny role effectively, again, as I say,
in a small authority, where there is not the staff to back them
up.
Mr Brake
104. I just wonder whether there is any evidence
of strong demand from the public for more accessible Audit Commission
reports or findings?
(Cllr Keymer) My own impression is that, again, where
there is a particular issue where—and, of course, in larger
authorities this is far from uncommon—members of the public
may have particular concerns over certain aspects of the council's
role. Therefore, what they have got to be able to find out easily,
and, unfortunately, it is not that easy at the moment, is how
they can actually pursue what is a very complex situation, as
far as making a complaint against the local authority is concerned,
which is what we are really talking about in this particular case.
In general, you can provide all this information to the public,
and you can provide it in simple terms, but if the public is not
concerned about a particular issue then they are unlikely to be
particularly interested in the Audit Commission's views. But,
having said that, I think that the press departments of local
authorities ought to put out a clear press release, giving the
warts and all on their audit report rather than just taking out
the bits they like.
105. But you would not be expecting thousands
of hits on the local authority's website if you put the Audit
Commission report on it?
(Cllr Keymer) I would not, no.
(Mr Warburton) I think we need to put all of this
in the context of Best Value and the fact that the local authority
will have to produce annually a Best Value Performance Plan, which
will be a comprehensive account of its performance across all
its functions. I think that we would expect the public to take
quite a lot of interest in that, and that may actually affect
the way in which the auditors' report on the adequacy of that
plan is received and what attention it gets locally; but, again,
this is guess-work because none of this has happened yet.
Chairman
106. Can I ask you, you made it clear that,
as far as your authority is concerned, the actual letter from
the auditors is put into the council circular, so all councillors
see it, are you sure that that happens with all local authorities,
or is there some evasion with some of them?
(Cllr Keymer) I cannot answer that question. I would
have thought very few actually do not let the members see the
management letter; but I can only comment from my own experience.
107. I have a suspicion that there are, in effect,
normally two letters, are there not? There is, if you like, a
provisional letter, which goes to the authority; now the theory
is that that is sort of to check that the facts are right, that
there is a bit of negotiation that goes around that letter, and
then, eventually, the final letter comes. Now would I be right
in thinking that that sort of provisional letter will only go
to senior officials of the council, or will it go to the cabinet
structure, where there is a cabinet structure?
(Mr Warburton) I think, practice will vary quite considerably;
it is impossible to generalise and we have not asked that question
systematically of authorities.
108. But have you any feel for it?
(Mr Warburton) My feeling would be that the informal
sounding will encompass the inner circle in whichever authority,
whatever that is in the authority involved; it is difficult to
generalise, again.
(Cllr Keymer) I would say, in our own authority, it
is actually widely distributed among members, and, in fact, there
have been quite major changes to the letter; though it is by far
the exception rather than the rule, but there have been changes
to the provisional letter. So, to that extent, the system does
work; although, having said that, obviously, the assumption by
the external auditor is that the letter will stand unless people
produce major evidence to show it is wrong. So, to that extent,
the system does work quite well.
(Mr Usher) My experience, as a senior officer in four
authorities in the last ten to 15 years, has been that the draft
gets circulated to senior members and senior staff and then the
final report goes to a committee of the council, the one that
that particular authority finds most appropriate.
Christine Butler
109. Just on that point, is it a matter of public
record, is it included in the agenda papers for the committee,
in your experience?
(Mr Usher) In my experience, yes.
110. Now we are looking at audit fees. The private
sector say they are much too low, and local councils say they
are much too high; who do you side with?
(Mr Warburton) Both could be right. That is not a
flippant point. The issue, I think, for suppliers of audit is
whether they are paid the rate for the job. The issue for local
authorities is whether the amount of work is right and whether
they have got the resources to pay for it. I think the issue of
audit supply and the costs of supply is a matter you may wish
to pursue with other witnesses, but, from the local authority
point of view, there are two concerns. The first is a perception
that there is insufficient control, or insufficient input into
the amount of work that is actually carried out by auditors in
the local authority. In particular, the point has already been
mentioned about local Value For Money studies, where some authorities
feel that they have insufficient control over whether this local
work is carried out and whether it is relevant to their concerns,
but they still have to foot the bill. So some authorities are
feeling that there is too much work being carried out by auditors.
And I think authorities would also say that in some cases they
do feel that the quality of that work is inhibited possibly by
the charge for it, because insufficiently experienced staff are
being put on to work which they cannot actually cope with. The
second point of concern is, however much work is carried out,
so local authorities have the resources to support it; and, here,
the issue is that there has been inadequate reimbursement, in
the view of many authorities, in Revenue Support Grant, in the
overall local government finance arrangements, for the amounts
of money that they are having to pay to auditors.
111. You are saying two things, basically, here.
One is that there should not be quite so much audit; that then
goes back to legislative arrangements that are now in place, and,
obviously, with Best Value coming forward, that will require more
audit. So I do not know whether the LGA are saying, "Well,
we think there's far too much audit, and if there weren't as much
it would be cheaper," or whether they have a position to
take on the quality of audit. And if the private sector are right
in saying that it is too low and therefore you cannot get the
right people into local government audits then that is a sorry
state of affair, it means that the audit will not be done properly,
that, indeed, the audit itself is not providing good enough value
for the job?
(Mr Warburton) On the first point, we are saying that
it is a question worth looking at, in more depth than has so far
been done, whether there is too much audit, or there will be too
much audit and too much inspection under Best Value.
Chairman
112. A study of one of the first areas for Best
Value to look at?
(Mr Warburton) That is one way of looking at it. Some
of our members would certainly argue that there is too much audit
and too much inspection. On the second point, of the quality of
audit, there are not, on the whole, a huge number of authorities
complaining about the quality of the audit, but there is a continuing
stream of complaints from some authorities that the quality of
audit is low, and that may be a result of the fact that the quality
is compromised by the inability of the firms to deliver the right
kind of staff—
Christine Butler
113. They are not up to scratch; so, in that
case, local authorities are really paying through the nose, are
they not? They get a `not up to scratch' team to inspect them,
then you say it does not reflect the complexity of the work or
the volume of the work, in any case, and it is too costly. So
there is not much good news there for the public at large, is
there?
(Mr Warburton) No, there is not, and we would certainly
like that looked at.
114. How would you suggest this might be improved;
is there another way that you could determine the fee structure?
(Mr Warburton) We suggest that possibly the issue
needs to be looked at properly and independently. Our perception
is that this set of issues is lost in the annual, rather inadequate
squeeze between central government's view about what can be delivered
and what the market is telling the Commission can be delivered
within the fee income involved.
115. There is not a firm proposal there, is
there, you are just pointing in the direction, rather?
(Mr Warburton) The Association has not taken a decision
which I can report, but we would not be averse to an independent
examination of this issue. We do feel that there is a problem.
(Cllr Keymer) We are getting both audit and Best Value,
and, certainly, as I mentioned at the beginning, I am very concerned
about the cost of the Best Value aspect. We have not only the
charge on the taxpayer in the additional grants being paid to
the Audit Commission; we have got the fee on the council taxpayer
because it is paid by the local council. We have the problem,
particularly with small authorities, again, of the additional
staff required. And, since my own authority has just lost £120,000
for its council taxpayers on the failure of the pilot scheme that
it was involved in, you can see why I am particularly worried,
and I do take your point.
Mrs Dunwoody
116. What sort of failure?
(Cllr Keymer) What happened was, they were looking
at a way of four authorities providing revenue services, and it
fell apart, and, in the end, the total cost over two years—
117. Why?
(Cllr Keymer) You will have to ask the other authorities.
Tandridge was left to the end, alone, deserted, at the altar;
the first one to go was Brighton and Hove, and you will have to
ask them why they departed. But, basically, it did collapse, it
did leave a heavy cost for a small authority, and the whole question
of the cost of Best Value is, as I say, of very great concern.
The Government, I know, argues that, "You'll make it back
in the savings with Best Value," but, I am afraid, these
sorts of costs, it is difficult to see how they will be. So you
are absolutely right to concentrate on the costs of the audit
side of Best Value, which is something that is worrying.
Christine Butler
118. So what do you suggest; do you think that
the local authorities should be reimbursed for the extra Best
Value audit?
(Cllr Keymer) There is an element in the grant; it
is the old story, how do we know how it is made up. We are told
there is an element in the grant to cover that; but, of course,
even if there is, and I am sure, if the Government said it, it
is true—
Chairman
119. But you are not told how much of it?
(Cllr Keymer) No, we are not told.
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