Examination of Witnesses (Questions 190
- 199)
TUESDAY 1 FEBRUARY 2000
MR RICHARD
HARBORD, MR
BILL ROOTS
AND MS
LESLEY HALTON
Chairman
190. Can I welcome you to the Committee, and
ask you to identify yourselves, for the record, please?
(Ms Halton) Lesley Halton, West Devon Borough Council,
Borough Treasurer.
(Mr Harbord) Richard Harbord, Managing Director of
the London Borough of Hammersmith and Fulham.
(Mr Roots) Bill Roots, Chief Executive and Director
of Finance of Westminster City Council.
191. Thank you very much. Do any of you want
to say anything by way of introduction, or are you happy for us
to go into questions?
(Mr Roots) Yes; into questions.
Chairman: Right. Can I stress, on the questions,
that, probably, on some of the answers you will all agree, and
if you all agree just one answer will be more than enough; but
if you disagree, please chip in.
Christine Butler
192. What are the most important, most valuable
aspects of the current external audit regime?
(Ms Halton) I believe that what it ought to be is
the development of expertise, because they have the experience
of visiting other sites; and I think the independence they ought
to be able to bring should be a necessary and welcome attribute,
because, being outside the organisation, they should be able to
get a perspective on what we are doing and be able to suggest
ways of us saving money and being more efficient.
193. Do they?
(Ms Halton) No.
(Mr Roots) Can I just add a couple of points, from
my perspective. I think the fundamental thing, to me, from the
external audit process, is reassurance, reassurance to me, reassurance
to members of the authority, reassurance to the public. And the
other thing that I would particularly focus on, in terms of the
Commission, is the dissemination of best practice, and that is
something I am particularly keen to see from the wide span of
activity that the Commission undertakes, through its auditors
and through its own staff.
(Mr Harbord) Can I just say that, certainly, the reassurance
point, but that is particularly with strong probity and regularity
audits and the risk assessment of systems; and, also, I think,
another strong and valuable point is the way performance indicators
are dealt with.
194. You have almost touched on, some of you,
what might be the least valuable aspects of the current external
audit regime; maybe you might like to say something about that?
(Mr Roots) It is the other side of the coin, in terms
of the best practice. I personally think, over the years, the
Audit Commission have produced some very good, national reviews,
some of them have been uncomfortable for local government, e.g.
the review about early retirement costs and the way that was dealt
with. I thought that was a good piece of work, it was pragmatic,
it was not overly prescriptive and it drew the attention of members
of authorities and senior officers to issues that had to be addressed;
a good piece of work. But, equally, occasionally, one comes across
other national studies that I think are weak, and the one that
particularly sticks in my mind is People, Pay and Performance,
where a lot of spurious statistics, in my view, were put together
and then there was a £500 million potential saving, nationally,
on the back of this; it was the local application of that study
which I think, personally, was particularly poor.
195. Thank you for that; but I would rather
focus, for now, on the external audit as it applies to any authority.
You all have to suffer or enjoy this, and I would welcome the
responses, from your own experience; what do you think it is good
at, where is it delivering, where is it not?
(Mr Roots) Sorry. I was on the Commission more than
the external audit.
196. No, the external audit itself?
(Mr Roots) I think the reassurance point
is key, to me, the probity, the checking that there is nothing
wrong fundamentally with our systems, looking at fraud issues,
making sure we have tight processes; as a Director of Finance
and a Chief Executive, that is pretty important to me, to have
that external scrutiny. Where I struggle occasionally is, just
to cover the other side of the coin, because I think you did ask
me what also was not too satisfying, is the local application
of some of the national Value For Money studies. First of all,
I do not think they are relevant; and, secondly, I have struggled,
on occasion, with the quality of the people that undertake those
studies.
197. Can I ask all of you, or any of you, when
you get the management letter, is it something you have always
expected, and say, "I knew they'd say that," or are
you ever surprised by anything they come up with?
(Mr Harbord) I think, generally speaking, you are
not surprised because you have had discussions with your external
auditors, right the way through the process, and I would think
it would be a great failure of the external audit process if when
you got the management letter there was something that actually
surprised you.
Chairman
198. Let me put it another way, do they start
to point you in a direction, in that process, that you would not
have been looking at but for their intervention?
(Mr Harbord) That may be so, yes, but you would be
alerted early on in the process if they had found anything.
Christine Butler
199. I did not mean that, I meant, what the
Chairman has just pointed out, this is an important question,
that when all this process begins, or ends, or in the middle,
or whatever, does the external audit come up with something that,
before it all started, you had not been aware of, that you thought
was doing possibly okay on, and, indeed, the audit took another
view?
(Ms Halton) I think, any weaknesses, I tend to have
known about them beforehand.
(Mr Roots) Can I just say, of course, they do come
up with things occasionally that I did not know about, but they
tend to be, hopefully, points of relatively minor significance,
in other words, the things I did not know about.
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