Examination of Witness (Questions 238
- 259)
TUESDAY 15 FEBRUARY 2000
MR STEVE
BUNDRED
Chairman
238. Welcome to the third session of the Committee's
inquiry into the Audit Commission. Please will you identify yourselves
for the record?
(Mr Bundred) I am Steve Bundred, the Chief Executive
of Camden Council.
239. Would you like to say anything by way of
introduction, or are you happy for us to go straight into the
questions?
(Mr Bundred) I would like to say two things. I am
not at all clear whether there is a particular reason why the
Committee has chosen to launch this inquiry at this time, but
I am clear in my own mind that primarily I would like to see two
matters dealt with by the inquiry. I touched on both matters in
my evidence. Firstly, I would like to see the Committee encourage
a wider study of the extent of audit and inspection in local government
at the present time. In recent years there has been massive growth
in this area. It imposes a considerable burden on local government
and I believe that the full extent of that burden is worth a wider
study. I hope that the Committee will feel able to encourage that.
Secondly, I hope that the Committee will also feel able to encourage
some wider research into what constitutes best practice in audit
and inspection. As I mentioned in my evidence, there is, in the
perception of local government, a considerable difference between
the approach of the different inspectorates to which we are subject.
It seems to me that there is very little research that demonstrates
a clear link between inspection and service improvement or between
any particular form of inspection and service improvement. That,
too, I believe is worth more study. Those are the two areas to
which I would encourage the Committee to give further thought.
Chairman: That is helpful. Thank you.
Mr Cummings
240. What do you believe to be the most valuable
aspect of the current external audit regime?
(Mr Bundred) For me it would have to be the basic
accounts audit. From the work of our external auditors I look
for assurance that the figures in our accounts can be relied upon,
that our systems are sound and that the authority has conducted
its affairs in a proper manner.
241. The London Borough of Hammersmith and Fulham
advised the Committee that it believes that "there is a strong
desire for strong probity and regularity audits. I suspect these
are the most valued part of the audit process". Do you subscribe
to that statement?
(Mr Bundred) To an extent.
242. Do you have reservations about that statement?
(Mr Bundred) To me the most valuable part of the audit
work is the accounts audit. Regularity and probity are part of
that work. To that extent I agree with the statement. Of course,
the corollary is that the least valued part of the work that external
auditors do, to my mind, is the local value for money studies.
243. What do you believe to be the least valuable
aspect of the current regime and why?
(Mr Bundred) For a number of reasons, the local value
for money studies, firstly, because the areas in which those studies
take place are not always the areas which are of most relevance
to individual authorities; secondly, because the quality of local
value for money studies is often variable; thirdly, because the
cost of those studies is not as transparent as consultancies that
an authority might itself choose to commission in such an area;
and, finally, because the timeliness of such studies often leaves
a great deal to be desired.
244. Given that District Audit undertakes 71
per cent of audits—the remainder are undertaken by the private
sector—why do you have reservations about opening up the
audit market to more private sector providers?
(Mr Bundred) If you read my written submission carefully
you will see that I have slightly hedged my bets on that topic.
I do not believe that there can be any fundamental objection to
opening up the market more widely, but I have reservations in
two areas. One is that while I see no fundamental objection to
opening up the market, nor can I see any evidence that there will
be substantial benefits from that, and certainly not as far as
fee levels are concerned. I see no evidence that opening up a
wider share of the market to private firms will drive down fee
levels. Secondly, I have a concern—as I mentioned in my
written submission—about consistency. It seems inevitable
that a more diverse market would be a more inconsistent one.
245. Given that two firms have already withdrawn
from the market, surely opening up the market is the only way
to retain the existing private sector suppliers. Would you agree
with that?
(Mr Bundred) I am not in a position to comment in
detail on the circumstances in which those two firms withdrew
from the market. That is a question that would be best addressed
to the firms concerned. However, it remains the case that the
firms have a substantial share of the market. It may be appropriate
to allocate them a larger share. I am certainly not opposed to
that. I am merely saying that if a larger share of the market
is allocated to the firms, that needs to be approached with some
caution.
Christine Butler
246. We have had a lot of evidence from the
local authority side that the audit fees are too high and from
the auditors that they are too low. Do you think that in view
of the work that they have to do that the fees as presently configured
reflect adequately the complexities of the work involved?
(Mr Bundred) There are two elements to fees. That
may be why you have heard different views from witnesses. There
is the fee level and there is the volume of work. What matters
to local authorities is the total fees paid for external audit.
What matters to auditors is the fee level, the hourly rate. Certainly,
the hourly rate has increased over recent years in excess of the
rate of inflation. Nevertheless, it is the case that it is still
relatively low in comparison with the hourly rate that the same
firms may command for consultancy work in the local government
market.
Chairman
247. Could it be that they are overpaid for
other consultancy work?
(Mr Bundred) You may say that. I could not possibly
comment. It seems to me that the real issue is the amount of work
or the volume of work that auditors are called upon to carry out.
I have touched on some of that in my written submission, particularly
in relation to the mix between the basic accounts audit and the
value for money studies. Obviously, it will be a much more severe
problem once the Best Value audit and inspection regime comes
into play, when as a consequence of the way in which the Government
have approached Best Value inspection, the total level of fees
that will fall to be met from local government will increase very
substantially.
Christine Butler
248. Do you think that your authority will struggle
to pay these fees, or will it be put in a difficult position?
Would that also reflect the position of other local authorities
in your experience through SOLACE?
(Mr Bundred) I think it would be overstating the case
to claim that an authority with a turnover in excess of £600
million would struggle to pay an audit fee of a few hundred thousand.
Clearly, local government meets audit fees. I am not aware of
any local authority that would struggle to meet those fees. However,
I believe that many local authorities, including my own, may feel
that some element of those fees could be better spent.
249. Do you think that the work of the auditors
and the output of the Audit Commission reflects good value for
money?
(Mr Bundred) In some areas, but not in all.
250. In which areas does it not represent good
value for money?
(Mr Bundred) I touched on that in my answer to Mr
Cummings. At present, the area about which I would have particular
concern is the area of the local value for money studies. In the
regime that is about to commence I would question whether the
extent of Best Value inspection will represent good value for
money.
Chairman
251. How much does the auditor look at how things
lie on the ground in a local authority? He puts things down as
assets, but does he take the trouble to check on the state of
those assets?
(Mr Bundred) Yes.
252. Do you think that they look at them regularly?
When the Committee carried out its inquiry into parks, we saw
numerous examples of buildings that were neglected and vandalised
and yet it did not appear that the auditors had drawn that to
the attention of the councillors, so allowing resources to be
wasted.
(Mr Bundred) There will always be differences between
the approach of different auditors. Certainly I would have no
reason to question the thoroughness with which any of the auditors
of whom I have had experience have approached their work. When
our pension fund accounts were last audited, I know that our auditors
visited our fund managers and demanded to see all the share certificates
which represented the assets in that fund.
253. It is rather easier to look at share certificates
than some of the physical things in a local authority.
(Mr Bundred) Our auditors are on site all the time
and do visit establishments around the authority.
Mr Benn
254. Do you make all the audit reports that
you receive in Camden publicly available as a matter of course?
(Mr Bundred) Yes.
255. I ask that question because it has been
put to us that there is not necessarily an absolute legal requirement
on local authorities to do that. It depends on whether the reports
go to a public committee or not. In view of what you have said,
I take it that you would favour, if there is any lack of clarity
in the current law, a statutory right of access to audit findings
by members of the public?
(Mr Bundred) I would hesitate before favouring imposing
yet another statutory responsibility on local government. As a
matter of good practice, I think that audit reports should be
reported to a public committee. For as long as I can remember,
in Camden that has been the case.
256. It has also been put to us that there are
examples of value for money studies where the audit report consists
of a discussion between the auditor and the officers of the council.
Are you aware of that issue? How would one deal with that as far
as public access is concerned?
(Mr Bundred) I cannot recall any study in Camden that
has consisted purely of a discussion. In my experience, value
for money studies in my authority, and in other authorities in
which I have worked, have always resulted in a report of some
kind.
257. In your view an oral report would not constitute
good practice?
(Mr Bundred) No.
258. Do you think that the public are sufficiently
aware of public audits? Are they interested?
(Mr Bundred) Generally, no.
259. Do you think that there is anything that
can be done to make the public more aware of them in terms of
the way in which an authority publicises an audit or the language
in which it is written?
(Mr Bundred) I think that there is a wider problem
about public interest in local government. The low turn-out in
local elections is evidence of that. At the present time, there
are already, for example in relation to performance indicators,
and soon will be in relation to Best Value Performance Plans,
substantial duties placed upon local authorities to make those
publicly available. Camden, like all other authorities, fulfils
that duty but very little public interest is generated. I do not
know what more we could do to stimulate wider interest.
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