Memorandum by the City of Westminster
(AC 08)
The City Council welcomes the fact that the
Environment Sub-committee has resolved to conduct an enquiry into
the work of the Audit Commission.
The Council supports the principle of an Audit
Commission for the following reasons:
(a) To achieve a consistent and coherent
approach to the external audit of local authorities.
(b) With the same body controlling both health
and local authority external audit practice there is the potential
to avoid duplication given the increased joint working between
local government and the NHS.
(c) To provide a means of regulating external
audit practice given the degree of autonomy given to individual
Appointed and District Auditors.
(d) Providing an authoritative and independent
voice to comment on the environment in which local government
and the NHS operate.
(e) To disseminate best practice identified
by national reviews and work undertaken by individual audited
bodies.
The Commission has existed for 16 years during
which time its role and practice has evolved. There are a number
of aspects of the Commission's role that the Council would ask
the Sub-committee to examine. These are summarised below in a
relatively brief form. Should the Sub-committee require any further
information on these points the Council would be happy to elaborate.
The Local Government Bill announced in the recent
Queen's speech proposes the abolition of surcharge. There is almost
universal agreement that the abolition of this provision is long
overdue. However in the Council's case there is an outstanding
objection raised over a decade ago which awaits the eventual resolution
of the Designated Sales case which the Appointed Auditor has appealed
to the House of Lords.
The Council would hope that with the abolition
of surcharge that old and as yet uninvestigated cases could be
dispensed with. The Sub-committee's views on this issue would
be welcome.
There is a general perception in local government
that individual auditors treat objections differently in the sense
that some appear more pragmatic than others. Were surcharge not
being abolished the Council would have requested that the Audit
Commission's role in ensuring consistency on investigating objections
should be examined.
While surcharge is being abolished the External
Auditor's role in issuing "Advisory Notices" (ie holding
up decisions which the Auditor considers may be unlawful) will
continue in place of "Prohibition Notices". The Council
asks that the Sub-committee examine the advice given by the Commission
to Appointed Auditors in this respect.
As part of current External Audit activity Appointed
Auditors undertake Value for Money Studies. There is a tension
between those studies that the Commission requires to be undertaken
at a local level as opposed to those studies that local authorities
themselves would find of value. While in recent times some moderation
in this respect has occurred the Sub-committee is requested to
examine these arrangements.
Of more significance currrently is the overlap
between Value for Money Studies and work associated with Best
Value. Best Value will bring about an increased level of External
Audit and Audit Commission Inspectorate activity. This stems primarily
from the Government's requirements but many in local government
including the City Council consider the level of inspection as
excessive.
In addition Value for Money Studies will continue
alongside Best Value work. This appears to be because the legislation
requiring Value for Money work has not been repealed or amended
despite the arrival of Best Value. The City Council believes that
Value for Money projects at a local level should be tailored into
the Best Value process.
The Council recently considered a Public Interest
report prepared by the Appointed Auditor specifically appointed
to examine a number of outstanding formal objections. During discussion
on the Public Interest report questions were raised about the
status of a Value for Money Study previously undertaken by the
then Appointed Auditor in the service area concerned.
The Council was advised in essence that it could
not rely on the findings of a Value for Money Study. Accordingly
the Council resolved
"That the Auditor be advised of the City
Council's deep concern that the final report contained no reference
to the findings of the 1992. . . Value for Money Study, the implication
therefore being that Members cannot place any reliance on Value
for Money Studies commissioned in the future".
The Leader of the Council has written to the
Audit Commission in this respect. But the status of/and extent
to which local authorities can rely on the findings of Value for
Money report is a fundamental issue which the Sub-committee is
asked to consider.
The level of fees payable by local authorities
has in recent years risen above the level of pay/price inflation
allowed in national public expenditure calculations. The prime
driver for this appears to be the salary levels payable to Auditors
from the private firms. Pay levels are increasing at a faster
rate than allowed for the public sector and hence the need for
the Audit Commission to increase external audit fees. The Sub-committee
views on this would be welcome.
The Audit Commission has the ability to examine
key issues that impact on the environment in which local authorities
operate. In essence this amounts to examination of aspects of
Government policy eg the Capital controls system. The Commission
only appears to use this opportunity in a limited way. The City
Council would like to see the Commission undertaking more work
in this respect. In particular it would welcome an assessment
of:
(a) the number of inspections that local
authorities now have to satisfy; and
(b) the number of individual service plans
that local authorities have to produce for individual Government
Departments. Again the Sub-committee's views on this would be
helpful.
W Roots
Chief Executive
December 1999
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