Memorandum by the London Borough of Hammersmith
and Fulham (AC 14)
The work of the Audit Commission can be divided
into a number of separate areas.
1. APPOINTMENT
OF EXTERNAL
AUDITORS
The Audit Commission is responsible for the
appointment of external auditors to local authorities. The current
process is a very unsatisfactory one. The Audit Commission believes
that from time to time they should change the auditors of local
authority. Few would argue that this is a desirable state of affairs
to prevent the relationship becoming a "cosy one". The
difficulty is that there seems to be no pattern whatsoever to
the change of auditors. Many local authorities have had the same
auditors for a long while.
The Audit Commission should make explicit their
policy on this topic. Requests for such a policy to be explained
are met with no specific information.
The stated policy should also include market
testing as the norm for audit appointments. This is used but in
a minority of occasions. The system should be that, auditors present
to a panel made up of the Commission and the authorities. The
Commission could still maintain a balance between district and
private auditors and a geographical balance by selecting the firms
to go forward to each bout of market testing.
However it is done the policy should be transparent
and understandable.
2. PROBITY AUDITS
In discussions with the Director of Finance
and Chief Executives of local authorities it is clear that there
is a strong desire for strong probity and regularity audits. I
suspect these are the most valued part of the audit process. They
are about assuring local authorities about the risks inherent
in their systems. We would welcome a more direct approach to fund
investigations of the use of dedicated staff for this purpose.
There have been some very welcome developments
over the last few years. The reliance on internal audit and internal
checks via the managed audit has been an excellent innovation.
Local Authorities would welcome the exchange
of external and internal auditors on secondment. This would help
to improve the quality of audit generally.
3. VALUE
FOR MONEY
STUDIES
Again the Audit Commission has improved from
its early days when we were greeted with headlines announcing
that local authorities generally were wasting £x million
etc. However it is likely that value for money work is now a thing
of the past. Most local authorities doubt the value of national
studies and are irritated by their inability to influence the
areas chosen for study each year. The current consultation is
known to be less than perfect and many Local Authorities do not
bother to put their views forward because they believe it has
no effect.
With local authorities having different programmes
for Best Value over a five-year period, it will be difficult to
keep Value for Money studies relevant and the resources would
be better used on Best Value inspections. The cost of that for
individual local authority will be considerable and could be mitigated
by fewer days on Value for Money. One imagines that local Value
for Money studies will be overtaken by Best Value work in any
case.
4. PROFESSIONALISM
The Audit Commission sets down standards and
procedures for District Audit and the private firms. It should
perhaps take a greater role in training auditors and ensuring
the professional quality of audits is maintained. In the early
days John Banham used to visit a random selection of authorities
and seek information about the quality of the process. There seems
to be no system for feedback currently. Local authorities do get
irritated at lack of continuity and at having to train auditors
to audit them, some of which have never worked in a local authority
before.
5. PARTNERSHIP
There is still a reluctance on the part of Audit
to give Local Authorities their opinion or advice in advance of
"the" official audit. In circumstances where we have
wished to enter into contracts and having taken legal advice we
have tried to seek the auditors validation this has been denied
on the grounds that they will comment in restrospect or an objection.
This is not a sensible way of working in a complex world.
6. PUBLIC
INVOLVEMENT
One of the principles of the current system
is that it is a relationship between the authority and the Auditors.
Public interaction with the process is limited to the public inspection
of accounts and the process of objection.
Nobody would argue with the fundamental right
of electors to challenge items on the accounts. This right has
been used since the time of Elizabeth I but the process needs
to be renewed and streamlined. There has been a case of objection
to an item in the accounts which has taken two years to resolve
and where an objector has written 149 letters to the auditors.
The objection resulted in a public interest report, which concluded
comprehensively there was no case to answer. The costs and delay
occasioned are considerable.
7. PERFORMANCE
INDICATORS
This is an area where the Audit Commission should
be congratulated. The introduction of indicators could have been
a very high profile and badly managed but the Audit Commission
spent a great deal of time and effort on detailed press briefings
and the process was a model one. The audit and production of indicators
is also a good one. Clearly the Audit Commission role in this
will now change as we move to on set of indicators for Best Value
which will largely come from Government Departments and lead to
the Performance Framework on which Local Authorities of the future
are to be judged.
8. CONCLUSIONS
It is clearly timely to review the work of the
Audit Commission. Their role viz a viz other Inspectorates needs
to be clearly understood. Already their conlcusions on benefit
fraud in an authority may be contrary to the Benefit Fraud Inspectorate
over the same period and this does lead to a lack of confidence
in the whole Inspectorate system.
There should be consideration of the various
Inspectorates reporting to the Audit Commission to ensure no duplication
and maintenance of common standards. The current proposals for
bi-annual meetings of inspection bodies will not work.
In summary the future should be:
1. Audit Commission retains appointment of
external auditor but in a transparent fashion.
2. That they concentrate on probity and regularity,
train and utilise internal audit. Secondments of Staff should
be used to help this process.
3. They continue to audit the Performance
Assessment Framework of Local Authorities.
4. They are invited to work with Local Authorities,
franking difficult and innovative schemes before they happen.
5. The objection process is examined to see
if it can be streamlined and improved with swifter responses.
6. That consideration be given to a greater
investment in training.
7. That Value for Money Studies be subsumed
in the Best Value process.
8. That all local authority inspections be
co-ordinated by the Audit Commission.
December 1999
| 
