Memorandum by the Audit Commission (DRA
30)
SUMMARY
1. The Audit Commission (the Commission)
welcomes the oportunity to submit this paper to the Select Committee
in support of its pre-legislative scrutiny of the draft Regional
Assemblies Bill. The Commission has been asked to comment on the
proposed audit and inspection arrangements for regional assemblies,
and this paper focuses on these aspects of the Bill.
2. The Government's policy statement, which
accompanied the publication of the draft Bill, included commitments
relating to the audit and inspection arrangements for regional
assemblies.[35]
In particular, the Commission welcomes the proposal in the policy
statement that:
"elected regional assemblies and their
functional bodies would have auditors appointed by the Audit Commission
and would be subject to the Commission's `best value' and value
for money regimes (building on the lessons learned from local
government and tailoring requirements to the particular circumstances
of assemblies)"; and
"the National Audit Office (NAO) would,
for purposes of the financial audit and value for money studies
of government departments, have statutory rights of access to
documents held by the assemblies, for instance for reporting to
Parliament on the assemblies' contribution to national policies
and initiatives."
3. The Commission also welcomes the provisions
in the published draft Bill, in particular Clauses 155 to 157
and paragraph 44 in Schedule 6, which would go some way to achieving
the aims set out in the policy statement. The Commission notes,
however, that further work on the drafting of the Bill would be
needed to implement fully the proposals in the Government's policy
statement and will continue to liaise with the Office of the Deputy
Prime Minister (ODPM) to achieve this. The Commission also believes
that Clause 156, as currently drafted, should be amended in respect
of the provisions relating to audit recommendations to the Commission
to carry out "best value" inspections.
SUPPORTING COMMENTS
4. The Commission agrees with the ODPM that
the proposed arrangements reflect the way that regional assemblies
would be accountable primarily to their electorates rather than
to central government, and the Commission welcomes the Government's
proposal that the audit arrangements for assemblies, and their
Regional Development Agencies, would be similar to those already
applicable to the Greater London Authority and the London Development
Agency.
5. The proposed role in relation to regional
assemblies will complement well the Commission's existing functions
in relation to the effectiveness, efficiency and economy of the
performance of public authorities in local government, the NHS,
housing, fire and rescue services. As a cross sector regulator
the Commission recognises the potential impact which well co-ordinated
audit and inspection can have, both in terms of assessing the
value for money that regional assemblies and their functional
bodies themselves provide and in considering the contribution
and impact which the new arrangments make in the context of public
service provision within a region.
6. Under the proposals in the draft Bill
regional assemblies would be new forms of elected government with
the following general purposes within their regions:
— promotion of economic development;
— promotion of social development,
including improving the availability of good housing and of cultural
and recreational activities, and reducing health inequalities;
and
— improvement and protection of the
environment.
7. A range of specific functions are identified
to enable the assemblies to fulfil these proposed general purposes.
These relate to:
— the relevant Regional Development
Agency (RDA) and economic development;
— regional fire and rescue authorities;
— regional cultural consortiums;
— learning and skills; and
8. The draft Bill identifies three functional
bodies of an assembly. These are the RDA, the regional fire and
rescue authority and the regional cultural consortium. As noted
above, the policy statement indicates that an assembly and its
functional bodies would have auditors appointed by the Audit Commission
and would come within the Commission's "best value"
inspection and value for money audit arrangements. This would
be largely achieved through Clauses 155 and 156, and paragraph
44 of Schedule 6, in the draft Bill, although amendments are needed
to Clause 156.
9. The effect of Clause 155 would be to
bring a regional assembly and all its functional bodies within
the Commission's audit framework. This would mean that the Commission
would appoint the auditors who would be required to comply with
the Audit Commission Act 1998 and the Commission's Code of
Audit Practice.[36]
The effect of this would be that appointed auditors would carry
out an integrated audit which would include the audit of the financial
statements of relevant bodies and audit work in relation to arrangements
for securing economy, efficiency and effectiveness in the use
of resources by each relevant body. The Commission welcomes the
application of the Audit Commission Act 1998 to regional assemblies
and their functional bodies.
10. The effect of Clause 156 would be to
apply a duty on a regional assembly to secure continuous improvement
in the exercise of its functions having regard to a combination
of economy, efficiency and effectiveness. The clause would also
have the effect of applying a modified "best value"
framework which is a reference to the Commission's role of inspecting
best value authorities to ensure that they are complying with
their duty to secure continuous improvement in their functions
having regard to a combination of economy, efficiency and effectiveness.
The Commission's inspection role has proved to be an effective
tool in local government for providing external challenge to help
secure improvement in services, and so the Commission welcomes
the extension of this role to regional assemblies.
11. The draft Bill also provides for the
Commission's "best value" inspection role to apply to
regional fire and rescue authorities which would be designated
as best value authorities by means of paragraph 44 of Schedule
6. In this way, these authorities will be subject to existing
requirements applicable to fire authorities which will also ensure
consistency with arrangements in areas not covered by a regional
assembly. The Commission welcomes this.
12 However, the other two functional bodies
(the RDA and the regional cultural consortium) would not be brought
within the Commission's inspection arrangements as the Bill is
currently drafted. The Commission believes that consistent model
of audit and inspection should be applied across the regional
assembly and all its functional bodies. Therefore, the Commission
believes that Clause 156 should be amended to apply relevant sections
of the Local Government Act 1999 to RDAs and regional cultural
consortia as well as the assembly itself. The Commission will
continue to liaise with ODPM to help achieve this objective, recognising
that the Government's policy is to apply a "modified best
value regime".
13. The "modified best value regime",
which Clause 156 as currently drafted would apply to assemblies,
would have a number of effects including the following on which
the Commission would wish to comment since these relate to the
way in which the Commission's audit and inspection arrangments
would be applied in practice:
Provisions, from Local Government Act 1999
(LGA 99), and how these would be applied by Clause 156
| Commission Comment |
| General "best value" duty of continuous improvement having regard to a combination of economy, efficiency and effectiveness (LGA 99 section 3) would apply but omitting obligation to consult with non-domestic ratepayers.
| The Commission agrees that this should apply to assemblies, as modified given assemblies' specific funding arrangements, but the provision should also be applied to RDAs and regional cultural consortia as functional bodies.
|
| Performance indicators and standards (LGA 99 section 4) would not apply.
| The Commission notes that the Government's proposed performance management framework for regional assemblies includes requirements to report on targets within assemblies' annual reports, and in view of this, agrees that section 4 would not need to be applied.
|
| The requirement on the authority to carry out best value reviews (LGA 99 section 5) would be applied but with certain modifications including amending the reference to performance indicators to the targets included in the annual report.
| The Commission agrees that the requirement to carry out reviews, as modified, should be applied to assemblies but that this requirement should also apply to RDAs and regional cultural consortia.
|
| Best value performance plans (BVPPs) (LGA 99 section 6), the audit of BVPPs (LGA 99 section 7), the code under which a BVPP audit would be carried out and fees (LGA 99 section 8), and provisions related to responses to audits (LGA section 9). These sections would not be applied.
| The Commission notes that the Government's proposed performance management framework for regional assemblies includes a requirement for an annual report which would fulfil a similar role to a BVPP, and in view of this, agrees that section 6 would not need to be applied. The Commission also agrees that if section 6 is not applicable then the requirement for an audit of the BVPP (section 7) is also not needed. The Commission agrees that there should be no audit requirement for the proposed annual report.
|
| Inspections by the Commission (section 10 LGA 99) would apply but with the addition of a duty on auditors to include in the audit opinion under section 9 of the Audit Commission Act 1998 recommendations as to whether the Audit Commission should carry out an inspection.
| The Commission agrees that provisions for inspections should apply to assemblies but that these provisions should also apply to RDAs and regional cultural consortia.
However, the Commission's view is that Clause 156 of the draft Bill, as currently drafted, should be amended in respect of the provisions relating to audit recommendations to the Commission to carry out "best value" inspections.
Section 7 of the LGA 99 includes provision for the auditor of a BVPP to recommend the Audit Commission that it carry out an inspection. Because section 7 will not be applied, the draft Bill includes a specific provision, within Clause 156, to modify section 10 of the LGA 99 to include a new duty on auditors to include a recommendation in the auditor's opinion under section 9 of the Audit Commission Act 1998.
The Commission does not agree that it would be appropriate to include such a recommendation in the auditor's opinion under section 9 of the Audit Commission Act 1998 because this opinion relates to the auditor's functions under that Act, and is addressed to the audited body not the Commission. The Commission agrees that there should be provision within the draft Bill for auditors to make recommendations to the Commission to carry out inspections but that this should be a separate reporting requirement.
|
| Inspection powers and duties (section 11 LGA 99) and fees (section 12 LGA 99) would apply.
| The Commissioner agrees that these provisions should be applied to assemblies but that they should also apply to RDAs and regional cultural consortia.
|
| Reports (section 13 LGA 99). This section would be applied to assemblies but with the reference to the performance plan replaced with a reference to the annual report, and omitting the Secretary of State's powers of intervention powers.
| The Commission agrees that provisions relating to reporting the results of inspections should be applied, as modified, to assemblies but should also apply to RDAs and regional cultural consortia.
The Commission notes that the proposal not to apply the Secretary of State's powers of intervention is a policy decision. This proposal would not impact on the operation of the audit and inspection arrangements set out in other provisions.
|
| Section 15 LGA 99, relating to Secretary of State powers, would not be applied.
| This is consistent with the proposal not to apply the Secretary of State's intervention powers.
|
| Clause 156 of the Bill also specifically applies provisions derived from sections 23, 25 and 26 of the LGA 99.
| The Commission agrees that these provisions, as modified, should apply to assemblies but that they should also be applied to RDAs and regional cultural consortia.
|
| |
14. The ODPM policy statement acknowledges that further
work is needed to apply best value requirements, and explains
that the functional bodies as well as the assemblies, and would
wish to see the detailed comments made above reflected in the
re-drafting.
15. Full application of the Commission's broad remit
would make the most of the opportunity to plan and carry out audit
and inspection activities more effectively, and in a more co-ordinated
way, across local public services within a region. This would
facilitate the assessment of the performance of public services
at an area and regional level as well as form a firm basis for
assessing how well the regional assemblies fulfil their proposed
strategic roles in relation to public services where operational
delivery is the responsibility of separate authorities and other
organisations.
16. The Commission is mindful of the potential impact
on organisations of responding to the demands of external scrutiny
and notes that, in the case of regional assemblies, the NAO has
statutory rights of access to documents held by the assemblies
to enable it to report to Parliament on the assemblies' contribution
to national policies and initiatives. The Commission is committed
to principles of Strategic Regulation by which it seeks to ensure
that audit and inspection activities are proportionate, appropriately
co-ordinated and targeted where they are likely to have most impact.
Therefore, the Commission recognises that it will be important
to work closely with the NAO to ensure that the proposed arrangements
for regional assemblies are co-ordinated effectively. The Commission
has already developed considerable experience of working with
other audit and inspection agencies, and will be liaising with
the NAO on developing suitable arrangements for regional assemblies.
3. CONCLUSION
17. In conclusion, we support the proposal that regional
assemblies and their functional bodies should have auditors appointed
by the Commission and come within the inspection and value for
money audit arrangements.
18. Therefore, we welcome the provisions in the published
draft Bill which would go some way to achieving the aims set out
in the Government's policy statement. We recognise that further
work on the drafting of the Bill is needed to implement fully
the proposals in the Government's policy statement, and the Commission
is committed to continuing to work with the ODPM to achieve these
aims. The Commission will continue to liaise with the ODPM on
the drafting of the Bill including commenting on other aspects
of the Bill, where appropriate.
19. The Commission recognises that it will be important
to work closely with the NAO to ensure that the proposed arrangements
for regional assemblies are properly co-ordinated, and we will
be liaising with the NAO to put in place suitable arrangements
to ensure that overall audit and inspection resources are used
economically, efficiently and effectively.
35
The policy statement on elected regional assemblies was published
by the Office of the Deputy Prime Minister, alongside the draft
Bill, in July 2004. Back
36
The Audit Commission Act 1998 requires the Audit Commission to
prepare, and keep under review, a Code of Audit Practice,
prescribing the way in which auditors are to carry out their functions
under this Act.
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