Audit and inspection of local authorities - Communities and Local Government Committee Contents


1  Introduction

1. The audit and inspection of local authorities may not sound like a topic to set the pulse racing. Yet for the past decade and more it has been at the heart of the relationship between local and central government. Whitehall has wanted assurance that its substantial increases in funding for local government were resulting in the outcomes that it was seeking and not being consumed in increased costs and inefficiencies. Best value duties, targets, performance indicators, local public service agreements, "Gershon" efficiency savings and other mechanisms were introduced to direct, 'stretch' and compare the performance of local councils. These were backed up by audit and inspection.

2. The Audit Commission was the principal player in this field. As the audit regulator, commissioner and provider of local authority audit in England, the Audit Commission shaped and undertook local government audit. As principal local government inspector, it both carried out the instructions of Government—mainly but not exclusively for Department for Communities and Local Government (DCLG)—and also shaped the landscape within which it, the Audit Commission, operated. Its methodology started with best value inspections of individual services, moved to comprehensive performance assessment (CPA) of councils, and culminated in comprehensive area assessment (CAA) of councils and their local public sector partners.

3. On 13 August 2010, the Secretary of State for Communities and Local Government, Rt Hon Eric Pickles MP, announced the abolition of the Audit Commission.[1] Local authorities would be given responsibility to appoint auditors of their choice. The Audit Commission's audit practice—the fifth largest audit practice in the UK—would become a stand-alone business that would have to compete against the private sector for audit work. Other functions of the Audit Commission would cease or pass to other bodies, including the National Audit Office (NAO) and the professional audit bodies.

4. The Government subsequently published more detailed proposals for local government audit arrangements in a consultation paper, Future of local public audit: Consultation.[2] This paper excluded proposals for the Audit Commission audit practice and certain other functions undertaken by the Audit Commission, such as the National Fraud Initiative and national value-for-money (VfM) studies.

5. The proposals for reform of the audit and inspection of local authorities give rise to fundamental questions about both the principles and practicalities of public audit, the relationship between local and central government, and the best mechanisms to bring about improvements in local government services. Some of our witnesses clearly felt that fundamental principles had been breached. Others were of the view that the principles could hold provided adequate safeguards were put in place. We address these issues of principle in our report. The Government has said that it intends to publish a draft Bill for pre-legislative scrutiny later this year.[3] This will be the appropriate opportunity to address finer points of detail; we trust that whichever Committee carries out that scrutiny will consider the Bill carefully in the light of the conclusions and recommendations of this Report.

6. We are grateful to the organisations and individuals who provided evidence to our inquiry. We were advised throughout by Ron Hodges, Professor of Public Services Accounting at the University of Sheffield, and Gillian Fawcett, Head of Public Sector at the Association of Chartered Certified Accountants.[4]


1   Department for Communities and Local Government : Eric Pickles to disband Audit Commission in new era of town hall transparency, press notice, 13 August 2010 Back

2   DCLG, Future of local public audit: consultation, March 2011. The consultation period lasted from 30 March to 30 June 2011. Back

3   Ev 228 Back

4   Professor Ron Hodges declared the following interests: Professor of Accounting at the University of Sheffield (paid), Member of the ACCA International Public Sector Technical Committee (unpaid), Member of the CIMA Research Board (unpaid), Treasurer and Trustee of the British Accounting Association-a registered charity (unpaid), Director and Trustee of Gedling Homes-a registered charity (unpaid), Member of Finance Committee of the New Charter Housing Trust Group (unpaid), I have conducted research work with numerous other researchers in various public sector organisations (these are all temporary projects and have not involved funding from the organisations themselves).

Gillian Fawcett declared the following interests: April 2009-to date: Head of Public Sector for the Association of Chartered Certified Accountants (ACCA), Up until 2006: senior policy advisor with the Audit Commission, ACCA has commissioned some research with the New Local Government Network (NLGN) which is focusing on the same areas as the Committee's inquiry. Back


 
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© Parliamentary copyright 2011
Prepared 7 July 2011