Written evidence submitted by the County
Councils Network
SUMMARY
— The
broad moves towards decentralised audit and performance management
arrangements are welcome.
— There
need to be ways to ensure that audit prices remain competitive
and that quality is maintained under the new regime.
— There
is a role for inspection in relation to services for vulnerable
groups—but it needs to be joined-up, risk-based and proportionate.
— There
should be greater self-regulation across the local government
sector, with centrally-imposed data burdens substantially reduced.
— Value-for-money
studies could continue to be useful.
BACKGROUND
1. The County Councils Network is a cross-party
special interest group of the Local Government Association which
speaks, develops policy and shares best practice for the County
family of local authorities, whether unitary or upper tier. CCN's
38 member councils, with over 2,500 Councillors, serve 24 million
people over 45 thousand square miles or 87% of England.
2. CCN welcomes the opportunity to submit evidence
to this inquiry. In the months before last year's General Election,
CCN engaged its members in a major policy debate which culminated
in the publication in March 2010 of the CCN Manifesto.
This document sets out the CCN's vision of a future in which local
government, working with central government, can deliver better
outcomes for local communities. A key part of this vision was
a new approach to local accountability, with councils becoming
accountable first and foremost to the people and communities they
serve.
3. This submission reflects the principles set
out in the Manifesto, applying them to the current context given
the significant developments following the General Election. It
also takes into account recent discussions amongst the CCN membership
and views provided by our member authorities.
INTRODUCTION
4. Since the General Election, there have been
a number of significant developments relating to the audit and
inspection of local authorities. Comprehensive Area Assessment
has been scrapped; Government has announced its intention to abolish
the Audit Commission and replace it with a new "decentralised
audit regime"; the Place Survey has been abolished; and more
recently, Government has announced that local areas would be "placed
fully in control" of their Local Area Agreements, and that
the National Indicator Set would be scrapped and replaced by a
"single comprehensive list" of all local government's
reporting requirements.
5. Alongside this, Government has indicated that
it expects councils (along with other public bodies) to become
more transparent. The Coalition Agreement states that Government
will require "all councils to publish meeting minutes and
local services and performance data", along with "items
of spending over £500, and contract and tender documents
in full". The Secretary of State has urged councils to move
at speed to adopt this approach.
6. CCN welcomes the broad thrust of these developments,
the bulk of which is consistent with our own position on the future
of the performance framework and our call for a move towards locally
owned performance management and a reduction in the burden for
local authorities. We welcome the indications that the bureaucracy
associated with inspection and reporting will be reduced, that
councils will have greater responsibility for their own performance,
and that there are moves to increase accountability outwards to
citizens and communities rather than upwards to central government.
7. That said, there remain a number of outstanding
issues, including about future audit arrangements and the burden
of continuing inspection frameworks. Our thoughts on some of these
issues are set out below.
AUDIT OF
LOCAL AUTHORITY
EXPENDITURE
8. CCN considers that external audit plays an
important role in ensuring probity and good governance on the
part of public bodies, including local authorities, and in holding
these bodies to account. As we move towards a climate in which
a greater emphasis is placed upon the transparency of public institutions,
it is vital that robust external audit arrangements remain in
place.
9. In announcing that the Audit Commission was
to be abolished, Government set out proposals for a new, decentralised
audit regime. This would include the transfer of the Commission's
audit practice out of public ownership, the strengthening of the
Local Government Ombudsman's powers, and the regulation of audit
within a statutory framework overseen by the National Audit Office
and the profession. Councils would gain the ability to appoint
their own auditors. District auditors would retain a duty for
reporting issues in the public interest.
10. CCN supports in principle the move towards
a more decentralised approach. This is consistent with the Government's
approach to devolving greater responsibility away from Whitehall
and towards local councils and local communities. From a localist
perspective at least, the proposal to enable councils to appoint
their own auditors is welcome.
11. The government has suggested that this move
will enable the driving down of costs by creating "a more
competitive and open market". We would be a little more cautious
about the potential for savings. There is only limited number
of audit firms acting as approved auditors under the current regime.
We cannot assume the sudden creation of an open market in which
numerous additional firms have the appropriate skills and capacity
to carry out local authority audits. There is the significant
possibility that competition will be limited, creating the potential
for price rises.
12. The Audit Commission, by contracting with
these firms on a large scale and ensuring the smooth management
of changes of auditors, has helped to regulate significantly the
prices charged. Under the new regime, it will be incumbent upon
local authorities to find ways to ensure that prices remain competitive.
13. Potentially the most effective way of doing
this will be to explore possibilities for collaboration in the
procurement of external audit services. This could involve collaboration
amongst groups of authorities with shared characteristics (CCN
members for instance), or amongst all types of authority on a
regional or sub-regional basis.
14. There is also the possibility of councils
collaborating with other public sector bodies to commission jointly
a single auditor on an area basis. Such an approach has been mooted
by the LGA and would accord with current thinking about community
budgets and a place based approach to service delivery.
15. In addition to the price of audit services,
the quality of provision—the skills, experience and capacity
of the firm - is an important consideration. Audit firms may therefore
find it more useful to bid for area or group contracts, as it
may assist their operating model in enabling them to assemble
an office with the appropriate skills.
16. Moreover, as more authorities move towards
shared service arrangements in various forms, a joint procurement
approach may help to make the auditing of these arrangements simpler
and more cost-effective. The present regime does not properly
cater for such models; indeed, because of the requirement to audit
joint committees, the audit burden is often increased where shared
services are in place.
17. We would stress that any collaborative arrangements
should be entirely voluntary and formed on the basis of "consenting"
local authorities coming together. We would also suggest that,
regardless of whether appointments are made individually or on
a collaborative basis, it would be helpful to have in place some
form of framework contracts from which authorities or voluntary
groupings can call off.
18. CCN suggests there should be forced rotation
of auditors after a given number of years. This will be important
for ensuring transparency and avoiding any perceptions of relationships
becoming too close.
19. CCN believes that external audit should focus
on the accuracy of the accounts and matters of probity. We share
the concerns of the LGA about auditors making value for money
judgements. It should be for democratically-elected councillors
to determine how limited resources can best be spent to meet the
needs and priorities of their citizens and communities. We would
also question whether it is appropriate for auditors to make judgements
about financial resilience.
OVERSIGHT AND
INSPECTION OF
LOCAL AUTHORITY
PERFORMANCE
20. While in principle supporting the moves towards
an area based approach to performance management, CCN had a number
of concerns about the way in which the Comprehensive Area Assessment
framework was implemented. These included issues about the burden
of inspection, the overwhelming focus upon the local authority
(and, in multi-tier areas, the county council), and the lack of
join-up between inspectorates. CCN therefore welcomed the abolition
of CAA and Government's commitment to a move towards a more locally-owned
approach to performance management. We also welcome Government's
announcements that the Ofsted and CQC annual performance assessments
are to be scrapped, as we have consistently argued that these
were not fit for purpose.
21. There remain, however, a wide range of performance
frameworks and inspection regimes linked to functional specialisms.
CCN is keen to ensure that these frameworks are also reduced to
a minimum, rationalised and aligned to support joined-up delivery
between public services at local level.
22. We believe there remains a role for inspection
in relation to safeguarding services for vulnerable groups. However,
such activity needs to be joined-up, risk-based and above all
proportionate. It will be important to identify new, more effective
ways of co-ordinating continuing inspection activity in the absence
of the "gatekeeper" role previously performed by the
Audit Commission.
23. CCN supports moves towards greater self-regulation
on the part of the local government sector. Fundamentally, each
council should be accountable to citizens and responsible for
its own performance. However, we accept that councils also have
a collective interest in the performance of the local government
sector as a whole.
24. CCN therefore responded positively to the
LG Group's recent consultation on sector self-regulation and improvement,
whilst cautioning against the creation of an over-engineered and
potentially burdensome new regime. We suggested that the proposals
should be broadened to reflect a place-based approach, in line
with the current thinking around community budgets. We also suggested
that they place much greater emphasis on the role of the overview
and scrutiny function to ensure front line councillors play a
key role in holding their authorities to account.
25. CCN also welcomes moves to rationalise the
data requirements placed upon local government. The National Indicator
Set failed to reduce the data burden placed on local government
and its partners, was insufficiently aligned with other frameworks,
and was focused excessively on process rather than outcomes. Moreover,
many of the indicators were ill-defined.
26. We are keen to ensure that these issues are
not repeated with the creation of the new list, that it represents
a genuine reduction in the data burden, and that local government
reports data to central government only where there is a genuine
necessity to do so. While data can play an important role in managing
performance and in providing transparency, it should be for councils
to decide which data to collect in accordance with locally-determined
priorities.
27. The draft single data list was published
for consultation late in December 2010. In publishing this, CLG
released a press notice stating "Councils data demand overload
dramatically reduced". However, the draft list includes some
152 "data collections" beneath each of which is a series
of more detailed "data topics"; as it stands, it still
represents a significant burden for local authorities, especially
at a time when councils are facing major financial challenges
and are rightly focused on protecting frontline services.
28. CCN agrees with the LGA that there should
be an assumption against Whitehall-imposed surveys and data collection.
It should be for Government departments to demonstrate that any
information on the list is necessary, explaining why it is needed
and for what it will be used.
29. CCN also has some concerns about the impact
and input indicators published for consultation in departmental
business plans. A significant number of these appear to relate
to local government. There is potential for these to place a substantial
new burden upon local councils.
VALUE FOR
MONEY STUDIES
30. CCN considers the Value for Money Studies
to have been one of the more useful areas of the Audit Commission's
work, whilst acknowledging there may at times have been issues
about forward consultation and sector involvement. In the current
climate, independent studies of this type could continue to be
helpful to local authorities. There are a number of bodies that
could potentially take on this role, including the National Audit
Office, CIPFA and Local Government Improvement and Development.
January 2011
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