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

Written evidence submitted by the County Councils Network


—  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.


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.


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.


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.


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.


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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Prepared 7 July 2011