Examination of Witnesses (Questions 140-154)|
Wednesday 11 June 2003
Q140 Mr Williams: Is there any way
in which the draft Bill could be changed to ensure the continuation
and the encouragement of the partnership approach?
Mr Grace: It may be that the advisory
board that has been mooted can perform a number of functions.
Some of them have been mentioned. One of its functions would clearly
potentially be to help keep the Auditor General's office in touch
with these currents of opinion. The Auditor General of course
could always speak directly with relevant bodies and so on, but
this would be an additional formalised mechanism for doing that,
a structured way of doing it, so I think that advisory board could
perhaps help to underpin the partnership approach.
Q141 Dr Francis: If we could move
on to inconsistencies between central and local government, Clause
50 of the draft Bill restricts the disclosure of information by
the Auditor General for Wales in respect of local government audit
work. There is no similar restriction on the disclosure of information
by the Auditor General for Wales in respect of central government.
Why do you wish to remove this clause from the draft Bill?
Mr Evans: We are arguing for the
retention of Clause 50 in the Bill. Clause 50 in the draft Bill
replicates Section 49 in the legislation under which the Commission
and its appointed auditors operate. It is often misunderstood.
There is nothing in that clause that prevents auditors from reporting
in public the findings of their work or sharing information that
they come across in the course of their work where it is consistent
with their statutory functions. What the clause does is protect
the integrity of the audit process. You have to remember that
in local government auditors have duties to members of the public.
In particular they have to consider and determine objections that
local electors may make to items or transactions reflected in
the accounts. In the course of determining those objections they
may have to share information with members of the public at a
draft stage and it would in our view be quite unhelpful for the
audit process, unhelpful for the auditor in particular, and for
the audited body if that information were to leak out or to appear
inappropriately in the press, and that is why this clause is in
our legislation. Interestingly, the only time that it has been
invoked in living memory was when a journalist leaked some information
about the auditor's investigations at Westminster City Council
and was tapped on the shoulder and invited to come to Charing
Cross police station and be reminded of the provisions of Section
49, so we think it is an important safeguard for the integrity
of the audit process. It is not about restricting the auditor's
right to report or the public's right to know what auditors have
Q142 Mr Caton: Why do you think it
is necessary in local government but not in central government?
Mr Evans: In local government
auditors do have this range of responsibilities to local electors
and to members of the public which they do not have in relation
to other public bodies. There are other safeguards in place in
central government. I do not know the details of them, but clearly
there are safeguards which prevent leaking of NAO reports on central
government departments before they are published.
Q143 Mr Williams: On Monday several
of our witnesses agreed that Clause 11which gives statutory
effect to the recommendations made by Lord Sharman to increase
the Auditor General's access rights to follow public fundscould
be extended to local government. Would you welcome this move?
Mr Evans: We do, and in so far
as local government auditors are concerned those powers are reflected
in Clause 18 of the draft Bill. They replicate the powers in our
current legislation, Section 6 as it is known, which I think was
the model for Sharman's recommendations. Local government auditors
in particular have always enjoyed stronger rights of access than
historically the NAO has in central government.
Q144 Mr Caton: Schedule 1 of the
draft Bill confers on the National Assembly the power to extend
or disapply best value authorities in Wales. Why is it necessary
for the Assembly to have the power to disapply best value authorities?
Mr Grace: I do not know that it
is an absolute requirement that they do need that power. Obviously,
there is quite a shift going on in relation to best value. The
original best value framework that was set out in the Local Government
Act 1999 and the particular form it took over the first couple
of years has gone through quite a change both in England and in
Wales, in England through the creation of the Comprehensive Performance
Assessment, in Wales through the Wales Programme for Improvement.
I suppose it is conceivable that at some stage it would be thought
that the particular duties and requirements of the 1999 Act, particularly
Section 10, might not any longer be as relevant and so they might
sensibly be decoupled from that legislation. In my view if that
were to happen some compensating requirement or duty upon local
authorities to continue to pursue continuous improvement would
still be necessary.
Q145 Mr Caton: Can you think of an
example off the top of your head where that circumstance might
Mr Grace: In what I might call
the improvement world of public services there is now quite a
mix of methodologies and approaches which to some extent overlap.
The audit methodology now, for example, overlaps with the inspection
methodology quite considerably to some extent. It is possible
that at some stage there will be a sifting out and a sorting out
so that there is one regime, let us say, for local government
which brings together those drivers and stimulants for continuous
improvement, and so the best value as such would in effect be
incorporated in the code of practice audit regime. That is, I
think, perfectly conceivable though as far as I know nobody has
got any plans to do that.
Q146 Dr Francis: In its memorandum
the Welsh Local Government Association notes that the draft Bill
will change the process of agreeing the Code of Audit Practice
from affirmative resolution by both Houses of Parliament to that
of consultation with the National Assembly. Is this a change that
we should be concerned about?
Mr Evans: I do not think so in
practice. I think what is important about the code of practice
is that its development follows a proper process of consultation
with all the interested parties, the audited bodies themselves,
other stakeholders and the accountancy profession. The key thing
is the status it enjoys when it is finalised and when it is adopted,
and that is, reflected in the draft Bill. Under our regime it
is a statutory requirement for auditors of local government bodies
to comply with the code and we think that is the key thing. I
can see why you might not want the National Assembly to have the
right of approving the code because that could be seen as a way
of constraining the independence of the Auditor General. We have
made some comments about the code, that it should be extended
beyond local government, but we are less concerned about the actual
process by which it gets to be approved and put in place.
Mr Grace: The thing to bear in
mind about this process is that one of the reasons it is not appropriate,
for example, for the Assembly to approve the code in the same
way that the House does in relation to the current one is of course
because of its particular status as a body corporate itself with
an undivided legislature and executive. If some of the aspirations
in Wales to develop the devolved government so that there is a
formal separate executive and legislature are realised, then it
may be that the legislature could perform the same role in relation
to the code that the Houses of Parliament do at the moment.
Q147 Mr Williams: Going on to talk
about collaboration and inspection, the draft Bill allows the
Audit Commission to retain the functions of national comprehensive
performance assessments of all local councils and cross border
studies. Would formal joint working between the Audit Commission
and the Wales Audit Office, and the publication of joint reports,
offer a more appropriate method of working?
Mr Grace: I think what the Audit
Commission Chairman said earlier about comparisons is at the heart
of this. It should not just be about collaboration and sharing
of information. There should be active comparison for learning
purposes and that learning should flow in both directions. The
regimes for looking at local government, interestingly, have diverged
at the moment in the Comprehensive Performance Assessment and
the Wales Programme for Improvement. There are some signs that
in the next phases of Comprehensive Performance Assessment it
will look much more like the Wales Programme for Improvement and
I think we will have to live with those divergences and make sure
that there is active comparison going on both around the corporate
capacity of local government but also around the key service areas.
Mr Strachan: It is important to
stress that the way we see our regulation of the public sector
going forward as it becomes increasingly strategic and increasingly
focused on maximising regulatory value for money is that of the
100% an increasing percentage will be focused on government structures,
the framework within which services are provided, and the remainder
will still focus on specific service outcomes but, as I said earlier,
the focus will be very much to use resource where the room for
improvement is greatest rather than to continue what has happened
in the past of always creating a universal alibi across the board
regardless of performance.
Q148 Dr Francis: In your memorandum
you argue for a strengthening of the draft Bill to ensure that
performance comparison takes place. Would you like the Bill to
prescribe a minimum number of cross border studies per year?
Mr Strachan: It is not so much
the number of cross border studies. It is more on the one hand
to acknowledge that there is a very legitimate reason post-devolution
for variances to exist but to say that a balance needs to be struck,
not so much in terms of numbers of studies but between that on
the one hand and the value that can be extracted from ensuring
that that divergence has not become so great as to make comparisons
meaningless on a cross border basis. Our emphasis is much more
on that rather than merely citing a number of cross border comparisons
because clearly if we allow that to go what value the cross border
comparison in the first place?
Q149 Dr Francis: How do you arrive
at that balance then? Who decides on that balance? Is that your
Mr Strachan: No. That needs to
be ultimately a democratically based judgment, would be my first
statement. Certainly we can advise in terms of input from experience
but ultimately that has to be a democratically based judgment
Q150 Mr Caton: The draft Bill gives
the appointed auditor the power to issue an "Advisory Notice"
if they discover a potentially unlawful action. Is this merely
a change in terminology from "Prohibition Orders" (as
set out in the Audit Commission Act 1998) or are there differences
in the extent of these powers in truth?
Mr Evans: The powers for auditors
to issue Prohibition Orders were repealed in the Local Government
Act 2000 and were replaced by the provisions for Advisory Notices
and these have been carried across into the draft Bill so, as
far as we are concerned, the current Bill reflects our auditors'
current powers. There is a difference, obviously. An Advisory
Notice has different status from a Prohibition Order and this
reflects some of the lessons that have come out of recent high
profile audit cases about the role of the auditor in relation
to a democratically elected local body.
Mr Caton: I am tempted to ask you to
go further on that but it is a different piece of legislation,
I appreciate, and perhaps that is for another day.
Q151 Mr Williams: Perhaps we could
turn now to the effect on staff and training of the proposed merger.
The draft Bill proposes to merge two separate organisations into
a single entity. What consideration has been given to integrating
staff from these different organisations and ensuring that a single
Audit Office ethos will be created?
Mr Strachan: I think that is a
question for Clive who of course now runs the Audit Commission
Mr Grace: The current position
is that we are working very closely with our colleagues in the
National Audit Office. We have a Joint Steering Committee which
Sir John Bourn chaired the first meeting of recently. Beneath
that we have a series of work streams set up, including work streams
concerned with issues of staffing and terms and conditions and
so on. They have got quite a long way to go but what is particularly
heartening is the strength of shared commitment and the degree
of collaboration which is taking place between myself and my senior
colleagues, and Ian Summers and his senior colleagues in the NAO
so, although it is bound to be a bit turbulent as we go along
and there will be a lot to do, we think it is very positive indeed.
Q152 Dr Francis: What impact would
the draft Bill have on existing staff, and in particular what
arrangements have been made in respect of existing terms and conditions
and the possibility of redundancies?
Mr Grace: The Bill provides for
statutory transfer of the staff and the existing terms and conditions
into the new office. It is a bit of a moot point, I think, whether
we attempt to create an integrated set of terms and conditions
before the new office takes place so that people start on the
new set of integrated terms and conditions, or whether that would
be too ambitious and it would be better to do some of that after
their integration has taken place. At the minute the number of
redundancies, if any, I would expect to be pretty small. We use
associates whom we employ on a day rate basis and, for a variety
of reasons, including the fact that this Bill is in process in
draft form, we have a much higher proportion of associates than
we would normally have and that gives us quite a bit of flexibility
and I have no reason to think that there would be any enforced
redundancies on the Audit Commission side.
Q153 Mr Williams: At present professional
accountancy training is organised from London. What consideration
has been given to the provision and cost of training personnel
under the proposed arrangements?
Mr Grace: It has not been a matter
that we have specifically looked at but I think that would probably
fall to be considered not only in relation to this proposal but
also the much wider initiative which goes under the rather unalluring
title of the Public Sector Managers' Initiative which both the
First Secretary and the Permanent Secretary have endorsed, and
that is an initiative about building training and capacity in
Welsh public service across the board, and I would certainly see
training and development for the staff of the new Wales Audit
Office ideally forming part of that much wider enterprise.
Mr Evans: The actual training
programmes are run by the professional accountancy institutes
themselves and they offer that training around the country. Our
own in-house audit agency, our Operations Directorate, is the
largest single trainer of CIPFA (Chartered Institute of Public
Finance and Accountancy) accountants in the country. We train
around the country and they attend CIPFA centres wherever they
Q154 Mr Caton: Those are all the
questions that we wanted to ask you. Are there any other points
that you would like to make before we close the meeting?
Mr Strachan: No. I think between
our detailed written submission and what has been said that is
everything we wanted to highlight.
Mr Caton: Can I once again thank you
for coming along and giving your evidence and giving it so well?
I know you had to get away by six o'clock, Mr Strachan. We have
easily beaten that deadline, thankfully, even with the hiatus.
Once again, thank you.