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Lord Davies of Oldham: The amendment would have the effect of requiring the Auditor General to make arrangements for the certification of claims, returns or accounts relating to bodies for which he has no statutory audit responsibilities. The fact that he
would be required to perform the functions irrespective of his wider audit relationship with a body could result in him undertaking such work in a complete vacuum—which, the noble Baroness will recognise, would be a most unfortunate circumstance—without any background knowledge of what he is meant to certify, for whom and why.The intention of the provision in Clause 2, which inserts a new Section 96B into the Government of Wales Act, is to clarify the fact that the Auditor General is required, upon request, to make arrangements for the certification of claims, returns or accounts relating to public bodies for which he does have statutory responsibilities. These would of course include local government bodies. Claims in respect of European Community grant schemes would be an example of such certification work.
Under the Audit Commission Act 1998 the bodies to which the noble Baroness referred have the ability to shop around and are not required to go to the Audit Commission. The noble Baroness will recognise that the amendment could create difficulties for the Auditor General for Wales in that he could be asked to carry out functions which are out of context with his ability to do so.
I hope that clarifies at least one aspect of the noble Baroness's question and that she will withdraw the amendment.
Baroness Noakes: I thank the Minister for his reply. I am slightly puzzled in regard to claims being made by bodies for which the Auditor General is not responsible. The "relevant bodies" are those whose accounts he audits and local government bodies, for which he is responsible for appointing the auditor. So we are talking about claims made by bodies within the envelope, as I understand it, of the audit arrangements in Wales.
I am not clear about the first point raised by the Minister. I find it rather mystifying and worrying that in England, and now in Wales, bodies can "shop around" for those who would give opinions on grant certificates; that they do not have to go to a person who knows about the body making the claim. Our fundamental approach to the clause is that the right person to "sign off" such claims, accounts, terms and so on should be someone who knows the bodies—that is, either the Auditor General or, if the drafting is improved, auditors appointed by him in relation to local authorities. Shopping around is a most undesirable practice.
I shall read carefully what the Minister has said in Hansard but, I confess, I remain a little concerned about this issue. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees: Before calling the next amendment, I should inform the Committee that if Amendment No. 4 is agreed to. I cannot call Amendment No. 5 under the pre-emption rules.
Baroness Noakes moved Amendment no. 4:
- Page 3, leave out lines 36 to 42.
The noble Baroness said: Amendment No. 4 seeks to leave out subsection (3) of new Section 96C of the Government of Wales Act as inserted by Clause 2. It is a probing amendment designed to discover what this subsection is all about.
Subsection (3) allows the Auditor General for Wales to make arrangements with the three kinds of organisations set out in the subsection—namely, a "relevant authority", which is defined in subsection (5) as a government department, local authority or holder of a public office; a "qualified auditor", who is someone who can audit a local authority under the terms of Clause 14; or an "accountancy body", which is also defined and includes bodies such as the Institute of Chartered Accountants in England and Wales, of which, I remind the Committee, I am a member and former president.
The Explanatory Notes go some way to explaining this subsection as they give examples of how and why the Auditor General might want to make arrangements with, for example, the Assembly Social Services Inspectorate. The notes do not explain why specific legislative cover is required. I could not see similar provisions in the legislation covering the Audit Commission or the Comptroller and Auditor General. Why is the position in Wales different?
The notes do not help at all with what kind of arrangements might be made with qualified auditors or accountancy bodies. What kinds of arrangements would be made and for what purpose? Will the Minister also say why the Auditor General needs to make arrangements with local authority auditors who are appointed by him under Clause 14? What are these arrangements? Will the Minister say what kinds of things they might be involved with? Are similar powers contained in legislation governing the Audit Commission or the Comptroller and Auditor General? I could not see from a brief scan that there were equivalent provisions.
Will the Minister say which accountancy bodies the Assembly intends to approve under paragraph (b) of the definition of "accountancy body" in subsection (5)? This refers to European Union bodies of accountants and I would be fascinated to discover what kinds of European bodies might conceivably be relevant to the work of the Auditor General and his work in Wales, given the different context of public sector audit in Europe. I can just about understand the Auditor General needing to make arrangements with supreme audit institutions in Europe, but the clause does not seem to have a power to that effect. I am clearly nothing like imaginative enough to see what accountancy bodies in Europe would be relevant. I beg to move.
Lord Livsey of Talgarth: I support the amendment, which seeks to take out subsection (3). I am not so well qualified as the noble Baroness, Lady Noakes—I am more of an applied management agricultural accountant than anything else—but, nonetheless, I can see the point—
4.3 p.m.
The Deputy Chairman of Committees: I have to interrupt. A Division has been called in the Chamber. We will reassemble at 14 minutes past the hour.
(The Sitting was suspended for a Division in the House from 4.3 to 4.14 p.m.)
Lord Livsey of Talgarth: To continue, I was saying that I have some expertise in accountancy, but nothing like that of the noble Baroness.
Subsection (3) in new Section 96C is widely drawn. We are concerned about ensuring that the independence of the auditing process is strengthened. New Section 96C(1) states,
- "Arrangements may be made between the Auditor General for Wales and a relevant authority".
That new section spells out a number of things that can be done, which seem to be satisfactory. However, in subsection (3) it is spelt out again in a rather different way. Obviously, one needs a bit of flexibility, but the issue of auditing of public funds is important as far as the administration of the dispersal of public funds is concerned. There should be no loophole in the Bill if at all possible—not that I am saying that if there were that it would be improperly used. I would like an assurance from the Minister that subsection (3) is necessary, and if so, the reason why.
Lord Davies of Oldham: Highly qualified noble Lords on the other side of the Committee have been discounting their accountancy qualifications. I am one of those few people who get into trouble with the tax authorities by overpaying them from year to year. My accountancy skills are clearly absolutely rudimentary, and it is not because of them that I am in my place at present.
I assure noble Lords that we are concerned about Amendment No. 4. I will come on to the issue of detail in a moment. If the amendment were pressed, it could prevent or hinder the Auditor General from making arrangements with other regulatory and audit bodies for co-operation and mutual assistance that would be mutually beneficial to the exercise of their respective functions. It could also hamper his ability to participate in joint working and co-operation.
The desirability of wide powers of co-operation was endorsed by the pre-legislative scrutiny committee during our consultation on this Bill, particularly by the Welsh Affairs Select Committee. A key principle of the Bill is to ensure that there is greater collaborative working through joint review work and strategic forward planning between audit and regulatory bodies, including bodies from elsewhere in the UK, such as Audit Scotland, and bodies from outside the UK.
Increased collaborative working would also reduce the administrative burdens on client organisations. The Auditor General may well by virtue of his office have implied power to enter into arrangements, but without this specific provision, each of the categories of bodies referred to would have to consider whether its powers were sufficiently wide to enable it to enter
into such an arrangement. That is the point of the inquiry by the noble Lord, Lord Livsey of Talgarth. The key objective of the clause is to make clear the powers of all prospective parties to enter such arrangements.The purpose of the proposed new Section 96C is to put beyond doubt that all prospective parties to the arrangement have the legal power to enter into the arrangement. Some bodies, for example statutory bodies, will have only expressed legislative powers, or those that can reasonably and properly be implied. We want to ensure that it is clear beyond all doubt that such persons or bodies will have the power to enter into such arrangements.
The noble Baroness also asked what bodies the Assembly might approve under subsection (5)(b). The most major UK body of public accountants, CIPFA, would currently need such approval. Many local government auditors—currently appointed by the Audit Commission—are, as the noble Baroness will know, drawn from CIPFA. The kind of arrangements that the Auditor General for Wales might enter into with an EU accountancy body are joint organisation of conferences, or training or secondment of staff.
There are reasons why we need the provisions in the clause for the supervision of public funds. I ask the noble Baroness to recognise that there would be a significant limitation on the Auditor General if the amendment were pressed.
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