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Future of local public audit: Consultation closes 30th June 2011

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kevin
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Summary

On the 13 August 2010 the Secretary of State for Communities and Local Government announced plans to disband the Audit Commission, and refocus audit of local public bodies on helping local people hold those bodies to account for local spending decisions, the very essence of localism.

The aim is to replace the current, centralised audit systems managed by the Audit Commission, with a new decentralised regime, which will support local democratic accountability, and one that will also cut bureaucracy and costs, while ensuring that there continues to be robust local public audit. This consultation sets out proposals on the new audit framework where:

  • audit quality is regulated within a statutory framework, overseen by the National Audit Office and the accountancy profession
  • local public bodies will be free to appoint their own external auditors with stringent safeguards for independence.

This consultation will run until 30 June 2011.

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kevin
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Baroness Hanham CBE

Parliamentary Under Secretary of State

Parliamentary Under Secretary of State

Future of Local Public Audit


Date of statement 30 March 2011
Type Written

The Parliamentary Under-Secretary of State for Communities and Local Government (Baroness Hanham):

On 13 August 2010 my right hon. Friend, the Secretary of State, announced plans to disband the Audit Commission, transfer the work of the Commission's in-house practice into the private sector, and refocus audit on helping local people hold councils and local public bodies to account for local spending decisions.

Since the announcement, my Department has worked closely with other Government departments, the Audit Commission, the National Audit Office, the accountancy profession, local government and health sectors and other partners to design the new framework. I am now publishing, for initial consultation, our detailed proposals, which are a continuation of the Government's desire to increase the independence of local public bodies and their accountability to local people, while maintaining clear accountability, through Ministers, to Parliament. I have placed a copy of the consultation paper in the Library of the House.

Our proposals follow a set of design principles: localism and decentralisation; transparency; lower audit fees; and high standards of auditing. We have also been guided by the established principles of public audit, including the independence of public sector auditors from the organisations being audited and the wider scope of public audit.

The new framework mirrors that already in place for the audit of companies. If audit firms wish to become statutory local auditors, they will need to fulfil the rules and arrangements of the professional bodies that are designated as "Recognised Supervisory Bodies" by the Financial Reporting Council. They will therefore be mainly self-regulated.

The overarching issue is how to ensure levels of assurance are maintained in the new framework, without creating a complex bureaucratic system which places additional costs and burdens on councils. Strong accountability to Parliament through accounting officers will be retained, while decision making on auditor appointment's selection will be decentralised.

The Department of Health is considering the governance and accountability arrangements for the new health landscape and these will help determine the appropriate audit arrangements. The local public bodies referred to in the consultation paper do not, therefore, include local health bodies. However, I will be undertaking a further consultation on the arrangements for the audit of all local public bodies for which auditors are currently appointed by the Audit Commission, including health bodies, when I publish my draft audit Bill for pre-legislative scrutiny. The Department of Health will publish a paper summarising its proposals at the same time.

http://www.communities.gov.uk/statements/corporate/futurelocalpublicauditbh<

also refer http://www.communities.gov.uk/statements/corporate/futurelocalpublicaudit<

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kevin
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Grant Shapps MP questioned about future of local authority audit and inspection

Is there sufficient competition in the market for public sector auditing to ensure robust accountability for local authorities in future or could public money be put at risk by 'an Enron scenario' in local government?

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These and a range of related questions about the future of local authority audit and inspection arrangements will be explored during the closing session of oral evidence for this inquiry.

Monday 4th April, the Grimond Room, Portcullis House

Witnesses

4.20 pm

  • Amyas Morse, Comptroller and Auditor General, National Audit Office

4.50 pm

  • Rt Hon Grant Shapps MP, Minister for Housing and Local Government, DCLG

http://www.parliament.uk/business/committees/committees-a-z/commons-sele...<

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kevin
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In August 2010 the Department for Communities and Local Government (DCLG) announced plans to put in place new arrangements for auditing England's local public bodies.

DCLG is consulting on proposals for a new audit regime< and we will respond before the deadline of 30 June 2011. The department will then publish a draft Bill for further scrutiny and comment later in the year.

In Parliament, the Communities and Local Government Select Committee is also holding an inquiry into the ‘audit and inspection of local authorities’. The Commission has presented written evidence to the inquiry< and on 14 March 2011 the Chairman and Chief Executive provided oral evidence<. The Committee has not yet published its report.

Eventually our responsibilities for overseeing and commissioning local audit will stop, as will our other statutory functions, including those relating to studies into financial management and value for money. At this point the Audit Commission will be disbanded.

DCLG and we are considering ways of transferring our existing in-house audit practice into the private sector. Pending approval from the government our preferred option would be to for this to include an employee-owned, or mutual, organisation.

Appointment of auditors

Until the new audit regime is introduced the Audit Commission continues to appoint auditors to councils, NHS bodies (excluding NHS Foundation trusts), police authorities and other local public services in England and to oversee their work. The auditors we appoint are either Audit Commission employees or one of the private audit firms.

http://www.audit-commission.gov.uk/aboutus/future/Pages/default.aspx<

also refer http://www.communities.gov.uk/newsstories/corporate/1889668<

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anonymous (not verified)
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The Audit Commission will outsource all its in-house local public audit work to the private sector in the next financial year, Communities Secretary Eric Pickles announced today.

Ministers have determined this approach should offer the best value for money. This follows the decision to disband the Audit Commission last year which will refocus audit on helping local people hold their councils to account for local spending decisions.

The Commission has already been asked to begin substantive preparations for outsourcing. The contracts, which start from 2012-13, are expected to run for three or five years giving local councils and other public bodies the time to plan for appointing their own auditors.

A fair and competitive procurement process will be run that would give suitable private sector bidders the chance to compete for the Commission's audit work in a way that gives taxpayers best value for money.

This option would also allow for the possibility of a bid on behalf of the staff of the Audit Commission which could then form the basis for an employee owned company. Arrangements are in place to ensure such a bid does not have an unfair advantage.

The Commission will radically reduce in size by the end of next year as a consequence of outsourcing its audit work. Prior to primary legislation being enacted a small residual body will remain to oversee the contracts and make audit appointments. The Commission's inspection work and Comprehensive Areas Assessments has already ended.

Mr Pickles said:

"We have set in train measures to save council taxpayers money by radically scaling back on the centrally imposed, bureaucratic and costly audit and inspections previously undertaken by the Audit Commission.

"This Government is determined to refocus local audit on helping local people hold councils to account. We believe that the next step is to outsource the audit practice next year as a way to secure best value for money.

"We are working closely with the Audit Commission to design a fair procurement process that will allow a wide range of bidders, whether a mutual or private sector accountancy firm, to compete for the Commission's audit business.

"Outsourcing will also allow further progress to be made on the new audit framework that will give councils the power to appoint their own auditors."

The consultation on proposals for a new audit framework closed on 30 June 2011. Ministers are considering the proposals in light of the consultation responses received and the Government will bring forward primary legislation in due course. Once established the Audit Commission would be formally disbanded and local public bodies would appoint their own auditors.

Notes to editors

1. Around 11,000 local public bodies are audited under the Audit Commission's regime, including local government, health and police bodies, national parks authorities and passenger transport executives.

2. The Audit Commission's Board met this morning and formally agreed the process for outsourcing the audit work from 2012-13 onwards.

3. The Audit Commission will be running two outsourcing processes in parallel, one for principal local public bodies and another for the smaller bodies which fall under the limited assurance regime following which private sector auditors (as opposed to Commission auditors) will be appointed to all local public bodies.

4. Outsourcing the Commission's in-house practice will mean that many of the Commission's audit staff would transfer with their work to the private sector under the Transfer of Undertakings (Protection of Employment) (TUPE) terms. In line with previous practice, the Commission plan to allow for a significant period of consultation with local authorities prior to finalising appointments. Their procurement and consultation timetable means that appointments are planned by the start of the Annual Audit Cycle on 1 September 2012, which will be manageable as the focus of auditors work in the first half of the financial year is generally on the previous year's accounts.

5. The Commission will seek bids from audit firms on the basis of three and five year outsourced contracts. Longer outsourced contracts, five years as opposed to three, have the potential to generate lower audit fees. The Department therefore plans to engage in a short discussion with local public bodies about the trade off between the potential for lower audit fees and delaying the point at which local public bodies can appoint their own auditor once there is a better sense of the difference this makes to audit fees.

6. The Department for Communities and Local Government's Permanent Secretary, Sir Bob Kerslake, wrote to local authorities on 2 June 2011 to advise Ministers' initial view was that outsourcing was likely to offer the quickest, most straightforward and value for money option for transferring the work to the private sector. Sir Bob Kerslake is writing again today to local authorities. The Department of Health and Home Office are communicating the same message to health bodies and police authorities respectively.

http://www.communities.gov.uk/news/corporate/1954729<

anonymous (not verified)
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The Committee has concluded its inquiry into the Audit and inspection of Local Authorities. The report was published on 7 July 2011. 

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The abolition of the Audit Commission is one of the most far- reaching changes announced by the new Secretary of State. This inquiry will examine carefully the full implications for the accountability of local government likely to follow from this decision. 

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anonymous (not verified)
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Summary

On the 13 August 2010 the Secretary of State for Communities and Local Government announced plans to disband the Audit Commission, and refocus audit of local public bodies on helping local people hold those bodies to account for local spending decisions, the very essence of localism.

The aim is to replace the current, centralised audit system managed by the Audit Commission, with a new decentralised regime, which will support local democratic accountability, and one that will also cut bureaucracy and costs, while ensuring that there continues to be robust local public audit.

From March to June 2011, the Government consulted interested parties on its proposals for the new audit framework. These proposals build on the statutory arrangements and professional ethical and technical standards that currently apply in the private sector with adaptations to ensure that the principles of public sector audit are maintained. The consultation closed on 30 June 2011 and the Government's response has now been published.

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