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We’ve suggested that the Government's proposals to establish audit panels are unnecessary and will introduce additional costs and burdens on local authorities, as well as muddy the waters for accountability and governance. Instead, there should be a statutory duty in the draft Bill for local authorities to have audit committees - these would carry out the functions laid down in the Bill – using industry guidance set down by the Financial Reporting Council to enable this to happen. This would provide local authorities with a clear framework in which to operate - an essential to promote value for money for the future
—Gillian Fawcett, head of public sector, ACCA

Concerns are raised today by ACCA (the Association of Chartered Certified Accountants) in its official response to the Government’s Draft Local Audit Bill about the future of local government audit

The Local Audit Bill details the new proposed audit framework for local public bodies, the process for the appointment of auditors, and the regulatory framework for local public audit. ACCA is specifically concerned that a comprehensive impact assessment has not been conducted so far. The focus is wholly on cost without reference to the impact of downward fee pressures on audit quality. 

Gillian Fawcett, head of public sector at ACCA, says: 'This lack of a comprehensive impact assessment also means costs have been under stated, which make it likely that overall savings claimed as a result of the revised audit framework for local government are inflated and may not be sustainable.'

Gillian Fawcett adds: 'The issue for ACCA has always been about whether the government’s proposals for local government audits won’t place significant amounts of public money at risk, or would fail to provide assurance about value for money. ACCA is not convinced that proposals lay these concerns to rest.'

ACCA is also seeking clarity over the threshold for public sector audits – currently at £6.5 million - as the Government is proposing a tiered level approach which would confuse rather than add clarity. The threshold of £6.5 million means that significant sums of money below that will not be subject to an audit. 

Ms Fawcett says: 'Value for money in local government is important now more than ever, and proposals for the future leave gaps. We need to be sure that the Government is comfortable with the risk of not being assured that public money for small bodies – below the £6.5 million threshold - is well spent and represents value for money.'

ACCA says that as the proposals stand, they will not bring a proportionate and risk-based approach to public audit, which delivers accountability and promotes public trust. ACCA is also concerned that a large proportion of local government contracts have now been let, and all contracts include a clause for a possible extension until 2020. This means that there is a potential for some local authorities not to be appointing their own local independent auditors for a further 7 years. 

Ms Fawcett explains: 'Under such circumstances, it seems irrational that a draft Bill and impact assessment are being put forward to close the Audit Commission before £89.4 million a year contracts have run their course and without any clear strategy for managing them.'

Because of this, ACCA would want to see the regulatory function of the Audit Commission to be retained, at least during the life time of the contracts; the other option is for the management of contracts to be determined by HM Treasury and the National Audit Office – until locally independent audit appointments are made. 

Lastly, ACCA has said in its response to the consultation that it wants local authority audit committees to have oversight of the auditors and their work.

Ms Fawcett concludes: 'We’ve suggested that the Government's proposals to establish audit panels are unnecessary and will introduce additional costs and burdens on local authorities, as well as muddy the waters for accountability and governance. Instead, there should be a statutory duty in the draft Bill for local authorities to have audit committees - these would carry out the functions laid down in the Bill – using industry guidance set down by the Financial Reporting Council to enable this to happen. This would provide local authorities with a clear framework in which to operate - an essential to promote value for money for the future.'

  • Read the 'Draft Local Audit Bill' via the 'Related Links' sections to the left of this article.