By Amyas Morse | 1 July 2012
Abolition of the Audit Commission will change the way council spending is scrutinised just as funding pressures increase. But the National Audit Office will help the sector steer clear of the dangers, says the auditor general
Illustration: Jason Bennion
‘Survival of the fittest?’, the theme of this summer’s CIPFA conference, certainly focuses the mind. The challenges of cost reduction have prompted much comment on the need for public sector reform. But we all know that these difficulties will not stop with this funding settlement. Further cuts are on the horizon, raising the prospect of more tough decisions on how to provide services more efficiently for the public.
As cost reduction becomes a permanent part of all our lives, I’m keen to move the discussion from reform to transformation. This has been the target of the National Audit Office’s recent work. As funding cuts were passed on to councils early as part of the Comprehensive Spending Review, they are, in some respects, leading the way. Local government is already handling the challenge of how services will be provided in future: working across organisational boundaries, working with new partners, and in some cases developing radically different organisational structures.
These changes are exciting, raising the genuine prospect of the public sector delivering more with less. Inevitably, this does not come without risk. And it’s here that the NAO can play an important role. Local democratic accountability and the vital scrutiny function within councils will remain in place. But, with the government’s decision to abolish the Audit Commission, the framework for the independent scrutiny and audit of public spending is set to change.
Rightly, people will always be interested in how their taxes are spent. The scrutiny and challenge provided by the audit regime overseeing local government, led by the Audit Commission, has hitherto supported local accountability and, in turn, provided assurance to Parliament. The system that replaces the commission must not reduce audit standards. There will be plenty of opportunity to go through the government’s proposals in depth during Parliament’s pre-legislative scrutiny of the draft Local Audit Bill, which is to be published shortly.
The NAO is keen to play its part in bringing about a strong audit system. We’ve agreed with government that, subject to parliamentary approval, we will take on the role of producing the Code of Audit Practice and supporting guidance, which sets out the framework within which local auditors carry out their work. The government’s consultation on its proposals indicated that 93% of those who responded approved of this approach.
I want to ensure that the Code of Audit Practice promotes genuinely valuable local audit work. As our plans develop, I will continue to talk to the sector to ensure that local government, as well as the audit profession, has a role in shaping the future.
There are many of the commission’s roles that the NAO will not pick up. We will not appoint local auditors, we will not audit individual local public bodies, and we will not run an inspection regime for local bodies. And, as our work is funded directly by Parliament, we will not charge audit fees to local bodies.
An area where we do see ourselves adding value is through our programme of value-for-money studies. We currently publish 60 of these a year on central government. Some of them already touch on the work of local government. For example, two recent reports, Protecting consumers – the system for enforcing consumer law and Oversight of user choice and provider competition in care markets, focused on areas where local government has prime responsibility. Indeed, 46 reports published since 2008 have touched on local issues.
We will now conduct studies that consider local provision more explicitly. Our reasoning is twofold. First, we want to strengthen our work to hold central government to account with more end-to-end evaluations of the value for money of services delivered locally.
Secondly, we want to support and encourage improved performance locally by applying the skills and expertise that we have developed over many years.
Our studies of central government have proved that our expertise and knowledge can do much to accelerate the learning of important lessons between public bodies. I hope that our value-for-money programme will provide a similarly rich source of insight and good practice to local public services. We are planning three locally focused studies in 2012/13, possibly rising to six by 2014/15. Our programme will complement the work of the Audit Commission until its closure, along with the work of regulators and inspectors of local services. We will also take full account of the work that the sector itself is developing to support self-improvement, under the leadership of the Local Government Association.
As with the development of the Code of Audit Practice, our value-for-money work will be informed by those across the sector who can help to direct our interest into the right areas. Consultation has already started with the establishment of a Local Government Reference Panel to advise us as we develop our plans. The panel, which met for the first time in April, includes local authority chief executives, finance directors and academics with an interest in local government. We will consult with them on all relevant emerging findings and on future study proposals. I expect the panel, chaired by Carolyn Downs from the LGA, to be an important way of liaising with the sector, providing both challenge and constructive advice to me and my staff on how we should work with local government and its partners.
The NAO leadership panel has also spent a great deal of time meeting and listening to people across local government, talking to individual authorities and meeting key organisations such as the Society of Local Authority Chief Executives and Senior Managers, the LGA and the Treasurers’ Societies. We have also recruited senior staff from local government to help build our capability – notably, Lynda McMullan, formerly Kent County Council finance director, as assistant auditor general.
So what can local government expect to see from the NAO over the coming months as we move from planning to delivery? We have already published one study that may be of interest. Central government’s communication and engagement with local government recommends improvements in the way Whitehall liaises with its local partners that could transform their working relationship. Work on three further studies is in progress: financial sustainability in local government, local accountability (not just in local government, but across local services) and on the Community Budget projects. All these findings will be readily available to the sector.
The CIPFA conference will give me an opportunity to continue our dialogue with local government. My ambition is for the NAO to contribute powerful insight to the difficult decisions that public sector managers must make, in both central and local government, to help transform the public sector.
Amyas Morse is comptroller and auditor general of the National Audit Office. He will be speaking at the CIPFA conference being held in Liverpool on July 3–5
This article first appeared in the July/August issue of Public Finance