Local public audit: one year on

Photo: Alamy

On 1 April 2015, the Local Audit and Accountability Act came into force, creating a new external audit landscape within the public sector. One year after the Audit Commission was closed, CIPFA and the National Audit Office held a joint public audit roundtable seminar at CIPFA’s London headquarters.

The key engagement partners from the UK’s main public audit firms were invited, plus representatives from other major stakeholders, including the Department for Communities & Local Government, the Department of Health, Public Sector Audit Appointments and the Financial Reporting Council, to discuss the main issues facing auditors and audited bodies in this still-uncertain situation. Rob Whiteman chaired the event, which saw DCLG and DH reflecting on progress over the past 12 months and looking ahead to potential challenges for auditors and public bodies.

Attendees also heard from an NHS director of finance and the Local Government Association on what their sectors wanted from their auditors, both now and in the future. Later in the day, auditors shared their own perspectives of the challenges facing their firms and their clients, leading to an open discussion led by Whiteman and David Aldous, a director at the NAO, of the skills and knowledge needed by auditors to address the challenges identified.

The key messages from the seminar include:

● Audited bodies need to keep up to date with the changing external audit regime. Do officers understand their options for appointing local auditors in the future (for example, by using an auditor panel or opting into the sector-led body arrangement) and the increasingly tight timescale for this process? How can these options best be communicated to members, who will make the final decision on the appointment method? CIPFA is running workshops on establishing auditor panels, covering all aspects of this, to raise awareness of what authorities need to know now and what will be happening in the short and medium term;

● Accountability trails can change. There is a risk that clear public accountability will be lost as new types of collaborations and organisations will put barriers across the path of following the public pound. Are organisations ready to ensure that accountability is kept transparent, particularly with new delivery models being designed and put into place? Public sector bodies and auditors need to aware that ‘hidden black holes’ can develop to avoid accountability and possibly financial disaster. Internal audit departments can advise on governance and controls when new arrangements are being drawn up to help to mitigate such risks;

● Audit committees are vital to protecting organisations from financial or governance failure. Audit committees do not always work as well as possible, for example in accordance with CIPFA’s Practical Guidance for Local Authorities and Police. They need the knowledge and experience to get to grips with the changing public sector landscape. Organisations should assess their audit committee’s effectiveness, perhaps using the questions in the guidance, and identify areas for development;

● Reporting is the responsibility of both audited bodies and auditors. Enhanced auditor reporting is one way to flag up concerns, and organisations must embrace narrative reporting and concepts such as integrated reporting, known as <IR>, to take ownership of their reporting. They should also take account of CIPFA’s Delivering Good Governance in Local Government: Framework, published in April.

If public sector bodies ensure that they are well informed about the changes to the audit landscape, keep those charged with governance up to date sooner rather than later and look ahead to how they can use their audit committees to maintain good governance in increasingly complex delivery structures, they will be setting out good foundations for this uncertain future.