Local public bodies are having to deal with unprecedented challenges to the sustainability of their finances and services. Many are looking for new ways to secure sustainable sources of funding, such as entering into partnership arrangements with others or exploring commercial opportunities to generate income. And there is little evidence yet to suggest that these pressures are likely to reduce in the medium-term.
In this context, effective local audit that is both relevant and authoritative is vital. Auditors need to be able to respond to these challenges, both to provide local service users, taxpayers and other stakeholders with assurance about how their money is spent, and to ensure that those entrusted with public money are properly accountable for their decisions and actions.
The NAO’s report ‘Local auditor reporting in England 2018’ identified that in 2017-18, £64 million was spent on fees to external auditors by local government (which includes local authorities, police and fire bodies) and local NHS bodies in England. For this money, local public bodies gain independent assurance that they are spending and accounting for public money properly, and that they have adequate arrangements in place to manage their affairs.
'The review of the Code is a valuable opportunity to ensure that it is focussing auditors’ attention on the right issues, so that when auditors report the results of their work, their reporting is valued, timely, and accessible to all who rely on it.'
The value of this assurance is reduced, though, if the work of auditors is not having enough impact. Taxpayers, national bodies and other stakeholders reasonably expect that the auditor will normally be able to provide assurance that the accounts have been properly prepared, are free from material error, and that the body has proper arrangements in place. However, the public also rightly expects the auditor to highlight publicly any significant concerns.
The National Audit Office is responsible for the Code of Audit Practice, which sets out how external auditors of local public bodies need to carry out their statutory duties. The Code can significantly influence how auditors do their work and how they report.
The NAO is now consulting on a new Code. The consultation document is a wide-ranging ‘Issues Paper’ that looks across local auditors’ responsibilities and highlights the issues that the NAO thinks are relevant to the development of the next Code. Through a series of open questions, it seeks views on those issues, as well as asking whether there are any other matters that should be taken into account.
The feedback gathered from the current consultation will inform the development of the new draft Code, on which a further public consultation is planned for later this year. Responding to this first stage is therefore a real opportunity to engage directly with the NAO and influence the way in which the Code evolves, and how local auditors approach their work over the coming years.
The consultation on the Issues Paper remains open until 31 May 2019. More information about the consultation, including details of how to respond, can be found on the NAO website (www.nao.org.uk).
