CONCERNS about the future of local public audit are plaguing stakeholders who attended a joint ACCA and NewStatesman discussion panel at yesterday’s Conservative Party conference.
Auditing the Big Society: Governance and Accountability united Stephen Hammond MP, third- in-command at the Department for Communities and Local Government (DCLG), ACCA’s public sector chief Gillian Fawcett and deputy head of Manchester City Council Sue Murphy.
Stakeholders are worried about proposals for the post-Audit Commission landscape, including local councils having no say in auditor appointments and the “armchair auditors” government hopes will boost public finance accountability.
The greatest scepticism was reserved for armchair auditors, with only Hammond appearing confident this volunteer workforce would materialise. Gillian Fawcett cited University College London research into the use of the Freedom of Information Act, which shows “very little appetite” for the discipline.
Audience members too expressed doubts, while Fawcett said if such a group were to emerge, it would be no substitute for professional auditors.
DCLG’s calls for accountancy-trained independent members on audit committees also sparked criticism. Chartered accountant Neil Reddin, a long-standing Bromley Council member who sits on the audit committee, noted these so-called non-execs would not be elected, meaning constituents might rightly question why they are charged with protecting the public purse.
DCLG hopes the ‘non-execs’ will ensure the highest level of accountability, casting an un-biased eye over local government spending. Fawcett noted it is “critical to have an audit committee with the right level of skills”, saying the bodies could benefit from independent experts.
Sue Murphy agreed it is essential for audit committees to exert “the correct level of challenge” but maintained “it is already there”, saying the bodies are rigorous in their scrutiny of council accounts.
Murphy argued the abolition of the Audit Commission was “done too fast”, warning appropriate transfer arrangements are lacking and too little consideration has been given to the destruction of strong working relationships with existing auditors.
Her concerns were echoed by a councillor from Preston, who criticised plans to appoint auditors on local councils’ behalf for contracts of up to three years. “We spend hundreds of thousands on the audit. There is no other service we would pay so much for without overseeing the appointment, or even checking contractors’ competency,” he complained.
DCLG also came under broader criticism for its handling of the Audit Commission abolition. Fawcett bemoaned the lost opportunity for a holistic look at public sector audit, examining other key players like the National Audit Office.
This was a chance to consider how we want the governance and accountability framework to look in the future, she said, suggesting wider exploration could have resulted in a more coherent regime.
Many participants assumed a ‘we were fine as we were’ attitude, questioning how the proposed changes will improve audit quality in practice.
Fawcett noted that in 150 years of local public audit, no Enron-style disaster has occurred, saying this is proof that auditors are sufficiently independent.
Critics could argue the not-for-profit slant of local government and smaller sums involved would make such crises – and the weak financial management that underpins them – less likely.
However, there is no doubt that stakeholders remain unconvinced by DCLG’s proposals. One noted a primary reason for abolishing the Audit Commission was to give councils more control over auditor selection, a popular measure that has yet to materialise.
The UK’s decision to leave the EU has raised questions about whether the FRC's regulatory framework should change in the future
Following international accounting standards for leasing one battle too many for the MOD
Head of editorial Kevin Reed discusses the accountants in the new cabinet; the FRC's report into audit market concentration; and the Top 40 International Networks Survey 2016
Despite the high levels of tendering and rotation, the Big Four’s share of the FTSE 350 market has risen from 96.7% to 97.4%, the FRC finds