THE WORLD of local government audit is in flux. Audit Commission spin-off mutual, DA Partnership, maintains its shadowy persona; 70% of former commission work is out to tender, and the government is busy poring over responses to its recent consultation.
At the centre of all this change, the National Audit Office has been a silent observer. The Department for Communities and Local Government has suggested it take on many former commission responsibilities, but its future role remains unclear.
DCLG has a wish list of jobs for the public money watchdog: prepare the audit codes of practice; consider best practice and value for money; oversee auditing standards and examine the impact of locally administered policies.
This is on top of the NAO’s traditional role auditing central government and begs the question, just how far will its influence spread?
As yet, DCLG’s plans for who should assume these functions are no more than suggestions, but it seems unlikely that the NAO will turn its back.
A spokesman said the body has “very little to say on the matter” while it is still in discussion at Westminster. However, he confirmed the NAO will not be carrying out local audit, but will “probably” be involved in standard setting.
The Auditing Practices Board has overall responsibility for audit standards, and the Audit Commission has restricted itself to setting codes of practice defining the scope, nature and extent of work.
Does this mean the NAO will simply assume the commission’s code setting role, or will it go further? Why doesn’t the APB take on both roles? And if the NAO is to oversee auditing standards, are the audit standard setters disempowered?
The codes focus on value for money and require auditors to give their opinion of local government efforts. The NAO has a similar oversight function in central government, and DCLG has suggested the two roles be combined.
MacIntyre Hudson chairman Rakesh Shaunak thinks the NAO has a bigger part to play, suggesting it will become both regulator and commissioner. “As the ultimate custodian of the government purse, it would be logical for the NAO to take on these two strands.”
And he could be right, if the recent hiring of former Kent County finance director Lynda McMullan is anything to go by.
The new assistant auditor has 20 years’ experience in local government and could lend the watchdog gravitas in post-Audit Commission Britain, allowing it to carve out a central spot in the debate.
NAO chief Amyas Morse (pictured) said McMullan will contribute “her extensive local government experience to our organisation as the importance of local service provision becomes ever clearer. At a time of significant change in the public sector, she will bring a fresh perspective to our work.”
McMullan might find herself examining the impact of policies administered by local authorities, another responsibility DCLG is keen to hand to the NAO.
A source close to the issues suggested public finance institute CIPFA could also take on this role. If so, division of responsibilities between the two will be a key question.
With local public audit up in the air, it seems there are just a few things to be sure of. Firstly, DCLG sees a sizeable chunk of responsibilities heading the NAO’s way. Secondly, former commission-delivered audits are up for grabs, and the division of contracts could change the audit landscape significantly. Finally, winding down such a big and multifaceted organisation is infinitely complex, and stakeholders must work very hard to ensure nothing falls through the cracks.
FRC to raise levies as government funding withdrawn
Latest FRC UK Corporate Governance Code update further restricts auditors in bid to minimise conflict of interest
Two PwC whistleblowers and journalist to stand trial over alleged leaking of corporate tax documents
The FRC's new disciplinary regime for public interest entities could see could see more frequent enforcement on more minor matters, write Taylor Wessing's Andrew Howell and Stephen Flaherty