Shaky foundations for audit?
Foundation hospitals are contentious in many ways but now they appear set to become controversial because of proposed audit arrangements.
Under the proposals the hospitals, designed to be more independent than in the past, will also be able to appoint their own auditors. This is a significant break with the past in lots of ways and will no doubt cause consternation among observers worried about the accountability of public bodies.
Up until now health trusts have had their audits controlled by the Audit Commission, the spending watchdog that covered local government and the health service in the same way as the National Audit Office covers Whitehall departments on behalf of parliament.
The Audit Commission provided a useful service and ensured that the financial arrangements and management of health trusts were publicly accountable.
The question is whether the same can be said once the hospitals gain foundation status and start appointing their own auditors. What standards will they work to, will audit opinions be publicly available, will being paid directly by the hospital, instead of the Audit Commission, change the nature of the relationship between auditor and client?
These are some of the big questions that will need answering properly before the audit arrangements go ahead as proposed. There are some other observations to be made though. To begin with at a time when the government sought to expand the remit of the NAO to follow public money wherever it may, it appears strange to suddenly curtail the responsibilities of the Audit Commission by removing foundation hospitals from its purview.
Even if the foundations continue to get a good audit, it seems a contradictory tack in terms of policy. The foundation hospitals expect to receive more public money, and assume more independence on behalf of the public. So it seems strange that the public’s own auditor will no longer be looking at the books.
On another front, the ability of the foundation hospitals to get value for money from their audit may well be affected. It is true that the Audit Commission sub contracts much of its audit work to the private sector which means they have substantial buying power. But will a single foundation negotiating over a single audit have the same purchasing power?
There will be many who are uncomfortable with the plans for foundations and the plans for audit will need much clarification before these concerns are eased.