Leader: CIPFA’s good intentions open door for another audit payday

WE’RE ALL FED UP – but equally intrigued – by an outsourcing foul-up, particularly in the public sector. Is it a ghoulish fascination not dissimilar to rubber-necking at accidents? Well, no. The taxpayers’ – our – money is at stake.

Today CIPFA has called for a much more rigorous approach to the management of public sector outsourcing contracts, primarily through open book contract management – the key plank of which is to make the ongoing cost of running these contracts transparent. Crucially, both parties share the pain if costs escalate.

With this approach, underpinned by open book accounting methods and robust controls to find abuse, everyone is ‘bought into’ keeping down the cost base.

So, who can help provide assurance around the bookkeeping and controls that the parties have put in place? Well, CIPFA thinks that the contractor’s external auditors should provide the assurance.

Adding a layer of assurance is understandable, but also presents its own issues.

Where big contracts are in place, we’re likely to see the big accounting firms undertaking the assurance work. Their involvement in the public sector has proved controversial on a number of levels – particularly around ‘tax avoidance services’ while picking up highly lucrative public sector consulting contracts.

So skimming off the top of client’s outsourcing work will, at the very least, cause consternation.

With that in mind, would those firms really want that work? Not only is there the political sensitivity, but such a contract would have to be tightly defined – they would not want any of the flak ‘outsourced’ onto them if a public sector contract in which they’re a third party starts to go pear-shaped.

Perhaps then, this is an area in which the firms below the Big Four might start licking their lips…or the Big Four might gleefully scoop up the work anyway.

So CIPFA’s initial solution for the provision of value for money in outsourcing may well create another layer of outsourcing, and another layer of awkward questions to be asked.

Kevin Reed is editor of Accountancy Age and Financial Director

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