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Local Audit and Accountability Bill 2013CIPFA Conference 2013
David Watkins, CIPFA P&T Associate
cipfa.org
Agenda
Overview of the Local Audit and Accountability Bill 2013
Auditor appointment, auditor panels and audit committees
Council tax referendums
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Overview of the LAA Bill 2013
Repeal of existing arrangements General requirements for accounts and audit Appointments of local auditors Eligibility and regulation of local auditors Conduct of local audits Data matching Council tax referendums Examinations by the Comptroller and Auditor
General Code of Practice on local authority publicity
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Auditor appointment
Relevant authorities appoint their own auditors with the exception of: Chief Constables Commissioner of Police of the Metropolis
Maximum appointment period: 5 years After consultation with the Auditor Panel
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Auditor Panels
Majority of independent members Chaired by an independent member Functions can be exercised by another committee if
it meets the above requirements
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Audit Committees
CIPFA guidance on audit committees for local authorities (2005)
The audit committee chair should not be a member of the executive
Membership should be balanced, objective, independent of mind, and knowledgeable
Properly trained to fulfil their role
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Council tax referendums
Increases set by levying bodies are taken into account when local authorities determine whether they have set an excessive amount of council tax each year
Applies from 1 April 2014 Retrospection to 2013-14 and 2012-13
Helping the nation spend wisely
CIPFA Annual Conference Workshop
Future of Local Audit
Helping the nation spend wisely
Accountability: Our role
• The National Audit Office (NAO) scrutinises public spending for Parliament
• We help to hold government departments and the bodies we audit to account for how they use public money
• Our work helps public service managers to improve performance and service delivery, nationally and locally
Helping the nation spend wisely
Local Audit & Accountability Bill: Role for the NAO• Code – NAO will take responsibility for the preparation and
maintenance of the Code of Audit Practice and supporting guidance to auditors
• VFM – NAO will expand gradually its VFM programme to consider local services more explicitly
• will facilitate evaluation of VFM of public spending as a whole, from national to local level
• do not expect to hold individual local bodies to account centrally
• Extent of NAO role – quite specific part of the regulatory component, NAO is not the new Audit Commission
Helping the nation spend wisely
Local Audit & Accountability Bill: Proposed Audit Framework
Helping the nation spend wisely
Local Audit & Accountability Bill: position update• Bill reflects outcome of public consultation and pre-
legislative scrutiny by Commons ad-hoc parliamentary committee chaired by Margaret Hodge.
• Bill has started parliamentary passage in the Lords. DCLG expecting Royal Assent early 2014.
• NAO Code of Audit Practice expected to be in place from 2015-16.
• NAO VFM powers – DCLG to confirm commencement date. NAO content for powers to apply as soon as Bill receives Royal Assent.
Helping the nation spend wisely
Local Audit & Accountability Bill: issues arising• Areas within Bill that are generating debate include:
• accountability clauses – compliance with Code of Practice on Local Authority Publicity; calculating threshold for Council Tax referendums;
• auditor panels – requirement for authorities to take advice of independent auditor panel when appointing external auditor;
• NAO – general support for new NAO responsibilities. Concerns focussed on availability of resources + possibility of “mission creep” + central v local accountability
Helping the nation spend wisely
Continued focus on Central Government
We audited 458 accounts
in 2011-12
Bodies we audit include government departments, charities, and even some companies
We laid 63 major reports before Parliament in
2011-12
We highlight important
lessons for the bodies we audit
and for government more widely
This enables us to respond quickly to important issues that public bodies
currently face
Our work focuses on improved
decision making, robust financial
management, and using information
better
We help the Committee of
Public Accounts (PAC), other
select committees,
and individual members in
their scrutiny of public spending
and service delivery
We are on the UN Board of Auditors, and
audit a range of other
international organisations
We report on EU spending in the
UK
We are a member of the
INTOSAI* board
Financial audit
Value for money studies
Investigations work
Support to Parliament
International work
* International Organisation of Supreme Audit Institutions
Helping the nation spend wisely
NAO’s Local Government Team Structure
Lynda McMullan
AAG Local Services
Mike Suffield
Director
TBC
Director
Mark Allen
Audit Manager
AC TUPE (Timetable to be
agreed) Audit Principal x1
DCLG liaison, legislation Code of Audit Practice Data/Information Knowledge Building
National VFM Broader NAO VFM Work Stakeholder Engagement Knowledge Building
Andy Whittingham
Audit Manager
Mark Parrett
Audit Manager
Andy Nichols
Audit Manager
Researcher x3 Senior Analyst x5 Audit Principal x3
Angela Hands
Director
Daniel Lambauer
Audit Manager
Helping the nation spend wisely
NAO is working with the sector
• NAO has established a Reference Panel, to provide sector input to future study programme. The Panel meets twice a year (April and September).
• Expert panels as necessary to advise on individual VFM studies, e.g. Financial Sustainability.
• Engagement with LGA, SOLACE, ALATs and other specialist and regional bodies.
• NAO will consult sector on draft Code of Audit Practice.
• Numerous visits to individual councils either as part of studies or more generally to hear what they think (since summer 2011 – around 50)
Emerging Local Government VFM Strategy
Financial management and accountability- To assure Parliament that systems for good financial management and accountability are in place and working.
Growth- To assess whether the government, through a range of initiatives with local government, is achieving its objectives for growth.
Integrated services- To establish whether integration is being implemented in a way which delivers better VFM.
Local Enterprise Partnerships
Housing BenefitUniversal Credit
Community BudgetsEfficiency & cost reductionUse of InformationLeadership & governance
Financial sustainability Service redesign/process improvementAccountability for local services Council tax benefit localisationEducation cost reduction
Local Economic Growth
Farm-based enforcement
Integration of public services
Asset management
Major transport: HS2New school places
Adult social care
Children’s services
Community Infrastructure levyBusiness rates retentionNew Homes BonusLocal transport
Investment Income
Shared services
Key:
In 2012-13 programme
Potential study 2013-14 or 2014-15
Planned or potential theme work, guide or toolkit
Growth in cities
Housing
Tackling fraud
Public health
Helping the nation spend wisely
Value for Money Studies to Date
• Strategic focus on growth, financial management and accountability, integration of services.
• Published reports include:
• The NAO’s work on local delivery – March 2012
• Central government’s communication and engagement with local government - June 2012.
• Financial sustainability in local authorities - January 2013.
• The New Homes Bonus – March 2013
• Measuring the costs and benefits of whole place community budgets – March 2013
Helping the nation spend wisely
Value for Money Studies we are doing
• Strategic focus on growth, financial management and accountability, integration of services.
• Current examinations include:
• Funding and structures for local economic growth – approaching completion;
• Care for adults, overview report – fieldwork underway;
• Localisation of Council Tax support – fieldwork underway;
• Using payment by results to help troubled families – fieldwork nearing completion;
• Housing strategy – scoping stage underway
Helping the nation spend wisely
Code of Audit Practice – work underway
• DCLG Implementation Steering Group – provides oversight of specified work streams;
• NAO leading on Code of Audit Practice;
• Code Stakeholder Group – provides strategic steer;
• Code Practitioner Group – will assist/advise on preparation of draft Code of Audit Practice.
• Sector consultation – NAO will consult sector on draft Code
Helping the nation spend wisely
What do these changes mean for you? – grateful for views/thoughts
We would welcome feedback:
Local.Government@nao.gsi.gov.uk
developing audit committees in the new framework
Diana MelvilleGovernance Advisor CIPFA Better Governance Forum
diana.melville@cipfa.org
cipfa.org.uk
How does the Bill affect your audit committee?
Current audit committee responsibilities:
Receiving and considering the work of the external auditor
Ensuring that there is effective working between all audit functions
Monitor management action in response to recommendations
No change following the Bill
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‘Maintaining an independent relationship’
Auditor Panel function to advise
Audit Committee will need to have regard for this advice
Possible examples: Monitoring non-audit work performed by external
auditor Reviewing the public reports about non-audit work
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What more can the audit committee do?
A company audit committee would: Review & agree adequacy of engagement letter for
each audit Satisfy itself that fee payable is appropriate and a
high quality audit can be delivered for it Consider whether work plan is consistent with
engagement, including resources & composition of audit team
Review audit findings & opinions Assess the effectiveness of the audit process &
report to the board
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Actions to consider:
How your audit committee currently monitors quality & effectiveness of external audit
How your audit committee currently monitors non-audit work by the external auditor
What support is provided to head of finance?
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Establishing the auditor panel – options & relationships
Separate auditor panel Protocol for liaison with audit committee
Multiple authority auditor panel If joint auditor panel, then multiple audit committee
relationships Could include an independent (audit committee)
representative from each authority
Combined auditor panel and audit committee Must meet independence requirement of Bill
Auditor panel is sub-set of audit committee, eg made up of independent members of audit
committee – as per the Bill
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Implications for audit committees
Evaluate current audit committee make up – do you have independent members already?
Consider requirement for independent members depending on your preferred option for the auditor panel
Plan recruitment process if necessary
Briefing / training for audit committee members
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Timing considerations
Local appointment 2017
Procurement underway 2016
Panels would need to be in place by then at the latest
Regulations & guidance will follow enactment
Allow time for recruitment plus time to build up knowledge
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