Local Audit and Accountability Bill 2013CIPFA Conference 2013

David Watkins, CIPFA P&T Associate

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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

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CIPFA Annual Conference Workshop

Future of Local Audit

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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

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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

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Local Audit & Accountability Bill: Proposed Audit Framework

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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.

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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

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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

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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

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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

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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

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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

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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

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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

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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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