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Tony McArdle: The audit regime needs an overhaul

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The financial pressures upon local government and the strain that they will continue to impose for some time to come are well described by Rob Whiteman in his recent article for LGC.

The consequences for the financial stability of councils have thus led the Chartered Institute of Public Finance & Accountancy to develop a financial management code that will support finance professionals and provide assurance and confidence to a wide range of stakeholders, within the sector and beyond.

This is welcome and he and his organisation should be commended for taking this step in the absence of – indeed in preference to – regulation or ‘guidance’ from government.

Mr Whiteman cites the travails of Northamptonshire, and it is certainly the case that financial collapse was a prominent feature of the council’s failure. It was, however, a symptom of that failure rather than the cause of it. Application of such a code would have helpfully drawn earlier attention to the way things were going. Governance and management problems at the county council which brought about financial collapse were capable of deepening and going unaddressed until the point was reached that real damage – financial and otherwise – was well advanced and difficult to remedy.

In addition to the benefits of the proposed Cipfa code, the Local Government Association continues to develop and promote peer review. If given some of the teeth that it currently lacks, this may prove a useful tool. There is still something missing, however.

The government has recognised the need to look at the audit regime. It is evidently in need of an overhaul on a range of fronts. Born out of the abolition of the Audit Commission, it was deliberately and sensibly constructed to get away from the conceited paternalism that marked the latter years of that organisation. But in doing so, some things have been lost: a repository of advice and distilled good practice; a helpful ability to propose measures for improvement; a right to warn of the consequences of failure to make progress; and ultimately the ability to recommend to the secretary of state that an authority which has ignored advice, help and warning be placed in some form of externally directed action.

All of these things need reconsideration. The present audit approach offers no platform for any of that, but a reform of it could usefully do so.

Tony McArdle

Lead commissioner, Northamptonshire CC

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