The Audit Commission has slammed plans to allow councils to select their own external auditors in a damning dossier presented to an influential group of MPs.
The doomed watchdog’s submission to the Communities & Local Government select committee’s Audit and the Inspection of Local Authorities inquiry added that the transition to new arrangements will bring significant and financial risks and weaken accountability.
The submission, put into the public domain on 3 February, said the principle that public bodies such as councils should not be able to appoint their external auditors, was first recognised by Parliament in 1864 and it should remain.
“Allowing local bodies to do so [appoint auditors] would undermine auditors’ ability to work independently and report without fear or favour, key principles of public audit. This would weaken accountability to the public and Parliament for about a third of public spending,” The commission said.
The dossier said moving to new arrangements “will be complicated and protracted, bringing significant financial and governance risks” and that it was possible to achieve most of the government’s objectives more quickly, with reduced risk and without major legislation.
It also questioned the logic of ditching the commission’s non-audit functions.“Some of the commission’s wider functions, which cease on abolition, are valuable. It is counter-intuitive to disband expertise on VFM, data, analysis, governance and assessment when severe financial pressures are increasing the risk of financial or service failure in local public bodies,” it said.
The inquiry has also provoked fresh calls for ministers to fully explain claims that abolishing the Audit Commission will save £50m.
A submission by union Prospect, said: “Despite a considerable passage of time since the announcement, there are still no detailed breakdowns of the projected cost savings in the public domain, thus preventing any real discussion or challenge to the government’s claims.”
The union added that the proposed abolition provided little detail on potential liabilities, which it estimated at over £100m for pensions and up to a further £70m of redundancies above the current cost of £50m.
Its submission added: “We believe that the changes to the current independent appointment of auditors will compromise the current high standards of scrutiny and subsequent performance in local government.”
The inquiry follows communities secretary announcing plans to ditch the watchdog last August and stating that councils should be able to appoint their own auditors.
A DCLG spokesperson said: “The options we are developing for a future audit regime will shift power from Westminster to people, save taxpayers money, deliver high standards of auditing practice and maintain inspection and intervention arrangements for the most vulnerable. The Comprehensive Area Assessment has already been abolished saving millions and avoiding wasted time spend on profligate reporting. We will set out further detail on the new arrangements shortly.”
“The corporate centre of the Audit Commission lost its way,” he added. “Rather than being a watchdog that champions taxpayers’ interests, it became the creature of the Whitehall state. Audit should remain to ensure taxpayers’ money is properly spent, but this can be done in a more competitive environment, drawing on professional audit expertise across the country”