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New audit regime could face delays

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Ministers’ plans to have a new local government audit regime up and running by 2012-13 could be subject to delays, the Department for Communities & Local Government (DCLG) has admitted.

The department said ministers will review the implementation timetable in light of views expressed to the Communities & Local Government Committee’s audit & inspection of local authorities inquiry.

DCLG said consultation on the details of the new framework would be carried out in early 2011 with the necessary legislation published at “the earliest opportunity”.

No breakdown of how the move will save £50m – a fillip cited by communities secretary Eric Pickles at the time of the watchdog’s controversial abolition last August – is provided but the memorandum does flesh out the framework,  which will allow councils to select their own auditors.

The memorandum said the lion’s share of the regulation of the new audit regime will be undertaken by the Financial Reporting Council and the National Audit Office.

“The Financial Reporting Council would have direct responsibility for certain matters: for example its Audit Inspection Unit would carry out the monitoring of the largest public interest audits.

“The National Audit Office would provide the necessary oversight of auditing standards, including responsibility for developing and maintaining the audit codes and supporting guidance,” it said.  

DCLG said no decision had been taken as to whether or not it will give the green light for the Audit Commission’s core audit practice to set up as a mutual – as senior local government figures have called for.

Experts witness have already warned the CLG Committee the new framework has potential flaws with substantial objections raised to the prospect of councils selecting their own auditors and questions around projected savings.    

“There is a really fundamental issue that people who spend public money should not be responsible for appointing their own auditors,” University of Aberdeen Business School Professor of Accountancy David Heald told the MPs.

Professor Steve Martin, director of the centre for local & regional government research at Cardiff University, said: “The LGA say they have had further discussions about supporting councils to regulate themselves and they found out that councils are going to need support and funding to do that.

“Well that is not a huge surprise…Who is going to fit the bill for that? Is this alleged £50m simply now going to be for local authorities to pick up the tab now they have to regulate themselves.”

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Readers' comments (1)

  • Fans of struggling football teams know well the chant "You don't know what you're doing." No better description could be applied to Reckless Eric's announcement of the abolition of the Audit Commission and the completely mythical £50m saving. We'll need to await Sir Bob's memoirs to discover whether he said "That's a very brave decision, Minister", but he must be embarrassed by the contents of this Memorandum which simply demonstrates that the announcement was not based on any thoughtful analysis or considered alternative.

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