We need to ensure we have a cost-effective and responsive independent audit function, of sufficient quality, in place after the current contracts come to an end in 2018.
Councils now have the opportunity to appoint their own auditors. This is welcome news, but we need to think carefully about the best way to take advantage of this new-found freedom. The Local Government Association has been working hard to ensure there is a viable, collective option for the sector.
The LGA set up an independent company, Public Sector Audit Appointments (PSAA), to take over the existing contracts from the Audit Commission when the latter was closed down in 2015. PSAA was specified by the communities secretary in July 2016 as the ‘appointing person’ to appoint auditors through a national scheme, following work by the LGA to develop and promote this option.
So why is the national scheme so attractive and important for the sector?
Firstly, since 2012 the cost of audit has reduced by 45% with the contracts currently in place. Without a national scheme for procurement there is a very strong likelihood that audit fees would increase.
Secondly, it is much more straightforward to manage the audits between bodies that work together and to manage the potential conflicts that arise and create difficulties for maintaining independence. PSAA, as a national appointing person, can group appointments and make changes to appointments as necessary.
Thirdly, the management and monitoring of these contracts by a specialist team will ensure the quality of the audits is maintained at the required standard and will provide greater oversight of the required ethical standards.
Fourthly, and potentially most significant, the viability of the public audit market is maintained into the medium and long term. A national scheme can help to manage the market to support this requirement on behalf of the sector.
The alternative is for councils either individually or collectively to establish auditor panels.
These need to be independent of councils (comprising an independent chair and mostly independent panel members). These panels would then oversee the procurement and make recommendations to councils about the auditor to be appointed. They would also have an ongoing role to oversee the contracts and crucially to monitor independence issues and compliance with ethical standards.
Clearly councils would incur costs in setting up the panel and running individual procurements, which we believe will be far more costly than joining the national scheme.
For all these reasons the LGA is promoting the national scheme run by PSAA and is working hard with the PSAA to make sure the offer meets the needs of the sector. The early indications are that take up will be very significant, as councils are recognising the benefits of the national scheme and the difficulties inherent in the alternative.
All councils have been sent an invitation and have until 9 March 2017 to respond, having taken the decision through full council. Any queries can be directed to firstname.lastname@example.org and further information is available on the PSAA website.
William Nunn (Con), chair, improvement and innovation board, LGA