Local Audit and Accountability Bill 2013 CIPFA Conference 2013 David Watkins, CIPFA P&T Associate

cipfa.org Agenda  Overview of the Local Audit and Accountability Bill 2013  Auditor appointment, auditor panels and audit committees  Council tax referendums

cipfa.org 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

cipfa.org 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

cipfa.org Auditor Panels  Majority of independent members  Chaired by an independent member  Functions can be exercised by another committee if it meets the above requirements

cipfa.org 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

cipfa.org 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 and

Helping the nation spend wisely CIPFA Annual Conference Workshop Future of Local Audit

Helping the nation spend wisely 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

Helping the nation spend wisely 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

Helping the nation spend wisely Local Audit & Accountability Bill: Proposed Audit Framework

Helping the nation spend wisely 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 NAO Code of Audit Practice expected to be in place from NAO VFM powers – DCLG to confirm commencement date. NAO content for powers to apply as soon as Bill receives Royal Assent.

Helping the nation spend wisely 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

Helping the nation spend wisely Continued focus on Central Government We audited 458 accounts in Bodies we audit include government departments, charities, and even some companies We laid 63 major reports before Parliament in 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

Helping the nation spend wisely NAO’s Local Government Team Structure

Helping the nation spend wisely 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 Benefit Universal Credit Community Budgets Efficiency & cost reduction Use of Information Leadership & governance Financial sustainability Service redesign/process improvement Accountability for local services Council tax benefit localisation Education cost reduction Local Economic Growth Farm-based enforcement Integration of public services Asset management Major transport: HS2 New school places Adult social care Children’s services Community Infrastructure levy Business rates retention New Homes Bonus Local transport Investment Income Shared services Key: In programme Potential study or Planned or potential theme work, guide or toolkit Growth in cities Housing Tackling fraud Public health

Helping the nation spend wisely 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 Financial sustainability in local authorities - January The New Homes Bonus – March 2013 Measuring the costs and benefits of whole place community budgets – March 2013

Helping the nation spend wisely 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

Helping the nation spend wisely 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

Helping the nation spend wisely What do these changes mean for you? – grateful for views/thoughts We would welcome feedback:

developing audit committees in the new framework Diana Melville Governance Advisor CIPFA Better Governance Forum

cipfa.org.uk 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

cipfa.org.uk ‘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

cipfa.org.uk 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

cipfa.org.uk 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?

cipfa.org.uk 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

cipfa.org.uk 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

cipfa.org.uk 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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