Local Audit and Accountability Bill 2013 CIPFA Conference

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 2013 -14 and 2012 -13

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 prelegislative scrutiny by Commons ad-hoc parliamentary committee chaired by Margaret Hodge. • Bill has started parliamentary passage in the Lords. DCLG expecting Royal Assent early 2014. • NAO Code of Audit Practice expected to be in place from 201516. • 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 Financial audit Value for money studies Investigations work Support to Parliament International work We audited 458 accounts in 2011 -12 We laid 63 major reports before Parliament in 2011 -12 This enables us to respond quickly to important issues that public bodies currently face 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 Bodies we audit include government departments, charities, and even some companies We highlight important lessons for the bodies we audit and for government more widely Our work focuses on improved decision making, robust financial management, and using information better We report on EU spending in the UK We are a member of the INTOSAI* board * 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) Helping the nation spend wisely

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. Financial sustainability Service redesign/process improvement Accountability for local services Council tax benefit localisation Education cost reduction Asset management Tackling fraud Key: In 2012 -13 programme Potential study 2013 -14 or 2014 -15 Planned or potential theme work, guide or toolkit Housing Benefit Community Infrastructure levy Universal Credit Business rates retention New Homes Bonus Adult social care Local transport Community Budgets Children’s services Investment Efficiency & cost reduction Income Use of Information Leadership & governance Public health Local Economic Growth - To assess whether the government, through a range of initiatives with local government, is achieving its objectives for growth. Major transport: HS 2 New school places Local Enterprise Partnerships Farm-based enforcement Integration of public services Growth in cities Housing Shared services Integrated services - To establish whether integration is being implemented in a way which delivers better VFM.

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 2012. • Financial sustainability in local authorities - January 2013. • 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: Local. Government@nao. gsi. gov. uk Helping the nation spend wisely

developing audit committees in the new framework Diana Melville Governance Advisor CIPFA Better Governance Forum diana. melville@cipfa. org

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 nonaudit 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

cipfa. org. uk