A new day for local audit


By Rob Whiteman, CIPFA CEO

In my experience, change starts slowly, and then happens all at once. This has certainly been the case for the public sector over the last ten years, with the initial rumblings of transformation as austerity ensued becoming a tidal wave of innovation as the decade went on. 

One such change that had equally far-reaching ramifications for the sector was the abolition of the Audit Commission. And while I couldn’t go as far as to say that anyone regrets its passing, I’ve often wondered if we threw the baby out with the bathwater. 

At a Public Accounts Committee (PAC) hearing in March, the heavy reliance on local audit reports for assurance that governance arrangements are satisfactory was clear. Yet at a time when more assurance is needed rather than less, consistency and quality of local audit has deteriorated, and the sector has certainly suffered as a result.

CIPFA has pushed for reform to local audit for some time, which is why we were particularly thrilled to welcome the Secretary of State for Housing, Communities and Local Government James Brokenshire, to our annual conference in July. As part of a moving speech in which he spoke about his father Peter, a CIPFA-qualified accountant, he announced a review into the quality of local authority audits and whether they are spotting warning signs early enough. 

The review will be led by Sir Tony Redmond, a distinguished local government leader, former local government ombudsman and a former president of CIPFA. So what are some of the issues we would hope the review will address?

An obvious concern is whether audit is fulfilling its core objective of providing assurance that is sufficiently timely and robust to guard against catastrophe. We know that audit since the abolition of the Audit Commission has been almost exclusively focused on the accounts and little else. Is this too narrow? Are there other financial factors at play that require professional assurance? 

Are auditors using their reporting powers correctly? Are the right recommendations reaching the right people? And how are we understanding the bigger picture? While Public Sector Audit Appointments brings together auditor conclusions in an annual report, there is no similar overview of health audit reports or those of smaller authorities. 

Crucially, we must go beyond operational questions. This review must maintain a certain breadth in its scope. Audit is a key element of government accountability, and therefore in the retention of public trust. 

Trust is a funny beast - there is no single player that can drive it. Government, stakeholders, clients who pay for and receive audits, and the general public all have a part to play. 

If the aim is to get back on the road to full transparency, it is vital that all of these perspectives are shared as part of the conversation. This is why we welcomed the secretary of state’s affirmation that the work would examine the public angle, exploring whether the public has lost faith in auditors, and whether there is an ‘expectation gap’ between what taxpayers believe an audit will deliver, and what it can deliver in reality.

The knowledge that all these questions and more are in the safe hands of Sir Tony Redmond makes me optimistic about the future. It’s great to see that our calls for review have not gone unnoticed. 

However, with the Conservative Party leadership contest having recently concluded, we must not be complacent about keeping this vital work at the top of the political agenda. During the campaign, both candidates were largely silent on many of the issues affecting local government, choosing to focus on Brexit. 

Brexit cannot be an eternal excuse. Vital issues that affect the sector, like local audit, need political time and attention and cannot be allowed to fall by the wayside. You can be certain that CIPFA will not accept silence as we move forward on this matter. 

This article first appeared in The LGC.

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