Stephen Sheen: Wanted: a caring home for audit

Stephen Sheen is the managing partner of Ichabod’s Industries, a consultancy providing technical support to local government.

The Audit Commission will vanish in a puff of smoke as midnight tolls on 1 April.  When the haze clears, will the commission have gone, leaving nothing but a sooty smudge on the wall to stir tales of the terrible beast that once haunted England?  Or will its spirit live on, wisps of its inspirational vapours filling the lungs of local government officers?

We can be assured that there will be at least one denizen of Westminster who will have a warm feeling come 1 April.  But should the rest of us be revelling or rueful?

In practical terms, there might not be a lot of change.  Most of the functions performed by the commission have been found what appear to be caring and responsible homes.  Provided the transition is smooth, things will continue to be done very much as before.  Sometimes even by the same people, just in different chairs.

Public Sector Audit Appointments Ltd has been incorporated by the LGA to take on the role of supervising auditor appointments and setting fees.  It will have the interesting job of managing authority and auditor expectations of the current bargain basement contracts.

The National Audit Office has drafted a new Code of Audit Practice and will have responsibility for other guidance to which auditors must have regard.  Their value for money studies will have a greater reach into local government.  The NAO’s chief, the comptroller and auditor general, will take the role of a prescribed person to whom whistleblowing disclosures can be made in respect of local authorities.

The Financial Reporting Council has the job of supervising recognised supervisory bodies, who will be authorised to confirm the eligibility of auditors for local audit appointments and keep a register of them.  The FRC will also have the primary responsibility for reviewing the quality of audits.

The commission’s fine work in countering fraud is to pass to the Cabinet Office, who will run the National Fraud Initiative data matching programme.  Counter-fraud work has transferred to CIPFA, hosted by the Counter Fraud Centre that was established in Summer 2014.

On the face of it, it would appear that the commission’s responsibilities have been scattered widely, as if each of the commission’s sister organisations had each felt obliged upon the event of this family tragedy to take in one of its orphan children.

On reflection, though, this dispersal might actually be a good thing.  Many of the things that the commission did were not particularly complementary and did not, by necessity, have to be carried out by the same organisation.  Separating them and passing them to different bodies, with different objectives, may lead to a more effective exercise of individual responsibilities.

For instance, the NAO may find itself freer to direct auditors in the conduct of their work if they are not concerned with the contentment of auditors as their contractors.  Public Sector Audit Appointments can concentrate with independence on auditor-authority relationships without having being muddied by detailed involvement in setting the parameters within which auditors work.

Each of the orphans appears to have found a loving foster parent.  The local government world won’t change significantly on 1 April (at least not for this reason).

But I would discourage any excessively celebratory mood.  There were moves before the final abolition of the commission which still cast shadows over the future of local audit, the darkest of which relate to the ending of a public audit service for local government.  The District Audit Service was swept up by the commission and then dropped into the laps of the successful firms in the outsourcing exercise.  There is small prospect that the public service ethos can survive the pressures within these firms to make money and not risk damage to one’s reputation.

Oh, alright – one small glass of champagne, then.  But then the graft begins to make sure that local audit works for the public interest.