At the crossroads: what is public audit for?
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The very future of public sector audit is at stake, says Paul Dossett.
I have worked in public audit for 32 years.
I started my career in the era of rate capping and illegal budgets, the era of Derek Hatton, Ken Livingstone, MK1 and Militant Tendency.
Just after I qualified, we had Westminster and the “Homes for Votes” scandal.
The role of the auditor was pivotal in this era with surcharge powers, court appearances and television interviews.
Trade, local and sometimes national press, often eagerly awaited the next public interest report by an auditor.
I have worked on value for money assessment as varied as housing maintenance and mental health services.
I have dealt with objections to LOBOs, libraries and council tax rebates.
I have received hundreds of letters over my career from local government electors.
It seems to me we are now at a real crossroads as to what we want public audit to be.
Do we want it to be a box ticking compliance exercise or do we want it be to a vibrant intervention, both protecting the public purse but at the same time offering comparative data, examples of good practice and actually looking at value for money in public spending?
As a profession, we have, in my view, made the mistake (which the Kingman review, published just before Christmas, clearly articulates) of conflating what is appropriate for the audit of corporate entities with what matters in public bodies.
The value of a company and whether it has sufficient cash to continue as a going concern are pretty important to say the least to investors, suppliers, staff and customers.
These are, in practice, of comparatively less relevance in the public sector.
Audit regulation has perhaps focused too much on the value of schools and hospitals.
Setting a balanced budget and ensuring efficacy of investments in companies are of course comparable risks which the public auditor should be very focused on.
On the other hand, awarding contracts for running ferries to companies without any ships, or spending billions on IT systems that do not work, or selling public assets to developers at suspiciously low prices are things taxpayers rightly care about and need more audit scrutiny.
We need a completely new approach to public audit regulation, where the auditor is scrutinised as to how they have demonstrated they have robustly assessed governance, stewardship of assets and value for money.
The recent NAO report provides a timely warning that both austerity and a change in the regulatory regime have led to concerns about local authority governance and whether audit scrutiny is focusing on the right things.
I seriously fear that in a decade, there will be very few people left in local audit who understand properly the pivotal link between taxpayers’ money and public audit.
So how do we achieve change?
Kingman helps point the way in terms of regulation.
He is clear that the new regulator needs to contain people steeped in public audit.
This should ensure that, in future, auditors are judged on how they have dealt with things that impact on the stewardship and governance of local bodies.
The new Auditor General, Gareth Davies has had a career in local audit and worked with many different councils and other public bodies.
His is a very timely and welcome appointment, with a new Audit Code of Practice due in 2020.
Public audit is important and our discussions with many councils is that they want to see more work, not less, on the issue surrounding value for money and governance.
There is a real opportunity to reset and ensure that public audit meets the expectations of all its stakeholders, particularly the taxpayer.
Paul Dossett is head of local government at accountancy firm Grant Thornton UK.
