Audit and inspection of local authorities

Book excerpt: Local authority control of audit and performance provides opportunities to improve value for money and to focus more closely on local priorities. However, there are significant risks to accountability for public money unless new legal and practical arrangements are put in place to uphold the vital principle of auditor independence. Until now the Audit Commission has been the regulator, commissioner and major provider of local government audit services (undertaking 70% of the local government audit and commissioning the remaining 30% under contract from five private audit firms). Under the changes proposed, local government will in future appoint their own auditors. The Government plans to introduce a public audit bill in the autumn. The Committee argues this legislation must set out a number of key principles to govern public audit arrangements in the future: strict adherence to the principle of auditor independence; a majority of independent members on any local audit committee; additional safeguards to ensure the continued effectiveness of public interest reporting; a proportionate and risk based approach to the scope of local government audit - to permit local innovation and application, particularly with regards to local value for money work. The Committee also welcomes the LGA's proposals for sector-led performance management, but calls on the Government to clarify arrangements for intervention in the exceptional cases of serious corporate or service failure. It also repeats its call for the Government to examine the contribution which robust local government scrutiny arrangements could make to improving local government performance.