It would be inappropriate for me to comment as the District Auditor and Audit Commission are both independent of Government and the District Auditor’s investigations are ongoing. This is an operational matter for the Audit commission and I have asked the Chief Executive of the Audit Commission to write to the hon. Member directly.
Letter from Steve Bundred, dated 4 February 2008:
Your parliamentary question on whether the district auditor has oversight over the (a) London Development Agency and (b) Greater London Authority has been passed to me for reply.
I think it would be helpful at the outset to clarify the role and responsibilities of the Audit Commission and the appointed auditor, before turning to the work being undertaken by the District Auditor for the Greater London Authority (GLA) and London Development Agency (LDA).
The role of the Audit Commission
The Audit Commission (the Commission) is an independent body with statutory responsibilities to regulate the audit of local government and NHS bodies in England. The Commission's statutory responsibilities in relation to audit are set out in the Audit Commission Act 1998 (the Act). They are to:
appoint auditors to local government and NHS bodies;
prescribe how auditors should carry out their functions through a statutory Code of Audit Practice, which is approved by Parliament at five-yearly intervals;
set scales of fees for audit work; and
make arrangements for certifying grant claims and returns.
The Commission appoints professionally qualified auditors from its own staff (known as District Auditors) and private firms of auditors. Once appointed, auditors carry out their statutory and other responsibilities, and are required by the Code of Audit Practice to exercise their professional judgement, independently of the Commission.
The separation between the Commission and its appointed auditors is reflected in statute and case law. The Act confers the duties and powers of the appointed auditor on appointed auditors, who exercise their duties and powers in their own right.
The statutory independence of auditors means that the Commission cannot:
interfere with an appointed auditor's exercise of his or her professional skill and judgement in performing his or her statutory functions;
substitute its own judgements for those of an appointed auditor in the exercise of those functions; or
direct an appointed auditor to act or to review his or her decisions, as only the courts have the powers to do so.
The Commission appoints the auditors to the GLA and its associated bodies including the IDA. The District Auditor for both the GLA and the IDA is Mike Haworth-Maden.
It is not therefore a matter for the Commission itself to investigate the recent claims of impropriety in the allocation of grants by the IDA and the GLA. Those claims are properly matters for the consideration of the independent District Auditor in the exercise of his functions (see below).
The role of the appointed auditor
The Audit Commission Act 1998 sets out the specific statutory duties of appointed auditors.
They are:
to comply with the Code of Audit Practice]
to give an opinion on the accounts of the audited body;
to satisfy themselves that the accounts comply with statutory requirements and have been compiled in accordance with proper practices;
to satisfy themselves that the audited body has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources; and
to certify completion of the audit.
In addition, auditors of local government bodies (which include the GLA and IDA) have other statutory duties and powers:
to consider issuing a public interest report about any matter that comes to their attention during the audit, which they judge should be considered by the audited body or brought to public attention;
to decide whether the audited body should consider formally, and respond to in public, matters raised in an audit report;
to give electors the opportunity to raise questions about the accounts, and consider and decide on objections received from electors about the accounts; and
where unlawful expenditure has been or is about to be incurred by an audited body, to issue an advisory notice, to apply to the courts for a declaration that an item of account is unlawful or apply for judicial review.
The Code of Audit Practice requires that where, in the course of an audit, representations are made to the auditor or information is provided that is relevant to the audit, or matters relevant to the audit otherwise come to their attention, auditors should consider whether the matter needs investigation and action.
Work carried out by the District Auditor
The District Auditor is currently considering a number of allegations concerning the allocation of grants that have recently been reported in the media. I understand that matters have also been referred to him by three MPs and the London Assembly.
The District Auditor is considering these matters in the context of his statutory responsibilities. His initial focus has been the conduct and findings of the GLA's and LDA's internal reviews to date. In this context, he has received the reports on the reviews recently undertaken by the Statutory Finance Officers:
(a) for the GLA, the report of the Executive Director of Finance and Performance dated 9 January 2008 (which is available on the GLA's website); and
(b) for the LDA, the report of the Group Director, Risk and Resources dated 11 January 2008 (which is available on the LDA's website).
His work to assess the conduct and findings of those reviews, and other related internal activity undertaken to date by the GLA and LDA, is currently in progress. As part of this, he has recently met officers from the Metropolitan Police with regard to the ongoing police investigations into a number of matters that the LDA's Statutory Finance Officer has referred to the police.
On the basis of his assessment of the internal reviews carried out by the GLA and the LDA, he will assess the further work required on his part, including whether further information, interviews or other investigation activity (of the GLA and LDA itself, or of third parties) is required with regard to the specific projects referred to him. This will also inform his wider assessment of the GLA and LDA in the context of his statutory responsibilities, including the arrangements for making grants.
In following the approach set out, he will need to have regard to other ongoing work, including:
the Metropolitan Police's ongoing investigations;
the further work that the LDA is carrying out on a number of specific projects, but also with regard to its planned wider risk-based project review; and
London Assembly scrutiny activity.
It is too early to assess the timescale for completion of this exercise.
I hope you find the above helpful. Please contact me, or Mr Haworth-Maden, should you wish to discuss any of the matters raised .
A copy of this letter will be placed in the House of Commons Library.