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Future of Local Public Audit

Volume 526: debated on Wednesday 30 March 2011

On 13 August my right hon. Friend the Secretary of State announced plans to disband the Audit Commission, transfer the work of the Commission’s in-house practice into the private sector, and refocus audit on helping local people hold councils and local public bodies to account for local spending decisions.

Since the announcement, my Department has worked closely with other Government Departments, the Audit Commission, the National Audit Office, the accountancy profession, local government and health sectors and other partners to design the new framework. I am now publishing, for initial consultation, our detailed proposals, which are a continuation of the Government’s desire to increase the independence of local public bodies and their accountability to local people, while maintaining clear accountability, through Ministers, to Parliament. I have placed a copy of the consultation paper in the Library of the House.

Our proposals follow a set of design principles: localism and decentralisation; transparency; lower audit fees; and high standards of auditing. We have also been guided by the established principles of public audit, including the independence of public sector auditors from the organisations being audited and the wider scope of public audit.

The new framework mirrors that already in place for the audit of companies. If audit firms wish to become statutory local auditors, they will need to fulfil the rules and arrangements of the professional bodies that are designated as “Recognised Supervisory Bodies” by the Financial Reporting Council. They will therefore be mainly self-regulated.

The overarching issue is how to ensure levels of assurance are maintained in the new framework, without creating a complex bureaucratic system which places additional costs and burdens on councils. Strong accountability to Parliament through accounting officers will be retained, while decision making on auditor appointment’s selection will be decentralised.

The Department of Health is considering the governance and accountability arrangements for the new health landscape and these will help determine the appropriate audit arrangements. The local public bodies referred to in the consultation paper do not, therefore, include local health bodies. However, I will be undertaking a further consultation on the arrangements for the audit of all local public bodies for which auditors are currently appointed by the Audit Commission, including health bodies, when I publish my draft Audit Bill for pre-legislative scrutiny. The Department of Health will publish a paper summarising its proposals at the same time.