The Association of Chartered Certified
Accountants (ACCA) has warned proposed changes to local UK
government audits could result in spend not being audited properly
in the future.

In its response to the Government’s Draft
Local Audit Bill
the ACCA said local government audit needs to
be “strengthened and clarified”.

The Bill details a proposed audit framework
for local public bodies, the process for the appointment of
auditors, and the regulatory framework for local public audit.

ACCA is mainly concerned that a comprehensive
impact assessment has not been conducted so far and the focus is
“wholly on cost without reference to the impact of downward fee
pressures on audit quality”.

“This lack of a comprehensive impact
assessment also means costs have been understated, which make it
likely that overall savings claimed as a result of the revised
audit framework for local government are inflated and may not be
sustainable,” ACCA’s public sector head Gillian Fawcett said.

She added the important issue for the ACCA is
that the proposals would not place significant amounts of public
money at risk or fail to provide assurance about the value for
money, but the institute is “not convinced the proposals lay these
concerns to rest”.

The institute also calls for more clarity over
the threshold for public sector audits – currently at £6.5m
($10.4m) – as the Government is proposing a tiered level approach,
which it thinks would confuse rather than add clarity. The current
threshold means significant sums of money below that will not be
subject to an audit.

According to the ACCA, the proposals as they
stand will not bring a “proportionate and risk-based approach to
public audit, which delivers accountability and promotes public

Contracts conundrum

The professional body is also concerned that a
large proportion of local government contracts have now been let,
and all contracts include a clause for a possible extension until
2020. This means there is potential for some local authorities not
to appoint their own local independent auditor for a further 7

“Under such circumstances, it seems irrational
that a draft Bill and impact assessment are being put forward to
close the Audit Commission (AC) before £89.4m a year contracts have
run their course and without any clear strategy for managing them,”
Fawcett remarked.

As such ACCA is calling for the regulatory
function of the AC to be retained during the lifetime of the
contracts. However, the institute offered another alternative of
the management of contracts as being determined by HM Treasury and
the National Audit Office until “locally independent audit
appointments are made”.

Lastly, in its response to the consultation
ACCA has suggested that local authority audit committees should
have oversight of the auditors and their work.

“We’ve suggested that the Government’s
proposals to establish audit panels are unnecessary and will
introduce additional costs and burdens on local authorities, as
well as muddy the waters for accountability and governance,”
Fawcett explained.

“Instead, there should be a statutory duty in
the draft Bill for local authorities to have audit committees –
these would carry out the functions laid down in the Bill – using
industry guidance set down by the Financial Reporting Council to
enable this to happen. This would provide local authorities with a
clear framework in which to operate – an essential to promote value
for money for the future.”