The closure of the Audit Commission on 31 March 2015 heralded the start of the process of devolving the responsibility for making external audit appointments to all local public bodies including all classes of local authorities, police (CC and OPCC), fire and rescue bodies (where separate), waste disposal, transport authorities and executives, together relevant NHS bodies.
Public Sector Audit Appointments Limited (PSAA), an independent company established by the LGA, manages the existing appointments under the transitional arrangements which, for local government sector bodies, are now due to end at the conclusion of the 2017/18 audits.
Extension of transitional arrangements
The transitional arrangements have been extended to include 2017/18 audits for all bodies, excluding NHS and smaller bodies such as Parish Councils for whom current contracts will expire when the 2016/17 audits are complete.
The LGA argued for this extension in order to lock in savings of approximately £24 million per annum for local government bodies.
What happen when the current arrangements come to an end?
The choice for Councils will be:
Establish your own independent auditor panel (Part 3, section 9 and schedule 4 of the Local Audit and Accountability Act 2014).The panel must be made up of a majority, or of wholly independent members and must be chaired by an independent members.
Establish a joint auditor panel carry out the function on behalf of two or more bodies.
Opt-in to the national scheme for the appointment of auditors run by Public Sector Audit Appointments Limited (PSAA) as the approved sector led body (SLB) specified by the Secretary of State to act as the Appointing Person on behalf of opted-in authorities. The LGA lobbied for the inclusion of this option within the legislation in order to secure economies of scale and savings in terms of the administrative burden on councils and other local government sector bodies.
New appointments for auditors need to be made by December 2017 regardless of which option is chosen.
Auditor Panels will need to be established to enable these panels to be engaged in specifying the Invitation to Tender and running the procurement exercise in 2017 to meet the statutory deadline for appointing new auditors.
The LGA has been working with PSAA in developing a sector led body offering so that there is a viable alternative to each council setting up a separate Auditor Panel. Formal invitations to opt-in were issued on 27 October 2016 with a response date of 9 March 2017. Opt-in will require Full Council Approval (Regulation 19, Local Audit (Appointing Person) Regulations 2015).
The LGA is supporting the sector led approach because of the following benefits for individual authorities and for the sector as a whole:
- PSAA will ensure the appointment of a suitably qualified and registered auditor and expects to be able to manage the appointments to allow for appropriate groupings and clusters of audits where bodies work together;
- PSAA will monitor contract delivery and ensure compliance with contractual, audit quality and independence requirements;
- Any auditor conflicts at individual authorities would be managed by PSAA who would have a number of contracted firms to call upon;
- It is expected that the large-scale contracts procured through PSAA will bring economies of scale and attract keener prices from the market than a smaller scale competition;
- The overall procurement costs would lower than an individual smaller scale local procurement;
- The overhead costs for managing the contracts will be minimised though a smaller number of large contracts across the sector;
- The will be no need for the council/authority to establish alternative appointment processes locally, including the need to set up and manage an ‘auditor panel';
- The new regime provides both the perception and reality of independent auditor appointment through a collective approach; and
- A sustainable market for audit provision in the sector will be easier to ensure for the future.
30 November 2016