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Local Audit and Accountability Act under scrutiny

Print publication

08/05/2014

Shortly after coming into power in 2010, as part of its drive to reduce the number of public bodies and save taxpayers’ money, the Coalition Government announced its intention to close the Audit Commission. True to its word, the Government began stripping the Audit Commission of its powers, scrapping its inspections and outsourcing its contracts, and then introduced the Local Audit and Accountability Bill to Parliament in May 2013. See our previous article on the original Bill. The Bill was passed on 30 January 2014 and is beginning to take effect. Its main purpose is to put in place a new audit framework for local public bodies in England, but there are a number of other provisions, hidden away towards the end under ‘Miscellaneous’, which are arguably of greater interest.

The new audit framework
The legislation underpinning the existing audit regime, including the Audit Commission Act 1998, is repealed. Instead, local public bodies in England, such as county and district councils, fire and rescue authorities and clinical commissioning groups, will have to appoint their own independent auditors, similar to the audit requirements on companies and charities. The auditors will be regulated by the appropriate professional accountancy regulators, and the Financial Reporting Council will have overall supervision, mirroring the arrangements under the Companies Act 2006.

The scope of the audit itself will remain very similar to the current audit. Auditors will have to comply with a code of practice and have regard to guidance. The code and guidance are being developed by the National Audit Office.

The audit framework will be implemented through secondary legislation and a consultation on this ran during November and December 2013. The Government’s response was published in February and the Government is working towards having finalised regulations on: the appointment and removal of auditors and their eligibility; and the conduct of local audits, ready to be laid before Parliament in the summer. Further regulations on: smaller authorities; establishment of a sector-led body to procure/appoint local auditors; and Accounts and Audit regulations, will be laid later in 2014 following a further consultation to be issued in May.

Smaller authorities with an annual turnover not exceeding £25,000 are exempt from a routine external audit. Instead they will be subject to new transparency requirements. The Government is currently consulting on a draft transparency code for parish councils, which it intends will act as a substitute for an audit, allowing local electors to access the information about the parish council’s accounts and governance so that those electors can ‘audit’ the parish council.

Local Authority Publicity Code
Eric Pickles has long had a bee in his bonnet about what he has termed ‘Town Hall Pravdas’ and section 38 of the Act enables him to direct a particular local authority to comply with the Code of Practice on Local Authority Publicity, or to make an Order (by passing a statutory instrument) imposing a duty on all local authorities to comply with the Code. This is as predicted by our previous article, Further restrictions on local authority publicity?. These powers came into force on 30 March and a letter has already been written to all local authorities warning them that the Secretary of State is minded to give a direction to any authority he considers is not complying with the Code. At the same time, Brandon Lewis wrote to Greenwich, Hackney, Newham, Tower Hamlets, Waltham Forest and Nottingham saying that “it has been suggested that your council might not be complying with the Publicity Code” and further suggesting that “prior to the Secretary of State’s new powers coming on-stream at the end of March, you take steps to ensure that your council is in compete [sic] compliance with the provisions of the Code”. It will be interesting to see if they heed these warnings or whether any directions are issued..

Council meetings
Section 40 was inserted as the Bill passed through Parliament and came into force on 30 March 2014. It allows the Secretary of State to make regulations allowing council meetings to be filmed, recorded and tweeted live. The aim of this is to make meetings of full council and committee meetings, plus parish council meetings, fully accessible to those who cannot attend in person, so that there is transparency and openness and that decision makers can be held to account. The Government seems to have inserted this clause as a reaction to various councils ejecting members of the public who were trying to film meetings. We expect regulations to be published shortly.

Council tax referendums
The Localism Act 2011 enabled the Government to set a threshold for council tax increases each year. If a local authority wanted to increase its council tax about that threshold, it triggered a referendum. The calculation did not take levies into account. Levies are amounts that a local authority pays to an external body, such as a waste disposal authority or integrated transport authority, and then recharges to the council tax payer via the council tax. They have been steadily increasing more than other parts of the council tax bill; last year they increased by 5.2 per cent. Section 41 of the Local Audit and Accountability Act therefore amends the calculation of council tax to include levies. This took effect on 30 January, enabling the levies to be included in the 2014/15 calculations.

Comment
The Act has caused some controversy but perhaps not as much as expected. This is probably because many of the provisions need to be implemented by regulations, most of which have not yet been issued for consultation. It does seem, though, that more responsibility for scrutiny – of finances and meetings – is being passed to a local level. Is central Government washing its hands of local government, leaving the people to decide? And yet, it is seeking to exert more control over how local authorities can influence public opinion, by enforcing the Code of Practice on Local Authority Publicity. Local authorities will have to be open and transparent and let the facts and figures speak for themselves.