Axeing Audit Commission could see "disastrous" loss of public faith if new regime fails: NLGN

Abolition of the Audit Commission could have a disastrous effect on public faith in local government if ineffective safeguards lead to failures in council finances, a leading think tank has warned.

The New Local Government Network report Show Me the Money called on the government to give citizens a lead role in auditing local government finances.

The think tank said the public should be allowed a Citizen Right of Appeal in those circumstances where an auditor’s independence might be compromised. It also warned of the dangers of an uncompetitive market for public audit and that councils could face higher costs.

The NLGN also:

• backed the establishment of a mutual based on the Audit Commission’s practice, saying this would introduce another competitor to existing providers
• called for barriers to entry for small and medium-tier firms to be removed
• urged the government to produce clear guidance “to guard against appointing on current ‘experience’”.

Publication of the report comes just days after the Department for Communities and Local Government launched a consultation on its proposals for a new public audit regime.

It said that the current arrangements where the Audit Commission is the regulator, commissioner and provider of local audit services were unnecessarily centralised. The DCLG also suggested there was a lack of transparency and clarity as well as potential conflicts between the roles.

NLGN’s Olivier Roth, author of the report, said: “We’re pleased to see that the government has recognised the need for a more open and less centralised system for auditing local councils, but if the new model doesn’t work and we see the deterioration or collapse of some councils’ finances, then public confidence in localism will be seriously undermined. With the audit landscape and public finances in turmoil, the best way to reassure citizens is to let them take the front seat in the drive for stable council finances.”

“We recommend giving citizens real power in auditing councils’ finances through measures such as independent, citizen-led auditor appointment panels, and a ‘Right of Appeal’ when auditor independence is compromised.”

A copy of Show Me the Money can be obtained here.