The National Audit Office has issued the second part of its consultation on the new Code of Audit Practice which is due to come into force by 1 April 2020. NALC will be responding. The consultation is open for a period of 12 weeks.
Context & proposals
The NAO completed the first stage of its consultation on 31 May and published its own response to this at this link. Schedule 6 of the Local Audit and Accountability Act 2014 requires that the Code be reviewed, and revisions considered at least every five years. The current Code came into force on 1 April 2015, and the maximum five-year lifespan of the Code means it now needs to be reviewed and a new Code laid in Parliament in time for it to come in to force no later than 1 April 2020.
In order to determine what changes might be appropriate, NAO are consulting on potential changes to the Code in two stages. The first stage is complete.
Stage 2 of the consultation involves consulting on the draft text of the new Code. To support stage 2, NAO have published a consultation document, which highlights the key changes to each chapter of the draft Code.
NALC is again minded to highlight:
- There is a difficulty for smaller local councils of the potentially high and disproportionate cost on a small authority when a concerted number of electors decide to raise a high number of minor / technical objections of a vexatious nature. We want to support the continued principle of proportionality (i.e. a lighter-touch for smaller bodies) and of safeguards to contain excessive fees brought about by habitual complainers.
- There should be the inclusion of a principle relating to proportionality in respect of smaller authorities, especially where the authority has an annual budget / turnover below £25k and is potentially exempt (i.e. smaller and subject to the Smaller Authorities’ Transparency Code).
- We agree retention of the current bullet under clause 5.4 that the auditor should consider “the costs of dealing with the matter, bearing in mind that these are borne by the taxpayer” where to a smaller local council the costs of an audit investigation could cost more than the council’s annual precept.
- NAO should also in our view work with NALC and the local council sector in the future to consider the need to revise upwards the financial turnover audit and accounts threshold of £6.5 million for the largest spending local councils in England.
NALC would be grateful if you could please respond to the below specific questions and is interested in the sector’s views:
- Do you think the updated draft Code should include more with respect to when auditors might be expected to use their additional powers?
- Do you think the current approach set out in the updated draft Code to undertake work at smaller authorities under specified procedures will enable auditors to continue to respond to the challenges at smaller authorities?
- Do you think the current approach to considering economy, efficiency and effectiveness at smaller authorities being appropriate and proportionate to the size of the bodies being reviewed is sufficiently reflected in the updated draft Code?