Local Audit & Accountability Act 2014 Appointment of External Auditor

Transcription

1 FULL Local Audit & Accountability Act 2014 Appointment of External Auditor EXECUTIVE MEMBER: LEAD OFFICER: REPORT AUTHOR: Councillor David Moore, Portfolio Holder Fiona Rooney, Director of Commercial & Corporate Resources (& Section 151 Officer) Fiona Rooney, Director of Commercial & Corporate Resources (& Section 151 Officer) RECOMMENDATION: Council is recommended to accept Option 1; being the invitation from Public Sector Auditor Appointments Ltd (PSAA) to opt in to sector-led arrangements for the appointment of the External Auditor for Copeland Borough Council from 31 December INTRODUCTION 1.1 The Local Audit and Accountability Act 2014 received Royal Assent on 30 January The Act abolished the Audit Commission and the associated arrangements for appointing local authority external auditors and placed the responsibility on local authorities to appoint their own external auditor. Local Authorities are required to have their new arrangements in place by no later than 31 st December The Act requires that the appointment of the external auditor is a decision for Council following advice from an Independent Auditor Appointment Panel. Appointments to the Panel (if appropriate) are also a decision for full Council. 1.3 There are 3 options available to the Council as follows: Join the sector led body specified by the Secretary of State to undertake auditor appointments on behalf of opted in organisations; Undertake a stand-alone auditor procurement and appointment exercise; or

2 Undertake a joint audit procurement and appointment exercise with other local authorities. 1.4 Under Regulation 19 of the Local Audit (Appointing Person) Regulations 2015, Council approval is also required for a decision to opt in to a sector-led appointment 2. INFORMATION 2.1 The introduction of the Local Audit and Accountability Act in 2014 abolished the Audit Commission and the arrangements for appointing local authority external auditors. The legislation placed the responsibility on local authorities to appoint their own external auditor having taken account of the advice of an Independent Auditor Appointment Panel. 2.2 The legislation includes specific criteria for the membership of an independent auditor appointment panel, but did not preclude authorities from joining together to share auditor panels. 2.3 The Local Audit (Appointing Person) Regulations 2015 issued more recently now provide an additional option for Local Authorities to consider. The Regulations provide for the Secretary of State to specify an appointing person to appoint an external auditor to audit the accounts of an opted-in authority. The Secretary of State has now specified Public Sector Auditor Appointments Ltd (PSAA) to undertake this function for Authorities opting in to sector-led appointment. PSAA is an independent organisation initially set up by the Local Government Association to manage all existing auditor appointments. 2.4 The Council s current external auditor is Grant Thornton, the appointment having been made by the Audit Commission. The current arrangement benefits from significant reductions in audit fees compared with historic levels. This is a result of a combination of factors; the closure of the Audit Commission and the fee rates negotiated with the accountancy firms in return for large regional shares of the public sector market. 2.5 Auditor appointments must be made by 31 December in the year before the financial year that the audit relates to. For Copeland Borough Council this means a new auditor must be appointed by 31st December 2017 to undertake the audit of accounts for 2018/ PSAA Ltd contacted local authorities (on 27 October 2016) with a formal invitation to opt in to the sector-led arrangements. A timetable has been established and Local Authorities are asked to respond formally by no later than 9 March At its meeting on 26 January 2017, the Audit & Governance Committee considered the options available as set out in Section 3 below. Based on

3 consideration of each of the options, the Committee is endorsing the recommendation of Option 1 to Council. 3. OPTIONS 3.1 The following options for auditor appointment are available to the Council. Option 1 opt into a sector led-body 3.2 The LGA has established Public Sector Audit Appointments Ltd (PSAA) to act as a sector-led body; PSAA has now been specified as an Appointing Person by the Secretary of State. 3.3 The sector-led body will have the ability to negotiate contracts with accountancy firms nationally, maximising the opportunities for the most economic and efficient approach to procurement of external audit on behalf of the whole sector. 3.4 The Council has received its invitation to opt into the sector-led arrangements from PSAA Ltd with a deadline for our response of 9 March PSAA Ltd have issued the following timetable for the sector-led procurement: Invitation to opt in issued 27 October 2016 Closing date for receipt of notices to opt in 9 March 2017 Contract notice published 20 February 2017 Award audit contracts by End of June 2017 Consult on and make auditor appointments by End of December 2017 Consult on and publish scale fees by End of March 2018 Option 2 Make a stand alone appointment 3.5 In order to make a stand alone appointment, the Council would need to set up an Independent Auditor Appointment Panel. The members of the panel must be wholly, or a majority, independent members as defined by the Act. Independent members for this purpose are independent appointees; this excludes current and former elected Members or officers and their close families and friends. This means that Elected Members would not have a majority input to assessing bids and choosing which firm of accountants to award a contract for the Council s external audit. A new Independent Auditor

4 Appointment Panel established by the Council would be responsible for selecting the auditor. Option 3 Set up a Joint Auditor Panel / Joint procurement arrangements 3.6 The Act enables the Council to join with other authorities to establish a joint auditor panel. Again this would need to be constituted of wholly or a majority of independent appointees. Further legal advice would be required on the exact constitution of such a panel having regard to the obligations of each Council under the Act and the Council needs to liaise with other local authorities to assess the appetite for such an arrangement. 3.7 The three options available to the Council have been considered very carefully and it is recommended that Option 1 is adopted. 3.8 The advantages of this option are: The costs of setting up the appointment arrangements and negotiating fees would be shared across all opt-in authorities; By offering large contract values, the firms would be able to offer better rates and lower fees than are likely to result from local negotiation; and Any conflicts at individual authorities would be managed by the sector-led body who would have a number of contracted firms to call upon. 3.9 The potential disadvantages / risks are: Individual Elected Members will have less opportunity for direct involvement in the appointment process other than through the LGA and / or stakeholder representative groups; and In order for the sector-led body to be viable and to be placed in the strongest possible negotiating position, councils will be asked to indicate their intention to opt in before final contract process are known. Value for Money Implications 3.10 It is considered that a sector-led procurement exercise will deliver the best value for money for the Council. Whilst the actual costs of the exercise are currently unknown, the Local Government Association considers that this approach will deliver economic and efficient external arrangements for the benefit of all authorities who wish to opt-in to this arrangement The sector-led approach is also considered to make best use of limited Council resources as there would be no requirement for the Council to establish an

5 Independent Auditor Appointments Panel and carry out its own procurement exercise. 4. CONCLUSION 4.1 The Authority must have in place arrangements for External Audit. This report ensures that the Council is compliant with the appropriate legislation. 5. STATUTORY OFFICER COMMENTS 5.1 Monitoring Officer Comments: The legal considerations relevant to the decision are set out in the body of the report. The decision to opt into a sector led appointment is a decision of full Council. 5.2 S151 Officer Comments: The Section 151 Officer has authored the report. No further comments to add. 5.3 EIA Comments: In undertaking the process for appointing an external auditor, the Council s aim will at all times be to secure compliance with its responsibilities under the Equality Act 2010 and in particular the public sector equality duty under that Act. The outcome of any decisions made during the process will be subject to further equality impact assessment. 5.4 Policy Framework Comments: No further comments to add. Appendices: None List of Background Documents: Local Audit & Accountability Act 2014 Appointment of External Auditor, report to Audit and Governance Committee, 26 January 2017