Author Topic: Transparency International Warns About Dismantling Audit Commission  (Read 325 times)

petagny

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Transparency International has produced a report on the UK that warns against dismantling anti-corruption infrastructure, including the Audit Commission. TI-UK suggests that the plans for replacing the functions of the Audit Commission 'seem ill thought-through'. Here's a quote (report attached):


'The Government should stop dismantling anti-corruption oversight structures until it has properly examined the potential impact in terms of corruption, economic loss and discrimination against those that most need access to fair institutions. Any future accountability mechanisms must be designed to guard against corruption risks.

In particular, this research leads TI-UK to be seriously concerned at the proposed abolition of the Audit Commission and that plans for its replacement seem ill thought-through. This should be put on hold until there has been proper consultation and a thorough assessment of alternative options for the auditing of local government and the NHS. Any future auditing mechanisms must be designed to guard against corruption risks.

Similarly, plans to dismantle the Serious Fraud Office should be put on hold and the Government should be transparent about its intentions and hold a public consultation on its proposals for re-organising the machinery for law enforcement against financial crime.'


harnett

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Re: Transparency International Warns About Dismantling Audit Commission
« Reply #1 on: June 15, 2011, 16:13:42 GMT »
Yes - strange that in an environment of tightening regulation post crisis, we should be witnessing the abolition of a regulatory body!  It would be inteeresting to hear what the accountants make of this one!

harnett

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Re: Transparency International Warns About Dismantling Audit Commission
« Reply #2 on: June 15, 2011, 16:19:29 GMT »
Just to add that the report is fascinating.  It seems to mirror the situation with our electoral system, whereby there is a perception of the UK having "world class" systems, but the reality.....
Not sure how helpful the finding is of illegal workers in the construction industry - it's always been such an industry, and is a means of keeping costs down.  Bit of a can of worms that one , which is open to abuse by the redtops in a recessionary environment.

John Short

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Re: Transparency International Warns About Dismantling Audit Commission
« Reply #3 on: June 15, 2011, 18:43:32 GMT »
It is interesting to go back to atseacliff's post on the Audit Commission in Axe falls on the Audit Commission in England and Wales  on August 31, 2010 (When external scrutiny and audit are effective tools? - http://pfmboard.com/index.php?topic=104.0 )

I doubt if the thought of the Audit Commission playing a role in combating corruption was even considered or even understood to be part of its role!
« Last Edit: June 21, 2011, 15:36:23 GMT by Napodano »

atseacliff

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Re: Transparency International Warns About Dismantling Audit Commission
« Reply #4 on: June 15, 2011, 19:52:58 GMT »
Thanks for drawing my attention to this report.  The decision to abolish the Audit Commission was done too quickly and with little if any consultative process.  As Professor David Heald's written submission to the Parliamentary Select Committee pointed out "Parliament has stood aside for too long. The required involvement and influence cannot be secured through after-the-decision inquiries; the Audit Commission should never have been subject to abolition or reconfiguration without advance Parliamentary involvement. The fact that this has happened, and has been treated as a fait accompli, is highly disturbing".  He goes on to point out:
 
1. The Audit Commission had a key role in appointing auditors and setting the framework for local authority audit, including how that differs from, and extends beyond, the financial certification audit undertaken in the private sector. The transparency that has been created by the Audit Commission’s framework, beneficial to local authorities, private sector audit suppliers and external stakeholders, is likely to be lost. Some substitute will have to be devised....in the absence of a specific-purpose arms-length body.
2. The privatisation or dissolution of the ‘District Audit’ (ie audit supplier) function of the Audit Commission will result in all audits to be undertaken by private sector firms. One of the stated advantages of a mixed model, as also adopted by the NAO, is that having an in-house provider allows for benchmarking against external providers and also provides the operational knowledge base on which the performance of private sector audit suppliers can be evaluated. This will now be lost, giving more market power to the private sector firms (an extremely concentrated market) and putting great demands on contract specification and management, wherever these functions are performed. Heald cites Australia as an example where similar reforms have been rolled back but he leaves it to others to judge the abilities of local government contractors to manage private sector auditors. Without the Audit Commission to devise a Code of Audit Practice and operate a framework agreement under which private sector auditors are commissioned, the market power of those of the Big 4 that wish to do public sector audit will increase.
3. The abolition of the Audit Commission puts centralised functions such as research, performance improvement and performance evaluation functions at risk.  As Heald notes these "capabilities are easy to destroy but will at a later date prove difficult and expensive to rebuild. Moreover, it is needed in the present, when a long period of strong public expenditure growth is followed by large real-terms expenditure reductions".

TI have picked up on the corruption issue because that is their raison d-etre.  The broader concern is the erosion of the framework of public accountability in the UK with little or no ex-ante thought about the consequences.  In an environment with district councils facing the brunt of expenditure cuts the opposition knives have been sharpened by the coalition when (not if) a major governance backdown takes place. 

   

atseacliff

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Re: Transparency International Warns About Dismantling Audit Commission
« Reply #5 on: June 15, 2011, 21:13:25 GMT »
This was heavily trailed over the last few months - out of the ashes....not that this addresses any of the issues raised in the previous post - if the AC LLP is a success would anyone bet against it being snapped up by one of the Big 4 ......

http://www.publicfinance.co.uk/news/2011/06/audit-commission-ready-to-set-up-audit-firm/

Martin Johnson

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Re: Transparency International Warns About Dismantling Audit Commission
« Reply #6 on: June 29, 2011, 21:26:27 GMT »
I guess Vince Cable was thinking of issues beyond the AC when he was quoted as saying that the Conservative side of the coalition was moving too quickly for policies to be thought through properly. Recent U-turns (err ... stakeholder consultations) demonstrate that VC was right. Probably the tip of the iceberg I imagine. I have had some interesting conversations with middle management in the UK probation service about the nature and detail of justice sector reforms that certainly do not sound like they have been well thought through. If VC didn't have the AC at the front of his mind back then, it has probably come to the fore since then. Pity that he allowed himself to be caught out voicing a personal opinion on a controversial and murky issue when he should have known (and undoubtedly knows now) better. Unfortunately that probably took away his effectiveness in communicating and influencing common sense to policy reform. I suppose that's the kind of thing that happens, though, when you end up in government when you least expect it.

 

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