One of the more interesting austerity measures to be implemented during the first 100 days of the UK Coalition Government was the decision to axe the Audit Commission; the Government quango charged with auditing local councils in England and Wales. So after nearly 30 years of checking local authority books, the commission's 2,000 or so staff will soon be out of a job. It has been argued that the Commission played an important role in improving performance, however others have argued that the burden of inspection outweighed the benefits, particularly as may failed to notice the improvements the Commission reported.
While much of the political theatre over the closure focused on alleged corporate excesses of the Commission the decision was grounded the two areas - cost and a desire to cut centralised bureaucracy in government. Now local council audits will be contracted to the private sector and competition may reduce costs. At the same time the Government will need policy safeguards to ensure that private sector auditor conduct their work with a high degree of independence in order to tackle financial mismanagement objectively, and not with one eye on trying to hold onto work. On decentralisation the government seeks to move away from setting centralised outcomes. Instead, it argues that local people should hold councils to account. How this will work in practice is unclear and the Government needs to act quickly to address the uncertainty left in the wake of the demise of the Commission. The previous system of comprehensive performance assessments did provide a benchmark for minimum standards and provided an incentive for improving poor performing councils. Now councils now need to develop their own systems for improving services and provide mechanisms for local communities to address poor performance. Institutionally it will be interesting to see how the necessary checks and balances can be implemented at a local level.
The audit of local authorities in the UK is a £200 million a year "business". There are some issues which have a generic interest to Boarders:
1. The linkage between the auditing profession in the public and private sector is important. In Scotland public sector audits have been sub-contracted for years and it is argued that these skills provide flexibility and reduced costs in the provision of audit services. On the other hand who audits the auditors and do private sector auditors really understand the complexity and mandate of public sector organizations?
2. Institutional arrangements will define the way that local councils are held to account. The balance between centralised regulation and local self governance will have to change and new mechanisms will need to support the over-arching goals of the government. What are the incentives for locally elected politicians to set challenging performance targets and cut costs in the current austere economic climate?
