Auditing for Change: Local Government and the Audit Commission
| DOI | http://doi.org/10.1111/j.1468-2230.1991.tb01857.x |
| Published date | 01 November 1991 |
| Author | Mike Radford |
| Date | 01 November 1991 |
Auditing for Change: Local Government and
the
Audit Commission
Mike
Radford
*
The Audit Commission for Local Authorities
in
England and Wales was established
by Part
111
of the Local Government Finance Act
1982
('the
1982
Act')
to
take
overall responsibility for the audit of local government.'
It
was created
with
the
twin
objectives of emphasising the independence
of
the
audit process and promoting
grcater value for money
in
local authority spending, the government being of the
view that 'improving public sector efficiency is still
in
large measure a matter
of
improving scrutiny, monitoring and management
within
the context
of
existing
institutions.
'2
In
performing this role the Commission has made a considerable impact
on
the
way
in
which local authorities operate.
In
part this has been an inevitable consequence
of its duty
to
examine and comment upon how they carry out their day-to-day
functions.
But
two further factors have greatly enhanced
its
power. First,
it
is
the
product of a period when many regarded accounting as an appropriate and objective
means of assessing the efficacy of public services. Consequently, the Commission
has played an important part
in
shaping how the public and
-
perhaps more
significantly
-
ministers perceive local government. Second, the Commission's
existence has coincidcd
with
a time of unprecedented turmoil within local authorities:
debatc about their funding, expenditure, indeed their very purpose, has never been
far from the top of the political agenda; relations between Whitehall and town hall
have deteriorated significantly; and authorities have been subjected
to
a barrage
of
legislation which has servcd
to
undermine their traditional power and (relative)
autonomy.
This breakdown
in
thc status quo has given rise
to
a fundamental reassessment
of
the role and status of local authorities, and the Commission has been peculiarly
well placed
to
have
a
profound effect both on the debate about the future of local
government and on the way
in
which authorities have adjusted
to
their new circum-
stances. This article considers how the Commission has used its considerable
influence,
with
particular reference
to
its role
in
promoting change
in
local
government.
Historical Background
Procedures whereby the accounts of
local
public bodies wcrc subjected
to
independent
scrutiny have existed since at least the early years of the fifteenth century, but
it
was
the increasing
cost
and complexity of the poor law which proved
to
be 'the
brccding ground of thc audit system.'.' Initially, poor law accounts were presented
*Scliool
ol
l,iiw9
Uiiivcrsity
of
E:ist
Anglin.
I
Tlic
Cotiiinissioii's jurisdiction
was
cxtcndcd
by thc Niitional Hculth Scrvicc
and
Cotiiiiiunity Cure
Act
1990.
s
20
iind
Schcd
4,
to
include hciiltli authorities and
otlicr
NHS bodies.
Its
Rill
titlc
is
now
the
Audit Coiiiniissioii for
I,ociil
Authoritics iind thc Nationnl Hciilth Scrvicc in
Englid
iid
Wnlcs.
2
HM
I'rtxisiiry.
71~
f'iddic
Svc/orjw
//ir
Pirhlic
(Econoniic
Progress
Rcport
No
145.
Mily 1982).
3
K.
Joiics.
1.otud
Goiwiiiiwit
h/i/
Ltriv
(I,ondoii:
HMSO,
2nd
cd.
1985)
p
12.
For
ill1
iiitrotluction
to
the Iiistoriciil tlcvclopiiicnt
of
local
govcriitiicnt audit,
scc
Ch
I.
9
12
711~
Moclcwr
hv
Rci*icw
54%
Novciiilxr 1991 O26-796
1
to
the justices of the peace for their appr~val,~ but by the middle of the nineteenth
century the practice of employing a specialist auditor, equipped
with
powers and
duties which would be familiar
to
his modern counterpart, was well established.
In
1834
the Poor Law Commissioners were provided
with
the power
to
appoint
paid officers with such qualifications as they thought necessary for the auditing
of
the accounts.s Ten years later, the chairmen and vice-chairmen of
the
boards of
guardians
within
each district were authorised to elect an 'Auditor of the District'
who was provided
with
'full
powers
to
examine, audit, allow or disallow' the
accounts, and
to
charge those responsible for any deficiency or
loss
incurred
as
a
result of negligence or misconduct.6 The same Act gave ratepayers a right to see
the accounts and
to
attend the audit
to
raise any objections. These arrangements
reflect the principal characteristics traditionally associated
with
local government
audit: an independent, retrospective inspection of the accounts
to
ensure financial
probity; the power
to
charge those responsible for any irregularities; and the
opportunity for involvement by those whose interests the system is designed to protect
-
the local taxpayers.
As local public services diversified and increased, district auditors were given
new areas of responsibility. By
1900
their jurisdiction included local boards of health;
school boards; sanitary authorities; highways; county councils; urban, rural district
and parish councils; and the London
borough^.^
It
was not
until
the Local Govern-
ment Act
1972,
however, that the audit of all local authorities
in
England and Wales
was finally placed under a single statutory regime, although they could choose whether
to
have their accounts audited by the district auditor or a private auditor, approved
by the Secretary of State. The effectiveness of district auditors was founded on their
independence and status. The District Audit Service (DAS) had been subsumed into
the civil service
in
1868
in
order to distance auditors from the bodies which they
audited.u District auditors were therefore paid and appointed by the government,
but they were unusual
in
that, despite their status as civil servants, they did not
carry out their duties on behalf of ministers. Statute provided them
with
powers
in
their own right, which they exercised as they considered appropriate
in
the light
of their own professional skill and judgement. The Secretary of State for the
Environment was describing a well established tradition when he told the House
of Conimons
in
1982
that
district auditors were 'entirely independent
in
discharging
their statutory duties for which they answer
to
the courts and not
to
me."'
Although the district auditor's function could be accurately described as 'more
judicial than an aspect of control by a central government department
,
''O
concern
grew during the
1970s
that auditors, by working from
within
a government depart-
ment, appeared
to
be acting on behalf of ministers. The Layfield Committee of Inquiry
into Local Government Finance, for example, considered
it
to
be wrong
in
principle
that an authority should be able
to
choose its own auditor, or that auditors should
be
so
closely identified
with
central government.
It
also expressed the view that
4 Poor Rclicf Act
1601;
Poor Rclicf Act
1703;
Poor Riitc Act
1801.
5
Poor Law Aiiicndiiient Act 1834.
6 Poor Law Anicndnicnt Act 1844. Thc District Audit Scrvicc was foundctl in 1846
iind
thc title 'District
Auditor' first appcarctl in
statute
in 1868.
7
Public Health Act 1848; Elciiicntnry Educittion Act
1870;
Public llcalth
Act
1872;
Highway
illld
Locotiiotivcs (Anicndnicnt) Act
1878;
Local Govcrniiicnt Act
1888;
LociIl Gnvcrnincnt Act 1894;
London
Govcrniiiciit Act 1899.
8 Poor Law Aiiicndiiient Act 1868.
9
Michael Hcscltinc.
HC
Deb vol
16,
col 53
(I8
January
1982).
Scc
;ilso
R
(Briclprrtor)
v
Drrrry
[
18941
10
J.A.G.
Griffith,
Ciwtrd Di~pwtirit~rtis trrrd /mid Artrlroriric.s
(London: Allen
ant1
Unwin. 1966)
p
59.
913
2
IR
489, 509; Departincnt of thc Environnicnt. Circular 79/73. parn 14.
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