Following the Queen’s Speech, the Local Audit and Accountability Bill (“the Bill”) was introduced in the House of Lords on 9 May 2013. The effect of the Bill would be to abolish the Audit Commission and to establish new arrangements for the audit and accountability of local public bodies (or “relevant authorities” as set out in Schedule 2 to the Bill) in England. The Bill also amends the legislative framework under the Localism Act 2011 for council tax referendums, to provide that increases set by levying bodies are taken into account when local authorities determine whether they have set an excessive amount of council tax each year. It also contains measures relating to local authority compliance with the Code of Recommended Practice on Local Authority Publicity.
The Bill consists of seven Parts and 13 Schedules. Part 1 (Clause 1 and Schedule 1) provides for the abolition of the existing audit regime.
Part 2 sets out basic requirements and concepts. Clause 3 imposes a requirement to keep accounting records and to prepare an annual statement of accounts, which must (Clause 4) be audited.
Part 3 imposes a requirement (Clause 7) to impose an external and independent auditor on the advice (Clauses 8 and 9) of an independent auditor panel (Clause 10) and to publish information about the appointment. Clauses 14 and 15 relate to limitation of auditor liability; and Clause 16 to resignation and removal of an auditor.
Part 4 relates to eligibility and regulation of local auditors.
Part 5 is concerned with the role and conduct of local auditors. The scope of the audit is set out in Clauses 19 and 20, and largely replicates existing provisions in the Audit Commission Act 1998. Clause 18 and Schedule 6 set out the role of the Comptroller and Auditor General of the National Audit Office in setting the audit standards through codes of audit practice and guidance. Clauses 23 to 30 set out the additional duties of local auditors in undertaking audits of relevant authorities, retaining the current roles in, for example, reporting in the public interest when necessary or taking questions and objections from local government electors. By virtue of Clause 21 a local auditor has a right of access to documents and information that relate to the relevant authority and are necessary for the purpose of the auditor’s functions under the Bill. The auditor may also require persons to provide information or explanations. Under Clause 22 a person who obstructs that access or fails to comply with a requirement (without reasonable excuse) commits an offence. Clause 25 makes provision about the inspection of accounting records and any documents supporting those records. The Court of Appeal in Veolia ES Nottinghamshire Ltd -v- Nottinghamshire CC [2010] EWCA Civ 1214 found in respect of the forerunner to this provision (Section 15 of the Audit Commission Act 1998) that it should be read down so as to exclude from that right confidential information unless its disclosure was justified in the public interest so as to ensure the provision was compatible with ECHR. Clause 25 therefore makes express provision in this regard. Information may not be disclosed if its disclosure would prejudice commercial confidentiality and there is no overriding public interest in favour of its disclosure.
Part 6 of the Bill is concerned with data matching. Apart from transferring the power to conduct data matching exercises from the Audit Commission to the Secretary of State or the Minister for the Cabinet Office, the data matching powers set out in Schedule 9 (which is given effect to by Clause 32) are largely the same as the provisions inserted into the Audit Commission Act 1998 by the Serious Crime Act 2007.
Part 7 of the Bill contains miscellaneous and supplementary provisions. These include Clause 38, relating to local authority publicity, and Clause 39, relating to council tax referendums. Clause 38 amends the Local Government Act 1986 to provide the Secretary of State with the power to give directions requiring one or more local authorities in England to comply with one or more of the recommendations made in a code of practice issued under Section 4 of that Act (a Code of Recommended Practice on Local Authority Publicity). A direction could apply to a single named authority, to a number of named authorities, to all authorities in a particular class, or to all authorities to which the code applies. It also sets out the procedures to be followed prior to making a direction and for the withdrawal or modification or withdrawal of a direction. Clause 39 amends Chapter 4ZA of Part 1 of the Local Government Finance Act 1992 to include the cost of levies within a billing or major precepting authority’s calculation of whether its council tax is excessive, and so requires a council tax referendum to be held. In effect, this means amending the meaning of “relevant basic amount of council tax” which is the primary trigger for council tax referendums from the current definition which excludes levies, to one that includes levies. Clause 38 comes into force 2 months after the Act is passed. Clause 39 comes into force on the day the Act is passed.