Minutes:
Further to minute AG22/16, Rich Clarke, the Head of the Audit Partnership, provided an update on the specific points raised by members at the last Committee meeting regarding the alternative options for appointing a new external auditor. His report provided additional information on the following issues previously raised:
The likely costs of an individual procurement
Mr Clarke advised that there would be limited cash costs to the Council undertaking the procurement process alone. However, he added that it was likely that there would be somewhere between 10 and 15 days of officer time required in carrying out the various procurement processes.
Attitude of neighbouring and other authorities towards the procurement routes
Mr Clarke advised that there was strong evidence to show that the significant majority of local authorities who had already expressed their procurement preference would be opting for the ‘sector-led body’ route. He added that he had found no evidence of a local authority opting for the creation of an auditor panel as their preferred procurement method.
Experience of the NHS in auditor selection
Mr Clarke said that his research into the experience of the NHS – specifically hospital foundation trusts – showed that they had benefited from a sharp fall in audit fees at the earlier time when they had been able to seek audit approval from a newly-created regulator – Monitor – to work with less oversight from central NHS control. However, in more recent times, Mr Clarke said that his research had shown that there had been very little change in the fees that the trusts were required to pay for their statutory audit.
Mr Clarke added that his conclusions were that it is not the external audit process which will impact on the fees that local government will be required to pay but the scope of the audit required.
Mr Clarke advised that evidence he had gained to date showed that there was clear support for handing the appointment decision and contract management over to an ‘appointed person’ (i.e. the ‘sector-led body’ option). He added that the only ‘appointed person’ to have come forward to date was Public Sector Audit Appointments Limited (PSAA), although details of their offer were not yet known.
Mr Quigley asked to what extent did the current external audit arrangement help with scale, adding that he hoped to see an analysis of cost benefit. Mr Clarke said that acting on its own, the Borough Council had no historical data from which to draw any firm conclusions. He did however say that the existing fee level was likely to have a strong influence on the level of fee which the authority would face.
Mr Quigley also asked for confirmation of the length of any agreement entered into with a sector-led body. Mr Clarke advised that PSAA were likely to ask for a three to five year contract period, with the industry norm probably set at three years. He added that the eight-week opt-in opportunity was at first felt to be a one-off position, but subsequent information gained indicated that this might not be the case.
Mr Colyer, the Director of Finance and Corporate Services, said that this was the second update report which the Committee had received. He said that, at the most recent Kent Finance Officers’ group meeting, all authorities across the county indicated that they expected to follow the sector-led body option. He added that, if Tunbridge Wells Borough Council decided to appoint another external auditor, there was a considerable amount of disruption, staff time and cost that was likely to follow. He said that, based on the evidence gathered to date, he was firmly of the opinion that the Committee should recommend the sector-led body route as the more safe and cost-effective option.
Councillor Coleman said that all parish and town councils had been required to follow a similar process, which would take effect from 1 April 2017. He added that, in Kent, he knew of just one parish council which had decided to follow the ‘solo’ procurement route.
Mrs Hough said that she supported the sector-led body option, although she felt that, to some extent, it might be seen as a return to the Audit Commission structure. Mr Colyer responded by saying that, at this juncture, there appeared to be only a few contracts available, sufficient to improve competitiveness. He felt the authority would be best-advised to follow this route, at least for the initial three year period.
Mr Shiels was also supportive of the sector-led body option. However, he warned that, with the shared services that the Borough Council operated, it was vital to ensure there was no duplication and that each function was only audited once.
Councillor Hamilton enquired if the current devolution discussions might have an impact on the procurement plans. Mr Colyer said that the authority could only focus on the existing structure of services.
The Chairman asked Mr Oyerinde from Grant Thornton, the authority’s current external auditors, for his views on the current position. Mr Oyerinde said that he had been impressed with the level of debate which the Committee had had over the two meetings, which he described as the ‘most informed’ he had witnessed.
In summing up the discussion, the Chairman asked the Committee to consider a second recommendation, namely that it supported the option of a sector-led body appointment and that the Full Council be recommended to follow this route.
RESOLVED –
(1) That the Committee notes the latest and further information on the external auditor appointment; and
(2) That the Committee recommend to the Full Council that, based upon the evidence to date, the sector-led body option appears to be the most cost-effective route and should therefore be followed by this authority.
Supporting documents: