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Audit Commission strategy consultation 2001

Comments from the Association of Chartered Certified Accountants

October 2001

Executive Summary

The Association of Chartered Certified Accountants (ACCA) is pleased to have this opportunity to comment on Delivering Improvement Together, the Audit Commission strategy consultation 2001. These comments have been prepared in consultation with members of the ACCA's Public Sector Technical Issues Committee, a group of experienced accountants working in the public sector.

ACCA welcomes this consultation document outlining the Commission's revised strategy. We believe, however, that these should have been a greater focus on reviewing the successes or otherwise of the implementation of the Commission's previous strategy. We do not consider that one page of highlights of how the Audit Commission implemented the priorities of its previous strategy is sufficient. We believe that the Audit Commission's strategy should be based on research into where the Commission has been most effective at facilitating positive change.

In turn, the current proposed strategy includes few clear objectives, milestones or action points. In view of this, we believe that it will be difficult in future to assess the extent to which the Commission has been successful in implementing this strategy. In addition, the strategy does not recognise some of the significant problems which exist in reforming our public services, for example:

• the costs of best value inspection
  
  and
  
  
• the fact that, in a recent survey, only one in ten senior public sector finance managers strongly agreed that public-private partnerships had a beneficial effect on public services.

We consider that the key priorities for the Commission should be to:

• ensure that adequate assurance is provided on probity and regularity in public services
  
  
• help to facilitate continuous improvement in the efficiency and quality of public services
  
  and
  
  
• ensure that this is achieved cost-effectively.

ACCA believes that it should not be the Commission's aim to ensure that audit and inspection work is carried out to the same level for all services in all entities. Better quality services in improving authorities should be subject to a lighter touch inspection. Inspectors should concentrate on ensuring that poorer quality services are improved.

We are pleased that one of the priorities contained in the strategy is working with other regulators. We are, however, disappointed that the role of internal audit within local authorities and health bodies has been ignored. We believe that effective internal audit could be an important factor in achieving the Commission's objectives. Responses to Specific Questions

NEW EXPECTATIONS

Where can positive changes be brought about most quickly and how?

1. We believe that the Audit Commission's strategy should be based on research into where the Commission has been most effective at facilitating positive change. We also believe that there should have been a greater focus on reviewing the successes or otherwise of the implementation of the Commission's previous strategy. Subjective impressions of the Commission's successes do not provide a sufficiently comprehensive picture.

2. We consider, however, that there are three main areas which could facilitate rapid positive change:

• developing an advice-giving role earlier in the best value process - we accept that this issue is covered in the consultation paper
  
  
• putting more resources into following up audit recommendations and taking action to monitor the implementation of advice which has been included in national studies (this should not be restricted just to key areas - see page 12)
  
  and
  
  
• working with local authorities to facilitate further improvements in the quality of their internal audit services.

How can the Audit Commission help?

3. The Commission could encourage improvement in the quality of internal audit by encouraging and facilitating the formation of consortia, as has happened, for example, in North Yorkshire. It should also ensure that the managed audit concept does not artificially restrict the scope and remit of internal audit.

4. We believe that the Commission should consider ways in which it could encourage local authorities to report on the adequacy of their internal financial control systems (expanding later to cover the whole of internal control). We also believe that local authorities and health bodies should be encouraged to report more widely on environmental and social issues.

5. ACCA considers that the quality of internal control systems could also be further improved in local authorities by further encouragement of the formation of audit committees and ensuring that these are not down- graded with the introduction of new forms of governance.

6. The Commission should also ensure that sound controls are introduced over partnerships with the voluntary and private sectors. These should include ensuring that each scheme has:

• proper accountability arrangements and appropriate public audit access agreements
  
  
• effective contingency plans in the event that the partnership has to be terminated prematurely
  
  and
  
  
• access to objective professional advice as an aid to proper decision-making.

FOCUSING ON USERS AND THE PUBLIC

Should we place the views and experiences of users at the heart of the Audit Commission's strategy along the lines outlined?

7. The Audit Commission and the auditors whom it appoints need to work with public sector managers to facilitate continuous improvement. Thus, there are problems with the suggested approach of focusing on the users of public services. The Commission should ensure that local authorities and health bodies are user-focused and are consulting their users, but the auditors and inspectors need not do this themselves directly (see the first bullet point on page 20). Similarly, at the top of page 16, it is suggested that the Commission should develop "a methodology for tracking where new resources are used and what impact they have". ACCA believes that this should be the role of management within the bodies audited and should not be for the Commission itself.

8. If, therefore, by "users" the Commission is referring to users of public services, ACCA considers that they should not be at the heart of the Commission's strategy. If the Commission is "to be a driving force in the improvement of public services", its prime partners should be the managements of local authorities and health bodies and their councils and governing boards.

9. The heart of the Audit Commission's strategy should be facilitating the continued optimisation of the accountability, transparency and openness of local authorities and the health service, and helping to ensure that these organisations provide efficient, user-focused services.

What are the opportunities and the risks of this approach for the Commission and for public services?

10. The risk of the Commission having too much of a focus on the users of public services is that its engagement with the managements of local authorities and health bodies may be lost. The prime audience of the Commission's reports should be senior management and members. The aim should be to facilitate positive change within their organisations. Providing useful information to the public should be a secondary aim.

How can we most effectively measure users' experiences of services?

11. We believe that this should be a vital role for the managements of public services. The Commission should ensure that management fulfils this aim; it should not itself be assuming this role.

How can we best reflect the diverse needs of service users and the public in shaping our work programme?

12. We believe, again, that this objective should be achieved by the Commission reviewing the management of public sector entities. Management of local authorities and health bodies should have as a prime objective ensuring that the diverse needs of users are met. The Commission should ensure that this is achieved in all relevant entities.

13. We also believe that, when planning the work programmes for Commission auditors and inspectors are planned, the diversity of local authority and health boards should be fully recognised. The programmes should be risk based and should ensure that resources are targeted at those areas where positive results will be achieved most quickly. We, therefore, support the proposals to conduct annual risk assessments across local government and the NHS.

Do we have the right priorities? What other priorities would you suggest?

14. ACCA does not feel that, in developing its strategy, the Commission has necessarily critically considered its core objectives and its past successes and failures. It is not clear why the Commission should now be "deploying [its]…services differently" (page 3) or why it should now "work in new ways and form new partnerships" (page 7).

15. We believe that the managements of entities which are subject to audit and inspection should centre their work on their users and should ensure that they respond to user experience of local services. The role of the Commission should be to satisfy itself that this happens. This means that its work should be targeted on management action and not necessarily directly around users.

16. One problem of focusing on issues which matter to users is that the Commission could find itself chasing rapidly changing headline issues. This could result in investigations of the symptoms rather than the causes of user problems.

17. We consider that the key priorities for the Commission should be to:

• ensure that adequate assurance is provided on probity and regularity in public services
  
  
• help to facilitate continuous improvement in the efficiency and quality of public services
  
  and
  
  
• ensure that this is achieved cost-effectively.

HELPING TO DELIVER IMPROVEMENTS TO PUBLIC SERVICES

Cross-sector working

Where should we focus our cross-cutting work?

18. We believe that the focus of the Commission's cross-cutting work should include considering:

• how effectively the health service and social services are working together
  
  
• the success and effectiveness of public-private partnerships
  
  and
  
  
• the cost effectiveness and success or otherwise of the best value initiative.

How can we best help local agencies to tackle cross-cutting issues?

19. The Commission should spend more time reviewing how it has levered-in change so that it can be more successful in future. The Commission should ensure that there is effective follow-up work of all audit and inspection reports, not just of the "key areas" (see bottom of page 12).

20. We believe that more effort should be made to ensure that national studies and local value-for-money work is targeted at ensuring that cost effective services are provided to users. This should include working across organisations and sectors where appropriate.

Local government

What do you think of our proposals for joining up audit and inspection work on best value?

21. Given the Commission's previous commitment to joined up working, we are surprised that these proposals are necessary. We consider that there is a particular need for better liaison with the Social Services Inspectorate.

22. We believe that appointing a client manager to serve as the single point of contact between the best value authority and the Commission would be particularly helpful.

Should we develop an advice-giving function? How could this be most helpful to you?

23. We consider that this would be a helpful development. We have some concerns, however, that advice may effectively become a stipulation which, if not complied with, would subsequently result in a negative inspection outcome.

24. Without further details, it is difficult to assess the likely success of this proposal. Would this work, for example, be undertaken by the relevant inspectorate or by Audit Commission appointed auditors?

What else should we do to reduce the bureaucracy of the best value process?

25. We agree that "regulation should be proportionate to risk and performance" (page 18) and believe that a risk based approach should be further developed for inspection of best value. This should aim to ensure that all services in each organisation do not receive the same depth of inspection coverage. Better quality services at improving authorities should be subject to a lighter touch inspection. Inspectors should concentrate on ensuring that poorer quality services are improved.

The National Health Service

What should be the Audit Commission's priorities in its NHS work?

26. We largely agree with the suggested priorities for the Commission's work in the NHS. We consider, however, that "focusing on the patient's experience" and "tracking where new resources are used" should primarily be the priorities of health managers. The Commission's role should be to support and advise managers, and to ensure that they act upon these priorities. It should not itself address these priorities directly.

Are there areas where we should do less, or could do more, to deliver greater benefit?

27. ACCA considers that the Commission should put more effort into reviewing the successes of the controls assurance initiative and improvements in the quality of internal audit in the NHS. These lessons could then be made available to local authorities.

Wales

How can the Commission respond to the challenges in Wales and uphold consistently high standards of public services for users?

28. ACCA considers that the priorities identified by the Commission should enable it to respond to the challenges in Wales and uphold consistently high standards of public services for users. We consider that the Commission should also make some comparisons of performance with local authorities and health bodies in Northern Ireland and Scotland to draw from best practices in these jurisdictions.

How should the Commission relate to the National Assembly for Wales?

29. We agree that the Commission should ensure that it reports adequately to NAW committees. We also believe that the Commission should consider the views of the NAW when considering national and local value for money work for Wales.

Which of the proposals listed above are the most attractive?

30. We consider that an annual Wales-wide risk assessment is the most attractive of the proposals listed. This should help to ensure that the Commission's resources are targeted at the areas which will result in the maximum benefit.

Should the Commission appoint a Director for Wales, based in Cardiff? Should that person take the lead for all of the Commission's services in Wales?

31. Yes. We welcome the proposal for the Commission to appoint a Director for Wales and consider that the person appointed should take the lead for all of the Commission's services in Wales.

Modernising ourselves

How do you think we could make our knowledge and information more easily accessible?

32. We believe that the Commission should put more effort into engaging with managers rather than communicating with public service users. Inspectors and Commission-appointed auditors should be viewed as vital sources of advice and good practice on how to implement successful improvements and achieve cost effective, high quality public services.

How can we improve access to the Commission for all of our stakeholders?

33. ACCA believes that the Commission should put more effort into working with managers in local authorities and health bodies to ensure that change is actually implemented and improvements are achieved. We consider that more work should be undertaken to monitor the extent of implementation of recommendations included in the Commission's national reports and in local value for money studies, inspection reports and audit letters.

What do you see as the most important issue for the Commission to address in order to improve its own effectiveness?

34. We believe that the Audit Commission's strategy should be based on research into where the Commission has been most effective in levering-in change. We believe that the Commission should aim to be seen as an effective facilitator of positive change and the most valuable source of consultancy advice for managers in the organisations where it appoints auditors and inspectors.

How can the Commission best measure its impact?

35. We believe that the Commission could best measure its impact by setting out clear objectives, milestones and action points in its strategy and then reviewing these as part of its next strategy review.

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