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Austerity, Audit, and Accountability : New Public Management and the Privatisation of Local Audit in England

Margaret Greenwood
p. 159-177

Résumé

This paper examines the experience of the local audit reforms in England against the doctrines and principles of New Public Management (NPM). NPM is a term applied to public sector reforms which aim to enhance both performance and accountability by adopting governance and accountability mechanisms from the private sector. The local public audit reforms, which were initiated in England in 2010, abolished the independent specialist Audit Commission, effectively privatising the financial audit function and severely curtailing the extent to which local public bodies are subject to performance audit. As with other state audit bodies, the Audit Commission had acted as both regulator and provider of audit services to local bodies, such as local authorities and local health service organisations. A review of evidence to date shows that short term efficiency gains were made in financial audit and that there is prima facie evidence of greater accountability to local people. However these gains have been made at the cost of : first, a severe reduction in performance audit, a key function of public audit in delivering both democratic and managerial accountability, and second, a longer-term risk to audit quality and thus to the risk of financial mis-statements. In summary, the evidence suggests that the principles of NPM were appropriated to legitimise the reforms, after the decision to abolish the Audit Commission was taken. In contrast, the rhetoric prior to abolition suggests that the reforms were, instead, inspired more by a personal and political agenda than one of rational economic decision making.

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Introduction

  • 1 Power, M., 1994 & 1997; Lapsley, I., 2008 & 2009.
  • 2 The Audit Commission’s strap line to be found on their publications and web-site <http://webarchive (...)

1In August 2010, following the financial crisis of 2007-2008 and in a context of widespread cuts in public spending, particularly that of local authorities, the Secretary of State for Communities and Local Government, in a surprise move directly in opposition to a growing culture of audit in society,1 announced the abolition of the Audit Commission. This has been the independent body and ‘protector of the public purse’2 responsible for the audit of English local authorities and local National Health Service organisations.

  • 3 Press Release: Secretary of State for Communities and Local Government, 13 August 2010. <https://ww (...)

The Audit Commission has lost its way. Rather than being a watchdog that champions taxpayers’ interests, it has become the creature of the Whitehall state. We need to redress this balance.3

  • 4 House of Lords 2010; European Commission Green Paper on audit policy,
  • 5 Campbell- Smith, D., 2008; Professor David Heald, in written evidence to the House of Commons Commu (...)
  • 6 European Commission Green Paper on audit policy, <http://europa.eu/rapid/press-release_MEMO-16-2244 (...)
  • 7 Local Audit and Accountability Act, 2014

2By 2015, at a time when there were increasing questions about the need for additional regulation of the private sector audit market,4 the Audit Commission had been abolished, financial audit essentially privatised, and performance audit, a distinctive and increasingly important feature of public sector audit,5 severely curtailed. Further, at a time when the European Union has considered the possibility of third party appointment of corporate auditors,6 the Local Audit and Accountability Act (2014) has reversed just such a model of independence for local audit by allowing local authorities to appoint their own auditors.7

  • 8 Buchanan, J. & Tullock, G.,1965; Niskanen, W., 1971.
  • 9 Hood, C., 1991 & 1995.
  • 10 Dunleavy, P. et al, 2006.
  • 11 Hyndman, N., and Lapsley, I., 2016

3As these reforms reach their final stages of implementation the evidence of their impact to date is examined against the rhetoric which informed and legitimised them. We find that the view of the Audit Commission in 2010 was consistent with a public choice theory characterisation of public services as being inefficient, wasteful and self-serving.8 Yet the radical reforms devised to address these issues exhibit only limited consistency with the claims that they would improve both performance and accountability of local public bodies. These claims were founded on the principles and doctrines of New Public Management (NPM), a term widely adopted to describe an approach to public sector reform which is characterised by increasing marketisation of public services and the adoption of governance and accountability mechanisms drawn from the private sector, a reference point for best practice.9 Indeed, the establishment of the Audit Commission in 1983 was, itself, informed by the principles of NPM. Notably, private audit firm participation in the market for local audit services was introduced as an incentive and benchmark for greater efficiency. Although there have been claims that NPM is dead10 there is nonetheless considerable evidence that it continues to inform public sector reform.11 Indeed, the growing desire to increase the alignment between the public and private sectors has evolved into the notion of ‘sector neutrality’ whereby the differences between the two sectors, particularly in the areas of accounting, finance and performance measurement, are minimised in order to facilitate a greater diversity of service provision.

4The findings of this review indicate that the radical reform of local public audit in England is supported by evidence of short-term efficiency gains in the delivery of financial audit services but that these gains have been secured at the expense of a longer-term risk to audit quality and, by inference, to both public money and services. Further, whilst there have been some steps to enhance accountability to local people, the loss of performance audit and wider competitive considerations in which public audit now has to compete for investment and regulatory attention with other commercial services, has arguably had a significant adverse impact on the accountability of local bodies both locally and nationally.

The Distinctiveness of Local Public Audit and its Development

  • 12 Mulgan, R., 2000, Sinclair, A., 1995, Hood, C. & Heald, D., 2006.

5Consistent with the notion of sector neutrality, one of the key objectives of local audit reform was to increase the alignment between the public and private sectors. However, whilst the processes and technology of audit are common across both public and private sectors, there is a consensus that public audit is characterised by some distinctive features. These can be summarised as: first, the scope of audit, which in addition to expressing a view on the financial statements, encompasses the legality and regularity of transactions and value for money; second, the independence of auditors, the aim being to be independent both of management and of government; and third, the wider scope of transparency and accountability relations of public sector bodies.12 The legal and statutory context of local authorities, in particular, is very different to that of the corporate sector and requires a distinctive knowledge base in order to fulfil the obligations around the legality and regularity of transactions.

6Further, local public audit long predates corporate audit13 and over its history there has been a sharp focus on the independence of the auditor, a critical factor in fostering public trust and confidence in government. As long ago as 1844 the Poor Law Amendment Act provided for the central government appointment of ‘District Auditors’ and in 1879 the District Auditors Act further provided that their remuneration and expenses would be paid by Parliament.14 Thus auditor appointment and remuneration became independent of the audited bodies. Independence was further strengthened in 1983 with the establishment of the Audit Commission.15 District Auditors, instead of being employees of the government and therefore vulnerable to governmental influence, became employed by a body which was independent not only of local government but also, by reporting directly to Parliament, of central government. This system, in which the appointment and remuneration of the auditor were independent of both the audited body and of central government, effectively remained in operation until the current reforms and established a level of independence which the private sector has consistently failed to match. Indeed the independence of private sector auditors continues to be the focus of considerable policy attention, most recently in a House of Lords report16 and in a European Commission review of audit policy.17

The Audit Commission and the Language of Public Choice Theory

  • 18 Power, M., 1994 & 1997
  • 19 Campbell-Smith, D. 2008; Institute for Government, 2014.

7By 2010, the Audit Commission was responsible for the audit of approximately £ 200bn per annum of public expenditure and its reach had extended beyond local authorities to include, inter alia, local National Health Services, the police and fire services. Consistent with wider trends associated with the ‘audit society’18 and with the demands of the previous Labour government,19 the scope of its activities had also expanded to embrace a much greater component of performance audit and assessments of value for money. A notable development was the emergence of institutional performance audit in which the Audit Commission sought to rate local authorities’ performance through the application of a number of metrics. It was this aspect of the Commission’s work which gave rise to tensions with audited bodies which questioned the Commission’s authority to make such judgements :

  • 20 Professor John Seddon, verbal evidence to the House of Commons Communities and Local Government Sel (...)

[Portsmouth Council’s] housing service had been downgraded by the Audit Commission for failing to undertake benchmarking, despite providing an efficient and popular service.20

  • 21 David Walker, former written evidence to the House of Commons Communities and Local Government Sele (...)

The work of the Audit Commission in recent years was repugnant to localists. League tables could never recognise the diversity of circumstance in local areas. Performance management implied councils were in tutelage to bureaucrats or ministers.21

  • 22 Chief Executive Essex Council Verbal evidence to House of Commons Communities and Local Government (...)

The attempt to capture best practice through this route is deeply flawed and acts as a contra-indicator to innovation.22

  • 23 House of Commons Communities and Local Government Select Committee 2011 p.7 (House of Commons, 2011 (...)
  • 24 Buchanan, J., & Tullock, G., 1965; Niskanen, W., 1971.

8The majority of the Commission’s activity however remained in the area of financial audit where it was responsible for appointing auditors, setting fees and standards of audit, and for monitoring quality. Approximately 70 % of audits were allocated to its own in-house Audit Practice (previously known as the District Audit service) with the remaining 30 % being put out to competitive tender in the commercial audit market. The financial audit function was well-respected,23 but the combined roles of auditor appointment, audit execution and audit regulation including fee setting, was increasingly questioned. Consistent with a public choice theory view of public services as being inefficient and self-serving,24 the Audit Commission was increasingly portrayed as being inefficient and self-serving and this in turn fed into the NPM narrative promoting the need to enhance both performance and accountability.

  • 25 Department of Communities and Local Government, 2012, p.2.

The current audit arrangements for local public bodies are inefficient and unnecessarily centralised. The Audit Commissioner acts as regulator, commissioner and provider of local audit services, creating a system with weak cost incentives that is too focused on reporting to central Government rather than to local people.25

  • 26 Daily Telegraph 27 July 2011. ‘The Audit Commission: spending watchdog accused of wasting thousands (...)

9Finally the Audit Commission was accused of not following its own advice by being profligate with public money. In the period when the reforms were announced there were several press reports, some of which were based on information released under the Freedom of Information Act 2000, which accused the Commission of lavish spending on travel expenses, away-days and the commissioning of consultancy services aimed at protecting its interests by ‘combating the activities of Eric Pickles’, the Secretary of State.26

The Audit Commission continued to spend thousands of pounds on lavish entertaining even after its abolition was announced as part of cost-cutting measures.27

  • 28 Sunday Times 31 January 2010.

The Audit Commission, which is supposed to be politically neutral, paid nearly £ 60,000 to the lobbyists, who advised it to “combat the activities of Eric Pickles”, the Tory party’s chairman.28

It now appears that the body charged with monitoring how public cash was spent were living in their own little fantasy world blowing taxpayers’ cash on drama workshops, role playing games and conflict management.29

Despite a slogan of ‘protecting the public purse’, it [Audit Commission] wasted public money on ill-advised spending decisions, such as a luxury London hotel to house its chief executive, a best practice audit conference with a string quartet, drinks receptions for its “alumni”, fine dining at the most expensive restaurants using corporate credit cards, Board dinners in Oysters Bars (losing the receipt in the process), and hiring lobbyists to “combat the activities of Eric Pickles”.30

10On the date of the announcement of the abolition of the Audit Commission on 13 August 2010 the Daily Telegraph concluded:

Mr Pickles had clashed publicly with the Audit Commission in Opposition and in Government – refusing a request to pay a new Chief Executive more than £ 200,000 for example – and whilst he insists that the decision wasn’t done out of revenge, he must be relishing killing the quango off.31

The Reforms and the Discourse of New Public Management (NPM)

  • 32 Draft Local Audit Bill 2012 p.6,
  • 33 The reform of public audit follows previous reforms in public sector accounting which similarly aim (...)

11Although the discourse building up to the abolition of the Audit Commission was often vituperative, the official arguments for reform quickly focused on a rational model of improving performance and accountability, especially local accountability, consistent with the doctrines and principles of NPM. The principles which were claimed to inform the reforms were : localism, decentralisation, transparency and lower audit fees with sustained quality.32 These principles appeal to the NPM language of enhanced accountability on the one hand and notions of efficiency and effectiveness on the other. Further, with its emphasis on efficiency, NPM eroded the reasons for the separate regulation of public and private sector audit. It was argued that, with the outsourcing of all financial audit to private sector firms there was no need for a public sector regulator as the private firms were already subject to regulation by the Financial Reporting Council (FRC). Whilst there were some distinctive features of public audit, these could be accommodated by the FRC’s regulatory regime. Thus, the reforms embraced the principle of ‘sector neutrality’ - aiming to enhance the alignment between the public and private sector practice by having just one regulatory oversight body:33

..the reforms address the fragmentation and duplication within the current regulatory regime, by merging the regulatory framework for local public audit as far as possible with the Companies Act 2006 system that governs the audit of private sector companies.34

12Since the Secretary of State’s announcement in 2010 the reforms were actioned as follows:

  1. 2010 : The Commission’s performance audit role ceased. The argument was that there was significant duplication of audit regimes. Education and health service audits are for example conducted by the Office for Standards in Education (OFSTED) and the Care Quality Commission (CQC) respectively.

  2. 2011: The Commission’s in-house Audit Practice was disbanded and the audit contracts they held, amounting to 70% of the total, were put out to tender.

  3. 2014: The remaining 30% of audit contracts already held by the private sector were re-tendered and the Local Audit and Accountability Act, providing for the abolition of the Audit Commission was enacted.

    • 35 Lord Sharman of Redlynch, 2001.

    2015: The regulatory function of the Audit Commission was transferred on the abolition of the Commission to a number of other entities. The National Audit Office, which was established at the same time as the Audit Commission and which had hitherto been responsible for the audit of central Government departments, now took over the responsibility for issuing audit guidance for local audit. Quality monitoring was transferred to the Financial Reporting Council (FRC), the regulator of private sector audit firms. This move was also based on the argument of duplication. Private sector firms conducting public sector work had been subject to regulation by both the FRC and the Audit Commission. Management of existing audit contracts was transferred to a new organisation Public Sector Audit Appointments Ltd (PSAA) until the assumption of local bodies’ powers to appoint their own auditors, contrary to the Sharman principles,35 in 2017 (NHS) and 2018 (local authorities).

  • 36 In the state of Victoria, Australia, for example, the audit practice of the Auditor General was tra (...)
  • 37 Funnell, W., 1997.

13These changes go much further than previous reforms of public audit in other jurisdictions.36 They have been pursued in spite of concerns that such prior reforms heralded the ‘last days of an independent audit function’.37

An Evaluation of Performance and Accountability

Efficiency

Theoretical context

  • 38 English, L., 2003.
  • 39 Institute for Government 2014, p.19.
  • 40 House of Commons, Communities and Local Government Select Committee, 2011.

14Paradoxically, whilst monopolistic supply is often associated with the potential for high prices and low quality, it has been argued that the distinctive features of public audit render the effective monopoly of the Audit Commission over local public audit to be an efficient solution to the more amorphous agency problems encountered in the public sector, which, in contrast to the private sector, is characterised by goal ambiguity, multiple stakeholders, and a weak incentive framework38. Consistent with this view, those few voices raised in support of the Audit Commission39 argued that prices would rise and quality would be impaired as a consequence of the reforms.40 The evidence relating to the impact of the reforms on both pricing and quality is considered below.

Pricing

15Following the cessation of performance audit and the outsourcing of the audit practice in 2011, audit fees for local bodies fell by over 40 %.41 Further reductions took place following the re-tendering of the remaining contracts in 2014 and recent discussions with NHS finance directors and audit committee chairs indicate that further reductions may be taking place upon the assumption of their powers of auditor appointment. These findings are consistent with the conclusions of an independent study which investigated the impact of the reforms on audit fees. Greenwood and Tao (2016) found that, prior to 2010, the audit fees of NHS Trusts were more than twice those of NHS Foundation Trusts. NHS Foundation Trusts were introduced in 2004-0542 and, distinctively, are subject to an audit regime very similar to the one introduced by the 2010 reforms. Further, although NHS Trusts’ audit fees reduced following the outsourcing of the Audit Commission’s Audit Practice in 2013, fees for Foundation Trusts were still a third lower than NHS Trusts. This finding suggests that the abolition of the Audit Commission’s regulatory function in 2015 and the power for local bodies to appoint their own auditors in 2017-2018 will result in further fee reductions. However, whilst overall fees were reduced in the Foundation Trust regime, there was increased variability across regions and evidence of the emergence of a ‘Big 4’43 price premium.44 This variability contrasts with the Audit Commission’s policy of setting fees independently of auditor identity and of smoothing out regional variations.

Quality

  • 45 Dechow, P. et al. 2010.

16Whilst there have been significant reductions in audit pricing the impact on quality has been more difficult to determine. Greenwood and Tao (2016) adopt econometric methods to analyse NHS financial statements and find no reduction in quality overall but, once more, find increased variation, this time across organisation types. However, the proxy used for audit quality in this study, although commonly used in the literature,45 is subject to measurement error. Thus, the absence of a fall in quality according to this measure may not be taken as being strong evidence that there is no such reduction – merely that the relatively low sample size may serve to confound the identification of statistically significant results.

17Other proxies for audit quality include the incidence of public interest reports46 and the incidence of qualified audit reports. However, the incidence of both is low and in the absence of very large sample sizes, results of statistical significance are hard to obtain. However, evidence that there have been no public interest reports on NHS Foundation Trusts since their inception in 2004 has been cited in support of concerns about audit quality. Foundation Trusts have operated outside the Audit Commission regime since their introduction but the absence of any such report as an indicator of reduced audit quality is confounded by the requirement for sustained high levels of performance and the demonstration of financial sustainability as a condition of their Authorisation.47

  • 48 Greenwood, M. (2017) ‘The abolition of the Audit Commission: user perceptions of the impact on audi (...)
  • 49 David Heald, written evidence to House of Commons, Communities and Local Government Select Committe (...)

18Additional insight into audit quality can however be obtained by the use of methods other than statistical analysis. A number of interviews with Financial Directors and Chairs of Audit Committees,48 for example, reveal perceptions of reduced audit effort, experience of reduced engagement with audit partners and the deployment of less experienced staff. If replicated across the sector, this could presage reduced audit quality and enhanced risk of financial mis-statement. Furthermore, if there is a reduction in expert input to the audit process, issues relating to the legality of expenditure, as in the ‘homes for votes’ scandal at Westminster Council in the 1980s, may also be overlooked. This in turn could lead to a ‘repetition of crises and scandals which led to the development of the existing [Audit Commission] framework’.49

19In the longer-term, other risks to audit quality include the way in which public audit now has to compete with other revenue generating services, such as private sector audit and lucrative private sector consulting services, for investment and a proprietorial approach to the sharing of best practice. The Audit Commission oversaw the development and quality of local audit services within the context of an open and transparent framework in which best practice could be shared but this will be constrained in a more competitive environment. Moreover, given the distinctive legal, institutional and accountability arrangements, operational considerations of deploying staff efficiently throughout the year could further erode staff expertise and knowledge of the public sector:

  • 50 Ibid.

‘Such capability is easy to destroy but will at a later date prove difficult and expensive to rebuild.’50

  • 51 Public Audit Forum, 2001
  • 52 Public Audit Forum 2001, HM Treasury; Committee on standards in public life: The seven principles o (...)

20Furthermore, Audit Commission staff who were previously working in a public service, motivated by a public service ethic51 and subject to the sector’s specific values, norms and ethical frameworks, have latterly found themselves in a private sector environment where the primary objective is the enrichment of the firm’s partners and where transparency is constrained by commercial confidentiality. In such an environment it will become more challenging for individuals to follow the ethical standards of the public sector and the prioritisation of the public over the private interest.52

Independence and market concentration

  • 53 House of Lords 2010; European Commission Green paper on Audit Policy, <http://europa.eu/rapid/press (...)
  • 54 Greenwood, M. & Tao, L., 2016; Ellwood, S.,and Garcia-Lacalle, J., 2015.

21Amid concerns regarding the threat to independence from market concentration in the corporate audit market53 it was hoped that the reform of local financial audit would support greater diversity in provision, with the entry of new audit providers and with the Audit Commission’s audit practice carving out an independent identity as a specialist public sector audit provider. In the event, neither of these objectives has been realised. Audit Commission auditors were absorbed into the private sector providers and although the reforms have led to a significant share of the market going to a mid-tier firm (Grant Thornton), there was no overall increase in the diversity of supply with four firms capturing over 90 % of the market.54 However, given that the market is small in comparison with the corporate market and that public audit demands distinctive skills and expertise which create considerable barriers to entry for smaller firms, the hope for greater diversity may have been ‘a triumph of hope over experience’. This market concentration means that there remains a threat that bodies in remote regions may experience difficulty in accessing services at current price and quality levels.

Accountability

  • 55 Bovens, M. et al., 2014 Ch. 1.
  • 56 As enacted in the Localism Act 2011.

22Accountability is a famously elusive concept but has its origins in record-keeping, book-keeping and accounting55 and there is a general consensus that accountability is a relational concept which links those to whom an account is owed and those who owe an account. Public accountability in this context is about delivering an account, openly and transparently, to the public of matters of concern to them, such as the spending of public funds, the exercise of public powers or the conduct of institutions. Parliamentary accountability plays a key role in delivering the public accountability of governments but in recent years there has been a growing movement also to strengthen local democracy and accountability as exemplified in growing regionalisation within the United Kingdom, the devolution of powers to Scotland, Northern Ireland and Wales, the election of city mayors and the move towards more regional assemblies. This mood was captured in the 2009 coalition government’s ‘localism’ agenda56 which was a major influencing factor informing the audit reforms.

“ [the Draft Local Audit Bill] has been designed to implement our commitment to disband the Audit Commission and re-focus audit on helping local people hold their councils and other local public bodies to account for local spending decisions.”57

  • 58 Posner, P. & Shahan, A., 2014, p.488.
  • 59 Posner, P. & Shahan, A., 2014, p.499.
  • 60 English, L., 2003.
  • 61 Hyndman, N. & Lapsley, I., 2016 p.403; Klijn, E.H., 2012.
  • 62 Grossi, G. et al, 2013

23Audit is critical to the ability of governments and elected officials to gain the confidence and trust of the public who look to them to answer numerous needs and demands.58 By providing independent assessment of the extent to which public agencies comply with applicable laws and values (legal accountability), by ensuring that spending is accurately accounted for (financial accountability) and that public programmes achieve their goals efficiently and effectively (performance accountability),59 audit represents a key accountability mechanism for democratic governments.60 In addition, the importance of an effective public audit function has become more pronounced as government has become increasingly complex. In recent years not only has public spending been running at levels in excess of 40 % of GDP but, since the advent of NPM reforms in the early 1980s, there has been an increasing diversity in public service provision and the emergence of models of network governance61 which pose particular challenges for financial accountability and the audit function.62

24In terms of the accountability of local bodies and their auditors, the Local Audit reforms have undoubtedly resulted in a greater focus on local communities though the quality of the accountability is questionable, particularly with respect to the loss of performance audit and the more limited capacity of local bodies to hold the auditors, and local management to account. Local authorities in particular can now trade off investment in audited services such as health and education against those which are subject to a much lower risk of audit. This reduces managerial accountability whilst simultaneously auditors can expect a lower level of challenge from local governance mechanisms that do not have the depth and breadth of knowledge of public audit as an expert body such as the Audit Commission.

25The impact on parliamentary accountability is also questionable. The Audit Commission was accountable to Parliament through the Secretary of State for Communities and Local Government and therefore its accountability focus was very much on the public interest and local communities. In contrast, the Financial Reporting Council, which is accountable to Parliament through the Department of Business Energy and Industrial Strategy (formerly the Department for Business Industry and Skills), has a much wider remit and assesses financial reporting quality across the full scope of its regulatory activity, which includes the corporate as well as the public sector. Thus public audit once more is competing with private sector interests, in this case with respect to regulatory attention.

Discussion and Conclusion

26In this paper, the NPM-inspired ambitions of enhanced performance and accountability of recent local audit reform have been compared with the evidence to date. It is indubitable that short term efficiency gains have been made and that these have been, on the face of it, significant. However, this has been at the expense of a loss of audit activity overall with a severe reduction in performance audit – a significant component of contemporary public audit, and key to holding local public bodies to account. Further, although at present the price of financial audit has fallen with no evidence of significant reductions in quality, the full impact of the loss of the Audit Commission has yet to be revealed. Until 2015 the Audit Commission retained a presence in the market, regulating quality and setting prices. At present, there also exists a residual knowledge and experience in former Audit Commission staff who are now practising in private sector firms. Over time, however, this expertise and residual knowledge will be dispersed and commercial considerations will present barriers to the sharing of best practices and to continued investment in staff development both within firms and at a regulatory level. As far as accountability is concerned, gains in local accountability have been more than offset by the loss of performance audit and by the erosion of parliamentary accountability. Thus, whilst this latest reform of public audit increases alignment with the principle of sector neutrality, it does so at the expense of downgrading the distinctive features of public sector audit.

27In summary, therefore, the reform of public sector audit in England demonstrates only limited compliance with the principles and doctrines of NPM. Rather, the discourse found in press briefings from the Secretary of State, suggest that the reforms were motivated instead by a personal agenda, a passion for reducing ‘red tape’ and a history of confrontation – a form of government by ministerial whim.63 In the somewhat chilling words of Eric Pickles, Secretary of State and author of the reforms: “I fully accept that I’ve had great fun abolishing lots of stuff”.64

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Acknowledgement : The author gratefully acknowledges the financial support of the Economic and Social Science Research Council (Grant ref: ES/L009897/1).

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Notes

1 Power, M., 1994 & 1997; Lapsley, I., 2008 & 2009.

2 The Audit Commission’s strap line to be found on their publications and web-site <http://webarchive.nationalarchives.gov.uk/20150421134146/http:/www.audit-commission.gov.uk/>, accessed 28 June 2017.

3 Press Release: Secretary of State for Communities and Local Government, 13 August 2010. <https://www.gov.uk/government/news/eric-pickles-to-disband-audit-commission-in-new-era-of-town-hall-transparency>, accessed 28 June 2017.

4 House of Lords 2010; European Commission Green Paper on audit policy,

<http://europa.eu/rapid/press-release_MEMO-10-487_en.htm?locale=en>, accessed 28 June 2017.

5 Campbell- Smith, D., 2008; Professor David Heald, in written evidence to the House of Commons Communities and Local Government Select Committee, (House of Commons, 2011, Volume 1, Ev. 124).

6 European Commission Green Paper on audit policy, <http://europa.eu/rapid/press-release_MEMO-16-2244_en.htm>, accessed 28 June 2017.)

7 Local Audit and Accountability Act, 2014

8 Buchanan, J. & Tullock, G.,1965; Niskanen, W., 1971.

9 Hood, C., 1991 & 1995.

10 Dunleavy, P. et al, 2006.

11 Hyndman, N., and Lapsley, I., 2016

12 Mulgan, R., 2000, Sinclair, A., 1995, Hood, C. & Heald, D., 2006.

13 Local audit has its origins in the Poor Law Act of 1601 in the which distribution of rates levied to alleviate the plight of poor parishioners was subject to a requirement for local churchwardens to ‘yield up to two justices a true and perfect account of all sums received or rated and sessed and not received’. (Campbell-Smith, D., 2008, Ch 3.)

14 Parliament then recovered the costs of the audit service by levying a ‘stamp duty’ on each local body.

15 Audit Commission Act 1998, <http://www.legislation.gov.uk/ukpga/1998/18/contents>, accessed 28 June 2017.

16 House of Lords 2010.

17 European Commission Green Paper on audit policy, <http://europa.eu/rapid/press-release_MEMO-10-487_en.htm?locale=en>, accessed 28 June 2017.

18 Power, M., 1994 & 1997

19 Campbell-Smith, D. 2008; Institute for Government, 2014.

20 Professor John Seddon, verbal evidence to the House of Commons Communities and Local Government Select Committee 2011, Q335 and Ev w44. (House of Commons, 2011)

21 David Walker, former written evidence to the House of Commons Communities and Local Government Select Committee 2011 Ev. 121 (House of Commons, 2011).

22 Chief Executive Essex Council Verbal evidence to House of Commons Communities and Local Government Select Committee 2011, p.28 (House of Commons, 2011)

23 House of Commons Communities and Local Government Select Committee 2011 p.7 (House of Commons, 2011).

24 Buchanan, J., & Tullock, G., 1965; Niskanen, W., 1971.

25 Department of Communities and Local Government, 2012, p.2.

26 Daily Telegraph 27 July 2011. ‘The Audit Commission: spending watchdog accused of wasting thousands on vanity snaps’, <http://www.telegraph.co.uk/news/politics/8666813/The-Audit-Commission-spending-watchdog-accused-of-wasting-thousands-on-vanity-snaps.html>, accessed 28 June 2017).

Daily Mail, 12 March 2011, <http://www.dailymail.co.uk/news/article-1365651/Eugene-Sullivans-4k-travel-expenses-minute-walk-hotel.html>, accessed 28 June 2017.

27 Daily Telegraph, 3 November 2010, <http://www.telegraph.co.uk/news/politics/8105920/Audit-Commission-spent-5000-on-lavish-dinner-after-abolition-announced.html>, accessed 28 June 2017.

28 Sunday Times 31 January 2010.

29 Grant Shapps Local Government Minister, Daily Telegraph, 3 November 2010, <http://www.telegraph.co.uk/news/politics/8105920/Audit-Commission-spent-5000-on-lavish-dinner-after-abolition-announced.html>, accessed 28 June 2017.

30 Eric Pickles 23 March 2015, <https://www.gov.uk/government/speeches/local-audit>, accessed 28 June 2017.

31 Daily Telegraph 13 August 2010, <http://www.telegraph.co.uk/news/politics/7945123/Eric-Pickles-interview-slimming-down-the-public-sector.html>, accessed 28 June 2017.

32 Draft Local Audit Bill 2012 p.6,

<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/8350/2174738.pdf>, accessed 28 June 2017.

33 The reform of public audit follows previous reforms in public sector accounting which similarly aim to reduce the differences between the public and private sectors. These include the adoption of: accruals accounting, the financial reporting and governance requirements of the Companies Act 2006 and, most recently, International Financial Reporting Standards (Ellwood, S., 2001).

34 Draft Local Audit Bill 2012 p.2, <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/8350/2174738.pdf>, accessed 28 June 2017.

35 Lord Sharman of Redlynch, 2001.

36 In the state of Victoria, Australia, for example, the audit practice of the Auditor General was transferred to an independent statutory body which was required to compete for all audit business with the private sector audit firms. Critically, unlike the case of the Audit Commission, the oversight role of the Auditor General was retained (English, L., 2003, Funnell, W., 2003).

37 Funnell, W., 1997.

38 English, L., 2003.

39 Institute for Government 2014, p.19.

40 House of Commons, Communities and Local Government Select Committee, 2011.

41 Greenwood, M, & Tao, L., 2016.

42 Health and Social Care (Community Health and Standards) Act 2003.

43 The Big 4 are the audit firms which dominate the commercial audit market in the UK. They are: KPMG, Price Waterhouse Coopers, Deloittes and EY.

44 Ellwood, S. & Garcia-Lacalle, J., 2015; Greenwood, M., & Tao, L., 2016.

45 Dechow, P. et al. 2010.

46 Public interest reports are publicly available reports on the findings of investigations into the financial performance of local bodies initiated by concerns, considered to be of public interest, arising in the course of the audit. A recent report was issued, for example, on governance failings in York City Council, <https://www.york.gov.uk/info/20003/your_council/1831/mazars_public_interest_report>, accessed 28 June 2017.

47 Health and Social Care (Community Health and Standards) Act 2003; Applying for NHS foundation trust status: guide for applicants, <https://www.gov.uk/guidance/nhs-trusts-apply-for-nhs-foundation-trust-status>, accessed 28 June 2017.

48 Greenwood, M. (2017) ‘The abolition of the Audit Commission: user perceptions of the impact on audit quality’. Workin paper supported by ESRC grant ES/L009897/1.

49 David Heald, written evidence to House of Commons, Communities and Local Government Select Committee, 2011, Ev 126.

50 Ibid.

51 Public Audit Forum, 2001

52 Public Audit Forum 2001, HM Treasury; Committee on standards in public life: The seven principles of public life, <https://www.gov.uk/government/publications/the-7-principles-of-public-life/the-7-principles-of-public-life--2>, accessed 15 February 2017.

53 House of Lords 2010; European Commission Green paper on Audit Policy, <http://europa.eu/rapid/press-release_MEMO-10-487_en.htm?locale=en>, accessed 28 June 2017.

54 Greenwood, M. & Tao, L., 2016; Ellwood, S.,and Garcia-Lacalle, J., 2015.

55 Bovens, M. et al., 2014 Ch. 1.

56 As enacted in the Localism Act 2011.

57 Draft Local Audit Bill 2012 p.2, <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/8350/2174738.pdf>, accessed 28 June 2017.

58 Posner, P. & Shahan, A., 2014, p.488.

59 Posner, P. & Shahan, A., 2014, p.499.

60 English, L., 2003.

61 Hyndman, N. & Lapsley, I., 2016 p.403; Klijn, E.H., 2012.

62 Grossi, G. et al, 2013

63 David Walker, former Director of the Audit Commission, written evidence to the House of Commons, Communities and Local Government Select committee, 2011, Ev 119.

64 Daily Telegraph 13 August 2010, <http://www.telegraph.co.uk/news/politics/7945123/Eric-Pickles-interview-slimming-down-the-public-sector.html>, accessed 28 June 2017.

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Pour citer cet article

Référence papier

Margaret Greenwood, « Austerity, Audit, and Accountability : New Public Management and the Privatisation of Local Audit in England », Observatoire de la société britannique, 19 | 2017, 159-177.

Référence électronique

Margaret Greenwood, « Austerity, Audit, and Accountability : New Public Management and the Privatisation of Local Audit in England », Observatoire de la société britannique [En ligne], 19 | 2017, mis en ligne le 01 juin 2018, consulté le 18 juin 2018. URL : http://journals.openedition.org/osb/1925 ; DOI : 10.4000/osb.1925

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Auteur

Margaret Greenwood

Associate professor à la School of Management, Université de Bath

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Observatoire de la société britannique

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