My Lords, I thank my noble friend Lord Palmer for bringing some rationality into this particular aspect. I support him very much in reminding the House that this is an intention to bring to a local level the management of an extremely important part of local government’s responsibilities, which is to have proper audited accounts, but to do it in a slightly different way from what has been done in the past, without the overall management of the Audit Commission but having to take into account the fact that these have to be properly done, whether they are done on the optional basis that we are talking about—having the wider procurement—or because they have taken account of having these on their own requirements.
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I understand the purpose of these amendments: to place a duty on the Secretary of State and ensure that appropriate arrangements are in place. My noble friend has made clear that he does not believe that this should be a responsibility of the Secretary of State, and nor do I, but I support the intent of the amendments. It is important that we plan for and implement a smooth transfer of the Audit Commission’s functions, that we enable a workable and coherent audit regime and that we ensure that the future regime is able to give assurance to accounting officers. I assure noble Lords that we have a commitment to these issues. However, as I and my noble friend Lord Palmer have said, rather than the Secretary of State having responsibility for this, we do not believe that there should be a commitment on him to take this up.
We are working closely with the Audit Commission, the Financial Reporting Council, the National Audit Office and the Local Government Association to develop arrangements to support the transition from the current regime to the future local public audit framework. This includes an assessment of what tasks that are currently undertaken by the Audit Commission need
to continue and, for those that do, options for which organisation should undertake them. Perhaps, if I may, I will take those issues in turn.
First, the noble Lord, Lord McKenzie, raised the issue of the Audit Commission’s existing contracts, which will run until 2017. We discussed this in Committee, and I advised the Committee that an interim body or bodies will manage these contracts as the Audit Commission passes and any related functions following the abolition of the commission. We are now working with other partners to scope out the range of options, which includes transferring the contract management function to the Government, a sector-led body or other potentially suitable organisation, which might be a specific organisation set up to manage the two years of the contract. The Bill currently provides flexibility, therefore allowing these various transitional options to take effect. I assure noble Lords that officials are working on the detail, and while I know that the noble Lord would like it all cut and dried with regard to exactly what is happening, at the moment I cannot do that. I can say that consultations are taking place, again including the Audit Commission, with an interest in the form and function of the interim arrangements. We are not going to try to artificially limit the range of options at this stage, and we will be scrutinising what needs to be done to ensure that and to ensure that we put in place the most effective successor arrangements for this contract announcement. We all understand how important this is.
My officials are still engaged in discussions with the Audit Commission—I have said that a couple of times, but with all these the commission is closely involved—about the future of the value-for-money programmes, including the content, format and host organisation. The Treasury is also working with individual departments to ensure that transitional arrangements are developed for grants requiring certification following the closure of the Audit Commission. In advance of the abolition of the commission, several departments have agreed to move early to develop tripartite arrangements with individual authorities and their auditors. A number of other departments already certify their grants in these ways so, in these instances, departments as grant-paying bodies will manage the arrangements supported by guidance to ensure a consistent approach across local authorities.
As part of this work, the Audit Commission has offered to support departments moving towards these tripartite arrangements in what they will need to ensure that arrangements are robust. As is currently the case, departments will continue to ensure that these arrangements provide adequate assurance to their own accounting officers. I would like to provide an assurance that, on all these transitional matters, once again we will make sure that noble Lords in this House are kept abreast of what is being discussed.
Amendment 3 focuses on the co-ordination of the new regime and how accounting officers obtain assurance on the effectiveness of financial management arrangements. If we reflect for a moment on the current arrangements, local authorities are accountable for their own financial management and expenditure, and there is an existing system of local accountability.
This is set out in some detail in the accountability system statement for local government, which my department’s accounting officer uses to provide assurance to Parliament. Audit forms only one small part of these wider arrangements and the Bill does not change the scope of audit, meaning that the assurance provided will be largely the same as at present, whoever it is provided by. Similarly, government departments, through their individual accounting officers, are accountable to Parliament, and they are required to demonstrate that their existing accountability systems are robust.
We are currently working with the National Audit Office to ensure that information from audit will still be available to the accounting officer at a national level to help provide assurance. I can assure noble Lords that this is definitely achievable, but in a similar way to the management of the commission’s existing contracts. This requires further consideration. We are working through the intricacies and are on course for a timely resolution, which I hope the other place will have time to consider.
Appropriate provision will remain in place to ensure that a high quality of audit is maintained and that there is sufficient visibility of audit output information in the new regime. To this end, the Financial Reporting Council and professional accountancy bodies will oversee and regulate. The noble Lord specifically asked me about the regulation on monitoring of quality of audit. This will be overseen by the Financial Reporting Council, which will also regulate the work of the auditors and the monitoring of the quality of the audit. Arrangements will be put in place for health bodies because, as we have discussed in the past, their accounts are consolidated into the Department of Health’s financial reports. All audit output information will continue to be available and will be published locally rather than centrally. It will be the responsibility of the local authorities.
I repeat my earlier assurances that it is the Government’s intention to achieve the purpose of the amendments that the noble Lord has put down. However, we do not believe that placing duties on the Secretary of State is the most effective way of achieving it at this time. The noble Lord asked me about the certification of housing benefit for the Department for Work and Pensions. The Audit Commission will continue to provide the grant certification for 2014-15. Housing benefit continues to be complex. I may need to come back to the noble Lord on that because I cannot read my writing. While the commission can start the process of developing guidance for 2014-15, the anticipated closure of the commission in March 2015 means that subsequent work is required to complete this under the proposed interim arrangements. I think we are back where we started in that this matter is still under consideration, as are all the other matters.
I know that the noble Lord wants specific arrangements in place at present. However, as I said before, we cannot give those in this House. There will be further discussions in the other place relating the specific elements that the noble Lord has raised. That is not to say that I am not grateful to him for having done so. It is important that we put down the fact that work will carry on over the next few months so that we can come to conclusions about these arrangements. I hope that
the noble Lord will feel able to accept my explanation, and I thank the noble Lord, Lord Palmer, for giving me some very rousing support.