My Lords, I am grateful to my noble friend Lord Tope and to the noble Lord, Lord McKenzie, for welcoming the amendments that we are currently discussing. I certainly agree with my noble friend Lord Tope that while the matters that come out of the DCLG might not always attract widespread interest, they are always important. I am glad to be responsible for this late stage of this piece of legislation.
The noble Lord, Lord McKenzie, asked some specific points which I am happy to respond to. On his question on whether Amendment 6 changes or narrows who might be specified as concerns the appointment of auditors of smaller authorities, I can be clear that it is not the Government’s intention to do so. We do not intend to use this power to make any further requirements which would have that effect, or under the new Clause 17 to principal authorities.
The noble Lord also asked whether it could be confirmed that functions of the auditor appointment, such as its powers to specify fees or scale of fees, could be included in Amendment 7. I reassure the noble Lord that the amendments to Clause 5 retain provision for the specified person to set a scale or scales of fees. Of the original drafting of provisions in Clause 5 relating to the setting of fees by the person specified by the Secretary of State to appoint auditors to smaller authorities, Clause 5(3)(d) is deleted by Amendment 7. These provisions are replaced by those in Amendment 10. The new provisions unpack the arrangements relating to fees to clarify that the regulations will impose duties on authorities which are opted into the specified persons’ regime to pay fees in accordance with a scale or scales of fees determined by the specified person.
More generally, on the questions of the noble Lord, Lord McKenzie, about audit contracts and transitional arrangements, I reiterate the importance that the Government place on ensuring that the Audit Commission’s existing audit contracts continue to be
well managed following its closure. These contracts have a combined annual value of £85 million and will continue to run until 2017, at which point we intend to introduce local or sector-led appointment of auditors. Noble Lords will be aware, however, that the contacts include provision to allow them to be extended for a further three years to 2020. While it remains our intention to introduce local appointment from 2017, no formal decision is needed on extension until closer to the scheduled end of the contracts. At that point, this will be a decision for the Government to take in conjunction with the interim body managing the contracts.
Given the length of the existing contracts, we need to make sure that the organisation that manages these contracts in the period following closure of the commission and introduction of local appointment is capable of putting in place resilient governance and management arrangements. In consultation with the Audit Commission and other key government departments and delivery partners, my officials have agreed a set of criteria against which all options should be assessed. They are now working with counterparts in interested organisations and have shared a set of requirements, roles and responsibilities alongside an invitation to formalise a proposal to the department to perform the role of designated transitional body. Subject to further work with each of the organisations, proposals will then be evaluated against the agreed criteria and we plan on making a decision by the spring.
I should add some remarks on another topic which I was not sure whether the noble Lord had raised in his question to me; if he did not I should perhaps have covered it in my opening remarks. Grant certification is a further critical issue raised in both Houses during the passage of the Bill. When the commission closes, the few remaining grants requiring certification will be certified through arrangements agreed between grant-paying bodies, the recipients and their auditors. There is one exception to these arrangements: the Audit Commission will continue to make arrangements to certify the housing benefit subsidy scheme for the 2014-15 return, due to its complexity and size, before the move to universal credit. However, work to complete this and oversee auditors’ work in autumn 2015 will then need to be undertaken by the designated transitional body. We are therefore drawing on the commission’s expertise to ensure that appropriate measures are put in place to support this work and also that Section 28 of the Audit Commission Act is saved so the designated transitional body can take on this function.
Finally, I will talk briefly about the future of the commission’s value-for-money profiles. The LGA has expressed an interest in taking on this tool and we are in discussions with it, the Audit Commission and others, including the National Audit Office. We are therefore currently considering the future and options for the profiles with these partners with the aim of making a decision by the spring.
I hope that by providing this additional information I am able to reassure noble Lords that we are working towards a resolution on each of these points and intend to reach a decision on outstanding transitional issues well in advance of the Audit Commission’s closure. I also take this opportunity to thank the Audit
Commission for its assistance and support in advancing these matters with my officials and other interested parties. We have been very grateful for its input.
With all that additional information, I hope that I have been able to answer any outstanding questions from noble Lords.