ACCOUNTS TO BE AUDITED BY DISTRICT OR APPROVED AUDITOR (Hansard, 24 October 1972)

§ Mr. Speed

I beg to move, That this House doth agree with the Lords in the said Amendment.

I suggest that we might also discuss Lords Amendments 201 to 234 and Question No. 244.

1138 These are tidying up Amendments. The first relates to the City of London. At present there are a number of provisions relating to the audit of different sections of the City's accounts. The accounts relating to social services and to the levy and collection of the poor rate are subject to district audit. The accounts of the superannuation fund and of general rate fund income and expenditure, other than social services, are audited by auditors appointed under local Acts of 1970 and 1931.

The Amendments provide that those accounts maintained by the City in its capacity as a local authority will be audited in the same way as the audit of accounts of any other local authority.

Amendments 203, 204, 205 and 206 are designed to ensure the simplest possible machinery for nomination of auditors at parish level. Clause 151(2) provides for the initial selection and appointment of auditors by local authorities under Part VIII of the Bill. Clause 151(2)(c) provides that the district council shall resolve whether the accounts of parishes etc., within its area are to be audited by the district auditor or by an approved auditor. It is envisaged that the district council will consult the parishes before choosing the auditor, who need not be the same as the auditor for the district.

Parish councils may be formed after the initial selection of auditor has been made by 1st January, 1974, and in the post-April, 1974, period under Clauses 9, 27 to 29 and Part IV of the Bill. The purpose of these Amendments is to ensure that audit of the accounts of those parishes formed after 1st January, 1974, will be undertaken by the auditor appointed in accordance with the district council's original resolution. Thus, one council resolution can be effective in relation to all parish authorities, present or future, within their districts.

Amendment No. 207 and those associated with it are drafting Amendments, as is Amendment No. 211. Amendments Nos. 213 and 214 relate to Clause 151(10) which provides that where, for want of a resolution under Clause 151(2) or otherwise, an auditor has not been appointed for the audit of an authority's accounts the Secretary of State may direct that the accounts shall be audited by the district auditor. Under 1139 Clause 151(10) the Secretary of State's direction has effect only as to the financial year specified and no provision is made for subsequent years.

The Amendments enable the direction to cover subsequent financial years. But at the same time they give the body concerned full power to change to an approved auditor for subsequent years, if they so wish. The direction will have effect as if the body itself had resolved that that the accounts should be audited by the district auditor. This means that the body will be free to change to an approved auditor in subsequent years by means of a resolution under Clause 151(3).

Clause 11 provides for the grouping of parish councils. Some grouped parish councils will straddle the boundaries of two adjoining district councils. The purpose of this Amendment is to place upon that district council which has the greater number of local government electors of the grouped parish the responsibility for appointing an auditor for the audit of the accounts of that grouped parish in accordance with Clause 151 of the Bill.

Lords Amendments Nos. 216 to 219 are drafting.

In regard to Lords Amendment No. 221, Clause 158 confers special powers on the district auditor in respect of illegality, misconduct and failure to account. He may apply to the courts for a declaration that an item of account is contrary to law and, if he finds failure to account or losses due to misconduct, he is required to certify sums due from those responsible, who may appeal to the Courts against his decision.

These special powers and duties have not been conferred upon the approved auditor. They can, however, be exercised in respect of accounts audited by an approved auditor since it is open to the Secretary of State to direct an extraordinary audit by the district auditor at which the appropriate provisions of Clause 158 apply.

The code of practice for local government audit which was published by the Secretary of State in April, 1972 stated in paragraph 24 that it was proposed that an approved auditor should be under a specific duty to report to the Secretary of State any circumstances which 1140 appeared to the auditor to require action under Clause 158. This Clause effects that intention.

Where an audit is conducted by an approved auditor and it appears to him that there is reasonable ground for believing that an item of account is contrary to law, or that there has been failure to account for any sum or loss due to misconduct, the approved auditor is under a duty to report the matter to the Secretary of State. This will enable an extraordinary audit to be directed at which the district auditor will be able to take action under Clause 158 in the same way as at an audit conducted by him in the ordinary way.

The group of Lords Amendments 222 to 232 provides comprehensively for audit of accounts which have been allocated to a private auditor who cannot, after all, act.

Under Clause 151(5) principal councils and the Common Council may decide that different accounts of the council shall be audited by different auditors. That Clause does not extend to appointments which fall to be made in the special situations arising under Clauses 161(4) and 161(8). Under Clause 161(4) a local authority must make an alternative appointment if the Secretary of State's approval to the council's initial choice of auditor is withheld. Under Clause 161(8) a local authority must make an alternative appointment if the approved auditor's appointment is terminated by death, cessation of qualification under Clause 161(2), by withdrawal of the Secretary of State's approval under Clause 161(6) or by mutual agreement between the auditor and the local authority. The purpose of these Amendments is to enable the authority to consider afresh how the relevant accounts should be audited.

Lords Amendments Nos. 227, 233 and 234 are drafting Amendments.

I am sorry to have wearied the House with this technical and boring exposition, but these Amendments are all tied up with the provisions relating to auditing and are somewhat complicated.