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19 November 2024
I concluded in my last blog (of 13 November 2024) that the internal auditor is ineffective in protecting taxpayers’ money at HPC and fails to hold the Council to account; the Council can get away with breaking the law and putting taxpayers’ money at risk.
This blog looks at the external auditor. You probably won’t be surprised that I come to the same conclusion about the external auditor.
The system for providing external audit to parish councils is very limited, very slow, and has very limited sanctions. The statutory requirement, and the underlying administrative system, does not protect taxpayers' money and holds no-one to account. And I suspect it is not value for money to the taxpayer.
First, some background.
I’m going back a bit to 1982, when the then Conservative Government set up an independent public body called the Audit Commission. Its role was to “protect the public purse”. The Commission appointed auditors to local authorities, setting standards for the auditors and overseeing their work. These auditors were mostly employed in-house.
The Commission was proactive. For example, it provided authoritative, evidence-based advice to help local public services manage their finances.
The Commission also had the power to investigate when services could be open to abuse and fraud.
For example, the Commission’s district auditor uncovered a “gerrymandering homes for votes” scandal at Westminster Council in the 1990s; council houses were sold at below market value to families likely to vote Conservative.
The former leader of Westminster Council, Dame Shirley Porter, and five other council officials were found to be 'jointly and severally' liable for repaying £36 million to the Council. Dame Shirley Porter eventually settled in 2004, paying £12 million to Westminster Council.
The Commission also traced £1.17 billion in fraud between 1996 and 2013.
In 2010, the incoming Conservative Government decided to close down the Commission, privatising most of its work. It said it was doing this to save money – about £50 million a year. I can’t find any analysis of these savings or find out whether the savings were made.
The Government then set up a private sector company limited by guarantee called the Smaller Authorities’ Audit Appointments Ltd (SAAA).
Unlike the Audit Commission, the SAAA has no remit to protect the public purse, no investigative function and no teeth. Its only remit is to procure and appoint external auditors to smaller authorities in England, including parish councils.
It does this by contracting out external auditing by region. The contract for smaller authorities in Buckinghamshire went to PK Littlejohn. (PK Littlejohn has the contracts for about 70% of the regions.)
So, PK Littlejohn is HPC’s external auditor.
How it works in practice (or not)
An elector in a parish can object about a parish council’s financial management to its external auditor.
Step 1 - The external auditor first assesses the objection against a number of eligibility criteria
For example:-
- objections can only be made during a short period of the year i.e. a 30- working day “public rights period” set by the parish council. For HPC, this period was from 1 July 2024 to 9 August 2024;
- objections have to relate to a “council’s annual governance statement, a material inaccuracy in the accounting statements or an unlawful item of account”. The objector is required to specify “the facts and grounds” on which they are relying; and
- objections can only be for the previous financial year. So, if someone wants to object to something HPC did in (say) June 2023, then they would have to wait until July 2024.
I sent my objections to Hughenden Parish Council’s statement and accounts to PK Littlejohn on 6 July, copied to Hughenden Parish Council. It is a substantial document. I am happy to send it to anyone who would like a copy.
PK Littlejohn is required to make best endeavours to complete Step 1 within a week.
In August, I had had no notification of Step 1 and I wrote to PK Littlejohn. They told me they hoped to complete Step 1 by the end of the month.
I wrote again in September and was told PK Littlejohn hadn’t yet started Step 1 for any of this year’s objections. They had “received so much more challenge correspondence than usual this year and just dealing with all the emails had delayed it by several weeks.” They were carrying out Step 1 in date order of receipt; mine was 15th out of 93 at that time.
On 25 September, 11 weeks after I sent my objections, PK Littlejohn told me that most of my objections had been assessed as eligible.
Step 2 - PK Littlejohn has to assess my objection against “acceptance criteria”
Acceptance of my objections broadly depends on whether I have raised something for which “further investigation/action is justified on the grounds of public interest”. PK Littlejohn may decide not to accept my objection because: -
the cost of dealing with it would be disproportionate to the underlying sum to which it relates; or
it is frivolous or vexatious.
PK Littlejohn is required to make best endeavours to complete Step 2 within a month.
I wrote in November to ask whether PK Littlejohn could tell me when they thought my Step 2 would be done. PK Littlejohn told me that this year it had “received an unprecedented level of challenge correspondence and this has significantly delayed the usual timescales of the objection process.”
My objection was 7th in line for Step 2; however, PK Littlejohn still had 29 sets of objections that required the Step 1 process to be completed before they could start on Step 2. More staff had been put on the work and PK Littlejohn apologised for the delay. However, it was “not possible for them to accurately estimate a time frame for my Step 2 decisions.
I still haven’t got a decision on Step 2.
Hopefully I will get a decision before Christmas. Hopefully my objections will meet the criteria for acceptance. If so, what then?
Step 3 is a challenge process.
PK Littlejohn asks HPC to respond to my objections and give me the opportunity to respond. I think PK Littlejohn then completes a limited assurance review on HPC and, depending on its conclusions, writes a decision letter and/or a public interest report. (As I haven’t got to this bit, I’m not sure this is completely right).
As far as I can see, there are no sanctions and PK Littlejohn cannot require a council to take action. All it can require is for the Council to respond to any report.
All the costs of any additional work that PK Littlejohn carry out as a result of challenge correspondence are met by the parish council i.e. the local taxpayer. The costs are set by the SAAA to the tune of £355 per hour plus VAT, i.e. £2,485 per day plus VAT.
PK Littlejohn is required to make best endeavours to complete Step 3 within 6 months.
By that time, the local elections will have happened and a new council will be in place in Hughenden (although perhaps with the same faces).
In summary, an investigation by the external auditor of something that happened in 2023/4 may (or may not) be concluded until sometime in 2025/6. The remit of what the external auditor can investigate is very limited. There is no enforcement of any conclusions as far as I can see and it may cost residents i.e. the local taxpayer a lot of money.
It's a pretty hopeless process for protecting taxpayers’ money and holding Council to account.
P. S. There is a Full Council of HPC tonight. I will report on this before resuming with Parts 3 onward about other bodies that should protect your money – and don’t.
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