Local Government is the most accessible and accountable part of the public sector for the general public. Local Government provides local services, collects locally administered taxes and acts as the first point of call for property planning, refuse collection and complaints about any part of the local infrastructure. Around the UK, local authorities can be County, Metropolitan, District or Borough councils according to local features and populations.
Internal Audit in Local Government
Historically, internal audit departments in Local Government were generic, auditing across Social Services, Housing, Education, Environment and other devolved directorates. In many authorities, individual auditors have specialisations such as contract or computer audit and they will be allocated assignments according to that expertise.
The introduction of Best Value to replace CCT has had a significant impact on Local Government operations and could redefine the role of the auditor in the sector. Best Value Reviews are key to the process and need to be carried out consistently. There has been a suggestion that the most effective arbiters would be the auditors themselves although whether this would be an internal or external function is unclear. Reviews of audit departments themselves have been carried out by most local authorities and have largely demonstrated a resource shortfall.
Recently, outsourcing has become increasingly common. Partial or total outsourcing of an authority’s internal audit function removes a number of problems that would be encountered by an in house department. Firstly, the difficulties inherent in recruitment are removed but, perhaps more importantly, any outsourcing partner is committed to providing staff to cover any peaks and troughs in demand and provide staff for specialised roles. In the past, many Local Government departments have found it difficult to find year round employment for computer audit specialists for example.
Outsourcing or partnering arrangements can account for an entire department, or a part of the annual audit plan or only a particular skill set. Most frequently, a Big 4 firm is the partner but, recently, these firms have faced intense competition from the next tier of professional practices which are increasing their share of the public sector outsourcing market.
The latest alternative to outsourcing is the formation of audit consortia whereby a number of audit departments amalgamate to form a larger grouping with responsibility for the internal audit of each of its component authorities. This has already proved an effective solution in the NHS but is still untried in Local Government although many of the same conditions apply.
Internal Audit Recruitment in Local Government
Where outsourcing has not yet taken place, Local Government in the UK, particularly in and around London, has been dependent to a degree on temporary recruitment. Typically, local authorities have found it difficult to recruit suitably skilled and qualified internal auditors in the face of competition from the private sector.
More recently, salaries have been reviewed upwards and employers have been more flexible in their requirements, resulting in an increase in permanent recruitment. At the same time, however, the number of Trainee Accountants and auditors on contracts with local authorities has fallen, suggesting that there are more recruitment difficulties ahead. The formation of audit consortia may prove to be the most effective solution to the recruitment problem.