Arrangements for securing economy, efficiency and effectiveness in the use of resources
Responsibilities of the audited body
66. It is the responsibility of the audited body to put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. Local public bodies are required to maintain an effective system of internal control that supports the achievement of their policies, aims and objectives whilst safeguarding and securing value for money from the public funds at their disposal.
67. As part of the material published with its financial statements the audited body is responsible for reporting on these arrangements as part of its annual governance statement.
Responsibilities of the auditor
68. The NAO have issued AGN03 Auditors work on value for money arrangements which auditors must have regard to in undertaking their work in determining the adequacy of the arrangements for securing VFM that an organisation has put in place. Nothing in this statement is intended to extend or limit the application of this guidance.
69. Auditors have a responsibility to satisfy themselves that the audited body has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. In carrying out this work, auditors are not required to satisfy themselves as to whether or not the audited body has actually achieved value for money during the reporting period. However, should evidence of poor value for money come to their attention during the course of the audit, they should consider the implications of this for their work.
70. Auditors’ work is designed to provide sufficient assurance to enable them to report to the audited body with a commentary on the specified reporting criteria on the arrangements the body has in place to secure value for money through economic, efficient and effective use of its resources for the relevant period. This should be reported in the auditor’s annual report.
71. Where the auditor intends to propose to PSAA that an additional fee is required they must:
- their judgement on the nature of the weakness they have identified;
- the evidence on which their view is based;
- the impact on the local body; and
- the action the body needs to take to address the weakness.
66. Where auditors identify significant weaknesses in arrangements as part of their work on arrangements to secure value for money, they should report by exception in their report on the financial statements and/or the certificate of audit closure.
67. Where auditors identify significant weaknesses in arrangements as part of their work on arrangements to secure value for money, they should report the matter promptly to the authority in accordance with principles of public reporting specified in the Code.
Approach
68. Auditors should take into account their knowledge of the relevant sector as a whole, and the audited body specifically, to identify any risks that, in their judgement, are relevant to their work on value-for-money arrangements. An understanding of the sector includes the relevant regulatory framework within which the audited body is required to operate.
69. The auditor’s work on value for money arrangements should be informed by:
- the audited body’s annual governance statement and any additional reporting by the body on the arrangements it has in place to manage risks to the achievement of value for money through the economic, efficient and effective use of its resources;
- evidence that the audited body’s arrangements were in place during the reporting period;
- evidence obtained from the auditor’s other work – including previous work on value-for-money arrangements, work completed as part of the audit of the financial statements and the audited body’s response to this work
- the work of inspectorates and other bodies – where the scope and results are relevant to the auditor’s value for money responsibilities. Auditors are not required to quality-assure or re-perform the work of others and may use such work to the extent that, in their judgement, it is appropriate to do so; and
- any other evidence source that auditors regard as necessary to facilitate the performance of their statutory duties.
70. In reviewing the audited body’s arrangements for securing economy, efficiency and effectiveness in its use of resources, it is not part of auditors’ functions to question the merits of the policies of the audited body, but auditors may examine the arrangements by which policy decisions are reached and consider the effects of the implementation of policy. It is the responsibility of the audited body to decide whether and how to implement any recommendations made by auditors and, in making any recommendations, auditors must avoid giving any perception that they have any role in the decision-making arrangements of the audited body.
71. Auditors do not provide assurance to audited bodies on the operational effectiveness of specific aspects of their arrangements. Neither can they be relied on to have identified every weakness or every opportunity for improvement. Audited bodies should consider auditors’ conclusions and recommendations in their broader operational or other relevant context.
72. Audit work in relation to the audited body’s arrangements to ensure that it promotes and demonstrates the principles and values of good governance does not remove the possibility that breaches of proper standards of financial conduct, or fraud and corruption, have occurred and remained undetected. Nor is it auditors’ responsibility to prevent or detect breaches of proper standards of financial conduct, or fraud and corruption, although they should be alert to the possibility and should act promptly if grounds for suspicion come to their notice.
Specific powers and duties of auditors
73. Auditors have specific powers and duties under the Act in relation to matters of lawfulness.
74. Auditors should undertake the following actions in relation to these duties:
- consider whether to issue a public interest report concerning any matter that comes to their attention during the course of the audit, which they judge should be considered by the audited body or brought to public attention (Schedule 7 of the Act);
- consider any questions raised by electors about the statement of accounts, and consider and decide upon objections received from electors in relation to the statement of accounts (sections 26 and 27 of the Act);
- consider whether the audited body should consider formally, and respond in public, to recommendations made in an audit report (Schedule 7 of the Act);
- consider whether to issue an advisory notice or apply to the court for a declaration that an item of account is unlawful (sections 28 and 29 of the Act), if they have reason to believe that unlawful expenditure has been or is about to be incurred by an audited body; and
- consider whether to apply for judicial review with respect to a decision of, or a failure to act by an audited body which it is reasonable to believe would have an effect on the accounts of the body (section 31 of the Act).
75. The auditor should also have regard to the NAO’s Auditor Guidance Note 04 ‘Auditors additional powers and duties’.
76. Fees arising in connection with auditors’ exercise of these powers and duties, including costs relating to the appointment of legal or other advisers to the auditors, are dealt with in accordance with s17(3) of the AP Regulations.