Consultation on fee rates and fee scales

Transcription

1 Consultation on fee rates and fee scales

2 Consultation on fee rates and fee scales Overview This consultation invites views and comments on the Wales Audit Office s proposals for: fee rates (hourly rates) chargeable in the financial year for all audit work; fee scales for the audit of accounts of unitary authorities, fire and rescue authorities, national park authorities, police and crime commissioners and chief constables, pension funds, and town and community councils; fee scales for improvement audits, assessments and special inspections under the Local Government (Wales) Measure 2009; fee scales for the National Fraud Initiative (data matching); and fee rates for the audit of other types of local government body, for work which goes beyond the general duties of the Auditor General (under section 17 of the Public Audit (Wales) Act 2004), and for grant certification work. Following consultation, the Wales Audit Office will submit a Fee Scheme with its Estimate , for consideration by the National Assembly s Finance Committee. The Fee Scheme is prepared under section 24 of the Public Audit (Wales) Act How to respond Please respond by 28 September Responses can be sent to the following address: Fee scales consultation Wales Audit Office 24 Cathedral Road Cardiff CF11 9LJ Or completed electronically and sent by to info@audit.wales. If you require this publication in an alternative format and/or language please contact us using the details provided above or by telephone on Wales Audit Office Consultation on fee rates and fee scales

3 Publication of responses confidentiality and data protection Information provided in response to this consultation may be published or disclosed in accordance with the access to information legislation (chiefly the Freedom of Information Act 2000, but also the Data Protection Act 1998 and the Environmental Information Regulations 2004). If you want any information you provide to be treated as confidential, it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give any assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the Wales Audit Office. Personal data will be processed in accordance with the Data Protection Act. Where such data falls within the scope of a request for information from another person, the provisions of the 1998 and 2000 Acts will need to be considered in the particular circumstances. While no situation can be prejudged, this is likely to mean that information concerning senior officials and public figures is likely to be disclosed while the names and addresses of ordinary members of the public are likely to be withheld. Wales Audit Office 2015 Wales Audit Office Consultation on fee rates and fee scales

4 Contents Message from the Wales Audit Office Chair and the Auditor General for Wales 5 Consultation on proposed fee rates for audit work 10 Consultation on fee scales for work undertaken at local government bodies 12 Consultation on fee scales for work undertaken under the National Fraud Initiative (data matching) 14 Fee refunds and excess charges 16 Appendix 1 Unitary authorities 18 Fire and rescue authorities 20 National park authorities 22 Police and crime commissioners and chief constables 24 Town and community councils with annual income or expenditure under 2.5 million 26 Local government pension funds 27 Fee rates for other work in local government 28 4 Wales Audit Office Consultation on fee rates and fee scales

5 Message from the Wales Audit Office Chair and the Auditor General for Wales For the first time, the Wales Audit Office is consulting all our key stakeholders on the fee rates we charge for the audit and certification work we do. Specifically, we would welcome your views on: our intention to deliver a second year freeze in the hourly rates for audit work undertaken during ; and the other statutory aspects of our fee proposals, as set out in this document and as relevant to you. We are sensitive to the pressures faced by audited bodies, and the need for our audit work to continue to add value as well as provide assurances on governance and use of the public pound. We recognise a continuing need to streamline our audit approaches and ensure the right skills mix to deliver quality work with maximum impact to help public bodies secure change and improvement. We are aware that you want to know how we at the Wales Audit Office are playing our part in austerity, which we set out below. Efficiency at the Wales Audit Office The Board is committed to ensuring the Wales Audit Office itself is a well-run and accountable organisation that demonstrates the highest standards of efficiency and effectiveness and that our work represents good value. As a non-profit-making organisation, we set our hourly rates and fees at a level only to recover costs. Legislation precludes us from charging more than the full cost of the work undertaken. Overall, our expenditure in running the Wales Audit Office and supporting the delivery of the Auditor General s work programme, equates to less than one fifth of one penny of every pound of the funds that are voted annually by the National Assembly. We have reduced our expenditure by over 20 per cent in real-terms since , as represented in the graph below. Our Estimate for and Fee Scheme were open and transparent about the cost pressures facing the Wales Audit Office, the impact of additional legislative requirements, and the steps being taken to find savings and efficiencies so as to contain the overall cost of audit on the public purse. The Finance Committee s report of December 2014 welcomed the work undertaken to meet the cost pressures through internal savings and efficiencies so as to not affect fee rates. The Committee was persuaded by our reasoning to make participation in the National Fraud Initiative free of charge to public bodies in Wales from , something which we hope is encouraging more bodies to participate and reduce the cost of fraud on the public purse. Wales Audit Office Consultation on fee rates and fee scales

6 30 Inflation trend 25 million 20 Expenditure Like all areas of public services, we face significant cost pressures year-on-year: for staff pay and increases in employers statutory costs; for inflation on supplies and services; and for investment in priority areas. Our funding comes from just two sources from the fees we charge for the audit work we do (circa 75 per cent), and from the Welsh Consolidated Fund which meets specific areas of our spend (circa 25 per cent). The Efficiency and Effectiveness Programme introduced by the Board is helping to ensure that we are able to meet these additional cost pressures without seeking to increase the hourly rates we charge. Continued streamlining of our structures, processes and the services provided by our corporate centre mean that our overhead costs are expected to be 1.1 million (14 per cent) lower than equivalent spend in We have restructured, contracted-out payroll and internal audit services, and we are doing more in-house development of IT solutions where procurement would prove too costly, so building in greater resilience too. We are part-way through a fundamental review of our key business processes with a view to searching out further opportunities for improved value for money. So as to ensure the most cost-effective audit operating model, steps taken over the past year mean that we will be containing our operating costs by undertaking more audit work in-house, with less contracted out to audit firms. This will result in us spending 0.9 million less on a like-for-like basis next year for a quantum of audit work currently contracted out. 6 Wales Audit Office Consultation on fee rates and fee scales

7 Transparency at the Wales Audit Office Statute requires us to consult on and prescribe certain aspects of our fee arrangements, namely in relation to local government fee scales and the National Fraud Initiative. This consultation is addressed to all bodies audited by the Auditor General, as well as associations of local government bodies, and covers all areas of our fee regime. Our governance arrangements see the National Assembly s Finance Committee scrutinise and approve our annual budget (the Estimate), our Annual Plan (the Business Plan) and our Fee Scheme (setting fee rates), which all dovetail to provide our framework of delivery each year and the costs arising therefrom. Our spending plans for will be scrutinised by the Committee this autumn. We listen carefully to the feedback you give us. We have frozen our fee rates in cash terms for the current year, and have improved transparency in our fee charges by introducing estimated fee breakdowns for audited bodies. Auditing in an age of austerity We are clear that the vital role of independent audit is never more heightened than when resources are scarce and sound decision making is ever more critical in positively impacting people s lives. We work to ensure the people of Wales know whether public money is being managed wisely, and public bodies in Wales understand how to improve outcomes. We also recognise that auditing in an age of austerity calls for rethinking of the audit work we undertake and how it is undertaken. We continue to review our skills mix on audits and we use benchmarking information from private firms and other audit bodies to compare and adjust. We are in the process of increasing our development of audit trainees, so enabling us to reduce the extent to which we use fully-qualified auditors for the more routine audit checks. On a like-for-like basis, this leaner skills mix will help contain the cost of audit in the longer term. Subject to the requirements of the Local Government (Wales) Measure 2009, our two operational business areas, Financial Audit and Performance Audit, are working to better align audit cycles and reporting for audited bodies. Going forward, we hope to apply a model that is already embedded and working well for NHS bodies. This will deliver a more streamlined audit experience from the perspective of audited bodies with opportunities for reporting pan-wales on issues of national significance. Further, we are committed to collaborating with other audit, inspection and regulation partners, particularly our Inspection Wales partners CSSiW, HIW and Estyn. We will work with partners by sharing our respective knowledge and experiences to focus our respective review activities to best effect; and collaborate on those activities, wherever possible, to maximise the impact of our collective resources. In this, we look to learn from the Scottish Crerar experience of co-ordinating the use of audit, inspection and regulatory bodies. Wales Audit Office Consultation on fee rates and fee scales

8 We have been working closely with the Welsh Government to enhance the impact of grant certification work by streamlining the requirements placed upon the Auditor General. We hope to be able to agree a model that focuses more on the outputs and outcomes from grant-supported activity, moving away from the traditional audit approach of checking invoices. This should provide the Welsh Government and audited bodies with a clearer understanding of the difference grant-supported activity is making, whilst also reducing the cost of grant certification work. We can complete our audit work faster and better contain our costs where audited bodies work with us in partnership throughout the audit process. Good record keeping and access to information, timely responses to audit queries, and adherence to agreed timelines all contribute to a streamlined and timely audit experience and positive impact on cost. The well-being of future generations The Well-being of Future Generations (Wales) Act 2015 requires specified public bodies to set and publish well-being objectives, take steps to meet those objectives and report annually on their progress. It also requires the Auditor General to carry out examinations into the extent to which those public bodies set objectives and take steps to meet them in accordance with the sustainable development principle. This new work undertaken by the Auditor General will need to be funded by fee charges, which we expect to come in to effect from During we propose to work with audited bodies and the Future Generations Commissioner for Wales as we develop and pilot the audit approach that fulfils the Auditor General s duty under the Act. For this, we will be seeking one-off additional funding from the Welsh Consolidated Fund, rather than seeking to increase fees. As we confirm our audit approach over the course of the year, we will talk to audited bodies about the implications for fees from We have urged the Welsh Government to reconsider the audit requirements for Local Government under Part 1 of the Local Government (Wales) Measure The Auditor General has given evidence to the National Assembly that reducing the extensive assessment requirements placed on him by the Measure and introducing instead simplified improvement planning and reporting requirements that are integrated with other legislation would have the potential to reduce requirements on Local Authorities and auditors, reduce costs and ensure that resources are used to best effect. Our stated position, for Local Government, is that that additional fee charges required in respect of work arising from the Well-being of Future Generations Act should be offset by reductions in fees resulting from the repeal or reform of the Measure. For health bodies, we will seek to adapt existing audit work to meet the new requirements so as to minimise any increase in fees. For central government bodies, the Auditor General s duty under the Act will necessitate additional audit work, which is likely to result in additional fee charges. 8 Wales Audit Office Consultation on fee rates and fee scales

9 In conclusion We hope you will welcome the proposed second-year freeze in fee rates for next year and, for local government bodies, the comparable fee scales to the current year. We look forward to receiving your feedback on these consultation points. Isobel Garner Chair, Wales Audit Office Huw Vaughan Thomas Auditor General for Wales Wales Audit Office Consultation on fee rates and fee scales

10 Consultation on proposed fee rates for audit work 1 Exhibit 1 sets out the proposed hourly fee rates for audit staff which reflect direct costs and a proportion of overhead costs. These rates represent a further cashfreeze, being the same as that charged since (a real-terms reduction of 1.4 per cent). Exhibit 1 - Fee rates for audit staff Grade Fee rate ( per hour) Engagement director 162 Audit manager 111 Performance audit lead 93 Financial audit team leader 75 Performance auditor 65 Financial auditor 56 Audit trainee 45 2 Audited bodies not covered by the statutory requirement for a fee scale have their estimated audit fees calculated in the same way as for those which are covered that is, through applying the published fee rates to the estimated team mix and hours of input required for the audit. 3 Auditors undertake grant certification work on behalf of the Auditor General, on a per-hour charging basis. The amount of grant certification work undertaken in any year is dependent on the number of schemes subject to audit and the number of audited bodies participating in those schemes. Charges for this work are calculated using the fee rates and reflect the size, complexity or any particular issues in respect of the grant in question. 4 The fee rates apply to all audit work that the Wales Audit Office will charge for, except to the extent that the fee scales, where applicable, regulate the amount to be charged (or in the case of work done under agreements predating 1 April 2014, rates are as agreed). If it subsequently appears to the Wales Audit Office 10 Wales Audit Office Consultation on fee rates and fee scales

11 that the work involved in a particular audit differs substantially from that originally envisaged, the Wales Audit Office may charge a fee which differs from that originally notified. 5 Where specialist support or legal or other professional advice is required, this will be charged to audited bodies in addition to the cost of Wales Audit Office staff. 6 We invite your views on our intention to deliver a second year freeze in the hourly rates for audit work undertaken during Wales Audit Office Consultation on fee rates and fee scales

12 Consultation on fee scales for work undertaken at local government bodies 7 The Wales Audit Office is required to consult on and prescribe: scales of fees payable in respect of the audit of accounts of local government bodies in Wales; and scales of fees in respect of audits, assessments and special inspections carried out under the Local Government (Wales) Measure Fee scales for the audit of financial accounts and improvement audits and assessments are provided in Appendix 1 in relation to work conducted at unitary authorities, fire and rescue authorities, national park authorities, police and crime commissioners and chief constables, town and community councils, and local government pension funds. A separate fee scale is provided in relation to the National Fraud Initiative (NFI). 9 Fee scales are a means of regulating the cost of public audit, through setting limits and by reviewing fees against those limits. The fee scales for annual audit work at local government bodies are underpinned by a zero-based approach to audit planning which takes account of variation in audited body risks and other factors that can have a bearing on the Auditor General s ability to properly discharge his responsibilities. 10 Fee scale minimum, median and maximum figures in the tables are rounded to the nearest 000. The proposed fee scales are comparable with those published for Annual audit work includes work undertaken in relation to the audit of accounts alongside, where applicable, improvement audit and assessment work carried out under the Local Government (Wales) Measure Annual audit work fee scales do not include work that goes beyond the general duty of the Auditor General (under section 17 of the Public Audit (Wales) Act 2004), such as reporting in the public interest, extraordinary audit, special inspections and work in relation to elector challenge and the prevention of unlawful expenditure. Such additional work is charged on an hourly basis. 13 Separate fee rates also apply to work undertaken to certify claims and returns in respect of grants paid or subsidies made to local government bodies. 14 Auditors will use their professional judgement, informed by the Auditor General s Code of Audit Practice, relevant accounting and auditing standards, and guidance issued by the Auditor General to determine where a particular audited body lies on the prescribed fee scale for that type of body. 12 Wales Audit Office Consultation on fee rates and fee scales

13 15 The fees to be charged at individual bodies will depend on each body s circumstances. In order to properly reflect the cost of the audit, and so provide transparency, the fee must be sufficient (but no more than sufficient) to fund the work required taking into account considerations such as the governance environment, risk, financial and performance management arrangements, size, complexity and the body s track record on improvement. 16 Town and community councils in Wales are subject to a limited assurance audit regime. For we will switch to charging for work on a time basis rather than the historical basis of a fixed fee according to expenditure/income bands. 17 We invite your views on our intention to retain fee scales for at a comparable level to those set for and on the switch to time-based charges for work at town and community councils. Wales Audit Office Consultation on fee rates and fee scales

14 Consultation on fee scales for work undertaken under the National Fraud Initiative (data matching) 18 The Wales Audit Office is required to consult on and prescribe scales of fees for data matching for mandatory participants in the NFI. 19 In order to support Welsh public bodies in combating fraud, the Auditor General conducts the NFI in Wales on a biennial basis. The NFI is also run in England, Scotland and Northern Ireland. The NFI matches data across organisations and systems to help public bodies identify potentially fraudulent or erroneous claims and transactions. The NFI has been a highly effective tool in detecting and preventing fraud and overpayments. Since its commencement in 1996, NFI exercises have resulted in the detection and prevention of more than 26 million of fraud and overpayments in Wales and 1.17 billion across the UK. 20 The Auditor General conducts the NFI using his statutory data-matching powers under Part 3A of the Public Audit (Wales) Act For , the National Assembly approved a fee scheme containing a nil fee scale for all participating bodies. The Wales Audit Office will instead fund the work through payment from the Welsh Consolidated Fund as approved through the Estimate. The reasoning for this is to encourage greater voluntary participation of non-mandated organisations, in line with the aspirations of the Public Accounts Committee. In tandem and in line with the Board s aspirations for a simplified funding regime, a nil fee scale is set for mandatory participants too. This helps avoid any confusion and provides a clear message in terms of the costs of participation in the NFI. In totality, NFI work is no longer funded through fee charges. As required by legislation, the fees for mandatory participants are shown below. Exhibit 2 - NFI fees Type of body Fee Previous fee Unitary authority Nil 3,650 Police and crime commissioners and chief constables Nil 1,000 Fire and rescue authority Nil 1,000 NHS trust Nil 1,000 Local health board Nil 1,000 Other voluntary Nil Subject to agreement with each body 14 Wales Audit Office Consultation on fee rates and fee scales

15 22 Mandatory participants will also be provided with access to the NFI Application Checker without charge. 23 We invite your views on continuing participation in the NFI on a nil-cost basis to participants. Wales Audit Office Consultation on fee rates and fee scales

16 Fee refunds and excess charges 24 On completion of audit assignments, we will assess the actual costs incurred in undertaking the assignment against the fee charged. We will refund any excess of fee over cost and, conversely, we may charge additional costs where the fee falls short. We will process refunds and additional charges in a manner which seeks to minimise administrative costs, such as through offsetting against future fees or fees for other aspects of audit activity. 16 Wales Audit Office Consultation on fee rates and fee scales

17 Appendix 1 Wales Audit Office Consultation on fee rates and fee scales

18 Unitary authorities Fee scale for audit of accounts Gross expenditure 000,000 Fee range 000 Minimum Median Maximum Previous year median , , , Fee scale for improvement audits, assessments and special inspections under the Local Government (Wales) Measure 2009 All unitary authorities Fee range 000 Previous year median 000 Minimum Median Maximum Wales Audit Office Consultation on fee rates and fee scales

19 Graphic of total fee scale for unitary authorities 1,200 increased complexity aspects improved quality aspects gross expenditure 000,000 1, Unitary authorities total fee scale minimum/maximum Unitary authorities total fee scale median audit fee 000 Wales Audit Office Consultation on fee rates and fee scales

20 Fire and rescue authorities Fee scale for audit of accounts Gross expenditure 000,000 Fee range 000 Minimum Median Maximum Previous year median Fee scale for improvement audits, and assessments and special inspections under the Local Government (Wales) Measure 2009 All fire and rescue authorities Fee range 000 Minimum Median Maximum Previous year median Wales Audit Office Consultation on fee rates and fee scales

21 Graphic of audit total fee scale for fire and rescue authorities increased complexity aspects improved quality aspects gross expenditure 000, Fire and rescue authorities total fee scale minimum/maximum Fire and rescue authorities total fee scale median audit fee 000 Wales Audit Office Consultation on fee rates and fee scales

22 National park authorities Fee scale for audit of accounts Gross expenditure 000,000 Fee range 000 Minimum Median Maximum Previous year median Fee scale for improvement audits, and assessments and special inspections under the Local Government (Wales) Measure 2009 All national park authorities Fee range 000 Minimum Median Maximum Previous year median Wales Audit Office Consultation on fee rates and fee scales

23 Graphic of total fee scale for national park authorities increased complexity aspects gross expenditure 000, National park authorities total fee scale minimum/maximum National park authorities total fee scale median improved quality aspects 0 Limited assurance audit arrangements may apply audit fee 000 Wales Audit Office Consultation on fee rates and fee scales

24 Police and crime commissioners and chief constables Auditors undertake audits of two statutory bodies in a police area the Police and Crime Commissioners (PCC) and the Chief Constables (CC). Based on current operating models in place at each of the Welsh police areas, the fee is to be split 50:50, but that is subject to change with any significant changes in local circumstances. Fee scale for audit of accounts Combined gross expenditure of PCC and CC 000,000 Combined fee range for PCC and CC 000 Minimum Median Maximum Previous year median Wales Audit Office Consultation on fee rates and fee scales

25 Graphic of total fee scale for police and crime commissioners and chief constables 400 increased complexity aspects improved quality aspects combined gross expenditure 000, PCC and CC fee scale minimum/maximum PCC and CC fee scale median audit fee 000 Wales Audit Office Consultation on fee rates and fee scales

26 Town and community councils with annual income or expenditure under 2.5 million Town and community councils in Wales are subject to a limited assurance audit regime. For we will switch to charging for work on a time basis rather than the historical basis of a fixed fee according to expenditure/income bands. The fee rate charges are as set out below. The estimated impact of this switch is set out in the table below. In circumstances where the auditor requires further evidence to properly discharge their responsibilities, including following publication of a related public interest report, additional testing will be undertaken to address the auditor s concerns. It is emphasised that the actual charge made to any particular body will be dependent on the time actually worked on that particular audit. The ranges provided in the table below are for indicative purposes only. Estimated time charges for audit of accounts of town and community councils Annual income or expenditure (fees are payable on whichever is the higher each year) Indicative baseline charge Indicative upper range fee Fee charged in previous year Nil 99 Nil Nil Nil 100 5, , , , , ,001 2,500, Wales Audit Office Consultation on fee rates and fee scales

27 Local government pension funds Fee scale for audit of accounts All pension funds Fee range 000 Previous year median 000 Minimum Median Maximum Wales Audit Office Consultation on fee rates and fee scales

28 Fee rates for other work in local government The audit of other types of local government body, work which goes beyond the general duties of the Auditor General, and grant certification work Other than those types of bodies for which fee scales have been prescribed, there are a small number of other types of local government body. For audits of these bodies, a zero-based approach to audit planning will still be applied, with resource requirements converted into fees directly based on the costs of delivering the work or by applying the fee rates as set out below. For all types of government body to meet their statutory responsibilities, it is sometimes necessary for the Auditor General to carry out work which goes beyond his general duties (those set out in section 17 of the Public Audit (Wales) Act 2004). Additional work can include reports in the public interest, extraordinary audit, special inspections and further work in relation to elector challenge and the prevention of unlawful expenditure. Charges for this type of work will reflect the nature of the work required. Auditors may also undertake grant certification work at local government bodies on behalf of the Auditor General. The amount of grant certification work undertaken in any year is dependent on the number of schemes subject to audit and the number of audited bodies participating in those schemes. Charges for this work are made on a per-hour basis and reflect the size, complexity or any particular issues in respect of the grant in question. We are working closely with the Welsh Government and hope to be able to agree a model that focuses more on the outputs and outcomes from grant-supported activity, moving away from the traditional audit approach of checking invoices. This should provide the Welsh Government and audited bodies with a clearer understanding of the difference grant-supported activity is making, whilst also reducing the cost of grant certification work. We expect to pilot this approach during and will discuss fee implications with pilot authorities. 28 Wales Audit Office Consultation on fee rates and fee scales

29 Estimates of the relative proportions of financial audit staff grades to be used for different types of grants work are provided below. Grade of staff Complex grants staff mix % All other grants staff mix % Engagement director 1 to 2 0 to 1 Audit manager 4 to 6 1 to 2 Team leader 18 to to 16 Team member/trainee 77 to to 81 Complex grants include: BEN01 Housing and council tax benefits scheme LA01 National non-domestic rates return PEN05 Teachers pensions return Wales Audit Office Consultation on fee rates and fee scales