Responsibilities for local authorities in relation to arrangements for securing economy, efficiency and effectiveness in the use of resources
29. 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.
30. The audited body is responsible for reporting on these arrangements as part of its annual governance statement.
31. 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.
32. Auditors have a responsibility to satisfy themselves that the audited body has put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. In carrying out this work, the auditor is not required to satisfy themselves as to whether or not the audited body has actually achieved value for money during the reporting period.
33. In planning this work, auditors consider and assess the significant risks of giving a wrong conclusion on the audited body’s arrangements for securing economy, efficiency and effectiveness. The auditor’s assessment of what is significant is a matter of professional judgement and includes consideration of both the quantitative and qualitative aspects of the item or subject matter in question. Auditors should discuss their assessment of these risks with the audited body.
34. The auditor will take into account their knowledge of the relevant local sector as a whole, and the audited body specifically, to identify any risks that, in the auditor’s judgement, have the potential to cause the auditor to reach the wrong conclusion on the audited body’s arrangements.
35. In assessing risks auditors have regard to:
- 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 value for money work and work completed as part of the audit of the financial statements, and the audited body’s response to this work;
- the work of third parties, where the results are relevant to the auditor’s value for money responsibilities. The auditor is not required to quality assure or re-perform the work of others and should rely on such work to the extent that, in their judgement, it is appropriate to do so; and
- any other evidence source that the auditor regards as necessary to facilitate the performance of their statutory duties.
36. 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.
37. 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.
38. 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 are alert to the possibility and act promptly if grounds for suspicion come to their notice.
39. At the conclusion of the audit, auditors provide a conclusion that in all significant respects, the audited body has (or has not) put in place proper arrangements to secure value for money through economic, efficient and effective use of its resources for the relevant financial year.