A summary of consultation responses are outlined below. Following this consultation process, and in accordance with EU procurement guidelines, contracting notices have now been issued. Audit firms are invited to submit expressions of interest to tender for work by June 23.

 Outcome of the Consultation:

The five questions which were submitted for consideration are detailed below along with a summary of stakeholders’ views and the Auditor General’s response to them.

Question 1: Do you agree that the Auditor General should continue to maintain a mixed market of supply for a low cost, high quality audit regime, based on a fixed market of suppliers?

Agreement was unanimous, provided that only suitable firms are engaged as quality, continuity and consistency are important.  Quality is the key factor – but not at any cost.

The Auditor General welcomes your endorsement for the mixed market.  Quality will have the greatest weighting among all the factors considered at both the pre-qualification stage and when suppliers’ tenders are assessed.

Question 2: How important is it to you that the Auditor General seeks to engage with a sufficient number of firms in order to provide contestability for the provision of audit services?

Almost everyone agreed that contestability was important. Local government bodies welcome firms’ involvement with the Auditor General’s audit regime but this is a new issue for central government bodies.  The need for value for money and open competition was emphasised and the potential for firms to add value to the Auditor General’s regime was recognised.

The Auditor General will ensure that he will be able to choose from sufficient audit suppliers when he makes future appointments or needs to engage contractors – subject to sufficient bids of an appropriate quality being received. The actual number of firms that the Auditor General will contract with will not be known until the autumn when the Auditor General’s procurement process is completed.  That process will follow the latest Public Contracts Regulations to ensure compliance with EC competition rules.

Question 3: The Auditor General will consult on the making of appointments and engagement of contractors but will, under statute, retain the ‘final say’ in appointing/engaging auditors.  To what extent would you wish to be consulted on the Auditor General’s general proposals for making appointments or engaging contractors?

Most responses asked for audited bodies to have more involvement when future appointments are proposed though there was a general acknowledgement that the ‘final say’ must be with the Auditor General. Only a minority wished for ‘little or no consultation’.

The Auditor General will continue to consult with local government bodies before appointments are made: indeed he has a statutory duty to do so under Section 14(7) of the Public Audit (Wales) Act 2004. While he does not have to consult local NHS and central government audited bodies, as he is their auditor, he does consider any information put forward by these bodies if there are circumstances that could prevent a new Engagement Partner from undertaking audit work on his behalf (such as a conflict of interest). Incoming Engagement Partners (acting on behalf of the Auditor General) and Appointed Auditors in local government will also hold introductory meetings and work with their predecessors to ensure a smooth handover.  The Auditor General recognises that many stakeholders would like more information on why individual appointments are proposed and this will be taken into account when future proposals arise.

Question 4: To what extent would ‘flexible’ appointments (i.e. where WAO staff perform inspection and VFM audit work and a firm performs financial audit work – or vice versa) be attractive to you?

Where respondents commented, nine of them saw flexible appointments as attractive and a further seven expressed an interest in them.  However, twenty-one responses did not welcome such appointments, raising concerns about possible duplication of effort, increases in audit complexity, and a poorer quality of recommendations if no-one could take a fully-informed overall view of the audited body.

In response, the Auditor General will continue to monitor the ‘joint appointment’ pilot project currently operating and identify the lessons learned from that.  The feasibility of future ‘flexible’ appointments will also depend on suppliers’ bids, the cost-effectiveness of such working arrangements and on the enthusiasm of audited bodies to have them.

Question 5: The Auditor General will consider bids from firms on the basis of quality, capacity, added value, ability and willingness to work flexibly in partnership with the WAO, and (if practical given the size of the market) price.  Are there other criteria you feel should be included?

Additional criteria cited included experience of the public sector in Wales, the ability to work bi-lingually and accessibility/coverage across all of Wales. Many stakeholders reiterated the need to secure ‘good quality audit work at a price which represents good value.’

The Auditor General confirms that factors specific to Wales will be taken into account before suppliers are invited to tender and again when the final bids are assessed, and also price which will be considered at the tender stage.  For local government bodies, the Auditor General will continue to set fee scales as he is under a statutory requirement to consult – as he considers appropriate – local authority associations and bodies of accountants (section 20(2) of the Public Audit (Wales) Act). He will continue to consult health service bodies on a voluntary basis and, where a firm acts on his behalf, his Liaison Director will review the proposed fee for the body concerned.

In conclusion, I can advise you that the contract notices for audit work at principal bodies and community/town councils were published in mid-May. Negotiations with suppliers on extending the current contracts where necessary are also being concluded.