ones 3.379 subsidiaries of Councils will be required to be audited from 2019, according to the Royal Decree 424/2017, adopted a year ago, but that entered into force on 1 July this year. This rule tries to regulate internal control (financial, accounting standards and audit compliance) of the local public sector.
the local auditors will have to apply this legislation of autonomous bodies, public business entities, consortia, societies and public companies, foundations and associations with municipal public capital.
standard “affects all of the local public sector and aims to ensure the regular management of public funds, the efficient use thereof and the financial sustainability of local authorities”, designates the explanatory statement of the named Decree. The Decree sets a term of three years, from 2019, for the municipal auditor secure “with own or external means” effective control of the general budget of the local authority.
and opens the door to private audit firms to collaborate with the external auditors in the review, subsequent, 3,400 of these subsidiaries accounts closed exercises.
Antonio López, President of the Chamber of Auditors of Andalusia and a member of the Commission of the public sector from the Institute of censors juries of accounts of Spain (ICJCE) explains: “what extent does this for the private auditor? Auditors not may collaborate in everything, but in the audit of these nearly 3,400 subsidiaries”.
and adds that “the opportunity for the auditing firms is important”. In addition, warns: ” but, eye, just as collaborators of the external auditor”.
the Decree actually defines the normative framework for municipal Auditors to ensure internal control. “The model ensure, with own or external, means effective control of 100% of the consolidated general budget in the form of teacher role and, at least 80% through the application of financial control mode. For this last, in the course of three consecutive years and based on a preliminary analysis of risk, it must have reached 100% of the consolidated general budget”, the Decree says.
standard defines the framework for action that auditors have in the internal control: the control before approving the budget, during the implementation and subsequent financial. For this last task, the Decree provides for the collaboration of private firms audit for a period of two years, renewable up to a maximum of eight.
Lopez points out that “the Auditors have to ensure that it can be a control of 80% of the consolidated budget of the subsidiaries, means that all subsidiaries must be covered.” But the reality is that there is no material media in the municipalities to do this.”
lack of media
therefore decree that came into force last July clarifies how to do it: “for the execution of the functions of financial control, in the form of public audit on the proposal of the administrator authority, and in case of failure media, through appropriate agreements or contracts, will collaborate with local authorities other public bodies or private audit firms”.
Lopez notes that the obligation to audit annually the accounts of thousands of subsidiaries has certain possibilities for hiring Auditors, private and local intervention, in the case of employees with the human resources for this purpose. And accurately that “in the case of compliance audits and operational, to not having a mandatory regularity, and does not affect all dependent entities, their chances are somewhat smaller, but they could be affected, approximately 2,000 entities” dependent”.
the President of the Chamber of accounts of Andalusia warns that private audit companies will have to invest in the training of personnel in the public sector specificities.
standard responds to the concern launched repeatedly by the Court of audit of Spain, that it has alerted that many local authorities do not have their accounts on a regular basis. In fact, 39% has not yet yielded figures for the year 2016.