Profile: Steve Bundred, Audit Commission chief executive

Marking your first anniversary with an office move may not be the most romantic way to celebrate, but for Steve Bundred, chief executive at the Audit Commission, the change of working location symbolises everything he has strived for over the last year.

The relocation of the commission’s headquarters from a leafy square in Pimlico to Millbank Tower, former home to the Labour Party, may not have major implications for Bundred’s commute, but it will see all the London staff in the same place for the first time. The shift will also create substantial savings in office costs, fitting in perfectly with Bundred’s aim of a leaner, fitter commission.

Bundred wants to scale back on a good proportion of the activities the commission has added to its repertoire over the past decade. Many observers, Bundred included, had begun to see the commission as an unwieldy behemoth that did not provide value for money – an unfortunate situation for a body assessing the value of other public sector organisations.

Indeed, Bundred is impeccably placed to point out the commission’s failings, having been on the receiving end of the commission’s demands as chief executive of the London Borough of Camden for seven years. And having previously served as director of finance for Camden, he also has an eye for getting the most out of his resources.

As a member of CIPFA, Bundred was the first professionally qualified accountant to hold the post of chief executive when he took over on 1 September 2003. He relished the opportunity to put some of the ideas he had from observing the commission into practice.

‘Although I always had a great deal of respect for the work that the commission did and the people doing it, I also spent much of the last 10 years on the outside, advising the commission on what it ought to do better,’ says Bundred. ‘So it’s been a really welcome opportunity to give effect to some of the things I have been arguing for in the past, and help move the commission in a direction where its relationship with audited and inspected bodies will be even stronger than in the past. Its impact will be greater and its effectiveness will be enhanced.’

Despite following in the footsteps of Sir Andrew Foster, who had been running the commission for many years, Bundred did not fear climbing into his well-worn shoes. Instead, he used the handover as a catalyst for change.

‘Partly because Andrew had been around for such a long time, the very fact of his going signalled the end of an era in the commission,’ he says. ‘There’s no doubt that the changes I’ve tried to make, and the commission more generally before I was appointed, are ones that our own staff had recognised were necessary and indeed possibly overdue.’

The main thrust of the change was putting into reverse the history of the commission’s expanding role, refocusing on how it could help improve services with fewer resources.

‘We’ve been looking very hard at the value for money we provide from our own activities – not just questioning the value for money provided by the bodies we audit and inspect,’ he says. ‘After a number of years of substantial growth for the commission, people outside had started to question whether the expansion had gone too far. What we’re doing now, for the first time in the commission’s history, is to withdraw from some of the things that we’ve done in the past.’

The initiative has resulted in the scrapping of mandatory value-for-money studies in local authorities, as well as a reduction in the number of grant claims that have to be certified. But this is only the beginning.

Several other consultations are underway, new codes of practice for local government and health authorities have been drawn up and an overhaul of the inspection regime is gathering steam. Bundred estimates that the proposals already implemented ‘have the affect of reducing our activities in local government by a figure equivalent to 20%’.

Much of this drive for greater efficiency has been aided by the introduction of comprehensive performance assessments (CPAs), that have allowed the commission to take more of an arm’s length approach with those public bodies that are performing well. But the commission had a battle on its hands to gain acceptance of CPAs by the bodies it oversaw, given the controversy and hysteria that performance indicators and league tables had generated in the past.

It’s not a new concept, but fortunately the reaction was more positive this time around. ‘I can remember back when the commission first introduced performance indicators, the howls of anguish that arose in local government at the time. People were saying this is a terrible thing because it will lead to the production of league tables, which will be misleading and oversimplify very complex issues around the delivery of local authority services. So the commission introduced performance indicators with some trepidation, and with a great deal of care.

‘Similarly, when CPA was first mooted, local authorities were saying “it will be very subjective” and “how can you possibly reduce a complex authority to a single word like good or weak?” There is no doubt that there was quite a degree of hostility within local government, in advance of CPA happening.

‘But I think because of the extent of the consultation that was done, the commission came up with a methodology that was recognised as good enough for the purpose of producing results that were credible and it produced a process that was helpful.

‘So when local authority leaders and chief executives were surveyed after the first round of CPA assessments, 80% said they had found the process really helpful and it had been instrumental in helping them drive their authorities forward.’

Consequently, three times as many authorities have registered an improvement since CPA was introduced. This has also helped reduce the commission’s costs. The combined audit and inspection fees for excellent authorities will be 28% lower this year, while costs associated with good authorities are expected to be reduced by 12%.

The commission’s working relationship with accounting firms is likely to be a crucial part of this continued overhaul. The firms currently undertake around 30% of the public sector audits on behalf of the commission. Whether this figure will increase as a result of the changes is still uncertain.

‘It’s a bit difficult to say with certainty what the future will be, because we’re in the process of conducting a review and we haven’t yet drawn even tentative conclusions. But we remain absolutely committed to there being a mixed market in audit, and we intend to extend that commitment to creating a mixed market in inspection as well.

‘We’re only at the moment working out how we might approach it, but we’ve had a small number of pilots where we’ve had inspections undertaken on our behalf by a firm. We’ve been very happy with the results of those inspections and it has shown us we can create a mixed market in inspection, like we did in audit.’

The working relationship between Bundred and chairman James Strachan has been crucial to driving these changes. Strachan has a background in the private sector, as well as experience in the public and voluntary sector. Bundred believes this range of expertise brings ‘some different perspectives to our discussions’ although he is far from convinced that taking ideas from the private sector always works successfully.

‘There are some substantial differences between the public and private sector,’ explains Bundred. ‘The public sector dips its hands into taxpayers’ pockets, and therefore a public sector auditor can’t afford to have an Enron or WorldCom on its hands. So public sector audit needs to be different. It needs to be of high quality and it needs to have a wider scope.

‘Many public bodies are effective monopolies, providing services to very vulnerable people or services that people can’t choose to opt out of. So there’s a necessity in the public sector to have other means to ensure effectiveness, stimulate innovation and drive improvement.’

The commission’s role as auditor of Westminster council, was central to its long-running battle to recover £27m from Dame Shirley in settlement of the surchage imposed by district auditor John Magill for her role in the homes for votes scandal. It highlighted the differences between auditing in the private and public sectors. But this added complexity drives Bundred, who seems more at home with the challenges provided by working for the government than with satisfying shareholders.

‘It is the added complexity of the public sector that makes my job so interesting. In the private sector, you are able to focus very clearly on the bottom line. You’ve got a clear objective. That’s not always true in the public sector. In the public sector, you often have many conflicting objectives and grappling with those is part of the skill of public sector management and part of what makes it so interesting.’

WHY BUNDRED WOULD VOTE FOR A MERGER

Recent talks between the ICAEW, CIPFA and CIMA have not gone unnoticed by Bundred, who sees the consolidation of the institutes as a vital and inevitable step to improving the reputation of the profession following the financial scandals of Enron, WorldCom and Parmalat.

‘I think the reputation of the profession has taken a bit of a battering over the last couple of years, and I do think that it’s an issue senior people in audit and accountancy bodies at a national level across different sectors ought to be thinking about,’ says Bundred.

‘It’s one of the reasons I particularly welcome the merger talks that CIPFA announced a couple of weeks ago. I’m a member of CIPFA and there have been many occasions in the past when I’ve voted to endorse merger proposals – more with hope than expectation that the mergers would come to fruition.

‘But I’ve always believed that mergers within the profession are the right way to go, and I very much hope that this one succeeds, because I think a stronger accountancy profession will inevitably lead to better financial management in the public and private sectors. It will also make the profession a more attractive career for talented young people.

‘There’s a degree of historic inevitability about the need for rationalisation of the profession in this country. It may not happen this time but it’s going to happen eventually and I think this time it’s probably got a better chance than on some occasions in the past. Not least because in the private sector bodies there is a growing realisation that the status quo is untenable and the profession needs to rethink it role.’

And of course the negotiations could not be in better hands,given that the current CIPFA president, Mike Barnes is head of technical development at the Audit Commission.