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Select Committee · Housing, Communities and Local Government Committee

Financial Reporting and Audit in Local Authorities

Status: Closed Opened: 3 Mar 2023 Closed: 18 Mar 2024 15 recommendations 16 conclusions 1 report

This inquiry will examine a range of issues relating to the purpose, understanding and impact of financial reporting and audit in local authorities. It will scrutinise the role of audit in local accountability and democracy and the extent to which accounts provide a clear picture of the financial sustainability and resilience of a local authority.

Clear

Reports

1 report
Title HC No. Published Items Response
First Report - Financial Reporting and Audit in Local Autho… HC 59 24 Nov 2023 31 Responded

Recommendations & Conclusions

5 items
10 Conclusion First Report - Financial Reporting and … Acknowledged

Accounting Code too expensive, restricting access for local authority account users.

The Code of Practice on Local Authority Accounting (the Accounting Code) is a statutorily recommended guidance document for preparing and understanding local authority accounts, but it is too expensive to be accessed by all possible users of the accounts. If made accessible, it could also serve to keep the agreed … Read more

Government response AI summary
The government acknowledges it may be beneficial to consider how to encourage the use of the Accounting Code and will consider this alongside CIPFA as they reform financial reporting, but does not commit to making the Code freely available.
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Ministry of Housing, Communities and Local Government
13 Conclusion First Report - Financial Reporting and … Acknowledged

Local audit system faces unacceptable crisis with extensive backlog of incomplete audits.

The local audit system is currently in an unacceptable crisis which requires significant and urgent attention. The most significant symptom of the crisis is an extensive backlog of incomplete audits and unaudited accounts, some of them many years out of date. This has led to a deleterious cycle in which … Read more

Government response AI summary
The government acknowledges the unprecedented audit backlog, stating that a consultation on proposals to clear it will begin in early February. They are working with system partners on a solution and will provide updates on progress.
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Ministry of Housing, Communities and Local Government
14 Conclusion First Report - Financial Reporting and … Acknowledged

Proposed actions to clear audit backlog are necessary but require further implementation.

The Department has proposed a series of actions to clear the audit backlog, which include resetting the system through a limited series of statutory deadlines for the delivery of outstanding audits from previous financial years. These proposals represent a necessary first step towards overcoming the audit crisis. However, more work … Read more

Government response AI summary
The government acknowledges the need for action to clear the audit backlog and states that a consultation on their proposals will begin in early February, emphasizing that this has involved detailed and complex work with system partners.
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Ministry of Housing, Communities and Local Government
18 Conclusion First Report - Financial Reporting and … Acknowledged

The Redmond and Kingman Reviews stated that a local audit system leader should be a...

The Redmond and Kingman Reviews stated that a local audit system leader should be a new standalone organisation, but the Government has decided to combine it with the separate audit regulator which is currently the Financial Reporting Council (FRC) but will eventually be the Audit Reporting and Governance Authority (ARGA). Read more

Government response AI summary
The government acknowledges the conclusion, confirming their decision to appoint a system leader from within the current system (FRC, transitioning to ARGA) rather than creating a new standalone body, explaining that this policy was subject to public consultation.
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Ministry of Housing, Communities and Local Government
31 Recommendation First Report - Financial Reporting and … Acknowledged

Introduce new guidance for local authority auditors to proactively flag potential issues earlier

The Department should work with the organisation that prepares the Audit Code (which is currently the National Audit Office but will be the system leader) to introduce new guidance for the auditors of local authorities in order to encourage them to make more proactive use of their existing powers to … Read more

Government response AI summary
The government agrees with the importance of auditors using their powers and will work with the NAO and FRC to consider the merits of introducing new guidance. However, it does not commit to introducing the guidance or assessing its effect.
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Ministry of Housing, Communities and Local Government

Oral evidence sessions

4 sessions
Date Witnesses
17 Jul 2023 Lee Rowley · Department for Levelling Up, Housing and Communities, Siobhan Jones · Department for Levelling Up, Housing and Communities View ↗
26 Jun 2023 Alison Scott · Three Rivers District Council, Councillor Abi Brown · Local Government Association, Councillor Richard Wenham · Central Bedfordshire Council, Councillor Tudor Evans · Plymouth City Council, Gerald Almeroth · Westminster City Council, Michael Hudson · Cambridgeshire County Council View ↗
5 Jun 2023 Conrad Hall · Newham Council, Gareth Davies · National Audit Office, Iain Wright · ICAEW, Lynn Pamment · Financial Reporting Advisory Board, Mike Newbury · National Audit Office, Rob Whiteman · CIPFA View ↗
15 May 2023 Dr Henry Midgley · Durham University, Ed Hammond · Centre for Governance and Scrutiny, Neil Harris · Financial Reporting Council, Professor David Heald · University of Glasgow, Sarah Rapson · Financial Reporting Council, Sir Tony Redmond · Chartered Institute of Public Finance and Accountancy (CIPFA) View ↗

Who gave evidence

20 witnesses
WitnessOrganisationSessions
Alison Scott · Shared Director of Finance (Section 151 Officer) Three Rivers District Council 1
Conrad Hall · Corporate Director of Resources Newham Council 1
Councillor Abi Brown · Chair of Improvement and Innovation Board Local Government Association 1
Councillor Richard Wenham · Councillor Central Bedfordshire Council 1
Councillor Tudor Evans · Leader of the Council Plymouth City Council 1
Dr Henry Midgley · Assistant Professor in Accounting Durham University 1
Ed Hammond · Deputy Chief Executive Centre for Governance and Scrutiny 1
Gareth Davies · Comptroller and Auditor General National Audit Office 1
Gerald Almeroth · Executive Director Finance & Resources (Section 1… Westminster City Council 1
Iain Wright · Managing Director for Reputation and Influence ICAEW 1
Lee Rowley · Minister for Housing, Planning and Building Safety Department for Levelling Up, Housing and Communities 1
Lynn Pamment · Chair Financial Reporting Advisory Board 1
Michael Hudson · Executive Director Finance & Resources (Section 1… Cambridgeshire County Council 1
Mike Newbury · Director, Code of Audit Practice National Audit Office 1
Neil Harris · Director of Local Audit Financial Reporting Council 1
Professor David Heald · Emeritus Professor University of Glasgow 1
Rob Whiteman · Chief Executive CIPFA 1
Sarah Rapson · Deputy CEO, Executive Director of Supervision, an… Financial Reporting Council 1
Siobhan Jones · Director of Local Government and Communities Department for Levelling Up, Housing and Communities 1
Sir Tony Redmond Chartered Institute of Public Finance and Accountancy (CIPFA) 1

Correspondence

5 letters
DateDirectionTitle
23 Apr 2024 To cttee Letter from the Minister for Local Government to the Chair dated 17 April 2024 …
17 Jan 2024 To cttee Letter from Minister for Local Government to Chair relating to the financial re…
5 Dec 2023 To cttee Letter from the Chair to the Local Government Association dated 27 November 202…
18 Jul 2023 To cttee Letter from the Parliamentary Under Secretary of State for Local Government and…
25 Apr 2023 To cttee Letter from the Mayor of Croydon to the Chair dated 30 March 2023 concerning ac…