Recommendation 17

As highlighted in Sir Tony Redmond’s independent review of local authority audit, the local audit market is deeply flawed. We are particularly concerned about the shortage of specialist local auditors, about the principle of allowing local councils 42 Local authority financial sustainability and the section 114 regime to choose their own auditor and about the lack of a co-ordinating body responsible for monitoring the performance of auditors and joining up auditor findings across the country. We are pleased the Government has now announced its plans for instituting a new audit system leader, and we can see the argument for separating regulation and procurement. We are also pleased that the Department has accepted the recommendation in the Redmond Review that the new system leader produce annual reports on the state of local audit, although it is not clear to what extent it will be able to join up individual auditor findings with a view to identifying systemic issues across local government. We also note that the new Audit, Reporting and Governance Authority, in which the standalone unit will sit, is being set up primarily to audit the private sector. Given that local authority audit is different from private sector audit, in that it must consider such additional matters as public interest and value for money, it remains to be seen if a standalone unit within ARGA can provide the necessary specialism that local authority audit requires. We have concerns that the Government has not established a regulator along the lines suggested in Sir Tony Redmond’s independent review, rather than as a standalone unit within another regulator.