Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 20
20
Rejected
Paragraph: 92
The Government must reconsider its plan to combine the local audit system leader with the...
Recommendation
The Government must reconsider its plan to combine the local audit system leader with the new audit regulator, ARGA. Specifically, the Government must, in coordination with the FRC, which currently has shadow system leader responsibility, introduce legislation to create a new body to manage, oversee and regulate local audit in line with the recommendations put forward by the Redmond Review. The new body must be sponsored by, and directly accountable to, the Department for Levelling Up, Housing and Communities. The legislation to establish this body should be introduced as soon as possible in the 2023–24 session of Parliament.
Government Response Summary
The government rejects the recommendation to create a new, separate body for local audit, stating a new arm's length body is not necessary and that ARGA's full establishment is dependent on parliamentary time, while a shadow system leader function is already active within the FRC.
Paragraph Reference:
92
Government Response
Rejected
HM Government
Rejected
As the Committee will be aware, Sir Tony Redmond’s ‘Independent review of local authority financial reporting and external audit’ recommended the establishment of a new independent regulator for local audit. The aim of this central proposal was to overcome fragmentation in the local audit framework, enabling a coordinated response to challenges arising. As set out in our May 2021 ‘Local Authority Financial reporting and external audit: Spring Update’, it is the government’s view that a new arm’s length body is not necessary to achieve this objective and that a system leader should instead be appointed from within the current system. This policy has been subject to a public consultation. The Auditing, Reporting and Governance Authority (ARGA) will be established through primary legislation when parliamentary time allows. Ahead of that, it was stipulated in our July 2021 public consultation ‘Local Audit Framework: technical consultation’ and the subsequent government response, that a shadow system leader function would start at the FRC, funded by and accountable to the Department. Accordingly, an MoU between the FRC and DLUHC was published in March 2023 setting out the roles and responsibilities the FRC will undertake as shadow system leader and associated governance arrangements. The local audit unit at the FRC, as incoming shadow system leader, has now been staffed and is working with the Department to lead the cross-system package of measures to clear the backlog.