3
Recommendation
Thirty-Fourth Report - Local Government…
Deferred
The Department did not act with sufficient urgency, nor has it set out an overarching plan and timetable, to address the severe and pressing problems with the local government audit market. Significantly delayed audits are a serious gap in local authorities’ accountability to taxpayers and risk undermining public confidence and …
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The Department did not act with sufficient urgency, nor has it set out an overarching plan and timetable, to address the severe and pressing problems with the local government audit market. Significantly delayed audits are a serious gap in local authorities’ accountability to taxpayers and risk undermining public confidence and trust in local government finances. Just 9% of 2020–21 local government body audits were completed in time for audited accounts to be published by the extended deadline of 30 September 2021 and too many audits for 2019–20 and 2018–19 remain outstanding, putting further pressure on the local audit system. Previously this Committee recommended the Department set out a detailed plan and timetable for getting local audit timeliness back on track. We also recommended the Department explain how it intended to work with the Department for Business, Energy and Industrial Strategy to set up the new system leader for local government audit, the Auditing, Reporting and Governance Authority (ARGA), and how it would address the pressing need for effective leadership while ARGA was being established. The Department agreed with our recommendations however their initial response lacked detail. While we welcome the measures to address the urgent issues in local audit the Department has recently announced these will take time to finalise and implement. Recommendation: Alongside its Treasury Minute Response, The Department should provide a detailed timetable and overarching plan that draws together the existing and recently proposed short- and long-term actions to address the problems with local government audit. This should include a clear timetable for finalising the local audit functions of ARGA, the transition arrangements and a mechanism to keep this committee updated on progress.
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Government response AI summary
The department will update the Committee in spring 2022, after the outcome of the consultation Local audit framework and BEIS's response on the White Paper Restoring trust in audit and corporate governance have been published and the early stages of the procurement process completed.
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HM Treasury
12
Recommendation
Thirty-Fourth Report - Local Government…
Deferred
This Committee recently recommended the Department should set out a detailed plan and timetable for getting local audit timeliness back on track. We also recommended the Department explain how it intended to work with the Department for Business, Energy and Industrial Strategy to set up the new system leader for …
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This Committee recently recommended the Department should set out a detailed plan and timetable for getting local audit timeliness back on track. We also recommended the Department explain how it intended to work with the Department for Business, Energy and Industrial Strategy to set up the new system leader for local government audit, the Auditing, Reporting and Governance Authority (ARGA), and how it would address the pressing need for effective system leadership while ARGA was being established.43 The Department agreed with our recommendations, however we felt its response lacked detail on specific actions capable of addressing the urgent issues in local audit.44 In December 2021, the Department published a range of measures which aim to support improved audit timeliness and the wider audit market, though some are still being considered following a consultation in summer 2021 while others are subject to further consultation or may require legislation to be passed.45 These measures aim to provide a whole system response and include guidance and training for audit firms, additional funding to support local bodies with the cost of strengthening their financial reporting, measures to improve local authority accounts, reviewing opportunities to reduce some of the accounting and audit requirements and extending the deadline for publishing audited local authority accounts in future years. The Department committed to publishing an update on these measures as part of its response to the summer 2021 consultation.46 37 (LFS0001/ICAEW), pages 3 and 4 38 Committee of Public Accounts, Financial sustainability of local authorities, Fiftieth Report of Session 2017–19, HC 970, 4 July 2018; Committee of Public Accounts, Local government governance and accountability, Ninety- Seventh Report of Session 2017–19, HC 2077, 15 May 2019; Committee of Public Accounts, Local auditor reporting on local government in England, Eleventh Report of Session 2021–22, HC 171, 14 July 2021; Q105 39
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Government response AI summary
The department will update the Committee in Spring 2022 after the outcome of the consultation and BEIS's response on the White Paper have been published and the procurement process has been completed, enabling a more detailed response on the transition to the new arrangements and …
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HM Treasury
13
Recommendation
Thirty-Fourth Report - Local Government…
Deferred
In 2018, this Committee recommended the Department should review the way local authority audit committees operate in examining and challenging local risks to financial sustainability.47 In 2019 this Committee highlighted that 27% of external auditors did not agree that audit committees provided sufficient assurance about authorities’ governance arrangements.48 CIPFA had …
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In 2018, this Committee recommended the Department should review the way local authority audit committees operate in examining and challenging local risks to financial sustainability.47 In 2019 this Committee highlighted that 27% of external auditors did not agree that audit committees provided sufficient assurance about authorities’ governance arrangements.48 CIPFA had told the Committee “We think audit committees are stronger if they have independent members” but that “We don’t have the ability to set mandatory guidance on audit committees.”49 In 2020, an independent review of the oversight of local audit and the transparency of local authority financial reporting, carried out in line with Committee recommendations from 2018 and 2019, highlighted “a potential weakness in the way in which audit outcomes are considered and presented to both the local authority and the public”, in part because local authority audit committees “mostly lack independent, technically qualified members”.50 We received evidence from the ICAEW stating weaknesses in audit committees “were a major contributory factor in the financial management failures” at the three councils where Public Interest Reports were issued recently and arguing “the government should make appointing independent members [to audit committees] a statutory requirement, as it is already in Wales.”51 When we raised the statutory requirement point with the Department, it agreed with us that it was an extremely sensible idea to have an independent person sitting on audit committees.52 Yet the Department’s consultation proposal is simply to have CIPFA strengthen its guidance. In fact, the Department’s consultation said it is still only considering as an option making it a statutory requirement for councils to have an audit committee at all.53 Potential to improve oversight
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Government response AI summary
The government agrees with the recommendation but defers concrete action, stating it will publish the response to its consultation on the local audit framework and update the Committee in Spring 2022 after the outcome of this consultation and a BEIS White Paper.
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HM Treasury