Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Accepted
Explain actions to mitigate local audit delays impacting accountability and central government department accounts.
Conclusion
Delays to the publication of audited accounts for local government bodies increases the risk of governance or financial issues being identified too late and hinders accountability for £100 billion of local government spending. There are ways in which auditors can sound the alarm on risks before their audits are completed, such as issuing a Public Interest Report as was issued in October 2020 for the London Borough of Croydon. However, the risk of significant financial or governance issues being detected too late certainly increases significantly where audits are delayed. With the same pool of auditors working across other sectors, including the NHS, the delays in local audit also risk spreading to other areas of public spending. Some central government departments and their arms-length bodies are continuing to experience knock-on impacts on accountability; for example, when there are delays to the assurances local auditors give on Local Government Pension Scheme accounts and figures supporting Whole of Government Accounts (WGA). As a result, the Department is open to exploring options that allow these central government audits to be concluded without relying on local auditor assurances. The FRC has committed to look at the wider local audit system to make sure actions to address the timeliness of auditing in one area do not affect another. 6 Timeliness of local auditor reporting Recommendation 2: The Department should, as part of its Treasury Minute response, explain what it is doing across the local audit sector to mitigate the impact of delays to the audited accounts of local government bodies on: • Accountability for public money spent by these organisations; • The accounts and audit of central government departments; and • Significant local audit issues being identified or reported late in the day.
Government Response Summary
The government agrees and states the recommendation is implemented. It explains that Minister Rowley has updated the Levelling-Up Committee on urgent work to clear the audit backlog, and the department has written to local authority Chief Executives emphasizing their role and monitoring financial health.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented As set out above, Minister Rowley has written to the Levelling-Up Committee to update on urgent cross-system work to address the backlog of local audit opinions and mitigate the impact of delays on local bodies going forward. This will help to ensure the system gets back on track which will in turn minimise the negative impact on other government departments and the Whole of Government Accounts. The department also wrote to local authority Chief Executives and S151 Officers (Chief Financial Officers) in March 2023 highlighting their critical role in delivering timely, high- quality financial reporting. The letter set out how both the annual auditor’s report to the Audit Committee and Full Council and S151 Officers’ responsibility to report any concerns on the authority’s ability to deliver high-quality draft financial statements by the statutory deadline provide an important accountability mechanism for the taxpayer. DLUHC does not rely entirely on audit for the assessment of risk; audit is only one part of the local control framework. The department regularly monitors the financial health of local authorities using a wide range of data including income and expenditure data and reserves levels, as well as through extensive direct engagement with councils. Minister Rowley’s letter to the Levelling-Up Committee also emphasises that auditors must continue to meet their statutory duty to report on value for money (VfM) arrangements in addition to using the existing statutory powers at their disposal to highlight concerns at an early stage.