Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Acknowledged
Local audit delays threaten NHS accounts due to shared auditor pools and sector changes.
Conclusion
We also asked the FRC about the risks local audit delays cause to NHS accounts. The FRC emphasised the challenges the health sector faces due to structural changes in the last year.29 This will be reflected in the NHS requiring audits of the three months Clinical Commissioning Groups were in place up to June 2022, and of the nine months of the Integrated Care Boards that replaced them for the rest of 2022–23.30 The FRC emphasised the interdependencies where the same pool of auditors works across both the health and local government sectors, a coordination risk also highlighted by local audit providers themselves.31 The FRC told us it plans to undertake a wider review of the local audit system, including the NHS, as an immediate priority.32 It argued that a more granular understanding will enable it to assess the best course of action to address issues affecting timeliness, without having a detrimental effect on other sectors.33 Incentives for timely audit
Government Response Summary
The government agrees with the committee's sentiment regarding local audit delays impacting NHS accounts and describes ongoing cross-system work, including letters to local authority executives and DLUHC's monitoring, to address the overall audit backlog and ensure timely financial reporting.
Government Response
Acknowledged
HM Government
Acknowledged
2.1 The government agrees with the Committee’s recommendation. Recommendation implemented 2.2 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. 2.3 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. 2.4 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.