Source · Select Committees · Public Accounts Committee
Recommendation 17
17
Deferred
Local audit market faces persistent capacity challenges despite recent procurement efforts.
Conclusion
When we asked PSAA about its confidence in the future of the market, it cautioned that the procurement had been very tough, having only secured 90% of the capacity PSAA needed in the initial round. PSAA described this outcome as ‘not ideal’ as it was not able to make a choice from the offers received and had to return to the market to ask for more.46 Following this supplementary process PSAA secured 99.5% of the capacity tendered, a level it judged sufficient following recent local government reorganisations.47 Only seven firms took part in the procurement, of which six won contracts.48 Two previous providers left the market, one large provider returned along with two new market entrants.49 Deloitte, one of the firms who left the market, told us it chose not to participate in the procurement. Its reasons included the terms of the contract prohibiting an auditor’s ability to resign – a power they have in other markets; regulatory imbalances around the quality expectations on the local authorities producing accounts and the firms auditing them; and challenges attracting, developing and retaining the staff required to perform local audit work.50 PSAA warned that without changes to the market, the next five-year procurement will be equally difficult.51
Government Response Summary
The government agrees with the committee's observation on market challenges, stating that the FRC plans to progress the Local Audit Workforce Strategy and will provide a further update before the end of 2023 detailing necessary actions across the local audit system.
Government Response
Deferred
HM Government
Deferred
3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 The Permanent Secretary has written to the Committee alongside this Treasury Minute setting out FRC’s plans to progress the Local Audit Workforce Strategy and will write again before the end of 2023 setting out the actions the FRC, working collaboratively with system partners, has determined are necessary across the local audit system.