Source · Select Committees · Public Accounts Committee
Recommendation 3
3
Accepted
Failures in the local audit market in England and Wales are resulting in poorer quality...
Recommendation
Failures in the local audit market in England and Wales are resulting in poorer quality data for Central Government to use in oversight, and in preparing the Whole of Government Accounts. Before the pandemic, the Local Government audit sector was already under strain, with widespread delays to statutory audits. The additional demands on Local Government from COVID-19 exacerbated these problems, with only 45% of 2019–20 Local Government audits completed by the target date of 30 November 2020, compared to 57% of 2018–19 audits completed by the prior year target date of 31 July 2019. As a result, and despite delivering the 2019–20 WGA later, the Treasury’s data is increasingly incomplete and unreliable, with the WGA including unreliable data for 29 unaudited Local Authorities and excluding 23 Local Authorities altogether. This has reduced the quality of data used to oversee the Local Government sector and to prepare the WGA, and reduces the certainty of any consequent insights, conclusions or decisions. The problem is likely to escalate, with the proportion of 2020–21 audits completed by the target date of 20 September 2021 dropping again to just 9%. The Treasury has raised the component audit threshold for the 2020–21 WGA, such that just 10 Local Government returns will require auditing for 2020–21. Although this will make it easier for the Treasury to produce the WGA on time, it may have negative consequences for the quality and reliability of data unless the Treasury undertake additional assurance work to mitigate this risk. Recommendation: The Treasury should set out how it will ensure the data in OSCAR II will remain of sufficient quality, despite significantly reducing the level of auditor assurances, for producing the WGA and informing its understanding of the local government sector.
Government Response Summary
The Treasury will centrally carry out assurance work over data submissions that are below the audit threshold (across all sectors) and is obtaining further specialist assurance advice on how to enhance the efficiency and effectiveness of the assurance procedures for WGA.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. Recommendation implemented WGA data submissions are prepared based on the component entity’s audited accounts where published. As an additional layer of assurance, entities above a certain size are also required to have their WGA data submission audited. The threshold for this additional data submission audit is periodically reassessed to ensure it remains appropriate. A range of different thresholds were considered for WGA 2020-21, taking into consideration the potential impact on data quality. Analysis showed that raising the local government sector threshold to match the existing threshold for all other WGA entities (which has not been changed) will provide a good level of assurance by ensuring audited data submissions continue to provide high coverage across all key accounts metrics, such as total assets, liabilities and expenditure. To further enhance the level of assurance over OSCAR II data, the Treasury will centrally carry out assurance work over data submissions that are below the audit threshold (across all sectors). The methodology for this work has been discussed with the National Audit Office. In addition, the department is obtaining further specialist assurance advice on how to enhance the efficiency and effectiveness of the assurance procedures for WGA, to support both this year’s account and future cycles.