Source · Select Committees · Public Accounts Committee
Recommendation 3
3
The Department did not act with sufficient urgency, nor has it set out an overarching...
Conclusion
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.
Government Response
Not Addressed
HM Government
Not Addressed
3.1 The government agrees with the Committee’s recommendation. Target implementation date: Spring 2022 3.2 The department remains committed to strengthening the local audit market. Since July 2021 the department has acted as interim system leader, leading work across the system through the Liaison Committee. This has included securing agreement with key partners to a package of measures designed to help improve the timeliness of local audit, published in December 2021. The package has been broadly welcomed by the sector. Furthermore, Public Sector Audit Appointment Ltd (PSAA) announced in March that 99% of eligible local bodies have joined its national scheme for auditor appointments, which will cover the audits for the financial years 2023-24 to 2027-28. 3.3 The Financial Reporting Council (FRC) has now recruited its first Director of Local Audit. The appointment of Neil Harris to lead the FRC’s dedicated local audit unit was announced on 13 March. The department is also working closely with the FRC and the NAO on requirements for the new unit ahead of the commencement of shadow system leadership arrangements at the FRC in the coming months. This will include a timetable for the transition which takes into account the new Director’s start. While this unit builds capacity, the department will maintain its enhanced leadership role and will act as joint Chair of the Liaison Committee from May, as part of the transition arrangements to the FRC. 3.4 The department will publish the response to its consultation Local audit framework: technical consultation shortly. The department therefore proposes updating the Committee in spring 2022, after the outcome of this consultation and Department for Business, Energy & Industrial Strategy’s (BEIS) response on the White Paper Restoring trust in audit and corporate governance have been published and the early stages of the procurement process completed. This will enable a more detailed response on the transition to the new arrangements and proposed junctures for further updates.