Source · Select Committees · Public Accounts Committee
Recommendation 12
12
This Committee recently recommended the Department should set out a detailed plan and timetable for...
Recommendation
This Committee recently recommended the Department should 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 system leadership while ARGA was being established.43 The Department agreed with our recommendations, however we felt its response lacked detail on specific actions capable of addressing the urgent issues in local audit.44 In December 2021, the Department published a range of measures which aim to support improved audit timeliness and the wider audit market, though some are still being considered following a consultation in summer 2021 while others are subject to further consultation or may require legislation to be passed.45 These measures aim to provide a whole system response and include guidance and training for audit firms, additional funding to support local bodies with the cost of strengthening their financial reporting, measures to improve local authority accounts, reviewing opportunities to reduce some of the accounting and audit requirements and extending the deadline for publishing audited local authority accounts in future years. The Department committed to publishing an update on these measures as part of its response to the summer 2021 consultation.46 37 (LFS0001/ICAEW), pages 3 and 4 38 Committee of Public Accounts, Financial sustainability of local authorities, Fiftieth Report of Session 2017–19, HC 970, 4 July 2018; Committee of Public Accounts, Local government governance and accountability, Ninety- Seventh Report of Session 2017–19, HC 2077, 15 May 2019; Committee of Public Accounts, Local auditor reporting on local government in England, Eleventh Report of Session 2021–22, HC 171, 14 July 2021; Q105 39
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.