Recommendation 13

In 2018, this Committee recommended the Department should review the way local authority audit committees operate in examining and challenging local risks to financial sustainability.47 In 2019 this Committee highlighted that 27% of external auditors did not agree that audit committees provided sufficient assurance about authorities’ governance arrangements.48 CIPFA had told the Committee “We think audit committees are stronger if they have independent members” but that “We don’t have the ability to set mandatory guidance on audit committees.”49 In 2020, an independent review of the oversight of local audit and the transparency of local authority financial reporting, carried out in line with Committee recommendations from 2018 and 2019, highlighted “a potential weakness in the way in which audit outcomes are considered and presented to both the local authority and the public”, in part because local authority audit committees “mostly lack independent, technically qualified members”.50 We received evidence from the ICAEW stating weaknesses in audit committees “were a major contributory factor in the financial management failures” at the three councils where Public Interest Reports were issued recently and arguing “the government should make appointing independent members [to audit committees] a statutory requirement, as it is already in Wales.”51 When we raised the statutory requirement point with the Department, it agreed with us that it was an extremely sensible idea to have an independent person sitting on audit committees.52 Yet the Department’s consultation proposal is simply to have CIPFA strengthen its guidance. In fact, the Department’s consultation said it is still only considering as an option making it a statutory requirement for councils to have an audit committee at all.53 Potential to improve oversight