Source · Select Committees · Public Accounts Committee
Recommendation 6
6
Unless local authority accounts are useful, relevant and understandable they will not aid accountability.
Conclusion
Unless local authority accounts are useful, relevant and understandable they will not aid accountability. Changes in auditing standards, such as on auditing pensions and grant distribution, have required considerable extra audit time. Some local authorities also have increasingly complex financial arrangements. The more property investments a local authority holds, the more specialist resources the auditor needs to gain accurate estimates of their values. We are concerned that some of the additional audit work now being carried out is disproportionate to the risk to the overall financial stability of the local authority. The accountability of local authorities to stakeholders, such as residents and service users, through audited accounts is a priority. Yet, the accounts of local authorities are impenetrable to many stakeholders. There could be much greater transparency in the financial reporting of local authorities, such as through the inclusion of a simple standard statement, focused on the key issues of most use and relevance to stakeholders, presented in a readily understandable way. The Department is working with others to look at simplifying aspects of the accounts of local authorities. It intends that the new system leader will also look into reducing accounting and audit requirements for areas of less risk to local authorities. Recommendation: The Department should write to us by September 2021 with its detailed plans for agreeing with stakeholders ways to focus local authority accounts and audits on areas of greatest risk and concern to citizens. Local auditor reporting on local government in England 9 1 Accountability, transparency and quality in local authority audits
Government Response
Not Addressed
HM Government
Not Addressed
6.1 The government agrees with the Committee’s recommendation. Target implementation date: September 2021 6.2 The government agrees and is clear that local accountability must be at the heart of local government financial reporting. To deliver on this work will require a collaborative effort across the local audit system. The department is currently developing a plan to deliver Sir Tony Redmond’s recommendation for each authority to prepare a standardised statement to be presented alongside the statutory accounts with the aim of providing greater transparency of financial reporting. 6.3 In its Spring Update 2021, the department also set out its intention to work with stakeholders to identify opportunities to reduce some of the accounting and audit requirements where these relate to areas of less risk to local bodies. This includes working with CIPFA to progress their project to improve the presentation of local authority accounts with the short term aims to review the statutory disclosures and materiality and the longer term review of the more complex disclosures that increase the time to prepare for- and audit in- the statement of accounts. 6.4 The Local Audit Liaison Committee that is now in place to cover the transition period until the new local audit system leader is established at ARGA and will provide a strategic steer to drive progress of the proposed changes aimed at improving the understanding and accountability of local authority reporting. MHCLG is happy to write to the Committee in September 2021 with a plan for how work will be progressed.