Financial Reporting and Audit in Local Authorities

Housing, Communities and Local Government Committee Closed Inquiry
Opened: 3 Mar 2023 Closed: 18 Mar 2024 Parliament page
This inquiry will examine a range of issues relating to the purpose, understanding and impact of financial reporting and audit in local authorities. It will scrutinise the role of audit in local accountability and democracy and the extent to which accounts provide a clear picture of the financial sustainability and … Read more
15 Recommendations
16 Conclusions
1 Report
4 Oral sessions
5 Letters
4 Events
Activity timeline 15 events
23 Apr
2024
Correspondence
5 Feb
2024
Report published
17 Jan
2024
Correspondence
5 Dec
2023
Correspondence
24 Nov
2023
Report published
18 Jul
2023
Correspondence
17 Jul
2023
Oral evidence
17 Jul
2023
Formal meeting (oral evidence session) · Room 16, Palace of Westminster
26 Jun
2023
Oral evidence
26 Jun
2023
Formal meeting (oral evidence session) · Room 16, Palace of Westminster
5 Jun
2023
Oral evidence
5 Jun
2023
Formal meeting (oral evidence session) · Room 16, Palace of Westminster
Oral evidence sessions 4 sessions
17 Jul 2023
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Oral Evidence
Lee Rowley · Department for Levelling Up, Housing and Communities Siobhan Jones · Department for Levelling Up, Housing and Communities
26 Jun 2023
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Oral Evidence
Alison Scott · Three Rivers District Council Councillor Abi Brown · Local Government Association Councillor Richard Wenham · Central Bedfordshire Council Councillor Tudor Evans · Plymouth City Council Gerald Almeroth · Westminster City Council Michael Hudson · Cambridgeshire County Council
5 Jun 2023
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Oral Evidence
Conrad Hall · Newham Council Gareth Davies · National Audit Office Iain Wright · ICAEW Lynn Pamment · Financial Reporting Advisory Board Mike Newbury · National Audit Office Rob Whiteman · CIPFA
15 May 2023
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Oral Evidence
Dr Henry Midgley · Durham University Ed Hammond · Centre for Governance and Scrutiny Neil Harris · Financial Reporting Council Professor David Heald · University of Glasgow Sarah Rapson · Financial Reporting Council Sir Tony Redmond · Chartered Institute of Public Finance and Accountancy (CIPFA)
Title HC No. Published Items Response
First Report - Financial Reporting and Audit in Local Authorities HC 59 24 Nov 2023 31 Responded
Recommendations & Conclusions
6 results
Clear
11 Recommendation Rejected
First Report - Financial Reporting…
Make the Accounting Code freely available to all local authority account users.
Through coordination with the Chartered Institute of Public Finance and Accountancy, the Department for Levelling Up, Housing and Communities must make the Accounting Code freely available to all possible users of local authority accounts before the next accounts production cycle … Read more
Government Response
The government states the Accounting Code is produced by an independent body (CIPFA) and local bodies receive funding for compliance. It does not commit to making the Code freely available by the recommended deadline of March 2024, but will consider what else can be done to encourage its use.
Ministry of Housing, Communities and Local Government
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12 Conclusion Rejected
First Report - Financial Reporting…
Local audit purposes are to establish credibility and supplement information for accountability.
Within the broader rationale for the local authority accounting and audit systems, the purposes of local audit specifically are: • to establish the credibility of the local authority accounts, so that they can fulfil their purposes in supporting local accountability; … Read more
Government Response
The government explicitly rejects the Committee's stated purposes for local audit, arguing that auditors are not equipped to comment on value for money and that such an expectation would hinder efforts to clear the audit backlog. It points to Oflog's role in informing citizens about local authority performance.
Ministry of Housing, Communities and Local Government
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20 Recommendation Rejected
First Report - Financial Reporting…
The Government must reconsider its plan to combine the local audit system leader with the...
The Government must reconsider its plan to combine the local audit system leader with the new audit regulator, ARGA. Specifically, the Government must, in coordination with the FRC, which currently has shadow system leader responsibility, introduce legislation to create a … Read more
Government Response
The government rejects the recommendation to create a new, separate body for local audit, stating a new arm's length body is not necessary and that ARGA's full establishment is dependent on parliamentary time, while a shadow system leader function is already active within the FRC.
Ministry of Housing, Communities and Local Government
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21 Recommendation Rejected
First Report - Financial Reporting…
The Department must ensure that the local audit system leader is the primary point of...
The Department must ensure that the local audit system leader is the primary point of contact to which local auditors can escalate matters of concern that they find during an audit of a local authority. Additionally, the local audit system … Read more
Government Response
The government states it is not envisaged that the local audit system leader will be the primary point of contact for auditors' escalations or coordinate responses to systemic issues. It notes existing reporting mechanisms to the Secretary of State and DLUHC, and that the FRC as shadow system leader already reports annually on overall trends and patterns.
Ministry of Housing, Communities and Local Government
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28 Conclusion Rejected
First Report - Financial Reporting…
Stakeholders desire explicit value for money opinions from local authority auditors
Local auditors are good at establishing the credibility of the accounts under audit. However, while recent changes to the Audit Code have made improvements to the commentary around value for money, many stakeholders want an opinion from the auditors over … Read more
Government Response
The government rejects the idea of auditors providing a value for money opinion on services, stating this responsibility lies with democratically elected leaders, and such a requirement would place significant, unequipped demands on the current audit system.
Ministry of Housing, Communities and Local Government
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29 Recommendation Rejected
First Report - Financial Reporting…
Ensure local auditors' value for money opinions include actual assessment of value achieved
The Department should work with the organisation that prepares the Audit Code (currently the National Audit Office, eventually the system leader) to ensure that local auditors’ opinions over value for money include an actual assessment of value for money achieved, … Read more
Government Response
The government rejects the recommendation, arguing that ensuring value for money is the responsibility of local leaders, that auditors lack the resources and expertise for such specific assessments, and that it would hinder efforts to clear the audit backlog. They highlight the role of the Office for Local Government (Oflog) in providing performance information.
Ministry of Housing, Communities and Local Government
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Government Response AI assessment · 31 of 15 classified
Accepted 2
Accepted in Part 4
Acknowledged 5
Deferred 14
Rejected 6
Total 15 recs + 16 conclusions
Correspondence 5 letters
23 Apr 2024 To committee Letter from the Minister for Local Government to the Chair dated 17 April 2024 concerning the Government’s response to the Committee’s report on Financial Reporting and Audit in Local Authorities
Parliament page
17 Jan 2024 To committee Letter from Minister for Local Government to Chair relating to the financial reporting and audit in local authorities, dated 9 January 2024
Parliament page
5 Dec 2023 To committee Letter from the Chair to the Local Government Association dated 27 November 2023 concerning changes to local government financing
Parliament page
18 Jul 2023 To committee Letter from the Parliamentary Under Secretary of State for Local Government and Building Safety to the Chair dated 14 July 2023 concerning local government audits
Parliament page
25 Apr 2023 To committee Letter from the Mayor of Croydon to the Chair dated 30 March 2023 concerning accountability in local government
Parliament page