Timeliness of local auditor reporting on local government in England

Public Accounts Committee Closed Inquiry
Opened: 23 Mar 2021 Closed: 16 Nov 2021 Parliament page
In 2019‑20, 487 local bodies including local councils, local police and local fire bodies in England spent nearly £100 billion delivering local public services that residents, businesses and taxpayers rely on every day.Proper accounting with high quality audit is essential for public trust in how taxpayers’ money is spent. Each … Read more
34 Conclusions
1 Report
2 Oral sessions
3 Letters
2 Events
Activity timeline 9 events
16 Nov
2021
Correspondence
28 Oct
2021
Report published
25 Oct
2021
Correspondence
14 Jul
2021
Report published
21 Jun
2021
Correspondence
20 May
2021
Oral evidence
20 May
2021
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
17 May
2021
Oral evidence
17 May
2021
Formal meeting (oral evidence session) · The Wilson Room, Portcullis House
Oral evidence sessions 2 sessions
20 May 2021
View on parliament.uk
Local government auditing in England 2020
Catherine Frances · Department for Levelling Up, Housing and Communities Jeremy Pocklington CB · Ministry of Defence Tony Crawley · Public Sector Audit Appointments Ltd
17 May 2021
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Local government auditing in England 2020
Fiona Baldwin · Grant Thornton Janet Dawson · Ernst and Young Mark Stocks · Grant Thornton Sir Tony Redmond · Chartered Institute of Public Finance and Accountancy (CIPFA)
Title HC No. Published Items Response
Eleventh Report - Local auditor reporting on local government in… HC 171 14 Jul 2021 34 Responded
Recommendations & Conclusions
34 results
2 Conclusion
Eleventh Report - Local auditor re…
There is a pressing risk of market collapse due to an over reliance on a...
There is a pressing risk of market collapse due to an over reliance on a small number of audit firms and significant barriers to entry. Only eight audit firms have the specialist knowledge and accreditation needed to audit local authorities. … Read more
Government Response
3.1 The government agrees with both the Committee’s recommendations. Target implementation date: September 2021 3.2 The government agrees a decision by firms to withdraw from local audit could pose a … Read more
HM Treasury
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3 Conclusion
Eleventh Report - Local auditor re…
The commercial attractiveness to audit firms of auditing local authorities has declined.
The commercial attractiveness to audit firms of auditing local authorities has declined. Audit firms bid for the current contracts to audit local authorities in 2017, but the work involved has increased significantly in response to well-publicised problems in the corporate … Read more
Government Response
3.1 The government agrees with both the Committee’s recommendations. Target implementation date: September 2021 3.2 The government agrees a decision by firms to withdraw from local audit could pose a … Read more
HM Treasury
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4 Conclusion
Eleventh Report - Local auditor re…
The rapidly diminishing pool of suitably qualified and experienced staff increases the risks to the...
The rapidly diminishing pool of suitably qualified and experienced staff increases the risks to the timely completion of quality audits. There are serious shortfalls in the number of specialists which audit firms rely on to carry out audits of local … Read more
Government Response
4.1 The government agrees with the Committee’s recommendation. Target implementation date: by end of 2021 4.2 The government agrees that a ready availability of skilled and appropriately trained auditors is … Read more
HM Treasury
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5 Conclusion
Eleventh Report - Local auditor re…
We are not convinced that the recently announced new local audit arrangements will meet the...
We are not convinced that the recently announced new local audit arrangements will meet the pressing need for effective system leadership now. In May 2021, the Department announced that the system leader for local government audit will be the new … Read more
Government Response
5.1 The government agrees with the Committee’s recommendation. Target implementation date: by end of 2021 5.2 The government recognises the need for effective system leadership now. The department’s Spring Update … Read more
HM Treasury
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6 Conclusion
Eleventh Report - Local auditor re…
Unless local authority accounts are useful, relevant and understandable they will not aid accountability.
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 … Read more
Government Response
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 … Read more
HM Treasury
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1 Conclusion
Eleventh Report - Local auditor re…
On the basis of a report by the Comptroller and Auditor General,1 we took evidence...
On the basis of a report by the Comptroller and Auditor General,1 we took evidence from the Ministry of Housing, Communities & Local Government (the Department); Public Sector Audit Appointments Ltd (PSAA); audit firms EY and Grant Thornton; and from … Read more
Government Response
Based on a report by the National Audit Office, the Committee took evidence, on 20 May 2021 from the Ministry of Housing, Communities and Local Government. The Committee published its … Read more
HM Treasury
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7 Conclusion
Eleventh Report - Local auditor re…
We asked the Department to explain the causes of delays to audit firms’ audits of...
We asked the Department to explain the causes of delays to audit firms’ audits of local authorities, given these had begun before the impact of COVID-19. The Department indicated that there was no single cause for the delays in completing … Read more
Government Response
2021. This is the government’s response to the Committee’s report. Relevant reports • NAO report: Overview of English Rail System – Session 2021-22 (HC 1373) • PAC report: Overview of … Read more
HM Treasury
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8 Conclusion
Eleventh Report - Local auditor re…
The deadline for local authorities to publish their accounts has changed over time, being 30...
The deadline for local authorities to publish their accounts has changed over time, being 30 September up to 2017; 31 July for 2018 and 2019; and for 2020 the original 31 July deadline was extended to 30 November.16 Grant Thornton … Read more
Government Response
1.3 As part of the government’s response to the Redmond Review, the Ministry for Housing, Communities and Local Government (the department or MHCLG) has taken action to help improve the … Read more
HM Treasury
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9 Conclusion
Eleventh Report - Local auditor re…
We pressed the Department on when we would see improvements in the timeliness of local...
We pressed the Department on when we would see improvements in the timeliness of local authorities publishing their audited accounts. The Department felt that it would not be possible to bring timeliness back on track in one audit cycle in … Read more
Government Response
1.3 As part of the government’s response to the Redmond Review, the Ministry for Housing, Communities and Local Government (the department or MHCLG) has taken action to help improve the … Read more
HM Treasury
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10 Conclusion
Eleventh Report - Local auditor re…
High-quality audits of local authority financial statements are important to assure taxpayers, stakeholders, and users...
High-quality audits of local authority financial statements are important to assure taxpayers, stakeholders, and users of the accounts, that local authority accounts have been properly prepared, and to maintain trust in audited accounts.21 The FRC is the independent body responsible … Read more
Government Response
4: PAC conclusion: The rapidly diminishing pool of suitably qualified and experienced staff increases the risks to the timely completion of quality audits. 4: PAC recommendation: The Department should work … Read more
HM Treasury
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11 Conclusion
Eleventh Report - Local auditor re…
The Department said it considered itself to be the steward of the system for auditing...
The Department said it considered itself to be the steward of the system for auditing local authorities and acknowledged that it was important to maintain the quality of audits of local authorities.24 Audit firm EY told us that it safeguarded … Read more
HM Treasury
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12 Conclusion
Eleventh Report - Local auditor re…
Sir Tony Redmond emphasised the need for much greater transparency in the financial reporting of...
Sir Tony Redmond emphasised the need for much greater transparency in the financial reporting of local authorities, to turn accounts that were impenetrable to the public into simpler information that the public wanted to know about. His review had recommended … Read more
Government Response
6: PAC conclusion: Unless local authority accounts are useful, relevant and understandable they will not aid accountability. 6: PAC recommendation: The Department should write to us by September 2021 with … Read more
HM Treasury
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13 Conclusion
Eleventh Report - Local auditor re…
Durham University highlighted that local authority accounts were an important means of democratic accountability, and...
Durham University highlighted that local authority accounts were an important means of democratic accountability, and could cover issues of financial sustainability, financial and service resilience and equity, and that work was needed to resolve questions of what local electors should … Read more
Government Response
6: PAC conclusion: Unless local authority accounts are useful, relevant and understandable they will not aid accountability. 6: PAC recommendation: The Department should write to us by September 2021 with … Read more
HM Treasury
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14 Conclusion
Eleventh Report - Local auditor re…
The audit firms EY and Grant Thornton told us that some local authorities had increasingly...
The audit firms EY and Grant Thornton told us that some local authorities had increasingly complex financial arrangements, for example in their borrowings, investments and financial instruments.34 EY explained that the more investment properties a local authority held, the more … Read more
HM Treasury
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15 Conclusion
Eleventh Report - Local auditor re…
Sir Tony Redmond told us that local authorities considered that audits give too much attention...
Sir Tony Redmond told us that local authorities considered that audits give too much attention to the valuations relating to pension funds and property. He added that local authorities believed the work that auditors had to carry out on valuations … Read more
HM Treasury
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16 Conclusion
Eleventh Report - Local auditor re…
The Department agreed with Sir Tony’s assessment that local authorities’ audited accounts were hard reading,...
The Department agreed with Sir Tony’s assessment that local authorities’ audited accounts were hard reading, and with his proposal for a summary statement in plain English. The Department had asked CIPFA to look at simplifying local authority accounts.40 This included … Read more
Government Response
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 … Read more
HM Treasury
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17 Conclusion
Eleventh Report - Local auditor re…
In May 2021, the Department announced its updated response to recommendations in Sir Tony Redmond’s...
In May 2021, the Department announced its updated response to recommendations in Sir Tony Redmond’s review, from September 2020. We challenged the Department on whether the new arrangements would have any real effect on the efficiency of local government auditing. … Read more
Government Response
5: PAC conclusion: We are not convinced that the recently announced new local audit arrangements will meet the pressing need for effective system leadership now. 5: PAC recommendation: The Department … Read more
HM Treasury
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18 Conclusion
Eleventh Report - Local auditor re…
Given that ARGA is not going to be set up until 2023 at the earliest,...
Given that ARGA is not going to be set up until 2023 at the earliest, we pressed the Department on what would happen in the interim. The Department acknowledged that it would take time to establish ARGA, and that doing … Read more
Government Response
The government agrees with the Committee’s recommendation. Target implementation date: by end of 2021 5.2 The government recognises the need for effective system leadership now. The department’s Spring Update set … Read more
HM Treasury
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19 Conclusion
Eleventh Report - Local auditor re…
The Department had asked PSAA to continue as the appointing body for procuring audit services,...
The Department had asked PSAA to continue as the appointing body for procuring audit services, unlike the recommendation in Sir Tony’s review to create a new body as a system leader, an Office of Local Audit and Regulation, which would … Read more
HM Treasury
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20 Conclusion
Eleventh Report - Local auditor re…
The Department confirmed that ARGA would be accountable to the Secretary of State for Business,...
The Department confirmed that ARGA would be accountable to the Secretary of State for Business, Energy and Industrial Strategy.50 The Department explained that it would hold Accounting Officer responsibility for the local government role of ARGA and for all aspects … Read more
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21 Conclusion
Eleventh Report - Local auditor re…
In September 2020, Sir Tony Redmond reported to the Secretary of State for Housing, Communities...
In September 2020, Sir Tony Redmond reported to the Secretary of State for Housing, Communities and Local Government, that it was clear from his independent review of the effectiveness of local audit and the transparency of local authority financial reporting, … Read more
Government Response
2: PAC conclusion: There is a pressing risk of market collapse due to an over reliance on a small number of audit firms and significant barriers to entry. 2: PAC … Read more
HM Treasury
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22 Conclusion
Eleventh Report - Local auditor re…
All parties agreed that the market was not currently competitive, and that one measure needed...
All parties agreed that the market was not currently competitive, and that one measure needed for the market to become effective was to have more audit firms in the market.56 Only eight audit firms are accredited to audit local authorities.57 … Read more
Government Response
2: PAC conclusion: There is a pressing risk of market collapse due to an over reliance on a small number of audit firms and significant barriers to entry. 2: PAC … Read more
HM Treasury
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23 Conclusion
Eleventh Report - Local auditor re…
We pressed the Department on what it was doing to encourage a greater number of...
We pressed the Department on what it was doing to encourage a greater number of audit firms to carry out audits of local authorities. The Department agreed that maintaining capacity in the market for auditing local authorities was a serious … Read more
Government Response
4.2 The government agrees that a ready availability of skilled and appropriately trained auditors is crucial to ensuring both the long-term sustainability of the local audit market and good quality, … Read more
HM Treasury
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24 Conclusion
Eleventh Report - Local auditor re…
PSAA is the organisation responsible for appointing audit firms to audit those local authorities which...
PSAA is the organisation responsible for appointing audit firms to audit those local authorities which have opted into its arrangements, for an initial five-year period to 31 53 Sir Tony Redmond, Independent Review into the Oversight of Local Audit and … Read more
Government Response
4.2 The government agrees that a ready availability of skilled and appropriately trained auditors is crucial to ensuring both the long-term sustainability of the local audit market and good quality, … Read more
HM Treasury
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25 Conclusion
Eleventh Report - Local auditor re…
PSAA recently commissioned research into the market for auditing local authorities which found challenges and...
PSAA recently commissioned research into the market for auditing local authorities which found challenges and barriers to audit firms looking to come into the market. New firms have to invest in their staff over time to build the specialist knowledge … Read more
Government Response
4.2 The government agrees that a ready availability of skilled and appropriately trained auditors is crucial to ensuring both the long-term sustainability of the local audit market and good quality, … Read more
HM Treasury
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26 Conclusion
Eleventh Report - Local auditor re…
For the next procurement round for audits of local authorities from 2023, PSAA is looking...
For the next procurement round for audits of local authorities from 2023, PSAA is looking at measures to reduce the barriers to entry for new audit firms. One measure proposed is for firms to enter the market while carrying out … Read more
Government Response
4.2 The government agrees that a ready availability of skilled and appropriately trained auditors is crucial to ensuring both the long-term sustainability of the local audit market and good quality, … Read more
HM Treasury
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27 Conclusion
Eleventh Report - Local auditor re…
We challenged the Department on the sustainability of firms auditing £100 billion a year of...
We challenged the Department on the sustainability of firms auditing £100 billion a year of spending by local government while relying on only a few hundred auditors with the requisite skills. The Department and PSAA recognised the challenge which audit … Read more
Government Response
4.2 The government agrees that a ready availability of skilled and appropriately trained auditors is crucial to ensuring both the long-term sustainability of the local audit market and good quality, … Read more
HM Treasury
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28 Conclusion
Eleventh Report - Local auditor re…
PSAA highlighted that the age profile of key audit partners was a factor likely to...
PSAA highlighted that the age profile of key audit partners was a factor likely to increase the challenge which audit firms faced, in having sufficient staff.80 EY confirmed that it was facing a retirement issue for its key audit partners, … Read more
Government Response
4.2 The government agrees that a ready availability of skilled and appropriately trained auditors is crucial to ensuring both the long-term sustainability of the local audit market and good quality, … Read more
HM Treasury
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29 Conclusion
Eleventh Report - Local auditor re…
Sir Tony Redmond highlighted that his review found that the lack of career prospects and...
Sir Tony Redmond highlighted that his review found that the lack of career prospects and opportunities produced a real challenge for trainee accountants when considering whether to go into public sector accounting and auditing. He believed that audit firms needed … Read more
Government Response
4.2 The government agrees that a ready availability of skilled and appropriately trained auditors is crucial to ensuring both the long-term sustainability of the local audit market and good quality, … Read more
HM Treasury
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30 Conclusion
Eleventh Report - Local auditor re…
The Department reported that it was working closely with the Financial Reporting Council (FRC), the...
The Department reported that it was working closely with the Financial Reporting Council (FRC), the Chartered Institute of Public Finance and Accountancy (CIPFA) and 75 Local Government Association submission, page 2 76 Institute for Chartered Accountants in England and Wales … Read more
Government Response
4.3 The department committed in its December 2020 response to working with the Chartered Institute of Public Finance and Accountancy (CIPFA), the Financial Reporting Council (FRC), the Institute of Chartered … Read more
HM Treasury
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31 Conclusion
Eleventh Report - Local auditor re…
PSAA noted that the audit firms carried out extensive training programmes for their staff, but...
PSAA noted that the audit firms carried out extensive training programmes for their staff, but that it was important to ensure these programmes covered training on the specific aspects for audits of local authorities.88 Grant Thornton informed us that it … Read more
Government Response
4.3 The department committed in its December 2020 response to working with the Chartered Institute of Public Finance and Accountancy (CIPFA), the Financial Reporting Council (FRC), the Institute of Chartered … Read more
HM Treasury
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32 Conclusion
Eleventh Report - Local auditor re…
In 2019, the previous Committee reported on the reduction in fees for auditing local authorities.90...
In 2019, the previous Committee reported on the reduction in fees for auditing local authorities.90 The Department accepted that audit fees had become insufficient to reflect the increased challenges in auditing local authorities.91 Sir Tony Redmond confirmed that audit fees … Read more
Government Response
3.4 As set out above, the government has committed to amend regulations to provide the appointing person (PSAA) with greater flexibility, including to set standardised fee variations across groupings of … Read more
HM Treasury
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33 Conclusion
Eleventh Report - Local auditor re…
EY and Grant Thornton highlighted that the amount of work which firms were required to...
EY and Grant Thornton highlighted that the amount of work which firms were required to carry out in auditing local authorities looked nothing like that required in 2017, for example, in the additional work involved in valuing assets supporting pension … Read more
HM Treasury
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34 Conclusion
Eleventh Report - Local auditor re…
We sought clarity from the Department on whether, if fees went up, it would look...
We sought clarity from the Department on whether, if fees went up, it would look to reflect the increase in the settlement for local government. The Department responded that is had put in more money this year for affected bodies, … Read more
Government Response
3.4 As set out above, the government has committed to amend regulations to provide the appointing person (PSAA) with greater flexibility, including to set standardised fee variations across groupings of … Read more
HM Treasury
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Correspondence 3 letters
16 Nov 2021 Correspondence from Dame Meg Hillier, Chair, Committee of Public Account, re Treasury Minute response – Timeliness of local auditor reporting on local government in England, dated 8 November 2021
Parliament page
25 Oct 2021 Correspondence from Jeremy Pocklington CB, Permanent Secretary, Department for Levelling Up, Housing and Communities, re response to the Public Accounts Committee’s 11th Report of Session 2021–22 Timeliness of local auditor reporting and Treasury Minute, dated 6 October 2021
Parliament page
21 Jun 2021 Correspondence from Catherine Frances, Director General, Local Government, Strategy & Analysis Ministry of Housing, Communities & Local Government, re PAC hearing into audit delays follow up, dated 14 June 2021
Parliament page