UK Inquiry Tracker

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

5 Recommendations

29 Conclusions

1 Report

2 Oral sessions

3 Letters

2 Events

Activity timeline 7 events

16 Nov
2021

Correspondence

Correspondence from Dame Meg Hillier, Chair, Committee of Public Account, re Treasury Minute response – Timeliness of local auditor reporti…

28 Oct
2021

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Eleventh report from Session 2021-22

25 Oct
2021

Correspondence

Correspondence from Jeremy Pocklington CB, Permanent Secretary, Department for Levelling Up, Housing and Communities, re response to the Pu…

14 Jul
2021

Report published

Eleventh Report - Local auditor reporting on local government in England

21 Jun
2021

Correspondence

Correspondence from Catherine Frances, Director General, Local Government, Strategy & Analysis Ministry of Housing, Communities & Local Gov…

20 May
2021

Oral evidence

Local government auditing in England 2020

17 May
2021

Oral evidence

Local government auditing in England 2020

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

View on parliament.uk

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)

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
Eleventh Report - Local auditor reporting on local government in…	HC 171	14 Jul 2021	34	Responded

Recommendations & Conclusions

6 results

1 Conclusion Not Addressed

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

The government acknowledges the Committee's report and provides context for its response.

HM Treasury

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7 Conclusion Not Addressed

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

The government's response is boilerplate text referring to unrelated rail reports and does not address the conclusion regarding the causes of delays in local authority audits.

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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14 Conclusion Not Addressed

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

Government Response

The government responded by outlining plans to simplify accounts and reduce requirements for less risky areas, but did not directly address the committee's observation about increasingly complex financial arrangements or the FRC's challenge to auditors on audit quality in these areas.

HM Treasury

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24 Conclusion Not Addressed

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 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 the Transparency of Local Authority Financial reporting, September 2020 54 London Borough of Hackney submission, para 3 55 Qq 4, 12 evidence session of 20 May 2021 56 Qq 28, 51 evidence session of 17 May 2021, Qq 5, 42, 46 evidence session of 20 May 2021 57 Q 11 evidence session of 20 May 2021 58 Q 5 evidence session of 20 May 2021; Q 28 evidence session of 17 May 2021 59 Q 28 evidence session of 17 May 2021; C&AG’s report para 1.16 60 Q 28 evidence session of 17 May 2021 61 Q 61 evidence session of 20 May 2021 62 Q 58 evidence session of 20 May 2021 63 Q 60 evidence session of 20 May 2021 64 Qq 58–59 evidence session of 20 May 2021 16 Local auditor reporting on local government in England March 2023.65 It has a legal obligation to ensure that there is sufficient capacity in the market for auditing local authorities, and that local authorities have access to auditors.66 PSAA recognised that there were many problems in the market for auditing local authorities, and considered that it would take time to sort them out. PSAA wanted to make the market a more attractive one for existing audit firms to stay, and for new firms to enter.67 It also wanted to have long-term viable contracts with the audit firms. We asked if there would be a fundamental problem if one or more of the large audit firms did not bid in the next contract round, and we sought assurance on whether any contingency was in place if any firms dropped out. PSAA explained that if any audit firms were minded to leave the market after the end of the five-year period, it had a safety net in that it could extend the current contracts for two years, forcing the audit firms to keep auditing local authorities beyond 2023.68 Show less

Government Response

The government generally agrees on the crucial importance of skilled auditors and the need to encourage more firms into the market. However, it does not address PSAA's specific efforts to make the market more attractive or its contingency plans for the next procurement round.

HM Treasury

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26 Conclusion Not Addressed

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 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 relatively small packages of audit work. PSAA is also open to consortia, in which an accredited firm would work with an unaccredited firm, to enable it to learn the ropes and gain experience of the unusual aspects of auditing local authorities.72 PSAA told us that it had consulted audit firms to gain their views on gaining accreditation and entering the market to audit local authorities. This included the option of working in consortia with accredited firms. It was also in contact with firms which had left the market to take soundings from them on returning to the market.73 PSAA explained that its strategy was to convince audit firms that auditing local authorities was an attractive market in which to work; one which would be worth their while; and worth their investment in training their staff. However, PSAA accepted that audit firms had a choice of audit markets and that it faced a challenge in making the offer attractive enough to audit firms.74 The Local Government Association also told us that the attractiveness of auditing local authorities had declined for audit firms, as the 65 C&AG’s report, Figure 1; Sir Tony Redmond, Independent Review into the Oversight of Local Audit and the Transparency of Local Authority Financial reporting, September 2020, para 3.2.1 66 Q 59 evidence session of 20 May 2021 67 Q 44 evidence session of 20 May 2021 68 Qq 63–66 evidence session of 20 May 2021 69 Q 11 evidence session of 20 May 2021 70 Q 28 evidence session of 17 May 2021 71 Institute for Chartered Accountants in England and Wales, page 5 72 Q 11 evidence session of 20 May 2021 73 Q 45 evidence session of 20 May 2021 74 Q 46 evidence session of 20 May 2021 Local auditor reporting on local government in England 17 demands of the audits had increased Show less

Government Response

The government generally agrees on the crucial importance of skilled auditors and the need to encourage more firms into the market. However, it does not specifically address PSAA's proposed measures to reduce barriers to entry for new audit firms.

HM Treasury

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Government Response AI assessment · 33 of 5 classified

Accepted 21

Accepted in Part 1

Acknowledged 6

Not Addressed 5

Total 5 recs + 29 conclusions

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