13
Deferred
In 2018, this Committee recommended the Department should review the way local authority audit committees...
Recommendation
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
Government Response Summary
The government agrees with the recommendation but defers concrete action, stating it will publish the response to its consultation on the local audit framework and update the Committee in Spring 2022 after the outcome of this consultation and a BEIS White Paper.
Government Response
Deferred
Government Response
Deferred
HM Government
Deferred
3.1 The government agrees with the Committee’s recommendation. Target implementation date: Spring 2022 3.2 The department remains committed to strengthening the local audit market. Since July 2021 the department has acted as interim system leader, leading work across the system through the Liaison Committee. This has included securing agreement with key partners to a package of measures designed to help improve the timeliness of local audit, published in December 2021. The package has been broadly welcomed by the sector. Furthermore, Public Sector Audit Appointment Ltd (PSAA) announced in March that 99% of eligible local bodies have joined its national scheme for auditor appointments, which will cover the audits for the financial years 2023-24 to 2027-28. 3.3 The Financial Reporting Council (FRC) has now recruited its first Director of Local Audit. The appointment of Neil Harris to lead the FRC’s dedicated local audit unit was announced on 13 March. The department is also working closely with the FRC and the NAO on requirements for the new unit ahead of the commencement of shadow system leadership arrangements at the FRC in the coming months. This will include a timetable for the transition which takes into account the new Director’s start. While this unit builds capacity, the department will maintain its enhanced leadership role and will act as joint Chair of the Liaison Committee from May, as part of the transition arrangements to the FRC. 3.4 The department will publish the response to its consultation Local audit framework: technical consultation shortly. The department therefore proposes updating the Committee in spring 2022, after the outcome of this consultation and Department for Business, Energy & Industrial Strategy’s (BEIS) response on the White Paper Restoring trust in audit and corporate governance have been published and the early stages of the procurement process completed. This will enable a more detailed response on the transition to the new arrangements and proposed junctures for further updates.
Source
Committee
Public Accounts Committee
Report
Thirty-Fourth Report - Local Government Finance System: Overview and Challenges
02 Feb 2022
HC 646
Addressee Bodies
HM Treasury
Timeline
Recommendation age
4.5 yrs
Report published
02 Feb 2022