Sixtieth Report - Timeliness of local auditor reporting

Select Committee
Public Accounts Committee HC 995 23 June 2023
Report Status Response document linked Recorded deadline: 23 Aug 2023

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Conclusions & Recommendations 28 items (1 rec)
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Government response
Treasury minutes: Government response to the Committee of Public Accounts on the Sixtieth report from Session 2022-23 · published 24 Sep 2023
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Recommendations & Conclusions

28 results
2 Conclusion
Explain actions to mitigate local audit delays impacting accountability and central government department accounts.
Conclusion
Delays to the publication of audited accounts for local government bodies increases the risk of governance or financial issues being identified too late and hinders accountability for £100 billion of local government spending. There are ways in which auditors can … Read more
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3 Conclusion
Develop the market and workforce for local audit, outlining plans, metrics, and milestones.
Conclusion
Long-term market and workforce development are essential if the Department is to resolve the current problems with local auditor reporting and create a more resilient system for the future. Much of the focus to date has been around short- term … Read more
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4 Conclusion
Set out contingency plans for delayed establishment of ARGA if legislation is not passed.
Conclusion
Delays to establishing the Audit, Reporting and Governance Authority (ARGA) and handing over responsibilities for leading local audit to the FRC, risk performance deteriorating further. The Department rejected the Redmond Review’s proposal to create an Office of Local Audit and … Read more
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5 Conclusion
Address the lack of incentives and sanctions for timely local auditor reporting by October 2023.
Conclusion
There are no consequences for local government bodies or local auditors failing to deliver audited accounts on time. Audit contracts cannot specify the delivery of opinions by a certain date. The FRC and the Department say that they want to … Read more
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6 Recommendation
Require the Department to urgently agree permanent measures for complex local accounts and their audit.
Recommendation
Government, local bodies and standard setters still lack a shared view of how to ensure that local public accounts, and the audit of them, are fit for purpose. Local government accounts have become increasingly complex. They have to meet financial … Read more
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1 Conclusion
Government progress on improving timeliness of local government audit opinions reviewed.
Conclusion
On the basis of a report by the Comptroller and Auditor General (C&AG) we took evidence from the Department for Levelling Up, Housing and Communities (the Department), the Financial Reporting Council (FRC), and Public Sector Audit Appointments Ltd (PSAA) about … Read more
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7 Conclusion
Department confident in audit timeliness improvement despite auditor market exit concerns.
Conclusion
We asked the Department why it was confident that performance on audit timeliness would improve and what signs of improvement it would be looking for. The Department described its particular focus on valuation issues which it told us has been … Read more
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8 Conclusion
Early accounts deadline risks exacerbating local audit backlogs and pressures.
Conclusion
We challenged the Department on whether its plans to bring the accounts publication deadline forward for 2022–23 would present a risk to progress. The Department told us it would keep this under review.20 However, local audit providers and local authorities … Read more
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9 Conclusion
Late local audits hinder financial assurance and risk identification for councils.
Conclusion
The audit process provides a key element of assurance for financial planning, budgeting and management in local government bodies and accountability for £100 billion of spend, but this only works effectively when audit work is timely. We pressed the Department … Read more
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10 Conclusion
Local audit delays cause knock-on problems for Whole of Government Accounts and central departments.
Conclusion
Local government audit delays are also creating problems in other parts of government. For example, delays to the completion of 2020–21 local audits are adding to uncertainty around progress with the Whole of Government Accounts, which will be published more … Read more
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11 Conclusion
Local audit delays threaten NHS accounts due to shared auditor pools and sector changes.
Conclusion
We also asked the FRC about the risks local audit delays cause to NHS accounts. The FRC emphasised the challenges the health sector faces due to structural changes in the last year.29 This will be reflected in the NHS requiring … Read more
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12 Conclusion
Local audit delays caused by authorities, auditors, and regulatory pressures on complex valuations.
Conclusion
The Department described the local audit system to us as having no ‘single version of the truth’ for what is holding up individual audits, in some cases issues being with the authority preparing the accounts and in other cases the … Read more
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13 Conclusion
Absence of audit contract deadlines for opinions challenges the independence-timeliness balance.
Conclusion
The Society of London Treasurers told us there also needed to be consequences for late sign-off of accounts, suggesting auditors should report on the causes of delay to audit committees. The Society also queried whether better contract management might help … Read more
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14 Conclusion
Insufficient oversight and sanctions for local authorities missing draft account deadlines.
Conclusion
Compared to the level of scrutiny over the quality of their audits, local audit providers highlighted a contrasting lack of oversight or sanction over the quality and timeliness of 28 Qq 97–99 29 Q 40 30 TAR0011 31 Q 40, … Read more
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15 Conclusion
Department fails to explore Scottish approaches to address English local audit delays.
Conclusion
The Department told us that, while Scotland was a very different market to that operating in England, its information was that there are not the same timing issues as it was facing in the English context. When we asked whether … Read more
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16 Conclusion
New local audit contracts significantly increase fees, improving financial viability for providers.
Conclusion
We recommended in 2021 that the Department ensured PSAA’s procurement exercise for the next round of audit contracts covering 2023–24 to 2027–28 financial years bring fees into line with the costs of work and be appropriately funded. The procurement completed … Read more
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17 Conclusion
Local audit market faces persistent capacity challenges despite recent procurement efforts.
Conclusion
When we asked PSAA about its confidence in the future of the market, it cautioned that the procurement had been very tough, having only secured 90% of the capacity PSAA needed in the initial round. PSAA described this outcome as … Read more
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18 Conclusion
Critically low number of ageing key audit partners threatens local audit resilience.
Conclusion
There are less than 100 key audit partners registered to perform local audits.52 We asked PSAA whether it felt there were enough audit partners in the market. PSAA described the number of key audit partners on the register as ‘worryingly … Read more
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19 Conclusion
New local audit qualification launch delayed, hindering efforts to boost auditor supply.
Conclusion
In 2021 we recommended the Department accelerate training to increase the supply of auditors quickly. The Department told us that it has worked with the Chartered Institute of Public Finance Accountancy (CIPFA) in developing a new qualification it now expects … Read more
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20 Conclusion
New local audit qualification's attractiveness and efficacy for private sector auditors questioned.
Conclusion
We challenged the Department on whether the qualification would equip staff to make judgements that are quite different to those in private audits. The Department accepted that difficult judgements require experience and joint working with council leadership teams. We pressed … Read more
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21 Conclusion
FRC develops long-term local audit workforce strategy, expected for autumn 2023 publication.
Conclusion
The FRC is beginning work on a comprehensive workforce strategy. The FRC told us this will represent a long-term plan including routes into local audit starting with championing public sector audit among people at university and college. When we challenged … Read more
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22 Conclusion
Establishment of ARGA, the local audit system leader, further delayed until 2024.
Conclusion
In 2020 the Department rejected the Redmond Review’s proposal to create an Office of Local Audit and Regulation (OLAR) to oversee local audit, partly due to the time it would take for a new body to establish itself.68 It chose … Read more
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23 Conclusion
FRC assumes 'shadow' local audit leadership, facing capacity building and dual-role risks.
Conclusion
The FRC said that from its point of view ‘ARGA cannot come in quickly enough.’ In March 2023 it agreed a memorandum of understanding with the Department setting out the ‘shadow’ system leadership responsibilities it will take on in the … Read more
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24 Conclusion
Local government accounts remain complex and impenetrable, hindering public accountability and understanding.
Conclusion
We have previously expressed our concern that local government accounts have become impenetrable to many and that unless local authority accounts are useful, relevant and understandable they will not aid accountability.78 CIPFA, one of the bodies responsible for setting the … Read more
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25 Conclusion
Complexity of property valuation arrangements creates disproportionate audit work for local authorities.
Conclusion
In 2021 we reported our particular concern that the complexity of valuation arrangements around property in particular generated levels of audit work disproportionate to the risks faced by authorities. Mazars described how these accounting values had limited importance to local … Read more
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26 Conclusion
Pursuit of optimal accounting standards obstructs understandable local audit and financial reporting.
Conclusion
We asked whether the desirable pursuit of the best possible accounting standards was preventing accounts being understandable. The FRC recognised the issue, yet despite the consensus it described around the need to reset the purpose of local audit and financial … Read more
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27 Conclusion
Alternative accounting frameworks risk inconsistency; simplifying standards proves difficult for bodies.
Conclusion
CIPFA’s evidence to us highlights its view that no alternative accounting frameworks are without their disadvantages, and that departures from the existing regime may risk reducing consistency with the rest of the public sector and require adjustments to feed in … Read more
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28 Conclusion
Simplified statements for local government accounts delayed amidst severe audit timeliness pressures.
Conclusion
We have previously stated our support for the Redmond Review’s shorter-term proposal for local authorities to publish a standardised statement alongside their accounts to improve transparency to the public.89 The Department told us that work was underway to develop simplified … Read more
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