Agenda item

The Committee received a report of the Assistant Director of Corporate Governance and Strategic Financial Management that provided a general update report to the Audit Committee, informing members of a number of developments, both national and local, which would likely impact on their role in the Council as the Committee charged with governance.

Due to concerns about the timeliness of local audit reporting there were a number of potential developments nationally, and the submitted report provided an update on useful information for Members. The report also detailed the progress on the audit of the 2021/22 Statement of Final Accounts and the submission for audit and inspection of the 2022/23 Statement of Accounts and it was noted that a vital role of this Committee was to approve the audited accounts on behalf of the Council.

The report also detailed the proposed training for the Committee’s Members. A high proportion of items considered over the financial year were technical in nature and the training would assist in the discharge of the governance role.

The Committee was informed that the challenges of Local Authorities obtaining timely audit opinions on their accounts had been widely reported across the public sector. The production of the Statement of Final Accounts (SOFA) had become more complex in part as more technical accounting requirements were being introduced into the process. This had challenged both the capacity of a proportion of Local Authorities to produce accounts to a standard for external audit in the timescale specified within the Accounts and Audit Regulations, and the capacity of External Auditors to complete the audit within agreed timescales.

The submitted report set out a summary of the plans which are beginning to develop within the Local Audit environment, with the objective of improving the timeliness of reporting the Local Authority Statement of Final Accounts. The report also sets out the progress made on the audit of the 2021/22 Statement of Final Accounts and the publication/submission of the draft 2022/23 Statement of Accounts for audit. It also sets out the proposed training for Members of this Committee to assist them in discharging their role.

A key recommendation from the Redmond Review was the creation of an independent body to oversee Local Public Audit. The response to the Redmond Review by the Department for Levelling Up, Housing and Communities (DLUHC) was to accept this recommendation with a proposal to create the Audit, Regulation and Governance Authority (ARGA). This would replace the Financial Reporting Council (FRC) acting as a local leader for local audit.

Presently ARGA had not been created as an independent entity. It was awaiting primary legislation and, at present, there is no definite timetable for when this will occur. In order to oversee the transition from a shadow body a Director for Local Audit (employed by the FRC) has been engaged and is developing the response to improve local audit. At present the FRC is acting as the system leader during the shadow period. The Director of Local Audit is currently recruiting staff to enable planned developments to progress.

As an interim measure, since July 2022, DLUHC has acted as interim system leader by establishing and chairing the local audit Liaison Committee of senior stakeholders and by leading work to agree a system wide package of measures to reduce local audit delays. This planned approach is set out in the Memorandum of Understanding which was detailed further in the submitted report.

The Committee was informed that there were two Parliamentary Select Committees, which undertook the Scrutiny of the timeliness of Financial Reporting and subsequent effectiveness of Local Audit. These were the Public Accounts Committee (PAC) and the Levelling Up, Housing and Communities Select Committee which provided Scrutiny on the performance of local audit. Both Committees considered evidence linked to local auditor reporting on local authority accounts.

Members were also advised that the PAC received oral evidence on the timeliness of local auditor reporting at a session that was held on 16^th March 2023. The witnesses giving evidence were the previous Permanent Secretary at DLUHC, the current Permanent Secretary at DLUHC, The Director General for Local Government, Resilience and Communities at DLUHC, The Director of Local Audit at the FRC and Chief Executive Public Sector Audit Appointments.

Resolved:
That the report be noted.