Policy Consultation E-Briefing 09-19 Independent Review Into Local Government Audit
Sir Tony Redmond is undertaking an independent review into local government audit. The Ministry of Housing, Communities and Local Government (MHCLG) are providing the secretariat for this work. The review will make its initial recommendations to the Communities secretary in December 2019 and a full report will be published in March 2020.
The remit of the review is to assess the arrangements in place to support the transparency and quality of local authority financial reporting and external audit including those introduced by the Local Audit and Accountability Act 2014 (the Act). The Review will not look at broader issues of local authority finances and sustainability. NALC is minded to reiterate some of its main recent positions on audit in its response and submissions (there is likely to be a formal call for evidence this Autumn) – and will include feedback from the sector on its experiences on how well or otherwise the transparency and audit changes introduced by the Local Audit and Accountability Act 2014 – have bedded in:
- We want to support the continued principle of audit proportionality (i.e. a lighter-touch for smaller bodies) and of safeguards to contain excessive fees brought about by habitual (local resident) audit complainers;
- In the National Audit Office (NAO) Code of Practice there should be the inclusion of a principle relating to proportionality in respect of smaller authorities, especially where the authority has an annual budget / turnover below £25k and is potentially exempt (i.e. smaller and subject to the Smaller Authorities’ Transparency Code). The local councils with annual budgeted incomes of less than £25k per annum will need further support moving forward in terms of ensuring complete compliance with the transparency requirements of the Act;
- The Review needs to be aware that to a smaller local council the costs of an audit investigation could cost more than the council’s annual precept;
- MHCLG and NAO should in our view work with NALC and the local council sector in the future to consider the need to revise upwards the financial turnover audit and accounts threshold of £6.5 million for the largest spending local councils in England; &
- The 2014 Act is still very new, is largely working and stability for this reason is needed to give the main changes from 2014 a chance to bed-in.
NALC is additionally interested in your views on the effectiveness and consistency of current internal audit arrangements. Wherever possible it would be very helpful to NALC if county associations of local councils and local councils could please provide case study examples to support their views.
NALC will be responding to the below review questions and is interested in the sector’s views:
- Have audit standards been maintained or improved, and not been compromised?
(a) In particular we are interested to hear from local (parish and town) councils as to why / how they think audit standards have been maintained and not comprised (or otherwise).
- Is there an ‘expectation gap’ in what external audit provides? What is the nature of the gap and how can it be filled?
(a) In particular we are interested to hear from Super Councils as to whether they think they are likely to exceed the £6.5 million ceiling threshold for the limited audit regime in the next three years.
- Are auditors properly responding to questions or objections by local taxpayers?
(a) In particular NALC is interested to hear examples of councils suffering repeat vexatious local objections to their accounts from their residents.
- Are audit recommendations effective in helping local authorities to improve their financial management?
(a) In particular we are interested to hear from local councils as to whether they think current internal audit arrangements for their council are strong enough with examples.
- Does the financial information provided in local authority accounts facilitate scrutiny by local taxpayers and by the local press?
(a) In particular NALC would be interested to hear examples from local councils which have had to pay excessive audit fees to cover the costs of an audit investigation and where these fees have been in excess of the council’s annual precept.
Please email your responses to this review to Claire.Goldfinch@nalc.gov.uk by 17.00 on 18 October, 2019.