Agenda item

Sir Tony Redmond introduced the report and set out that review was required due to concerns expressed about the price and quality of audit contracts. There was scope for improvement, and testing of financial resilience and fees were variable, and there was no oversight or coordination of local audit. There were also concerns on the ability for audit committees and the general public to understand the technical aspects of audit reports. There was no high level of consistency. Reaction from Ministers was still awaited, and some of the recommendations arising from the review would require primary legislation, while others could be developed in a shorter time scale.

Sir Tony highlighted the main recommendations from his review, including:

·       The establishment of a new body, the Office of Local Audit and Regulation (OLAR) to manage, oversee and regulate local audit. This body would take over all of the functions current exercised by PSAA, as well as some functions carried out by other bodies such as the National Audit Office (NAO), the Financial Reporting Council (FRC) and the Institute of Chartered Accountants in England and Wales (ICAEW). The cost of this body was estimated to be £5 million per annum. It would not be similar to the Audit Commission but have the power to hold auditors to account for their performance. Costs around the creation of this new office should be considered in detail by MHCLG in due course.

·       OLAR would be supported by a Liaison Committee comprising key stakeholders and chaired by MHCLG.

·       Auditors should have adequate skills and training and be properly resourced.

·       The audit fee structure should be reviewed, and Sir Tony suggested that they were too low.

·       Links between external auditors and Inspectorates such as Ofsted, the Care Quality Commission and HM Inspectorate of the Constabulary and Fire and Rescue Services should be formalised.

·       The deadline for publishing audited local authority accounts should be revisited with a view to extending it to 30 September from 31 July each year. This should be considered in the light of deadlines for the audit of local NHS bodies outside of the scope of Sir Tony’s review, but audited by the same auditors.

Cllr Richard Watts, Chair of the Resources Board, highlighted that the report contained a summary of the Resources Board discussion of the Redmond Review. The Board had agreed that there was a structural problem, and it was difficult for local authorities to get auditors to undertake good quality work within the current timescales. There were some recommendations to welcome, such as the move of the deadline and the liaison body with MHCLG. However, moving procurement and regulation into the same function was not regular practice and was not supported. The draft LGA response to the Review was set out in full in the report.

In the discussion which followed members raised a number of points including:

·       Members welcomed the suggestion that the deadline for publishing local authority accounts be moved back to 30 September, which could increase the capacity of audit firms to deliver audits. It was suggested that the change in deadline be undertaken first and other recommendations be considered if that did not improve the system. Sir Tony highlighted that the capacity of audit in the sector as a whole should be considered, and moving the deadline was only one part of that process.

·       As it was recommended that procurement and regulation would be linked as part of the OLAR there were concerns on independence. Sir Tony noted that issues around conflict of interest would have to be considered, and there was a suggested structure in the annex to his review on separation of powers, but the system should be designed in a more coordinated and coherent way.

·       Members raised that there was no detail in the review on the potential value for money of the new OLAR function. There was a risk that the new body would become similar to the Audit Commission, when local government audit had improved a great deal since the Commission had been abolished. Sir Tony added that there were opportunities for efficiencies in bringing together different elements into one new body. The OLAR would not be a new quango but would be restricted in its brief to address issues in coordination and system leadership.

·       Local authorities would currently be unsure about their financial resilience until they knew how much funding they would be getting from the Government for 2021/22.

·       Although health audit was not in Sir Tony’s remit, it was difficult to look at local government audit in isolation of the rest of the public sector.

The Chairman thanked Sir Tony for his presentation.

Decision

The Executive Advisory Board approved the lines for the response to the Redmond Review as outlined in paragraphs 10 to 14 of the report, which would be used to draft a response to the Government.