July 2022 news bulletin

Welcome to our latest e-bulletin. In this edition we provide an update on our annual client survey, developments relating to local audit and key topics shared at our most recent Advisory Panel meeting.

In March we asked you to share your thoughts on how we communicate and engage with you. Thank you to everyone who took the time to respond. As a result of the positive feedback we will continue to issue an e-bulletin every quarter.

We hope you continue to find our e-bulletin useful and we welcome your thoughts on future topics that you would like us to cover (contact the team).

Your sincerely

Tony Crawley, Chief Executive, PSAA

Content:

PSAA Annual Client Survey 2020/21

Between 7 February and 18 March we invited finance directors and audit committee chairs to share their views on their most recent audit. This survey is an important part of our Quality Monitoring and Reporting Framework. We commissioned the LGA’s Research and Information Team to manage the survey process to ensure independence and transparency.

The results have been published on our website.

The survey results reflected concerns with the current local audit situation, in particular the timeliness of local government audit opinions and the factors that contribute to those delays. These include the shortage of experienced auditor resources and the extent of the audit work now required on property and pension valuations. Also highlighted was the levels of additional review and scrutiny that firms are building into their process in response to regulatory challenge. This includes the format and complexity of the accounts produced under the current CIPFA/LASAAC code.

Respondents welcomed the new VFM arrangements commentary introduced as part of the audit for 2020/21, with 85% of audit committee chairs reporting that they found the commentary useful.

We will provide the survey results to the other local audit stakeholders to ensure that they continue to hear your views.

 

News from our recent Advisory Panel meeting

Our Advisory Panel of Treasurers’ Societies members met on 21 June.

A team from HM Treasury attended this meeting to request members’ feedback on their review of the valuation of non-commercial assets. This review was trailed in the DLUHC’s measures to tackle timeliness, and includes the long-standing policy decision to hold such assets at valuation rather than historical cost. Panellists discussed the benefits to users of this financial information and the associated costs. They also considered where burdens could be reduced without compromising the needs of users.

The meeting also covered an update on the progress of the next appointing period including the ongoing procurement, data on audit delivery for quarter four of 2021/22, our 2022/23 scale fee consultation, and a summary of local audit news (all covered below).

 

Update on our audit services procurement

We completed the selection stage of the procurement in early April. As a result our dynamic purchasing system (DPS) for auditor appointments launched in mid-May. Having the DPS will complement our main procurement and will help us to get the best from the market when there are audit resources available through the next contract period.

On 11 July we received tender responses for our main audit services procurement, and at the time of writing we are in the process of evaluating them all. We expect to make the contract award decision during August. Soon after this decision we will announce the procurement outcome and an indication of the changes to audit fees for the 2023/24 audits.

Following the conclusion of the procurement we will commence the auditor appointment process, which we are legally required to complete by 31 December. The auditor appointment process has three key stages:

  1. development of proposed auditor appointments and consultation with firms (September)
  2. consultation with opted-in bodies on their proposed auditor appointment (October-November)
  3. approval of proposed appointments by the PSAA Board, and notification to opted-in bodies (December)

 

Contract Monitoring Data Pack: quarter four for 2021/22

We recently published our Contract Monitoring Data Pack: Quarter 4 for 2021/22. The pack provides updated information regarding audit opinions as of 31 March 2022.

The main headlines for this quarter include the growing backlog of unfinished audits, with over 40% of opted-in bodies preparing their 2021/22 financial statements with the prior year not completed. This has been made worse by concerns about the valuation of infrastructure assets.

The data pack highlights the importance of the whole system working together to restore timely completion of audits to rebuild public trust and confidence.

Contract monitoring data packs for previous quarters are also available to view on our website.

 

Consultation on the fee scale for 2022/23 audits

Looking ahead, from Monday 22 August 2022 PSAA will be consulting on the 2022/23 fee scale for audits of opted-in bodies. The consultation will run for six weeks, closing on Friday 30 September.

All consultation feedback will be considered carefully by the PSAA Board before confirming the fee scale. We will publish the final fee scale with a summary of our response to the consultation on our website on Wednesday 30 November 2022. We will also write to opted-in bodies and other stakeholders to confirm the fee scale.

All opted-in bodies will receive an email at the launch of the consultation, with details of the proposed fee scale and a reminder of the closing date. Details of the consultation will also be available on our website in August.

In September we will be publishing additional information to support local discussions between opted-in bodies and auditors about fee variations for 2021/22 audits.

 

Local audit news from elsewhere

On the 31 May DLUHC shared its consultation outcome on its response to local audit framework: technical consultation. This was in response to Sir Tony Redmond’s independent review into the effectiveness of external audit and the transparency of financial reporting in local authorities. This included strengthening the guidance on audit committees, through the endorsement of CIPFA’s position statement as published at the end of April.

BEIS also issued its response to the consultation on restoring trust in audit and corporate governance: government response to consultation on strengthening the UK’s audit, corporate reporting and corporate governance systems on 31 May.

DLUHC and HM Treasury sent a joint letter to members of the Local Audit Liaison Committee which outlined measures being taken to address audit delays.

CIPFA issued an urgent consultation on temporary changes to the code to resolve infrastructure assets reporting issues. The consultation closed on 14 June.

The FRC issued guidance for recognising Key Audit Partners (KAPs) on 30 June. This has established more flexible routes for Responsible Individuals to become KAPs and is a step towards addressing the market’s resources issue.