Redmond Review wants new regulator for local public audit
9 September 2020: Sir Tony Redmond’s long-awaited report on local authority financial reporting and external audit in England has made a number of robust recommendations, including the creation of a new audit regulator.
The Redmond Review, published on 8 September 2020, sets out a new path for local authorities and their auditors, recommending the creation of a new audit regulator, expanding eligibility for appointment as a local public auditor and an extended deadline for delivering audited financial statements to councils.
ICAEW welcomes, in particular, the recommendation for at least one independent member of council audit committees, strengthening the ability of elected representatives to hold their local authorities to account on behalf of residents and council taxpayers.
This report has been keenly awaited by a range of stakeholders (as discussed in a previous article) given how important it is to the direction of local public audit and financial reporting in England.
The Office of Local Audit Regulation
The Redmond Review recommends the creation of an Office of Local Audit Regulation to oversee, procure, manage and regulate the external audits of local authorities in England. If accepted, some of the existing regulatory responsibilities that currently sit with ICAEW, FRC, PSAA and the NAO would transfer to this new body.
The report recommends revisions in the current fee structure for external audits to address shortcomings, with all eligible audit firms being able to tender for local audits and to be given proper consideration for appointment.
Local auditors’ skills training will be provided to expand the pool of competing firms and external audit teams will be encouraged to engage more effectively with local authority internal audit functions.
The new regulator will have the power to sanction firms for significant audit failures.
Deadlines for audits should be extended to 30 September, providing more time for audit firms with busy private sector audit workloads to deliver local public audits as well.
Governance
The Redmond Review also recommends that local authorities have at least one independent member on their audit committees, with sufficient training and expertise to support elected representatives in scrutinising local authority finances.
There will be a formal requirement for statutory officers to meet at least annually with the Key Audit Partner, while the annual report and accounts should be submitted to the first full council meeting after 30 September each year. All s151 council finance officers are to be offered induction training.
These recommendations would not apply to smaller authorities such as parish and town councils (of which there are around 10,000 in England).
Financial reporting
The report proposes a simplified standard financial statement of services and costs to be made available to the public and subject to audit. An illustrative statement in the annex to the report will be shared with local authorities and consulted on until 31 December 2020.
For 2020/21 the statement will be produced on a trial basis, and no audit will be required, with full implementation as an audited statement in 2021/22.
The report also recommends that the CIPFA-LASAAC Local Authority Code Board look again at the composition of the statutory accounts to see if improvements can be made to improve their usefulness and understandability. This may have benefits for the external audit by reducing the extent of disclosures in non-critical areas – and hence the audit work required.
Commenting on the review Alison Ring, Director for Public Sector at ICAEW, said:
“The Redmond Review proposes to streamline the current complicated regulatory landscape surrounding local public audit whilst at the same time strengthening governance. The proposed requirement for local audit committees to include an appropriately skilled and trained independent member is particularly important in strengthening oversight over council finance teams and external auditors.
“While many of the Redmond Review recommendations can be implemented without the need for primary legislation, the establishment of a new regulatory body will require a change in the law. We are aware that other important legislation on audit reform, implementing the Kingman and Brydon reviews, is pending. However, we would encourage the government to recognise the importance of public audit and finance to local communities.”
Sir Tony Redmond will be discussing the review at an ICAEW webinar on 30 September which you can book here.
Read the full Redmond Review by clicking here.