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ARGA powers strengthened on local government audit

Author: ICAEW Insights

Published: 20 May 2021

The Audit, Reporting and Governance Authority will be reinforced with new powers over local government audit, protecting public funds and ensuring councils are best serving taxpayers.

The new regulator, which will contain a standalone local audit unit, will bring all regulatory functions into one place, with the aim of providing a better coordinated, simplified local audit framework. The Audit, Reporting and Governance Authority (ARGA) will continue to act as regulator and carry out audit quality reviews, as the FRC does now.

It will now also provide annual reports on the state of local audit and take over responsibility for the updated Code of Local Audit Practice – the guidelines councils are required to follow. The government has confirmed that the Public Sector Audit Appointments (PSAA) will continue as the appointing body for local audit, in charge of procurement and contract management for local government auditors.

“Today marks an important milestone as we announce that ARGA will have strengthened powers over local government audit, ensuring local audit systems are resilient, councils are truly accountable and providing the certainty the sector needs”, said Minister for Regional Growth and Local Government, Luke Hall. “It is essential we have an effective and transparent local audit system that ensures value for money for the taxpayer.”

Redmond Review response

In the immediate term, MHCLG will set up and chair a Liaison Committee, which will comprise senior stakeholders across the sector that will oversee the governance of the new audit arrangements and ensure they are operating effectively. These measures finalise the government’s response to Sir Tony Redmond’s independent review into local audit, carried out last year.

The government has already announced £15m to support councils with additional costs in audit fees, and recently consulted on the distribution of this funding. They are also consulting on improving flexibility on audit fee setting and have extended the deadline for when councils must publish their audited accounts, from 31 July – 30 September for an initial two years to give firms more time to complete audits.

The government continues to work closely with stakeholders, including local bodies and audit firms, to refine proposals for implementing their commitments around system leadership, as well the range of other commitments they have made in response to the Redmond Review. They also intend to publish a further consultation on implementing the above proposals in the summer. 

ICAEW’s response

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.

Commenting on the announcement Alison Ring, Director for Public Sector at ICAEW, said: “I am pleased that the government has accepted the need for a system leader for local public audit in England through the establishment of a dedicated unit within the new Audit, Regulatory and Governance Authority, together with a commitment to implement the majority of the recommendations of the Redmond Review.”

Ring continued: “This is a positive step forward, but it is important that the Ministry of Housing, Communities and Local Government moves quickly to implement the other Redmond Review recommendations on ensuring the viability of the local audit market. We look forward to continuing our regulatory role supporting ARGA on local public audit matters.”

Further reading

Government gives green light to Redmond Review recommendations 

How do you solve a problem like local audit?

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