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ICAEW concerned about delays to local audit consultation response

Author: ICAEW Insights

Published: 09 Feb 2022

The procurement process for local government auditors has begun, even though the government has yet to respond to last summer’s consultation on the local audit framework. ICAEW has expressed its concerns.

On Monday this week, Public Sector Audit Appointments Ltd (PSAA) launched its procurement for the audits for the next five-year appointment period from 2023 of all local government bodies that opt in to its national scheme. PSAA has invited audit firms to complete initial selection questionnaires by 18 March. 

Only audit firms on ICAEW’s register of local auditors are permitted to carry out the audits of local government bodies. Firms on the register must meet the eligibility criteria specified in the Local Audit and Accountability Act 2014 and there are currently nine firms on the register. PSAA has said that in order to pass the initial selection questionnaire, firms must have begun the registration process with ICAEW.

Ninety-eight per cent of eligible bodies opted in to PSAA’s scheme for the current five-year appointment period and PSAA expects similar numbers to do so this period. More than 200 bodies have already formally opted in and the deadline is 11 March. Therefore, the procurement will determine the auditors for the overwhelming majority of local government bodies between 2023 and 2028. 

Despite PSAA commencing the procurement, the Department for Levelling Up, Housing and Communities (DLUHC) has still not published its feedback response to the technical consultation on the local audit framework, which closed in September 2021. This means that firms intending to take part in PSAA’s procurement or considering entering the local audit market for the first time lack clarity over DLUHC’s plans for the future of the framework. 

DLUHC announced a series of measures to address audit delays in December but there are many unanswered questions. For example, the government has not provided any clarity over whether the new system leader will maintain the technical networks currently operated by the National Audit Office once the responsibility for the Local Audit Code and Guidance is transferred. 

Alison Ring, ICAEW’s Director for Public Sector and Taxation, wrote a letter to Kemi Badenoch MP, Minister for Levelling Up Communities, to express her concern that the delays to the feedback response risk undermining efforts to improve capacity and resilience in the local audit market.

In the letter, Ring calls for the government to publish the feedback response at the earliest opportunity and offers to meet to explore ways ICAEW can support the government in improving capacity in the sector. In addition, Ring expresses disappointment about some of the short-term temporary measures that DLUHC have announced, arguing that the government needs to set a long-term vision for the sector. 

The letter also notes that it is not just the absence of DLUHC’s feedback response that is causing uncertainty for firms. It is still unclear whether the Department for Business, Energy and Industrial Strategy’s proposed expansion of the number of Public Interest Entities (PIEs) will capture more local authorities. ICAEW’s response to the consultation on the local audit framework called on the government to exclude all local authorities from the PIE definition, arguing the risk does not justify the additional regulatory burden. 

Alison Ring, Director for Public Sector & Taxation at ICAEW, commented: 

ICAEW supports the government’s desire to strengthen competition and resilience in the market but is concerned that efforts to achieve this are being undermined by the lack of clarity over the future of the local audit market.

“To provide certainty to firms considering bidding in the Public Sector Audit Appointments procurement, the government needs to publish its feedback statement on the technical consultation on the local audit framework as soon as possible, as well as clarify whether it intends for the revised Public Interest Entity definition to apply to local authorities.”  

More details about the Public Sector Audit Appointments Ltd (PSAA) procurement for the next appointing period from April 2023 are contained on the PSAA website here. ICAEW has offered to share contact details between firms interested in working together.