Meeting documents

To consider this report.

The Committee considered this report that provided details of the on-going ‘Calls for Views’ review led by the former President of the Chartered Institute of Public Finance Sir Tony Redmond, that was looking at the effectiveness of local authority financial reporting and the audit regime. It was noted that the review was considering how Councils publish their annual accounts and if there was sufficient transparency within the financial reporting system to allow it to be held to account. The deadline for submissions had been extended, given the unexpected General Election, to 20 December 2019 and it was anticipated the final from Sir Redmond would be published in 2020.

It was reported that the review of financial reporting and external audit followed the full implementation of the Local Audit and Accountability Act of 2014 which set out the responsibilities for local authority audits and how they should be conducted. Following the abolition of the Audit Commission and its being replaced by localised inspection regimes to provide a refocused local accountability on improved transparency the government was reviewing the effectiveness of the new arrangements.

Members heard that Local authorities across England were responsible for 22% of total UK public sector expenditure and it was thought important that readers of those accounts were able to effectively scrutinise the stewardship of public funds and that annual accounts and financial reporting systems were transparency and could be held to account.

Attention turned to the ‘Call for Views’ review document, attached to the report as an appendix, and it was explained that it contained 43 questions. Officers were formulating a response from the Council to provide views, information and evidence with a focus on how the accounts could provide greater assurance to locally elected members along with local taxpayers and service users.   It will also include how the accounts and audit process might be developed to better meet users’ needs and serve the interest of other stakeholders and the wider public alongside other financial and none financial reporting requirements.

The response would recognise the increasing complexity of local government financial reporting requirements and the increasing pressure within the audit process. It was noted that Officers held regular meetings with the external auditors, including planning and checking progress against plans and this included topics within the scope of the review.

There was a discussion about the review and the Interim Finance Director noted that it had come against background of the Financial Reporting Council’s expectations having recently changed. This had meant there was with an increased focus on improved financial reporting from organisations; an expectation for auditors to demonstrate increased scepticism and challenge; and an expectation for auditors to undertake additional and more robust testing. The changed expectations had also happened alongside the reduction of audit fees, and shorter statutory deadlines for the completion of the annual audit (moving from Sept to July each year).

It was noted that collectively those various changes had created much additional pressure and were no longer considered sustainable. Members were reassured that Officers continued to seek improvements and work closely with external auditors on all aspects of the review throughout 2019/20 and into future years.

It was also noted that consideration had been given previously to the Committee having an independent member, having noted that the external auditors had commented this was something other Councils had progressed. The Chair undertook to write to the Monitoring Officer to ask if this could be considered, at the Committee’s request, by the Constitution and Standards.

The Chair informed the meeting that this would be the last meeting attended by the Strategic Manager, Chief Accountant and on behalf of the Committee she thanked her for her support and wished her well for her new role at Wiltshire Council.

The Committee considered this report that provided details of the on-going ‘Calls for Views’ review led by the former President of the Chartered Institute of Public Finance Sir Tony Redmond, that was looking at the effectiveness of local authority financial reporting and the audit regime. It was noted that the review was considering how Councils publish their annual accounts and if there was sufficient transparency within the financial reporting system to allow it to be held to account. The deadline for submissions had been extended, given the unexpected General Election, to 20 December 2019 and it was anticipated the final from Sir Redmond would be published in 2020.

It was reported that the review of financial reporting and external audit followed the full implementation of the Local Audit and Accountability Act of 2014 which set out the responsibilities for local authority audits and how they should be conducted. Following the abolition of the Audit Commission and its being replaced by localised inspection regimes to provide a refocused local accountability on improved transparency the government was reviewing the effectiveness of the new arrangements.

Members heard that Local authorities across England were responsible for 22% of total UK public sector expenditure and it was thought important that readers of those accounts were able to effectively scrutinise the stewardship of public funds and that annual accounts and financial reporting systems were transparency and could be held to account.

Attention turned to the ‘Call for Views’ review document, attached to the report as an appendix, and it was explained that it contained 43 questions. Officers were formulating a response from the Council to provide views, information and evidence with a focus on how the accounts could provide greater assurance to locally elected members along with local taxpayers and service users.   It will also include how the accounts and audit process might be developed to better meet users’ needs and serve the interest of other stakeholders and the wider public alongside other financial and none financial reporting requirements.

The response would recognise the increasing complexity of local government financial reporting requirements and the increasing pressure within the audit process. It was noted that Officers held regular meetings with the external auditors, including planning and checking progress against plans and this included topics within the scope of the review.

There was a discussion about the review and the Interim Finance Director noted that it had come against background of the Financial Reporting Council’s expectations having recently changed. This had meant there was with an increased focus on improved financial reporting from organisations; an expectation for auditors to demonstrate increased scepticism and challenge; and an expectation for auditors to undertake additional and more robust testing. The changed expectations had also happened alongside the reduction of audit fees, and shorter statutory deadlines for the completion of the annual audit (moving from Sept to July each year).

It was noted that collectively those various changes had created much additional pressure and were no longer considered sustainable. Members were reassured that Officers continued to seek improvements and work closely with external auditors on all aspects of the review throughout 2019/20 and into future years.

It was also noted that consideration had been given previously to the Committee having an independent member, having noted that the external auditors had commented this was something other Councils had progressed. The Chair undertook to write to the Monitoring Officer to ask if this could be considered, at the Committee’s request, by the Constitution and Standards.

The Chair informed the meeting that this would be the last meeting attended by the Strategic Manager, Chief Accountant and on behalf of the Committee she thanked her for her support and wished her well for her new role at Wiltshire Council.