ACCA welcomes the opportunity to respond to the Ministry of Housing, Communities and Local Government’s public consultation on reforming local audit in England. ACCA supports the establishment of a Local Audit Office (LAO) and its remit to simplify the system. However, further detail is needed in several key areas, including clarity on likely costs and resource demands. Alongside our responses to relevant consultation questions, ACCA offers the following three observations.
The consultation is largely silent on how the proposed new system under the LAO will be resourced. ACCA recommends the development and presentation of resourcing plans, alongside an impact assessment, as soon as practicable. Without this, it is difficult to provide rounded feedback on the Government’s proposals. On people, capacity issues (on both the accounts preparation and audit side) are longstanding and deep-seated.
A recent report from the Local Government Association emphasises the limited candidate pool. As of October 2024, 26 per cent of local government accountancy roles remained vacant, along with 21 per cent of internal audit roles, and 20 per cent of business partner positions. Whilst the consultation document provides a useful starting point to discuss these matters, further work is needed. Indeed, priority should be given to developing a plan for a sustainable local government finance profession—one supporting both accounts preparation and audit.
- Possible public provision of audit services
A key proposal noted in the consultation document is the introduction of an element of public provision of audit. In theory, this could provide a broader and more sustainable base for local audit provision. Yet proposals are silent on exactly how this goal will be achieved. In the short term, setting up and supporting public provision would likely have to “cannibalise” from those audit firms already in the market. As a result, the overall benefit would be uncertain at best. Ultimately, it would do little to help grow the supply of skilled auditors overall.
Broader consideration is needed to design optimal future arrangements. Central to those are the factors driving the current challenged state of the local audit market (including fee levels). In turn, ACCA would not support short term moves that look to build public provision. With audit provision seeking to clear the backlog of opinions and disclaimed audit opinions, it could prove an unnecessary distraction for resourcing already severely strained.
- Finding the right balance
In responding to the Redmond Review, ACCA stressed that prioritising reductions in cost—at the expense of audit quality—is not acceptable. Neither is it sustainable over the long term. ACCA made a similar point in its submission on Addressing the local audit backlog in England. We are fully aware that local government as a sector is highly resource constrained. Similarly, ACCA recognises that the argument for spending on audit fees is not an easy one to make given the pressures on local authority budgets. Nevertheless, audit cost and fees are two important components of the solution. If the Government is committed to supporting the development of a sustainable local audit market, these must be struck at a realistic level.
To read the response in full, please download the consultation response document found on this page.
