Local audit bolstered with new Memorandum of Understanding
A new Memorandum of Understanding outlines the responsibilities of the Financial Reporting Council as shadow system leader for local audit.
The local audit system in England is set to be strengthened as the new responsibilities of the Financial Reporting Council (FRC) are given the green light today.
Local audit is the process whereby a local authority’s accounts are independently verified, so taxpayers can be assured the information provided is reliable, true and fair. By setting new responsibilities for the FRC in this area, the government aims to build a more resilient system that operates effectively so local taxpayers get the transparency and accountability they need.
As outlined in a Memorandum of Understanding published jointly by DLUHC and the FRC today, system leadership will enable a more coherent and quicker response to challenges across the local audit system which covers local government, NHS bodies, fire and rescue authorities, local police bodies, internal drainage boards and national park authorities.
This marks a significant milestone in the delivery of reforms committed to by Government following the Redmond Review, which found that the local audit system was too fragmented to operate effectively. A key recommendation of the review was that a system leader should be created, which should also report on local audit.
Neil Harris, Director of Local Audit at the FRC, will lead a new local audit department at the organisation with five key responsibilities:
- leading a coherent and coordinated policy response to challenges arising across the local audit system;
- facilitating stronger governance across the local audit framework;
- leading work to improve competition, bolster capability and market supply;
- overseeing the entire quality framework for local audit;
- and reporting on the local audit system.
DLUHC has acted as interim system leader since July 2021 through the local audit liaison committee. The Financial Reporting Council will take on its new role later in the year.
Lee Rowley, Minister for Local Government, said:
The Government remains strongly committed to building a stronger more resilient local audit system, properly equipped to deliver the transparency and accountability which local taxpayers deserve.
Sir Jon Thompson, CEO of the Financial Reporting Council, said:
We welcome this new role for the FRC and are committed to working with DLUHC and the rest of the local audit system to address the challenges facing the sector.
About Neil Harris, Director of Local Audit at the Financial Reporting Council:
Neil has over 20 years’ experience in local public audit. Before joining FRC, he was a Key Audit Partner for EY with responsibility for a range of local public sector audits across local government, central government, police and the fire sector. Neil contributed to EY’s response to a range of consultations on the future of financial reporting and external audit in the public sector. Before EY, Neil was a District Auditor for the Audit Commission where he spent 14 years. Neil is passionate about securing a sustainable future for high quality financial reporting, governance and audit in the public sector.
Further information
- The Redmond Review recommended a new Arms-Length Body should be created to act as system leader for local audit. Government instead decided to nominate a system leader from within the system.
- We announced the Audit, Reporting and Governance Authority, the new regulator which will replace the Financial Reporting Council, as our preferred choice of system leader in our May 2021 spring update. We then launched a consultation and published our response to consultation in May 2022. The shadow period will continue until the Audit, Reporting and Governance Authority is established through primary legislation.
- The Financial Reporting Council currently conducts Audit Quality Reviews and administers professional oversight - it will continue to do so independently of the system leader role.
- Prior to the spring, DLUHC will issue a letter outlining policy priorities for the first year of shadow arrangements, and the Financial Reporting Council will respond with its planned activities.