Agenda item

THE REDMOND REVIEW OF LOCAL AUTHORITY FINANCIAL REPORTING AND EXTERNAL AUDIT

Minutes:

The Head of Audit and Assurance briefed the Committee on the main points of the report on the Redmond Review of Local Authority Financial Reporting and External Audit. The Committee noted that the report set down the results of the Redmond Review and that there were a number of recommendations in the report which may impact on the Council in the future.

 

The Head of Audit and Assurance explained that the Redmond Review was one of four reviews that had taken place recently, which examined the transparency and efficiency of external audit within the UK. It also examined whether or not external auditors had been properly identifying those local authorities that were in financial difficulties soon enough. It looked at issues like whether or not the current system was fit for purpose and if the public had lost faith in the external audit process.

 

The Head of Audit and Assurance referred Members to section 9.3 of the Redmond Report which stated that audit work was currently under-resourced and that to address this weakness, a fundamental review of the fee structure was necessary. The report noted that evidence had suggested that audit fees were at least 25% lower than was required to fulfil current local audit requirements effectively. It was also pointed out in the report that the current deadline of the 31st of July was viewed as being unrealistic--there was a compelling argument to change this date to the 30th  September.

 

Some of the new regulations could be implemented without legislation, except for the recommendation that a new Regulator be established. 

 

The Head of Audit and Assurance explained that with regard to the recommendations in the report, it was expected that the Ministry for Housing Communities and Local Government would need to respond. It was recommended that an annual report from the external auditors should be submitted to Full Council after the 30th of September. A key recommendation that was of interest to the Audit Sub-Committee was the recommendation to consider whether or not one independent member with sufficient training and expertise should sit on local audit committees to aid in support and scrutiny. There was also a recommendation that the Head of Paid Service, the Section 151 Officer and the Monitoring Officer should meet with one of the key partners from external audit on a regular basis.

 

The report also recommended that a simplified breakdown of costs and services statement should be made available to the public, and that this should be subject to audit. The intention was that this would be trialled next year without being audited, and then the following year it would be published in a similar manner to other audited statements.

 

The Head of Audit and Assurance asked the Committee how they would like to progress the issue regarding recruiting an independent member to the sub- committee.

 

The Chairman asked the Head of Audit and Assurance if the extended deadline for the publication of accounts could result in reduced audit fees. The Head of Audit and Assurance responded by saying that the increased time scale allowed for the final publication of the accounts would help in terms of the competition for specialised resources and expertise by the external auditors and having more time would make things more easily achievable.

 

A discussion took place amongst the Committee regarding the possible merits and demerits of adding an independent member to the Committee. It was noted that a possible advantage to utilising an independent member could be that the person appointed could add experience that may be lacking and could fill a skills gap. An idea that was suggested was that the Council look at other local authorities to see how they were dealing with this matter. One of the issues that would need to be decided would be whether or not the independent member would be paid.

 

A Member expressed the view that a similar process had taken place with the management of the pension fund, where it had been decided to set up the Local Pension Board which (in his view) had not provided any additional value to the Council. He expressed the view that this process would impose additional bureaucracy and expense upon the Council, and therefore he opposed the introduction of an independent member.

 

Another member similarly opposed the introduction of an independent member and remarked that he would definitely need to be paid and would probably need to be a qualified accountant.

 

The Vice Chairman enquired regarding the status of the recommendations, on whether or not they would require parliamentary approval. The Head of Audit and Assurance stated that a response would be provided in due course from the commissioning minister, and this would provide clear direction going forward. It was the case that the proposal to set up the new body which was the Office of Local Audit would require statutory approval. The adoption of an independent member would not require statutory approval. 

 

The Head of Audit and Assurance pointed out that Bromley's Audit Sub- Committee already had many experienced individuals that were Committee members. Some council’s audit committees did not possess the same level of expertise and so for some of them, the addition of an independent member may be useful. The adoption of an independent member was not compulsory or something that had to be done, it was just something that could be considered. The Vice Chairman suggested that the Committee waited for a response from the Minister.

 

A Member drew an analogy with what happened with the Local Pension Board and stated that this had been of little value. He had argued that Local Pension Board members should be paid, but this had been rejected by Full Council. He highlighted that it had always been difficult to recruit people to the Local Pension Board, and the fact that it was an unpaid position may have been a contributory factor to this. He was under the impression that the current constitution of the Council could facilitate the adoption of an independent member to the Audit Sub-Committee if required, without any intervention from central government.

 

With reference to the establishment of the new audit regulatory body, a Member remarked that it would be helpful if at the same time, measures were put in place to limit the length of time taken to deal with auditing the accounts when vexatious objections were in evidence.

 

The matter of training for Audit Sub Committee Members was discussed, and it was the consensus that this would be a good idea.

 

The Chairman suggested that he liaise with the Head of Audit  and Assurance and with the Vice Chairman, to discuss what could be done in terms of providing training for Audit Sub-Committee members. 

 

RESOLVED that:

 

1)  The report on the Redmond Review of Local Authority Financial Reporting and External Audit be noted

 

2)  The Chairman, Vice Chairman and the Head of Audit  and  Assurance would discuss what could be provided in terms of training for Audit Sub-Committee members.

 

 

 

 

 

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