PRESS RELEASE : Local audit bolstered with new Memorandum of Understanding [March 2023]

The press release issued by the Department for Levelling Up, Housing and Communities on 2 March 2023.

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.