Local Authority Internal Audit Virtual Forum
26 July 2023
Please note:
- All Institute responses are boxed and highlighted blue
- Where the chair comments in that capacity this box is highlighted in yellow
- For confidentiality, the identities of all delegates/attendees are anonymised
| Institute welcome | Anne Kiem, CEO, Chartered IIA UK and Ireland Today, we welcome the Local Government Association to talk about their initiative for regional Audit Committee Chair discussions and how as internal audit you might wish to understand what is being shared with your Audit Committee Chair and members and how you might wish to support the initiative. The Local Government Association (LGA) is the national voice of local government. They are a politically led, cross party membership organisation, representing councils from England and Wales. Their role is to support, promote and improve local government, and raise national awareness of the work of councils. Local government bodies are expected to meet high standards of governance and accountability. An audit committee provides a specialist forum to support and monitor the authority in the areas of governance, risk management, external audit, internal audit, financial reporting, and other related areas. There are a number of statutory duties, regulations, and standards relating to financial reporting, governance, and audit that the authority must comply with, and an audit committee is best placed to oversee these. The audit committee can support the authority in establishing, maintaining, and improving effective governance, risk management, and internal control arrangements. These arrangements are the enablers that allow the authority to deliver against its objectives and improve its performance. They are essential if the authority is to make best use of all its resources and minimise loss and waste. The audit committee helps the authority to fulfil its responsibilities for accountability to the local community, and meet the expectations of partners, regulators, and other stakeholders. As the primary point of contact for the authority's auditors, it provides a forum to review audit conclusions and recommendations. The committee can escalate key recommendations for action, ensuring that areas of concern are given proper attention. |
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Chair opening comments | Piyush Fatania, Head of Audit, Risk, Assurance and Insurance at Gloucestershire County Council and Chartered IIA Council member Audit committees are a key component of an authority’s governance framework. They provide an independent and high-level resource to support good governance and strong public financial management. By overseeing both internal and external audit it makes an important contribution to ensuring that effective assurance arrangements are in place. Recommended practice is for audit committees to review and assess themselves annually or to seek an external review. The results of the assessment should be available in the annual report from the committee. But what happens if the audit committee is ineffective? It is likely that warning signs for failure are missed or early action is not taken. The audit committee is part of the defence mechanism within local government and part of the failure when things go wrong. An effective audit committee will
It is important that internal audit plays an active role, not simply attends, the audit committee. Our speaker today is Alan Finch, Principal Advisor, Local Government Association. |
- The LGA encourages all audit committee chairs (and their HIA) to join one of their regional forums to network and learn about good practice. For more information email beeton@local.gov.uk
- The environment for local government is challenging with multiple factors influencing failure such as financial difficulty, increasing government interventions, capacity concerns, and a struggling external audit market.
- Government response to local government failure:
- Office of Local Government – OfLOG – an informal type of audit commission.
- Best Value Standards and Intervention – consultation stage in respect of what Councils need to do to avoid failure.
- Borrowing powers Levelling-Up and Regeneration Bill (LURB) – additional to the Prudential Code.
- Statutory requirements for audit committees – expected shortly.
- LGA will be publishing research later this year into the failures, initial findings include:
- Poor quality risk management.
- Untimely scrutiny and reporting.
- Non-delivery of savings programmes.
- Poor management of commercial investment and arm’s length bodies.
- Inadequate management of demographic pressures.
- Perspectives from the LGA include:
- Local government requires better funding.
- Clearing the audit backlog is a priority.
- Clearer financial reporting – not ‘simplification.’
- No return to the Audit Commission– issues are more complicated than that.
- LGA work ongoing:
- Local audit chairs forums – provides networking and good practice events.
- Support for individual audit committees/chairs and leadership training.
- Publications and guidance.
- Reviewing the existing assurance framework map (see slides).
- Internal audit has an opportunity to raise its profile and demonstrate value with the serious attention that is being given to governance at the highest levels:
- Assert statutory status.
- Assert independence.
- Work closely with the audit committee.
- Encourage your governance leaders to learn from the failings of others but focus on the matters at hand in your own authority.
- Click here for presentation slides and the LGA website for publications and click here for the LGA list of Regions and organisers.
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Chair closing comments Although there is lots of guidance and standards, there is widespread inconsistency in how local government establish and employ audit committees. Legislation that overcomes this and encourages best practice would be welcome. In my experience the best audit committees are ‘a-political’ in how they operate. |
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Institute close | Liz Sandwith, Chief Professional Practices Advisor, Chartered IIA Our next session is 27 September looking at the new Risk in Focus 2024 report. The Chartered IIA’s report Harnessing the Power of Internal Audit has eight questions for the audit committee to ask internal audit – think about sharing this with your chair. Dates for your diary
Click here to book all events A spin-off Data Analytics for Local Authorities forum has been set up to address the specific needs of your sector. If you are interested in joining, please email mandy.coleman@iia.org.uk |
Chat Questions and Comments
Answers from speaker, anonymised comments from attendees
Comment |I attended a Regional Audit Committee Forum [hosted by LGA] to support my Chair and I found this really worthwhile. I have volunteered/arranged for my local authority to host the next regional forum to ensure that a more central location is available to help promote future attendance at meetings. [It included horizon scanning and was very useful for AC chairs to meet other chairs. I was however disappointed that my Chair did not take learnings from the event into the next AC meeting – it will take time to improve effectiveness.]
Response AF |It is useful when the HIA attends with the AC chair as it encourages discussion about what has been learnt and putting it into practice.
Question | I am about to start a review of our approach against the CIPFA Audit Committee guidance. In view of pending legislation you mentioned it there value in starting this?
Response AF | Yes. There is no timeline for legislation.
Response CIPFA | Absolutely yes. At this point in time DLUHC can't give a timetable for when a slot for legislation will be available. The CIPFA Position Statement on Audit Committees was published April 2022 following input from LGA and others. It is supported by DLUHC and Home Office. If you haven’t already reviewed your audit committee against the Statement then I’d encourage you to do so. The committee’s annual report should state if its arrangements comply with the Statement and an assessment of its performance.
Question | I would be interested whether, for the LGA research, there was anything noted around culture. A few of the public interest reports seem to have picked up on this. as a big issue. On a side issue my local authority has started having private sessions with internal audit and external audit before the main Audit Committee meeting. I have found these to be very useful in promoting debate in the main meeting.
Response AF | This has certainly been an issue in terms of how it plays out locally and can be driven substantially by individuals. The initial findings are more generic issues.
Response CIPFA |The Position Statement says that heads of internal audit should be able to meet privately with the committee - so if any HIA doesn't have this I should raise it.
Comment | Need to ensure that the Terms of Reference of the Council's Audit Committee includes joint working and partnership arrangements - scrutiny of governance, risk and internal controls of ALEOs, joint ventures, etc, including protocols on reliance on other entities' assurance arrangements to ensure coverage and avoid duplication.
Question | Some of the potentials of the new Standards will be that it will be harder for many to fully comply, there will be more matters for Audit Committees to comply with and there will be additional costs associated with EQA's at a time of severe financial challenge- how do you think Audit Committee members will react to that?
Response Chartered IIA |We can pick this up offline, although certainly from the Institute’s perspective there is no evidence to suggest EQA’s will be more expensive. We do recognise that introducing new Standards may be a challenge.
Question |Referring back to OfLOG, if they are using public data, are they likely to produce anything that councils do not already know themselves.
Response AF |I would hope not. It is possibly to provide more information for ministerial decision making than to improve local government activities.
