HFMA response / HFMA's response to the Public Accounts Committee's inquiry into the timeliness of local auditor reporting

13 April 2023 Lisa Robertson
1 CPD hour
The Public Accounts Committee (PAC) has previously reported that the system of local government audit in England is close to breaking point. There are many complex and intertwined factors leading to the issues in the NHS external audit market, similar to those being reported in local government.

HFMA's response to the PAC inquiry into the timeliness of local auditor reporting reflects the NHS experience and impact. Our key points are:
• NHS and local authority audits are interlinked, delivered by the same firms and audit staff.
• As a result of changes brought about by the Health and Care Act 2022, 2022/23 is a year of transition in the NHS requiring a three month audit of clinical commissioning group (CCG) financial statements and a nine month audit for integrated care boards (ICBs).
• As at March 2023, there remain a number of NHS organisations that have been unable to appoint an auditor for 2022/23 (covering providers, CCGs and ICBs).
• The key reasons for the issues in the NHS external audit market, and more widely, are the level of audit regulation and auditor capacity.
• Revisions to the UK international auditing standards (ISAs) 315 and 240, applicable from 2022/23 for the NHS and local authority audits, will further increase the level of work required by auditors.
• The key implications in the NHS are significant increases in audit fees and a lack of response to invitations to tender.
• The local government delays are also having an impact on the NHS, which relies on many of the same audit firms and staff. For example, fewer NHS interim audit visits is putting more pressure on the year-end audit and lack of overall capacity is, unsurprisingly leading to fewer bids for external audit contracts.
• We would recommend the Committee also questions senior officials at the Department of Health and Social Care (DHSC), as well as the Department for Levelling Up, Housing and Communities (DLUHC), the Department for Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) on the latest picture of local public audit.
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