Agenda item

To consider a recommendation from the Audit Committee that this Council opts in to the appointing person arrangements made by Public Sector Audit Appointments for the appointment of external auditors for a five year period commencing 2023/24.

Further to Minute 26 of the meeting of the Audit Committee held on 27 January 2022, the Council considered whether to opt in to the appointing person arrangements made by Public Sector Audit Appointments for the appointment of external auditors for a five year period commencing from 2023/24.

Council recalled that, following the closure of the Audit Commission in 2015, it had considered options for the appointment of its External Auditors in February 2017 and had agreed to opt-in to the appointing person arrangements made by Public Sector Audit Appointments (PSAA) for the appointment of external auditors from 2018/19 for a period of five years up to, and including, the audit of the 2022/23 accounts.

It was reported that this arrangement would terminate on 31 March 2023 and that the Council was now being invited by the PSAA to consider continuing with the existing opt-in approach for the re-appointment of its External Auditors for a five year period from 2023/24.

Members were informed that the PSAA had published an associated prospectus as part of their invitation process with a summary of the advantages of a national opt-in scheme as follows:

·      “the appointment of a suitably qualified audit firm to conduct audits for each of the five financial years commencing 1 April 2023;

·      appointing the same auditor to other opted-in bodies that are involved in formal collaboration or joint working initiatives to the extent this is possible with other constraints;

·      management of the procurement process to ensure both quality and price criteria are satisfied. PSAA has sought views from the sector to help inform its detailed procurement strategy;

·      ensuring suitable independence of the auditors from the bodies they audit and managing any potential conflicts as they arise during the appointment period;

·      minimising the scheme management costs and returning any surpluses to scheme members;

·      consultation with authorities on auditor appointments, giving the Council the opportunity to influence which auditor is appointed;

·      consultation with authorities on the scale of audit fees and ensuring these reflect scale, complexity, and audit risk; and

·      ongoing contract and performance management of the contracts once these have been let.”

In terms of the associated procurement process, PSAA had confirmed that they would:-

·   seek to encourage realistic fee levels and to benefit from the economies of scale associated with procuring on behalf of a significant number of bodies;

·   continue to pool scheme costs and charge fees to opted-in bodies in accordance with the published fee scale as amended following consultations with scheme members and other interested parties (pooling means that everyone within the scheme will benefit from the prices secured via a competitive procurement process – a key benefit of the national collective scheme);

·   continue to minimise its own costs, around 4% of scheme costs, and as a not-for-profit company will return any surplus funds to scheme members.

Council was made aware that, as an alternative approach to the opt-in arrangements above, it could choose to appoint its own external auditor. However, this would require the Council to:-

·      establish an independent auditor panel to make a stand-alone appointment. The auditor panel would need to be set up by the Council itself, and the members of the panel must be wholly, or a majority of, independent members; and

·      manage the contract for its duration, overseen by the Auditor Panel.

It was considered that making a local appointment allowed the Council to take maximum advantage of the local appointment regime, but it did introduce a number of challenges such as:

1.   recruiting and servicing a Local Auditor Panel;

2.   running the tender exercise and negotiating the contract;

3.   missing the potential economies of scale that sector-led procurement via the opt-in process be expected to deliver; and

4.   demonstrating quality and independence requirements.

In respect of number 3 above, Council was advised that there were currently only nine audit providers eligible to audit local authorities and other relevant bodies under local audit legislation. This meant that a local procurement exercise would seek tenders from the same firms as the national procurement exercise, subject to the need to manage any local independence issues.

In summary and as set out when the last five year appointing period had been considered back in 2017, the main advantages of opting in to the PSAA’s appointing person option remained and included:-

•    Timely auditor appointments

•    Managing the independence of auditors

•    Securing competitive prices

•    Saving on procurement time / costs

•    Saving time and effort needed to implement and support auditor panels

•    A stronger ability to focus on audit quality

•    The scheme operating on a not for profit basis with any surplus funds distributed to member bodies.

Based on the above and its relative success over the past five years, the Audit Committee had recommended that this Council opt-in to the PSAA appointing person regime for a further five-year period commencing 2023/24.

Members were advised that if the Council did not accept the PSAA’s invitation to opt-in by 11 March 2022 then it would not be able to do so until the following year. This would require the local appointment process to be implemented over the next 12 months, ahead of the 2023/24 year that the first year of the appointment period would cover.

It was moved by Councillor Coley and:-

RESOLVED unanimouslythat -

(a)    Tendring District Council continues to opt-in to the appointing person arrangements offered by Public Sector Audit Appointments (PSAA) for the appointment of external auditors for a period of five years commencing from 2023/24; and

(b)    PSAA be informed of the Council’s decision by the PSAA’s deadline for responses of 11 March 2022.