Annual Report and Accounts 2021/22

Directors’ report

The directors present their report and the audited financial statements of the company for the year ended 31 March 2022.

Directors

For the year commencing 1 April 2021 the PSAA Board membership was as set out in the table below:

Board succession

In January 2021 the IDeA Board approved a Board succession plan for PSAA designed to refresh the Board membership over time.

The Chairman is appointed by the IDeA and other non-executive directors are appointed by the Chairman following interviews with a panel of Board members. The composition of the Board is intended to bring together a range of skills and experience relevant to the governance of the company and its distinctive role and sphere of business.

On 31 January 2022 Stephen Sellers stepped down from the Board. Stephen has been succeeded by Fraser McKinlay. Subsequently, on 31 March 2022 Caroline Gardner stepped down from the Board. Caroline has been succeeded by Mike O’Donnell who joined the Board on 1 April 2022.

More information on the PSAA Board and individual directors is available on the PSAA website.

Register of interests

The register of members’ interests is available on the PSAA website.

Board members are also required to notify and register any issues on which they might have a conflict of interest. Declarations of interest are also invited at the outset of each Board meeting.

Statement of directors’ responsibilities

The directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. The directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102).

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing those financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable United Kingdom Accounting Standards have been followed, including FRS 102, subject to any material departures disclosed in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Future developments

Looking forward, there are a number of key changes on the horizon which will have a significant impact on the local audit landscape and the environment within which we operate:

• In March 2021 the government published a White Paper setting out its plans to reform corporate audit, reporting and governance, based upon recommendations arising in the reviews of the audit sector (Kingman, Brydon and the CMA). The government proposes to establish a new regulator, the Audit, Reporting and Governance Authority (ARGA) to replace the FRC. The government is considering the responses and will make decisions on implementation. These reviews are expected to impact audits of all types of entity and will therefore have implications for local audit.
• The appointment of the FRC’s first Director of Local Audit, Neil Harris, who will play an important role in establishing a new local audit unit within the FRC, ahead of the it assuming the “Systems Leader” role for local authority financial reporting and audit, as part of its transition to the ARGA.
• In December 2020 the government published its Green Paper on transforming public procurement in the UK. It has since consulted on these proposals and  published its Response to this consultation. It will be a while before draft legislation effecting such changes is produced, and changes aren’t expected to take effect until 2023. We will keep this under review and assess the impact on PSAA procurement procedures. We will need to prepare for the implementation of these changes during 2023.

Whilst these sector developments take shape and evolve, in the next year, PSAA will:

• conclude the main audit services procurement process, finalise and enter into contracts with successful audit suppliers, and potentially implement contingency measures if the procurement fails to realise all of the required auditor capacity;
• appoint auditors to opted-in bodies under the new audit contracts by 31 December 2022 and consult on and publish scale fees for the 2023/24 audits by 30 November 2023 (aligned to revised timescales in the updated appointing person regulations);
• continue to develop a programme of webinars and events under the Local Audit Quality Forum to support opted-in bodies on local audit matters, and as part of our role in the evolving local audit landscape; and
• following amendments to the Local Audit (Appointing Person) Regulations 2015, we have more flexibility to agree additional fees more quickly and at the time that the relevant audit work is completed, as opposed to after the completion of the audit.

Going concern

In June 2016 PSAA was specified by the Secretary of State for Communities and Local Government as an appointing person for relevant principal local government bodies under the provisions of the Local Audit and Accountability Act 2014. This extended the responsibilities of the company beyond the transitional arrangements for which the company was responsible at its inception. In May 2021 DLUHC confirmed that PSAA would remain the appointing person responsible for the next procurement. In that context it is appropriate to prepare PSAA’s accounts on a going concern basis.

COVID-19: As part of PSAA’s going concern assessment we considered potential uncertainties that may exist in relation to our future cashflow because local authorities’ finances are expected to be under significant pressure over the next 12 months due to the loss of income and additional spend in response to COVID-19. We are of the view that our short-term investments are adequate to cover any impact on our own cash flow over this period.

Subsequent events

We have considered the ongoing impact of COVID-19. Whilst we have included a statement on the pandemic, we note that this has no material impact on the accounting period ending 31 March 2022. We have included an estimate of income and audit costs in relation to fee variations for audit years 2020/21. We will continue to monitor the position as we receive more information from suppliers.

There have been no other events affecting the company or the information provided in this annual report and accounts since the year end.

Disclosure of information to auditors

For each of the directors at the time this report was approved, the following applies:

• as far as the directors are aware, there is no relevant audit information of which the company’s auditor is unaware; and
• the directors have taken all steps they ought to have taken as directors to make themselves aware of any relevant audit information and to establish that the company’s auditor is aware of that information.

Independent auditors

A resolution to appoint UHY Hacker Young as auditors for the company for three years was approved by the Board in January 2019. This appointment was extended for an extra year by Board resolution on 14 March 2022.

By order of the Board

Steve Freer

Chairman

6 July 2022

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