Directors’ report
The directors present their report and the audited financial statements of the company for the year ended 31 March 2023.
Directors
For the year commencing 1 April 2022 the PSAA Board membership was as set out in the table below:
| Board members | Position | Date of appointment |
| Steve Freer | Chairman | 1 October 2014 |
| Keith House | Non-executive director | 1 December 2017 |
| Marta Phillips | Non-executive director | 1 April 2021 |
| Fraser McKinlay | Non-executive director | 1 February 2022 |
| Mike O’Donnell | Non-executive director | 1 April 2022 |
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.
More information on the PSAA Board and individual directors is available on the PSAA website.
Register of interests
Board directors are 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. The register of director’ interests is available on the PSAA website.
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.
The directors take seriously their duties under Section 172 of the Companies Act 2006 to promote the success of the company for the benefit of its members as a whole. The directors have satisfied themselves that consideration of its requirements, and the directors’ duties under it, have informed and guided their work throughout the year and have published on the PSAA website a Section 172 statement detailing how they have complied with this requirement.
Directors’ indemnity provision
As permitted by the Articles of Association, the directors have the benefit of an indemnity which is a qualifying third-party indemnity provision as defined by Section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and is currently in force. The company also purchased and maintained throughout the financial year directors’ and officers’ liability insurance in respect of itself and its directors.
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 June 2022 the government published the consultation responses to the White Paper setting out 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 FRC appointed their first Director of Local Audit, Neil Harris, in September 2022. This is an important role in establishing a new local audit unit within the FRC. We will need to consider the potential for further developments to local audit as the FRC moves from operating in the role of shadow system leader for local authority financial reporting and audit to becoming system leader as part of its transition to the ARGA, at some point expected to be during 2024.
- Following BREXIT, the government has announced its intention to transform public procurement. The Procurement Bill is currently going through the legislative process and is expected to come into force in a phased way from late 2023 at the earliest. PSAA will need to comply with the new procurement regime and assess the 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:
- continuously review our programme of activities to ensure we remain focused on the crucial issues as the changes to the local audit environment unfold and to ensure we provide the best possible service to our opted-in bodies;
- both undertake and actively contribute to relevant research and projects, including annual fees-related research and analysis to inform the development of the fee strategy, and in support of projects commissioned by the shadow systems leader that seek to address the challenges faced by the local audit system;
- set the 2023/24 annual fee strategy and consult on the fee scale for the first year under the new audit services contract by 30 November 2023, reflecting audit risk and complexity;
- deliver a programme of Local Audit Quality Forum events such as themed all-day conferences and webinars to stimulate debate and to support opted-in bodies on local audit matters, and as part of our role in the evolving local audit landscape; and
- develop and implement updated arrangements for contract and financial monitoring to align with the 2022 audit services contracts.
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.
Subsequent events
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 MHA LLP as auditors for the company for three years 2022/23 to 2024/25 was approved by the Board on 24 October 2022.
By order of the Board
Steve Freer
Chairman
25 July 2023