Purpose of Report
1.
To provide the committee with an update on government proposals to
tackle the delays experienced nationwide in the completion of the
external audits of local authority accounts.
Background
2. As members
of the committee will be aware, for some time there has been a
significant national issue regarding the timely completion of the
external audit of councils’ accounts and the subsequent
publication of final, audited accounts. In November 2020 the
committee received a report on the findings of a report into the
effectiveness of local authority financial reporting and audit
conducted by Sir Tony Redmond. As reported to committee in
November 2020, the Redmond review identified a number of key issues
with local audit, including:
3. The
nationwide issues have continued since that report was issued, and
on 18 July 2023 an update letter was received from Lee Rowley MP,
the Parliamentary Under-Secretary of State for Local Government and
Building Safety, together with a “Cross-system statement on
proposals to clear the backlog and embed timely
audits”.
4. The letter
confirmed that:
·
Only 27 per cent of local authority audits for the 2021/22
financial year have been completed (i.e. the final, audited version
of the accounts has been published) by July 2023. The
statutory deadline for completion of these was 30 November 2022,
and
·
The combined total of outstanding local audits dating back to
2015/16 is nearly 520.
5. As
outlined in the cross-system statement, the proposal for dealing
with the backlog is that the National Audit Office (NAO) and the
Department for Levelling Up, Housing and Communities (DLUHC) would
set a series of statutory deadlines for accounts preparers and
auditors to clear the backlog of delayed audits for financial years
2015/16 to present. Auditors would be required to provide as
much assurance as possible for the outstanding years, but it is
acknowledged that these proposals may result in qualifications or
disclaimers for a number of local bodies.
6. The
statement also focusses on the need for longer term change to
ensure that there is no repeat of the backlog. This work is
looking at:
·
Competition, capability and supply in the local audit market
·
Proportionate financial reporting, auditing and regulatory
requirements.
7. The
letter from Lee Rowley MP is attached as appendix one to this
report, with the cross-system statement attached as appendix
two. They indicated that the proposals would be subject to
further consultation over the summer, including with Section 151 Officers, Chief Executive Officers,
elected representatives, the Local Government Association and audit
firms, with a view to implementation to begin by the end of
December 2023.
Further developments, and
implications for the councils
8. Further to
the letter and cross-system statement, a webinar was held on August
1 2023 which identified that the proposed statutory deadlines being
considered were as follows:
|
Financial years
|
Proposed statutory deadline
|
|
2015/16-2019/20 accounts
|
31
December 2023
|
|
2020/21-2021/22 accounts
|
31 March
2024
|
|
2022/23
accounts
|
30
September 2024
|
|
2023/24
accounts
|
31 March
2025
|
At the time of writing there
has been no further formal communication since 18 July.
9. For South
and Vale, the audit and publication of all accounts up to and
including the 2020/21 financial year have been completed. The
audit of the 2021/22 accounts is nearing completion and an
additional meeting of this committee has been scheduled for Monday
30 October 2023 for the accounts to be received and
considered.
10. For the 2022/23 accounts, further
clarity is needed on the government’s proposals for local
audit before EY can confirm how they will approach the audit of the
councils’ accounts, and when the audit will take place.
When EY are in a position to consider this and have shared their
approach with officers, we will communicate this to the
committee.
11. The 2023/24 accounts will be the
first accounts that will be audited by Bishop Fleming, who are new
to the local government audit market. Whilst officers have
had an introductory meeting with senior managers from Bishop
Fleming there is little that that Bishop Fleming can practically do
at this stage until clarity over the 2022/23 audit process is
received.
Climate and ecological impact implications
12. There are no direct climate and
ecological impact implications of this report.
Financial Implications
13. These are included in the body of
the report.
Legal Implications
14. The statutory framework within which
local authority audits are conducted is set out in the Local Audit
and Accountability Act 2014 and the Accounts and Audit Regulations
2015. They may need to be reviewed and amended to facilitate
the actions set out in this report.
15. The Council will need to ensure that
arrangements are put in place to comply with any amendments to the
Local Audit and Accountability Act 2014, Accounts and Audit
Regulations 2015 and statutory guidance.
Risks
16. Without further clarity on the
government’s proposals for local audit it is difficult to be
clear on any risks arising from their implementation at this
stage.
Conclusion
17. There is a clear need to deal with
the current nationwide problem of the backlog of local audits, and
the letter and cross sector statement show that the issue is being
given serious consideration. Officers will continue to keep
the committee updated as more details on the proposals come
forward.
Background Papers
Appendix one – Letter from Lee Rowley
MP
Appendix two - Cross-system statement on
proposals to clear the backlog and embed timely audits.
