Agenda item

Report by the Executive Director of Resources and Section 151 Officer

This report sets out an update on measures being put in place by the government to address the local audit backlog in England and what that will mean locally.

Recommendations:

The Audit and Governance Committee is recommended to:

(a)           Note the update on the arrangements that the government intends to put in place to address the local audit backlog in England.

(b)           Note the approach that EY LLP intend to take to the audit and reporting on the council’s accounts for 2022/23 onwards.

The Executive Director of Resources and Section 151 Officer presented the report and indicated the following:

In February 2024, the Department of Levelling Up, Housing and Communities (DLUHC) as it was known issued a consultation with the aim of clearing the backlog of local audits in England. The new government took the matter seriously and before going on the summer recess was able to issue a statement to Parliament setting out the proposals for addressing the local government audit backlog, although with minor amendments. The proposals related to five years’ worth of audits, for 2022/23 and years prior to that, and the subsequent four financial years to allow the system to catch up. It should be noted that in support of local bodies and auditors there was a commitment that there will be extensive communication in relation to the disclaimed and modified opinions. The reason being that it was not the fault of local authorities that the accounts had not been signed off, together with the introduction of backstop dates which were beyond the local authorities’ control. The approach that is to be prioritised by Ernst and Young would be to finalise value for money for accounts of 2022/23 and to complete the process of disclaimed audit opinions up to 2022/23, by end of November 2024. In relation to 2023/24 the expectation was that they would be completed audits for areas where draft and financial statements were published by 31^st July 2024, and where the audit work had been undertaken.

In response to Council Members the following was noted:

·       Local authorities could be judged by Members and the general public without a proper understanding of the context of the challenges, with the process unfairly deemed to be not satisfactory.

·       It was clarified that the County Council would not be breaching any government rules in respect of the audits.

·       The reason for not meeting the 31May 2024 deadline for two years was due to the accounts being in the process of being audited, as well as the opening balances not being confirmed.

·       In going forward the deadlines will be achieved because the deadline had been extended to June 2024.

·       The work on the final accounts for 2023/24 would start in February 2025 which would allow time to complete the workload.

·       Further assistance would be rendered through ensuring audit firms had the capacity to deliver on the audit.

·       The second issue was that not only would the 2023/24 accounts have included a disclaimer, but  the opening balances for 2024/25 and 2025/26 would also have a disclaimer.

·       The opening balance 2023/24 would be the opening balance for 2024/25 and effectively the closing balance for 2024/2025, which means the 2025/2026 accounts would be up to date.

·       The issue in relations to highways infrastructure assets in 2022 was that a temporary statutory override was put into place. The position going forward is uncertain as the statutory override cannot continue indefinitely.

Resolvedthat the Committee:

a)    Noted the update on the arrangements that the government intended to put in place to address the local audit backlog in England.

b)    Noted the approach that EY LLP intended to take to the audit and 

reporting on the council’s accounts for 2022/23 onwards.