Agenda item

The Head of Finance and Customer Services presented the Financial Compliance Report and in doing so noted that this report was part of the Financial Recovery Programme agreed by the Executive Committee in September 2022.

It was highlighted that the key issue remained the closure process for 2020-21 Statement of Accounts with work still to be undertaken by the Council and the External Auditors to validate the take on balances. Given this, it was now expected that the anticipated sign-off dates for 2020-21, 2021-22 and 2022-23 Accounts would be later than previously reported.

It was noted that a number of key legislative deliverables had recently been submitted to Central Government, however, the key returns that remained outstanding for the Council were the Revenue Outturn forms for 2020/21 and 2021/22 and the VAT returns. The draft Capital Outturn forms for 2020/21 through to 2022/23 had been submitted, however, the final Capital Outturn and draft Revenue Outturn returns could not be submitted until the 2020/21 Accounts had been audited.

It was reported that measures were in place to improve procurement processes including the ‘No Compliance No Order’ process that had been live since April 2023, and all contracts requiring renewal over the existing £50,000 key decision threshold being reported to the Executive Committee through Finance and Performance Monitoring Reports.

It was reported that there were provisional plans for the Department for Levelling Up, Housing and Communities (DLUHC) to introduce backstop dates for when audits of accounts had to be completed with provisional deadlines for local authorities to have audits of 2020-21 and 2021-22 statements of accounts signed-off by auditors before 31^st March 2024. It was reiterated that this measure was not yet in place and would require a change in legislation in order to come into effect. However, if the plans were to be implemented, the Council would need to speed up its audit process to avoid missing the deadlines and receiving qualified opinions on the accounts.

Questions were raised as to whether the Council had the capacity to speed up its audit process if this was necessary. In response, it was reported that the Council recently employed two technical accountants. However, it was highlighted that if the plans were to pass into legislation, this would represent a significant issue for the Council as the Accounts were interlinked across years and the Council had yet to resolve the situation regarding data take on balances for period 0 when the financial ledger system change took place in February 2021.

It was noted that if the statutory audit deadlines were to be implemented, there would be implications for local authorities in terms of accessing credit and finding contractors and it was highlighted that there were still over 500 outstanding local authority audits and given the backlog and capacity issues across the public audit sector, it was difficult to see how the deadlines proposed could be met by local authorities across the country.

During the discussion, a recommendation was proposed to the effect that in relation to the plans for introduction of statutory deadlines for completion of outstanding local authority audits, the Executive Committee ensure this was included on the Corporate Risk Register and that the Portfolio Holder for Finance and Enabling be asked, through the Local Government Association (LGA), to request the Government to provide a timeframe for when this legislation might come into effect. The recommendation was put to the vote, and it was:

RECOMMENDED

In relation to the proposed plans by the Department for Levelling Up, Housing & Communities (DLUHC) to tackle the backlog in local government audits by setting statutory deadlines for historic accounts to be cleared:

1)    That the Executive Committee ensure that the possibility of legislation being passed to speed up the local authority audit process be noted on the Council’s Corporate Risk Register;

2)    That the Portfolio Holder for Finance and Enabling be asked to lobby the Government through the Local Government Association (LGA) to provide a timeframe for when this legislation is to come into effect.

RESOLVED that

progress on the 2020/21 Audit process be noted.