Agenda item

The External Auditor from Ernst and Young provided an update on the audit status of the Council’s Statements of Accounts, including the audit of 2023/24 Accounts.

It was recapped that across the local government sector in England, there had been a significant backlog in completion and auditing of accounts in recent years. This had prompted the backstop legislation to clear the auditing backlog across the sector with the Ministry of Housing, Communities and Local Government (MHCLG) in collaboration the Financial Reporting Council (FRP) and other system partners having developed an approach to address the backlog in three phases.

The first phase involved clearing the backlog of historic audit opinions up to and including financial year 2022/23 by 13 December 2024 and the second phase involved recovery starting from 2023/24 financial statements to ensure that audit assurance across the sector was rebuilt across multiple audit cycles. The External Auditor reported that the Council did not meet the deadline for phase 1 and phase 2 of the recovery plan to clear the audit backlog due respectively to delays in the preparation of the financial statements for 2020/21, 2021/22 and 2022/23, and the challenges with changes to the Council’s auditor arrangements for financial years 2023/24 onwards.

The Committee was reminded that the Council had produced draft statement of accounts for 2023/24 in mid-January 2025 with the inspection period ending on 28 February 2025. Due to Ernst and Young’s appointment as auditor to the Council by PSAA not being until 2024/25, following completion of acceptance and onboarding procedures, the audit for 2023/24 Accounts did not commence until June 2025.

The External Auditor highlighted that challenges had been experienced following the commencement of their audit of the Council’s 2023/24 Accounts. This included the Council’s resources being initially focused on meeting the 30 June 2025 deadline for publishing the 2024/25 draft statement of accounts. External Audit resource was reallocated to July and August; however, further challenges were met, including matters requiring further investigation being identified including VAT, capital budgeting, compliance with laws and regulations and Value for Money which had led to further information requests. It was noted that some information had been provided but the External Auditor had currently paused its 2023/24 Accounts audit until these further information requests could be addressed.

It was reported that it was now highly unlikely the External Auditor would have available resource to recommence the audit of the 2023/24 financial statements until the 2024/25 planned audit period. As such, there would

be an impact on the delivery of the 2024/25 audit. The Assistant Director Finance and Customer Services reported that the Council had allocated additional resource for 2024/25 Accounts to ensure the backstop deadline for those accounts of 27 February 2026 would be met by the Council.

Questions were asked in respect of risks of significant weaknesses in Council’s Value for Money arrangements. A Member asked on the status concerning high staff turnover and a high number Governance

of the Council’s positions being filled through interim / temporary arrangements. The Assistant Director Finance and Customer Services responded that during her time in post, since April 2024, the finance team had been rebuilt to create a core, permanent team in post. It was highlighted that although there had been a number of successes in this area, due to challenges in the recruitment market, there remained interim staff in the finance department.

With regard to the Value for Money governance risk in relation to the Council being unable to submit VAT returns since 1 April 2021, it was responded that no penalties had been imposed on the Council as a result of this and the Council had submitted a back-claim of VAT to HMRC in December 2024. It was reported that money was owing to the Council with regard to VAT and the Council was working with HMRC to resolve this issue. The Council was undertaking preparations for a VAT inspection.

RESOLVED that the update report be noted.