The External Auditors, Ernst & Young, will provide a verbal update to the Committee.

Adrian Balmer, External Auditor, Ernst & Young, provided a verbal report to update the Committee on the 20221/22 accounts.  He informed the Committee of the national picture that the backlog of the publication of audited accounts had grown to an unacceptable level.  He advised the Committee of the three phases that had been developed to deal with the backlog agreed by the Department of Levelling Up and Communities and the Financial Reporting Council as follows:

·       Clearing the backlog and historic audit opinions up to and including the financial year 2022/23 by 30 September 2024.

·       Create backstop dates to mitigate against future backlogs of audits in future years.

·       Addressing system challenges in the local audit system and embedding timely financial reporting and audit reporting deadlines.

Three consultations had taken place and have informed the above decisions, and these were ‘Addressing the local audit backlog in England: Consultation’, ‘Local audit in England Code of Audit Practice’, and the CIPFA ‘Code of Practice on Local Authority Accounting in the United Kingdom 2022/23.

Bill Lewis, Financial Accounting Manager, advised the Committee that the Council had responded to the CIPFA consultation, and highlighted that simplification of local authority accounts would be welcomed to ensure that they were presented in layman’s terms, and therefore more accessible to more people.  In response to concerns raised regarding the reset dates, Maria Grindley, External Auditor, Ernst & Young, advised that they had responded to the consultation to note that it would not be helpful for the backstock dates to coincide with other peak deadlines.

In response to questions raised by the Committee, Maria Grindley advised that if the legislation was clear and that deadlines set in the first phase were agreed, then as E&Y were already working to meet those deadlines, it was hoped they would be completed by at least October 2024.  However, it was emphasised that this would be dependent on guidance being made available to external auditors in good time to complete these works. 

Bill Lewis provided an update on the progress of the 2021/22, 2022/23 and 2023/24 accounts to the Committee.  He advised that the 2021/22 were currently being reaudited following the changes to transactions from the QL system and were now finalised and were subject to approval.  The 2022/23 accounts had been put on hold until the final opening balance from the previous year’s accounts were available.  A final set of accounts were currently being prepared for public consultation, prior to being submitted for audit disclaimer and completion of the value for money work required by the external auditors.  Following completion of the 2022/23 accounts, the work would commence for the 2023/24 accounts, and ambitious deadlines had been set to get back on track.

Maria Grindley advised that from the external auditor’s perspective on the two years for 2021/22 and 2022/23, some work would be required to produce an audit disclaimer, and they were currently working through this.  In anticipation of the legislation, clarity from the regulators on what work was required to get to a disclaimer opinion in order to close those accounts was being sought.  However, it should be noted that the value for money opinion was required, and they were pushing ahead with this.  A draft value for money would be produced for the Committee, and a disclaimer report would cover both of those years.  It was expected that the accounts for the year ended 2023/24 would run as a normal audit year.

In response to a query from the Committee on the level of assurance provided by only having an audit disclaimer, Nigel Kennedy advised that whilst there were concerns, it was understandable following the consultations that had been run by the government.  In terms of the Council’s companies, there may be concerns raised that sets of accounts were not available for those years as only audit disclaimers would be available, especially during the tendering process for new works.  It was also noted that it would take approximately three years for those disclaimers to work through the system.

He also highlighted that there would also have to be conversations with the external auditors for allocation of fees payable as full sets of audits would not be provided, however these would be discussions for the PSAA, as they had negotiated the contracts with external auditors of behalf of local authorities. 

Maria Grindley responded that whilst there were agreed drafts for the audit disclaimers, these would need to be agreed across the system to ensure that they were upheld by their regulators.

The Committee noted their concerns with the above and looked forward to receiving updates at the next meeting.