Agenda item
Financial Compliance Report including update on Statements of Accounts
Minutes:
The Committee considered the Financial Compliance Report which noted, as at the end of June, progress with the 2020/21 Statement of Accounts, the ‘budget book’ for 2023/24 and key deliverables as required by legislation and government.
It was highlighted that the key issue remained the closure process for 2020-21 Statement of Accounts with work still undertaken by the Council and the External Auditors to validate the take on balances. It was now expected that the sign-off of the 2020-21 Accounts for external audit would take place in November 2023 with the audit expected for completion in spring 2024.
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 accounts had been audited. It was noted that although the Government now allowed these returns to be completed based on estimates, the level of uncertainty due to the Cash Receipting issue meant that these returns could not be completed until the External Auditors sign off the Council’s take on balances and the Council provides the draft accounts to Audit.
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 Cabinet through quarterly Finance and Performance Monitoring Report.
It was repeated 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 statements of accounts signed-off by auditors was 31st March 2024 and September 2024 for 2021-22 statements of accounts. 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, it was a concern that, if passed into legislation, this measure might result in local authorities across the country being issued with disclaimer opinions on their accounts, including qualified or no opinions. This would have implications for local authorities in terms of accessing credit and finding contractors. It was highlighted that there were still over 500 outstanding local authority audits and given the backlog and capacity issues across the audit sector, it was difficult to see how the deadlines proposed could be met by local authorities concerned.
In response, a suggestion was made by a Member that local accounting firms could be approached to help the Council with auditing their accounts given the scale of work still to be undertaken to catch up on the Council’s accounts process. Officers commented that this suggestion would be considered.
During the discussion, Members highlighted that without audited financial statements the Council could not be certain about its financial position which was a concern. In terms of the scale of possible misstatements on the Council’s Accounts as a result of the issues experienced, it was highlighted that there were public sector auditing standards with regards to materiality thresholds, which concerned the 2 per cent threshold for misstatement in the Council’s financial statements in comparison to the authority’s annual gross expenditure that would trigger a materiality concern. The level for Bromsgrove District Council based on this amounted to around £800,000.
During the discussion, a recommendation was proposed with regards to asking Cabinet to ascertain from the Department for Levelling Up, Housing and Communities (DLUHC) further detail on the Department’s plans for speeding up the local authorities’ audit process. On being put to the vote it was
RECOMMENDED that Cabinet ascertain from the Department for Levelling Up, Housing and Communities (DLUHC) the mechanism for audit of local authorities’ accounts to be caught up as per their press release.
Supporting documents:
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