Verbal Report of the Director of Finance
Minutes:
The Committee received a verbal update from the Director of Finance on the External Audit situation, focusing on the outstanding accounts to 2022/23, and the consultation regarding future arrangements.
A consultation had been issued by the Department for Levelling Up, Housing and Communities (DLUC) which closed at the beginning of March 2024. The outcome of the consultation was yet to be published. The proposal outlined three phases to address the audit backlog nationally. Phase 1 was a reset where outstanding audits up to the financial year 2022/23 were addressed. Phase 2 was a recovery phase where current and future years, progress would be made on timeliness of audits. Phase 3 was a reform where changes would be made to address systemic challenges in the audit system.
Phase 1 would address the outstanding accounts for 2021/22 and 2022/23, signing these off by the backstop date of the 30th September 2024. These would be signed off by disclaimer opinions, issued by the external auditors, however, no set wording had yet been agreed.
Work would still need to be done on the value for money conclusion and an Annual Audit Report for both years would need to be brought to the Committee. The backstop date applied to both of these aspects as well.
New external auditors would be part of the recovery phase and backstop dates had been proposed, over a period of four years, to enable audits to be completed in a timelier manner, with the audit for the 2026/27 accounts completed by the 30th November under normal timescales.
A risk was highlighted to the Committee in that the draft accounts for 2021/22 and 2022/23 would not be thoroughly audited as per previous years and therefore it would be possible that errors would be contained within the account.
The Committee noted a further consultation underway from CIPFA on the Code of Practice, comprising of a few minor and technical changes and simplifying the measurement of property, plans and equipment and using a specified indexation for those not valued by qualified valuers and reduced disclosures for pensions reporting. This would reduce the workload in preparing the accounts and in turn the auditors. This is proposed to exist for 2023/24 and 2024/25 accounts to aid the recovery of audits.
Members supported the arrangements for the outstanding accounts but noted the capacity issues of external auditors to take on the work of future accounts.
Members further queried the disclaimer opinions for outstanding audits and noted the risk associated with these, raising in particular the use of previous audits and errors identified to better inform quality checking of the outstanding accounts. In addition, clarification was sought on whether the disclaimer opinions changed the legal basis for the Council and responsibilities for completing the audits to the standards required.
In response, it was clarified that, should the consultation and proposal be accepted, a change in legislation would be made to allow for disclaimer opinions to be officially recognised. The Director of Finance would still be able to sign off accounts and certify that in their opinion, they demonstrated a true and fair few of the financial situation of the County Council, and had the same legal standing as an unqualified opinion.
Resolved – that the update be noted.