Agenda item

LBBD Audit Progress report and Sector Update and Preventing Failures in Local Government- Grant Thornton, External Auditors


Paul Dossett, Grant Thornton (GT) was welcomed to his first meeting. At the outset he made an observation as to whether spending a significant amount of the Committee’s time on the previous item was warranted given the equal importance of other matters on tonight’s agenda. 


He presented a progress report set out as Appendix A detailing delivering GT’s responsibilities as the Council’s newly appointed external auditors. The report summarised the emerging national audit issues and relevant developments to this Authority, specifically the significant delays in the completion of audit work and the issuing of audit opinions across the local government sector, with only 12% of Councils having received audit opinions in time to publish their 2021/22 accounts by the extended deadline of 30 November last year. 


GT have been working constructively with DLUHC, the FRC and audit firms to identify ways of rectifying the challenges that have been faced by the sector with a recognition of the difficulties the backlogs have caused local authorities across the Country. DLUHC were to launch a consultation regarding proposed backstop arrangements, in which they were expected to announce that all audit years from 31 March 2023 and earlier would be ‘backstopped’ if not completed by 30 September 2024, the result of which could see many disclaimers or qualified audit opinions.


Paul Dossett said that as yet the scope of work required for 2023/24 audits was yet to be determined. However, GT would, subject to no subsequent changes to backstop arrangements, intend to commence planning work this quarter with final accounts work from July 2024 onwards, with the aim of achieving sign-off by 31 December 2024. He stressed that GT would adopt a robust approach should Councils fail to produce accounts/respond to questions on time, insofar they would not hesitate to issue auditor recommendations to those Councils. He gave assurances that they would be proactive in reporting issues to Members for action. Given the level of resources available to GT he was confident that the majority of audits for 2023/24 would be signed off by the end of December 2024. 


In respect to fees Paul Dossett stated that the Public Sector Audit Appointments (PSAA) approach now was that in addition to setting the scale of fees they would set key milestones that auditors would be expected to meet such as producing audit plans, audit findings, opinions and annual reports, all of which would need to be completed before payments were made.  Consequently, it would be in the interest of GT to complete such tasks in a timely manner.


He then briefly referred to the second report on the agenda set out as Appendix B entitled ‘Preventing Failure in Local Government’ which GT produced in December following wide consultation with both Section 151 Officers and Monitoring Officers. He suggested that the paper be used by Members as a tool setting out the governance risks to sound financial management and the lessons learnt from past failures.


In response to the presentation, and specifically to Paul Dossett’s observation about the use of the Committee’s time, reference was made to the Audit progress report and specifically the section which talked about a report from the Commons’ Public Accounts Committee … ‘Timelines of Local Authority Reporting’ which highlighted the concerns of the Committee about the implications of audit delays, citing the cases of Woking Borough Council and Thurrock, both of which had years of unaudited accounts and had declared them themselves effectively bankrupt due to excessive levels of debt. This alone justified the importance of the Committee spending a significant amount of time discussing the Council Accounts 2019/20 – 2022/23 update item 


Turning to the audit fees, mention was made of the significant increase (240%) of the PSAA scale of fees for 2023/24 and whether the Section 151 Officer made provision for the increase in the budgets.  It was confirmed that the budget had been increased to match the new scale fee.  


The ‘Preventing Failure in Local Government’ report was seen as a very helpful report for the Committee. It was felt there would be merit in presenting it to all Members as it reinforced their role to ask the difficult questions, there being a responsibility on Members to do so. Another important point made in the report concerned the possible reform of the Public Loan Works Board to stop credit lines to ensure in future that local authorities did not borrow beyond their means.


Paul Dossett stated that local authority debt levels and borrowing was one area of focus for auditing, as were things such as the structural and governance arrangements of arm’s length companies set up by many local authorities. He confirmed that GT would focus its audit work on achieving value for money for this and other Councils, as well as financial statements audits, as quite often it was this area that unlocks many of the other financial issues being experienced in the local government sector today.


As GT would be assuming the external audit role for the Council in April and were aiming to present a final sign-off report in December, and given the local authority’s audit experiences of the past few years, would it be feasible to submit an interim report in Summer 2024?


GT planned to present their indicative audit plan to the next meeting in March, alongside which they would be engaging with officers about doing some interim testing work. There was then the process of preparing the 2023/24 accounts and how this played into the ongoing work by BDO and the views of officers’ as to the available time and capacity they have to complete the previous years’ outstanding accounts, as well as preparing the 2023/24 accounts and respond to GT regarding any subsequent queries.


From GT perspective they would be happy to provide regular progress reports to the Committee. Assuming all sets of previous accounts were signed off by the backstop deadline of 30 September, GT’s broader commitment was to complete their work at the very latest by March 2025, subject to all the said factors.


The Chair enquired that given the cross over between BDO finishing their role and GT assuming responsibility as the Council’s external auditors, would there be a process of engagement between both?  Paul Dossett confirmed that there was a requirement as the newly appointed auditor to review the outgoing auditor’s prior year’s file. However, given the current circumstances, and depending on future decisions around the backstop and other matters, GT would as a minimum review the files relating to the last set of fully audited accounts, which as things stood was timetabled for 31 August 2024.


The Committee accordingly noted the report. 






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