The scale of the backlog of audit opinions is beginning to “seriously undermine” financial management, governance and accountability in local authorities in England, according to the chair of Public Sector Audit Appointments (PSAA).
Steve Freer was speaking as latest figures showed that, at the publishing date of 30 November 2022, only 56 of the 467 local government bodies that have opted in to PSAA’s procurement had received their 2021/22 audit opinion.
This represents 12% of the total. Although this percentage is slightly higher than last year’s figure of 9%, this year’s publishing date is two months later than the 30 September target for 2020/21 opinions.
The PSAA said that what made the position “increasingly alarming” was the fact that more than 220 opinions from prior years remain outstanding. This means that 631 opinions are currently late.
“The scale of the backlog of outstanding opinions is such that it is beginning to seriously undermine the financial management, governance and accountability of local government bodies. As 2023 approaches, more than 160 bodies are still awaiting audit opinions for both 2020/21 and 2021/22 and, for some, even earlier years,” Freer said.
“As a result they are making decisions, managing multiple financial challenges and laying plans for the future with limited assurance about their underlying financial positions. The local audit system desperately needs to find a way of clearing the backlog and restoring the norm of timely opinions as quickly as possible.”
This year’s delays have been exacerbated by uncertainties concerning the valuation of infrastructure assets. The government has proposed a statutory override as a short-term solution to this issue, but this would not solve the problem.
People are preparing budgets without the previous set of accounts being audited and that is not a comfortable position for the 151.
Cumulative effect
“There is a cumulative effect over all these years – that is the real challenge. When things get behind, it is difficult to catch up. Something has to happen to address this,” Tony Crawley, PSAA chief executive, told Room151.
“People are preparing budgets without the previous set of accounts being audited, and that is not a comfortable position for the 151 and everyone.”
In a Room151 article in November, Freer proposed the establishment of a public sector-owned audit supplier. He suggested that this could “help manage fluctuations in capacity and protect against insufficient supply in future procurements”.
Crawley told Room151 that a public sector supplier could be considered as part of the workforce strategy that the Department for Levelling Up, Housing and Communities has committed to undertake with the Financial Reporting Council and the audit firms.
“That is an opportunity to think – should that workforce strategy consider some form of not-for-profit or public sector provider – an auditor of last resort,” Crawley said.
When asked by Room151 if the PSAA would support the creation of a public supplier, Crawley replied: What we support is that being evaluated – is it viable? The option needs to be considered even if, ultimately, it doesn’t turn out to be viable.”
—————
FREE weekly newsletters
Subscribe to Room151 Newsletters
Room151 LinkedIn Community
Join here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
