Concerns over 'reconciling' Royal Borough accounts as Government proposes audit backstop

Concerns have been raised over the auditing of the Royal Borough's future accounts after a Government consultation addressing the audit backlog was announced.

At a meeting of the audit and governance committee on Thursday, February 22, auditors Deloitte delivered an update on the current situation around the 2020/21 audit, along with the progress on the 2021/22 and 2022/23 audits.

Deloitte partner Jonathan Gooding explained that the Government is consulting on audit regulations to potentially introduce a backstop date on September 30 for historic accounts up to March 2023.

He said: “If audits are not finished by the backstop date, then the audit will be stopped, and the opinion modified on the basis that the work is not complete.”

Mr Gooding said the consultation closes on March 7 and confirmed that only the council's audit for 2020/21 would be fully completed by the proposed September deadline.

He said the ‘value for money’ and ‘objections’ work are ‘progressing well’ for the 2021/22 or 2022/23 audits but due to time constraints, the ‘other elements’ of the audit would not be completed by September.

Deloitte intends to ‘minimise remaining procedures and associated costs’ on these two open years so the council can ‘clear the backlog of accounts’ and ‘focus resources’ on implementing recommendations and preparing the 2024 statement of accounts for audit on time.

Councillor Simon Bond (Lib Dem, Belmont) said: “It would be great to have all three years up to date because we're looking back to two or three years and it's kind of getting to be of historic interest rather than current interest.”

He questioned whether the new auditors taking over from Deloitte in the new financial year would have a ‘firm base’ to start their work due to the potential incomplete audits from the previous two years.

Mr Gooding said the situation is ‘not dissimilar’ to many other local authorities across the country and arrangements were being put in place to offer guidance to the new auditors.

Andrew Vallance, the Borough's deputy director of finance said the Government consultations are an ‘evolving situation’ and the ‘final position is not entirely clear’.

He added: “There’s likely to be backstops in place for several years going forward as well as back.

“Hopefully there will be some simplifications to speed up the process but this issue of closing balances in the previous year not having been audited and therefore [affecting] opening balances in the following year is going to cause, potentially, nationally, qualified accounts, unfinished audits, backstops for several years hence.

“You could have some councils with a period of five or six years with qualified unfinished accounts in effect until it’s all caught up and the problem nationally is solved.”

Councillor Julian Sharpe (Con, Ascot & Sunninghill) said: “This sounds like potential for a real disaster... across the country.

“If we've got many councils that can't reconcile their accounts correctly, we've got a situation where frankly public finances in the local government sector are out of control.

“We're going to get to a situation if we're not very careful, of the public not trusting and not being able to trust what is being published.

“If you've got the closing balance for one year not reconciling with the opening balance for the following year, how can you take anything that is said during that year as truthful and accurate? It's an absolute disaster for the country.”

The Royal Borough’s executive director of resources, Elizabeth Griffiths said this was not a matter of ‘inconsistent’ accounts but about unaudited accounts not having its ‘consistency confirmed’.

She added: “We do appreciate that it's an issue and it's an issue for us, it’s an issue for the auditors and it's an issue that a lot of councils have.

“We're already speaking to [incoming auditors] about how we manage the situation when we have two years of unaudited figures before they start looking at 2023/24.

“It’s not great but it's a situation that I think has been caused partly by COVID, by the rising requirements that have been placed on all of the audit firms [and] everything's got a little bit behind.”

“I think that if it was only RBWM then we'd be holding our hands up and saying yes something went really wrong, but it's virtually every council everywhere and it's being recognised as a national problem and that's why the PSAA (Public Sector Audit Appointments) have taken this drastic step of deciding to draw a line.

“It causes issues but hopefully, it will be one year of pain and then we'll get into a position where we're all back up to speed and all moving forward.”