By Joe Locker, Local Democracy Reporter
An auditor says it will have to sign-off Nottingham City Council’s accounts from the past four years having no certainty everything is in check amid efforts to tackle a national backlog.
The financial accounts of public organisations, such as councils, are reviewed by auditors to ensure everything is in order.
The council audit system is typically used as an early warning indicator of financial failure, including effective bankruptcy.
These assessments had been conducted by the Audit Commission until it was closed by the Government in 2015.
Work is now outsourced to private firms, and ever since a significant backlog has developed.
It’s now become so severe the National Audit Office (NAO) said on November 26 it was impossible to accurately sign off the Government’s public spending figures because of unreliable financial data from councils, police and fire authorities.
To address and “reset” the system, the Government has set a legal deadline of December 13 for outstanding accounts up to 2022/23 to be reviewed, even if an auditor fails to complete them and provide assurances.
Accounts for 2023/24 have also been set a deadline to be finalised by February 2025, alongside further deadlines for 2024/25 and future years.
Grant Thornton, the auditor for Nottingham City Council, says the authority’s accounts from 2019/20 up to 2022/23 will be signed off with a disclaimer that they are incomplete.
During an Audit Committee meeting on Friday (November 29) Andrew Smith, key audit partner, said they had not been able to progress on accounts between 2020/21 to 2022/23 due to issues with the 2019/20 accounts.
“The implications of this going forward are that we don’t have assurances of the opening balances, so there will be a disclaimer on the 23/24 accounts because we are not going to be able to recover in time,” he said.
“That isn’t a great situation.”
The issues in the 2019/20 accounts relate to concerns raised in an Ernst and Young (EY) report published earlier this year.
EY had been looking at whether managers had overridden financial controls in other departments, following the discovery of the misspending of council tenants’ rent money from its Housing Revenue Account (HRA).
“You have corrected some of those issues in terms of the HRA breach, but what we don’t know and what we weren’t able to get assurance on in 19/20 was potential management override of controls,” Mr Smith added.
He said substantive audit work would be needed to give certainty from their perspective, and that forensic accountants would be required to do this.
Councillors were told full audit work would take a minimum of six months per financial year, meaning at least two years would be needed to fully review the accounts, assuming no further issues were uncovered.
Cllr Adele Williams (Lab), the chair of the committee, said: “It is a national position.
“Local audit is in a mess nationally and it has been for a decade at least, more than a decade.
“We are now in a position where we can start to recover assurance and start to be in a stable position. We know there is still some uncertainties sitting there because of the fact audits haven’t been fully completed.
“None of us are happy with this position.”
Mr Smith said it will take “several years” to get back to fully audited accounts, even with the Government’s deadline dates.
During the meeting, councillors agreed to accept the progress made so far on the accounts, both internally and externally, while noting the risks.
The statement of accounts up to 2022/23 was also approved, ahead of being signed-off by December 13.
Stuart Fair, interim corporate director of finance, said he is “satisfied the quality of the formulation of accounts represents proper accounting practice.”
