Delayed financial scrutiny now underway at Arun District Council

Each local authority has an annual financial audit carried out by an independent body.

This ensures that accounts accurately reflect spending, income and a council’s financial position.

ADC appointed Ernst & Young LLP to scrutinise its financial reports for the year ending March 2021.

However, the firm said it had not been able to start the audit on time due to ‘the ongoing impact of the coronavirus pandemic’.

Central government extended the audit deadline until September 30 this year due to the impact of the coronavirus – a deadline which has now been missed.

Audit finally underway

At a meeting of ADC’s audit and governance committee on Tuesday (November 16), members heard that the audit is finally underway but may not be ready until January.

Council officers previously expressed ‘concern’ about the delay and Ernst & Young ‘have accepted responsibility’.

Arun District Council’s accounts for 2020/21 are available online but remain unaudited.

Fee increase less than anticipated

The committee also heard that Ernst & Young had been unsuccessful in increasing costs for the 2019/20 audit by more than £32,000.

This followed a letter, sent in August, by committee chair Mike Clayden (Con, Angmering and Findon) to the body which appoints auditors and sets fees.

In its reply, Public Sector Audit Appointments Ltd (PSAA) said that an increase of around £14,000 was appropriate – £18,000 less than Ernst & Young’s suggested fee.

PSAA said it ‘shared ADC’s disappointment’ over audit delays.

It wrote: “We also appreciate the inconvenience that it will cause you, and we are very conscious of the adverse effects which flow from delayed audit opinions.

“They include disrupted related work plans for all parties, uncertainty about the organisation’s financial position, and weakened governance and accountability processes.

“Perhaps most obviously, delayed audited accounts are less valuable and relevant.”

Decision on future audits

ADC has now been granted more than £22,000 of Government funding to assist it with the anticipated rise in costs for the 2020/21 audit.

Its five year contract with Ernst & Young LLP is also due for renewal in 2023 and the committee considered future appointments of auditors.

Options included partnering with other councils to appoint auditors in future which could decrease costs but also reduce local input into the process.

As a result of the potential drawbacks, the committee has advised full council to adopt the status quo option for future appointments; that is, opting in to a sector led body, like the PSAA, which will appoint an auditor for the council.

Country-wide delays

ADC is not alone in experiencing delays and, according to a National Audit Office report, only 45 per cent of local authorities met the 2019/20 deadline for publishing audited accounts.

The government commissioned an independent inquiry into the issue which was published last year.

The Redmond Review highlighted ‘serious concerns’ about local authority audits and recommended that a new body is set up to oversee the process.

Sir Tony Redmond also said that accounting firms should be able to increase their fees for public sector audits to ensure they are of good quality and delivered on time.