Privatization of Local Authority Audit responsible for failure to sign off whole of government accounts

The spending watchdog disclaims government’s accounts for 2022/23, for the first time. The reason: Local Government and there failure to produced audited accounts. How can this happen without anyone being accountable is the 64 million dollar question.

Yesterday morning the National Audit Office released a very worrying press release

• The disclaimed audit opinion from the Comptroller and Auditor General (C&AG), Gareth Davies, on the Whole of Government Accounts (WGA) 2022-23 is the first ever.
• The cause is the severe backlogs in English local authority audits, with the consequence that there is inadequate assurance over material amounts throughout the WGA.
• The WGA is a vital tool in the management and scrutiny of public spending, as it brings together all public sector assets and liabilities. It is essential that the steps being taken by Government to restore timely and robust local authority audited accounts are effective.

As the NAO note

Backlogs in firms’ audits of England’s 426 local authorities have led to the National Audit Office (NAO) disclaiming the 2022-23 WGA for the first time.

The NAO Report:

Within his audit report, the NAO’s head, Gareth Davies, said he had been “unable to obtain sufficient, appropriate evidence upon which to form an opinion”.

Just over 10% (43) of England’s 426 local authorities submitted reliable data to the WGA. Of the near 90% of local authorities that failed to submit reliable data, 46% (196) submitted information that hasn’t been audited, and 44% (187) did not submit any data at all.

The Government is taking steps to address the backlog in audited accounts for English local authorities, including the use of fixed dates by which each year’s audits must be completed. This process is unlikely to allow the disclaimer on WGA to be removed for 2023-24, but it does offer a medium-term solution to the problem.

In 2015 the Audit Commission was abolished. This was done so that local authorities might be required to appoint independent private-sector auditors to audit their accounts. So in the instance of local authorities in Kent, Grant Thornton won the contract to provide external audits. 

For three years Folkestone & Hythe District Council have failed to publish their accounts on time. 

In 2021/22  the Council said the accounts were late because of “the increasing impact of COVID-19”. 

In 2022/23 the accounts were late due to “resourcing challenges“

And in 2023/24 “The delay has arisen due to a combination of factors including the previous year’s Accounts for 2022/23, which has not yet been signed off by the external auditor because of a delay in resolving issues in respect of technical accounting disclosure notes within the 2022/23 statement of accounts.“

Our Council have at least published their draft statement of accounts for these years. However, 187 Council have not submitted any accounts for 2022/23. So  we are in a better place than many other council’s.

Since the privatization of audit work to companies like Grant Thornton, there have been hardly any Public Interest reports. A report in the public interest will only be made where the auditor considers the matter to be sufficiently important to be brought to the notice of the council or the public. 

In Sept 2022, Grant Thornton , who undertake a lot of local government audit work noted

Not all councils:

• exercise appropriate care with public money
• exercise appropriate governance
• have the capability to manage risk in both the short and long term
• remove optimum bias in their medium-term plans.

And the Annual_Fraud_Indicator_Report_2023 noted

Fraud in local government (excluding benefits) also increased from an estimated £7.8 billion in 2017 to 8.8 billion in 2021-2022.

Most of the fraud reported in local government occurred in procurement; which estimated at £5.5bn. 

Since this blog began in Jan 2015, it has regularly highlighted issues with procured contracts, for example the M & R contract –nearly £200,000 lost; £1,45m spent on suppliers without a compliant contract; the P & R Contract – £1.5m lost, and then the Premier Roofing Contract – £2.5m lost, to highlight but a few.

Nobody was held accountable for these failings even though the financial and contract irregularities have been many. Lest we forget in July 2023, evidence provided by the Council’s internal auditor, East Kent Audit Partnership, showed that internal controls within our Council had gone from good to bad.

Yes a few people lost there jobs, and moved onto jobs elsewhere in local government. However, if one thinks or believes all the irregularities have ended, think again, as the Council’s own data shows there are still issues; which we will report in due course.

One has to be fair to our Council, because not many other Council’s receive the level of scrutiny ours does. However, that said, the Rotten Borough pages in Private Eye Magazine regularly reports on local council’s financial and contract irregularities.

So there you have it, privatization of Local Government audit is responsible for the NAO not being able to sign off the Government’s accounts for 2022/23. This is a first, and demonstrates outsourcing critical services doesn’t work as nobody looks to closely at the evidence available in the data released by Council’s; and that includes external auditor’s. However, what we can guarantee is nobody in local government is going to be held accountable. Which is not as unbelievable as you might imagine.

The Shepway Vox Team

The Velvet Voices of Voxatiousness