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ACCA warns on local authority audit backlog

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With the backlog of local authority audits reaching an ‘unacceptable level’, a senior figure at the ACCA says a long-term plan to tackle the issue is essential.

3rd Apr 2024
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A “variety of underlying systemic problems” have led to the huge backlog in local authority audits, according to Jessica Bingham, regional lead, policy and insights at the Association of Chartered Certified Accountants (ACCA).

On the back of a consultation on the matter, the government stressed that the backlog in the publication of audited accounts of local bodies in England has grown to an “unacceptable level”. The number of outstanding opinions peaked on 30 September 2023 at 918. As of 31 December 2023, the backlog of outstanding audit opinions stood at 771.

Plans were drawn up to help clear the backlog, including proposed backstop dates for the publication of audited financial statements up to 2022/23 and for financial years up to 2028.

Short-term fix

However, the ACCA subsequently expressed concerns that the plans “are ambitious” and a “short-term fix to more fundamental problems”.

Bingham noted that there are a “variety of underlying systemic problems that have led to the current backlog”.

“Some of these relate to shortages of experienced staff in local authority finance teams; attraction and retention hurdles in the profession; increased workload pressure on finance and audit staff; emerging new reporting requirements without associated upskilling in finance teams,” she said.

“This is all at a time when councils are under pressure to meet widening budget gaps amid cuts to government grants and are facing financial instability.”

Multi-faceted problem

Bingham believes a long-term plan is “essential to address this multi-faceted problem and its root causes”.

“ACCA acknowledges the current efforts to relieve local authorities and improve the timeliness of reporting but we see the current measures very much as temporary and look forward to further proposals to improve the quality and timeliness of reporting.”

She added that ACCA “continues to advocate for the provision of additional guidance to assist preparers in effectively navigating these present changes effectively, particularly considering the strain on local authorities’ financial teams”.

Effective reporting needed

Bingham said that while the organisation expects to see a long-term strategy finalised in the medium term, she warned that without adequate measures to address the issue, “the usefulness of local authority reporting is brought into question, as well as that of the whole of government accounts”.

“Effective and high-quality reporting is needed to ensure users are able to hold local entities to account and this is impacted by late publishing, which also impedes openness and informed decision-making by local authorities.”

She concluded by adding that permanently addressing the root causes of the long-standing issue will require “comprehensive and concerted efforts from various stakeholders including the government, the audit firms, the regulators and audit and accountancy bodies”.

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By Paully97
04th Apr 2024 09:46

I agree with all of the above, but to add to that, there is the overarching complexity of the reporting requirements of local authorities to segregate funds, reserves and budgets and report on the fact that they have been accurately maintained, in a way that would make a medium-sized plc blanche. I'm still surprised that some audit firms even want to stay within the local authority audit market.

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