Civic Offices April 2019

Liberal Democrat councillor Ricky Duveen used Reading Borough Council‘s (RBC) full council meeting on 25 February to say that the “never-ending issues with producing the council’s accounts are a disgrace.”

He added that these issues “do nothing to promote residents’ confidence in their elected councillors” and asked how much the last three years’ accounts had cost in fines and consultancy fees. He then asked when the accounts for the years ending 31 March 2018 and 2019 would be published.

RBC leader Councillor Jason Brock responded that the problems had started with delays in the accounts for the year ending 31 March 2017. He added that auditors Ernst and Young (EY) expected to sign off the 2018 accounts in June.

Councillor Brock announced that a draft of the unaudited 2019 council accounts were on the council’s website and that the 2019 audit would start alongside the 2020 accounts in August.

A nationwide shortage of external auditors

Councillor Duveen had said that other councils had managed to produce their accounts. Councillor Brock replied:

… at the time of writing approximately 50 councils have not yet produced signed-off accounts for the 2018/19 financial year, primarily due to a nationwide shortage of external auditors.

The Public Sector Audit Appointments (PSAA), the body responsible for appointing RBC’s auditors, reported in November 2019 that a shortage of audit staff had become an issue for 2018/19 local authority audits. For example,  Slough Borough Council have announced that their 2018/19 audit has been delayed because of their auditor’s resource problems:

At its meeting on 30 July 2019, the audit and corporate governance committee approved the unaudited 2018/19 statement of accounts. This is to demonstrate that Slough Borough Council has attempted to fulfil its statutory duties of publishing a final set of accounts by 31 July 2019, but has been unable to, due to the resourcing pressures of Grant Thornton UK LLP.

Observatory House

Observatory House, the home of Slough Borough Council

How much has this all cost?

Councillor Duveen had asked for the cost in fines and consultancy, but he was only given the costs of EY’s audit. Councillor Brock said that the audit of the 2016/17 accounts had cost £600k, and he didn’t know the audit fees for 2017/18 and 2018/19. He also said that the ‘scale fee’ for 2017/18 was £160,029.

This ‘scale fee’ comprises of £108,938 for the accounts audit, £34,951 for the housing benefit audit and £16,500 for work on housing capital receipts and teachers’ pensions. In their draft audit planning report to the RBC audit & governance committee on 30 January, EY said:

Given the significant issues identified in 2016/17 and the nature of the qualifications, we anticipate that there will be [an] additional fee in 2017/18. We will continue to update audit & governance [the RBC committee] and senior officers as the audit progresses.

PSAA set the scale fees each year, and they have to agree any increase They say:

Scale fees are based on the expectation that audited bodies are able to provide the auditor with complete and materially accurate financial statements, with supporting working papers, within agreed time frames.

Apex Plaza

The Reading home of Ernst and Young in Apex Plaza

Councillor Duveen had asked a similar question in June 2019: “…how much money has been spent on consultants sorting out the accounts for 2016/17 and for 2017/18?”

Councillor Brock had said that the cost of consultants on additional work had been £534,000:

The cost of consultants employed during this period has been £534,000. Not all of that cost is directly attributable solely to closing the 2016/17 accounts, but also includes recalculation of up to ten years of certain balances; work on the 2017/18 accounts; and implementing process improvements.

A famous quote from Luca Pacioli, the ‘founder’ of double-entry book keeping

Books should be closed each year, especially in partnership, because frequent accounting makes for long friendship.

Luca Pacioli (1494) Summa de Arithmetica

Pacioli, who published a book on double-entry bookkeeping


Links
  1. RBC
    1. statement of accounts
    2. full council meeting 25 February papers & webcast
    3. full council meeting 25 June 2019 papers & webcast
    4. audit & governance committee 30 January 2020 papers & webcast
  2. PSAA Local Audit Quality Forum, setting fees & fee variation process
  3. Slough Borough Council Statement of Accounts
  4. Reading Borough Council’s 2016/17 accounts have arrived at their final destination