The Kennet at County Lock - 23 December 2019

The Kennet at County Lock – 23 December 2019

The statutory deadline for production, audit and sign off of Reading Borough Council (RBC) accounts for the year ended 31 March 2020 has been extended from 31 July to 30 November 2020. This is the result of new  Government regulations for local authority accounts and audit during the coronavirus pandemic.

The Accounts and Audit (Coronavirus) (Amendment) Regulations 2020 also change the period of making the accounts available for public inspection; instead of saying that the period must include the first ten working days of June it must start on or before the first working day of September 2020.

Progress on accounts for the year ended 31 March 2018 & 31 March 2019

External auditors Ernst & Young (EY) presented their draft audit planning report for the year ended 31 March 2018 at the RBC audit & governance committee on 30 January 2020. The audit had already commenced and they expected that they would be able to complete their work by April.

At the same meeting, RBC officers said that accounts for the following year ended 31 March 2019 were almost complete.

When Councillor Ricky Duveen asked a question about progress on the accounts at the RBC full council meeting on 25 February, Leader of the Council Jason Brock responded that a draft of the unaudited 2019 council accounts had been placed the council’s website and that the 2019 audit would start alongside the 2020 accounts in August.

The period for public inspection of accounts for the year ended 31 March 2019 started on 27 February and was due to end on 9 April 2020. RBC offices shut down on 16 March part way through that public inspection period.

Reading Borough Council is closed

Reading Borough Council is closed

Accounts for the year ended 31 March 2020

Government regulations may have relieved some of the pressure on councils by extending the accounting deadline but some, such as Reading, already behind in their annual reporting may slip further behind.

Auditors will also struggle to catch up. 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.

Accounting for the coronavirus

RBC’s budget for 2020/21 and medium term financial strategy were set in February when the full potential impact of the pandemic on the UK and local authorities was not understood. On 11 March RBC and Public Health England made a statement on Reading’s first confirmed case of Covid-19.

As well as managing their own activities during the crisis local authorities have been co-ordinating national emergency measures locally. Government support to the economy has involved them in processing reliefs and grants to businesses and support for individuals and families.

In relation to business rate relief RBC say:

Our rates bills were issued before the budget announcement, so this change is not reflected in your initial bill. We processed the reliefs on 27 March and amended bills have been dispatched to all qualifying businesses. We identified 1,200 properties eligible for this relief, with the award in excess of £44 million.

Support available is changing on a continuing basis, for example at the beginning of May RBC informed small local businesses of a new discretionary fund administered by local authorities:

Local authorities have been asked by Government to prioritise businesses in shared spaces, regular market traders, small charity properties that would meet the criteria for Small Business Rates Relief, and bed and breakfasts that pay council tax rather than business rates. The allocation of funding will be at the discretion of local authorities.

This is not only additional work for RBC administrative staff but will involve reforecasting of budgets and changes in accounting and reporting requirements.

Financial information available from RBC

The council published their response to the pandemic on 25 March 2020 and recognised that there would be financial implications:

There are significant financial implications in responding to this emergency both in terms of additional costs as well as reduced income levels and officers have put in place procedures to record and track both. Additionally, the refocusing of staff to deal with this emergency will inevitably mean some savings are delayed or not delivered as planned. The Council’s monthly budget monitoring arrangements will be used to formally report on the financial position.

Officers are also working closely with our arms length companies to understand and help address the financial implications for them and to ensure they can continue to provide services where necessary and do not become insolvent because of this pandemic.

More than a month of cancelled or postponed committee and council meetings followed the introduction of social distancing measures on 16 March. Legislation had to be be passed allowing virtual council meetings to take place.

RBC’s first online meeting was  the 27 April policy committee meeting. It could be observed live and a Youtube recording is available.

The agenda included a review of urgent decisions made by the Chief Executive and the Leader of the Council in response to the coronavirus pandemic.

A report on decisions made up to 9 April stated that the cost to the council over a six month period could be up to £13million. Although some additional funding is being made available by the Government, RBC say:

It remains be seen however, whether all costs are recoverable.

An appendix to the report lists estimated costs of the decisions made, for example: £100k for voluntary sector grants; setting up the One Reading Community Hub £130k; accommodation for rough sleepers for three months £490k, and £747k for hotel rooms over a six month period to ease discharges from hospital.

The next virtual policy committee meeting will take place on 18 May and is expected to be available to observe online.

The future

The financial year 2019/20 and 2020/21 opened in the chaos of a pandemic with a range of associated emergency schemes, funding and regulations that mean new accounting risks and challenges.

RBC has been in catch up mode in the production of its annual accounts for several years. Even if the council were on top of its annual statutory reporting these would be difficult times.

It has also taken RBC some years to improve financial controls from the position in November 2016 when EY said:

We found that some of the basic financial controls were not working as expected, for example, the regular completion of reconciliations was not timely. This increases the risk of fraud errors remaining undetected. The Council recognise the need to improve financial controls.

In July 2017 when RBC internal audit presented their annual assurance opinion to the audit & governance committee based on their work during the year ended 31 March 2017  they concluded that:

Whilst no assurance can ever be absolute, on the basis of work completed during the course of the year, which is set out in more detail below, the Chief Auditor has concluded that only limited assurance can be taken that arrangements to secure governance, risk management and internal control within those areas audited in 2016/17, are suitably designed and applied effectively .

Two years later in July 2019 their opinion had improved:

Whilst no assurance can ever be absolute, on the basis of work completed during the course of the year, the Chief Auditor has concluded that reasonable assurance can now be placed on the adequacy and effectiveness of the Council’s internal control framework within those areas audited in 2018/19. Whilst this is an improvement on the last two financial years and the direction of travel is one of improvement, there is still more work to be done.

Difficult budgeting, accounting and auditing times lie ahead.

Houghton_Typ_520.03.736_-_Margarita_philosophica


Links

  1. Accounts and Audit (Coronavirus) (Amendment) Regulations 2020 & The Accounts & Audit Regulations 2015
  2. RBC website – Statement of Accounts
  3. RBC Audit & Governance Committee 30 January 2020 papers & webcast
  4. Problem with council accounts ‘a disgrace’ says Councillor Ricky Duveen
  5. Public Health England and Reading Council Statement on Confirmed Covid-19 Case
  6. RBC decision book
  7. Discretionary Fund for Small Businesses
  8. RBC policy committee 27 April papers & Youtube recording of the meeting
  9. RBC policy committee 18 May papers
  10. RBC coronavirus pages – council services & staying safe and well & advice for business (these pages are updated regularly)