Fees for a private firm to review Nottingham City Council’s accounts are rising again despite audits being incomplete – prompting concerns over value for money for the taxpayer.
The financial accounts of public organisations, such as councils, are reviewed by audit firms to ensure everything is in check – it is a legal requirement.
The Audit Commission conducted these assessments until it was closed in 2015 under a previous Conservative Government, and work is now outsourced to private firms.
Following the changes, a significant backlog in audited accounts has built up.
The issue became so severe that in the financial year 2022/23, just one per cent of local public bodies published audited accounts by the original deadline.
In response, the Government has set a series of statutory backstop dates to clear the backlog and allow the system to recover, meaning accounts will be finalised and passed off despite not being fully reviewed.
Grant Thornton, the city council’s external auditor, says the authority’s accounts beginning in 2019/20 have been signed off with a disclaimer that they are incomplete.
This means no assurances can be provided on the council’s opening balances each year.
The challenges in the sector have led the Public Sector Audit Appointments (PSAA) – which appoints auditors to councils and sets the charges – to increase the fees charged to the council to £645,000.
A delegated decision document shows the fee will again be paid to Grant Thornton, having been reappointed as the council’s auditor for the period between 2023/24 and 2027/28.
The PSAA says the fees “reflect both the increased work auditors must now undertake as well as the scarcity of audit firms willing to do this work”.
However, Cllr Andrew Rule, of the Nottingham Independents and Independent Group, said: “Given Grant Thornton has stated they will be giving a disclaimer of opinion on the current year’s accounts without completing the audit, it is a struggle to see how their increased fee represents value for money for the council taxpayer – given their prejudgement on the accounts.
“Residents will doubtless be keen to know how this increase is justified in the context of cuts to services and increased charges.”
The National Audit Office (NAO) has said it will be publishing a new set of guidance for auditors, as part of its Local Audit Reset and Recovery Guidance, setting out key considerations that may assist auditors in regaining assurance at previously backstopped audits.
Tony McArdle, who was appointed by the Government as lead commissioner in February last year to help improve the council following its declaration of effective bankruptcy in 2023, previously said drawing a line despite audits being incomplete is the “least-worst” option available.
“The frustrations that are being expressed are being expressed in many council chambers by members all over the country,” he said.
“No one wants to be in the position we find ourselves in, particularly so in a council which has got some of the challenges and difficulties you have got; that is particularly galling, really.
“The least-worst solution which has been concluded is to draw that line and be able to move on… and get back on a level playing field, albeit without the assurance that you would want to have.
“No one can defend how we have got into this position. It is dreadful. But it is the least-worst solution that is currently available.
“Let us hope that when the review of previous years is carried out, we don’t find something we didn’t know about.”
