Nottingham City Council has confirmed that it will adopt the ‘backstop audit opinion’ approach for its 2019/20 financial audit, following extensive discussions with its external auditors, Grant Thornton.
This decision is expected to help the council avoid further delays in its financial reporting and ensure that future accounts can be processed on time.
The council was presented with two options by Grant Thornton: either to complete a full audit opinion, which would require additional work and increased costs, or to opt for a ‘backstop’ opinion.
After considering both, the council has opted for the latter, with the decision finalised by Ross Brown, the Corporate Director for Finance & Resources and Section 151 Officer, in consultation with key stakeholders such as the Best Value Finance Commissioner and the Chair of the Audit Committee.
Key Considerations
Grant Thornton indicated that issuing a full audit opinion for the 2019/20 accounts would require significant additional work, pushing the council beyond its proposed backstop dates for finalising accounts. The auditors warned that this option would risk delaying not only the 2019/20 accounts but also those for 2020/21, 2021/22, and 2022/23.
Furthermore, it would reduce the time available to audit the 2023/24 accounts. The added costs and increased staff time required for this option made it unfavourable for the council.
Instead, the council has agreed to Grant Thornton’s alternative, the ‘backstop audit opinion.’ This option is seen as a cost-effective solution, with minimal impact on the council’s resources and staffing. It would also help meet government-imposed deadlines for overdue accounts. Importantly, it does not add further financial burden to the council, which has been grappling with historical financial control and governance issues.
Benefits of the Backstop Audit Opinion
The ‘backstop audit opinion’ is expected to offer several advantages:
- Cost Savings: The council avoids the need to spend additional funds, a critical factor in a period where local authorities are facing budgetary constraints.
- Timeliness: It provides the best chance of meeting the backstop dates for the completion of financial accounts for multiple years, including the overdue accounts from 2019/20 to 2022/23.
- Future Planning: The decision leaves ample time for the audit of the 2023/24 accounts, ensuring that the council stays on track with its financial obligations in the years to come.
Challenges with a Full Audit Opinion
While the full audit opinion would have been more comprehensive, Grant Thornton had made it clear that this would have come with a ‘disclaimer’ due to long-standing financial governance issues. This option would also require the council to divert significant staff time towards answering queries raised by the auditors, increasing pressure on the council’s already stretched resources.
Grant Thornton has confirmed that substantial work has already been completed on the 2019/20 accounts audit. A report summarising their findings will soon be presented to the council’s Audit Committee, offering valuable insights for closing future accounts.
Operational Nature of the Decision
Ross Brown, in his role as the Section 151 Officer, was authorised to make this operational decision as it fell outside the remit of the council’s constitution or any of its formal bodies. His decision was supported by the council’s Best Value Finance Commissioner and Chair of Audit Committee.
The move is seen as a strategic way forward to ensure that Nottingham City Council can adhere to its financial deadlines while mitigating the risk of additional costs or delays in the future.
By opting for the ‘backstop audit opinion,’ the council aims to safeguard its financial position, maintain transparency with local taxpayers, and meet crucial governmental deadlines. The final audit report on 2019/20 accounts is expected to provide a clearer view of the council’s financial challenges and areas of improvement.
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