Commission highlights year-on-year improvement in financial reporting
The Audit Commission’s annual report on the stewardship of taxpayers’ money by local public bodies [1] Auditing the Accounts 2012/13, has found that in 2012/13, the quality and timeliness of financial reporting was consistently strong for most groups compared to last year, while councils and small bodies had improved further still.
The Commission’s Controller of Audit, Marcine Waterman says: ‘Bearing in mind that the overwhelming majority of councils and small bodies already met their financial reporting responsibilities, even this slight improvement for 2012/13 really has to be commended, especially given the continuing financial pressures on local public bodies.’
99 per cent of councils [2] received an audit opinion on their accounts by 30 September 2013. Overall, 475 of 510 principal bodies (93 per cent) met the statutory publication requirements for accounts but issues with the timeliness of publishing audited accounts were noted for the other 35 bodies. Of 510 principal bodies, only one received a qualified audit opinion on their 2012/13 accounts and only 12 councils, two police bodies and two other local government bodies had their arrangement for securing value for money (VFM) qualified.
Marcine Waterman says: ‘We’ve published Auditing the Accounts for five years now, and during this period there has been a real improvement. Councils have made the greatest strides, moving from 85 per cent receiving an audit opinion by 30 September for their 2008/09 audits to 99 per cent this year. The figures reflect the effort that bodies have invested into getting this process right.’
The timely presentation of audited accounts with an unqualified audit opinion[3] indicates that bodies have sound financial management arrangements and good governance. It is the main way that they account for their use of public money.
Marcine Waterman says: ‘We are again naming those bodies that failed to publish their accounts by 30 September. Three bodies failed to publish any accounts by this date, while for the first time we are naming 14 bodies for publishing draft accounts only, even though the audit opinion had been issued in time to allow audited accounts to be published. For those bodies that failed to publish any accounts, I am concerned by the resulting lack of public transparency. I hope the bodies that delayed publishing their audited accounts this year appreciate the importance of putting this information into the public domain as early as possible and will work to avoid a similar occurrence in the future. With all the resources it has to hand, it is especially disappointing to see the largest council in the country miss this deadline. However, we also highlight 13 principal bodies that published their audited accounts early this year, ten of which have published their audited accounts early for at least three of the last four years. They set the standard for all other organisations.’
There were seven bodies where the auditor was unable to issue the accounts opinion on the 2012/13 accounts by 30 September 2013 for reasons unconnected to local elector objections. An opinion was subsequently issued for all bodies in either October or November 2013.
For the first time since the Commission began publishing Auditing the Accounts, there are no parish councils or IDBs that have failed to prepare and publish audited accounts for three consecutive years.
Marcine Waterman says: ‘Normally in our report, we have to list some small bodies that have struggled and have not produced an annual return for three consecutive years. Where a body has responsibility for public money, they should publicly account for it. I’m particularly pleased that there are no small bodies in this position for 2012/13. This reflects the commitment to local accountability of the great majority of small bodies.’
The majority of small bodies received an unqualified opinion on their 2012/13 annual return by 30 September. However, 751 parish councils (8 per cent) and 11 IDBs (9 per cent) received a qualified opinion. This is a significant increase for IDBs.
Marcine Waterman adds: ‘The Local Audit and Accountability Bill, which is currently before Parliament, proposes that small bodies with an annual turnover of £25,000 or less will not receive a routine annual audit in the new regime. For 2012/13, 495 of these bodies received a qualified opinion on their annual return. In our view, it is not clear how local taxpayers will receive independent external assurance around accountability and governance for these bodies in the future.’
[1] Principal bodies including councils, fire and rescue authorities, police bodies and other local government bodies, spend around £137 billion of public money each year. Small bodies include parish councils and internal drainage boards (IDBs) each with annual turnover below £6.5 million.
[2] An audit opinion was issued by 30 September 2013 by all fire and rescue authorities, 97 per cent of police bodies, 98 per cent of other local government bodies and 98 per cent of both parish councils and IDBs.
[3] See the notes for editors section for a description of opinions
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Notes for editors
1). The full report, Auditing the Accounts 2012/13, can be downloaded now under embargo.
2). The Audit Commission Act 1998 (the Act) requires auditors to issue an opinion on the accounts on completion of the audit. Auditors aim to issue the opinion by the statutory accounts publication deadline of 30 September, to enable bodies to publish their accounts with an auditor’s report.
3). Auditors will issue a qualified opinion if they think the accounts do not give a fair representation of the body’s financial position and income and expenditure for the year, or if they think the accounts have not been prepared in accordance with relevant accounting and reporting standards.
4). Auditors are required to consider whether they should report, in the public interest, on any matter that comes to their attention during the audit that they consider sufficiently important to be highlighted to the audited body or the public, either as a matter of urgency or at the conclusion of the audit.
5). Auditors also have a duty to consider whether to make any written recommendations to the audited body which need to be considered and responded to publicly. These are known as section 11 recommendations.
6). When issuing an opinion on the accounts, an auditor has five possible types of opinion.
- Unqualified opinion: the financial statements give a true and fair view, in all material respects, in accordance with the identified financial reporting framework. (All other opinions, other than an unqualified opinion are known as being ‘non-standard’.)
Non-standard opinions - Qualified ‘except for’ opinion – limitation of scope: the financial statements give a true and fair view, except for the effect of a matter where the auditor was unable to obtain sufficient evidence. For example, the auditor considers the accounting records for a material transaction or balance in the accounts to be inadequate.
- Qualified ‘except for’ opinion – disagreement: the financial statements give a true and fair view, except for the effect of a matter where there was a material disagreement between the auditor and audited body about how the matter was treated in the financial statements.
- Adverse opinion: there was a disagreement that was so material, or pervasive, the financial statements as a whole were misleading or incomplete.
- Disclaimer of opinion: the auditor was unable to express an opinion, because he or she could not obtain evidence to such an extent the financial statements as a whole could be misleading or incomplete.
7). Only one principal body had received a qualified audit opinion on the 2012/13 accounts at the time of going to print. This non-standard opinion has been issued on the 2012/13 accounts at a principal body. This is at Manchester City Council, where the group accounts received a qualified ‘except for’ opinion due to a limitation of scope. This is because the assets of a material component of the group accounts were included in the group accounts at their original cost, when the Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 (the Local Authority Code), published by CIPFA/LASAAC[4], required them to be included at their fair value.
8). Improvement since 2008/09
In 2008/09, 85 per cent of councils, 97 per cent of police, 100 per cent of fire bodies, and 88 per cent of other local government bodies received an audit opinion by 30 September. The biggest improvement is therefore for councils from 85 per cent to 99 per cent.
9). Bodies where the auditor was unable to issue the 2012/13 opinion by 30 September 2013
There was an outstanding objection to the accounts at one of eight bodies which meant the auditor could not issue the 2012/13 opinion by 30 September 2013. This body is not named below and at the time of print, the opinion at this body had not yet been issued.
The other seven bodies are:
Councils
– Birmingham City Council
– Craven District Council
– Newham London Borough Council
– Slough Borough Council
Police bodies
– Chief Constable for Kent Police
– Police and Crime Commissioner for Kent
Other local government bodies
– Lee Valley Regional Park Authority
(Appendix 2 sets out the reasons for the delay at each of these bodies listed)
10). The three principal bodies that did not publish their accounts, either audited or unaudited, by 30 September 2013 were:
– Birmingham City Council;
– Chief Constable for Thames Valley Police; and
– Lower Severn (2005) Internal Drainage Board.
11). Fourteen bodies failed to published their audited accounts even though they were in a position to do so
– Cheshire Fire and Rescue Authority
– Chesterfield Borough Council
– Chief Constable for North Yorkshire Police
– London Borough of Hillingdon
– Newark and Sherwood District Council
– North Norfolk District Council
– Northumberland National Park Authority
– Nottingham City Council
– Peak District National Park Authority
– Peterborough City Council
– Police and Crime Commissioner for Merseyside
– Police and Crime Commissioner for North Yorkshire
– Sefton Council
– Trafford Metropolitan Borough Council
12). Auditors issued a public interest report to Corby Borough Council and made statutory recommendations to Walsall Metropolitan Borough Council.
13). Auditors issued public interest reports to six parish councils but made no statutory recommendations to small bodies.
14). Bodies able to publish their audited accounts early
– Oldham Metropolitan Borough Council*
– Transport for London*
– Kent County Council*
– Royal Borough of Greenwich*
– Fire and rescue authorities
– Kent and Medway Fire and Rescue Authority
– Yorkshire Purchasing Organisation
– Transport for Greater Manchester*
– Great Aycliffe Town Council*
– Nexus*
– London Waste and Recycling Board*
– Centro
– West Yorkshire Passenger Transport Executive*
– West Yorkshire Integrated Transport Authority
Bodies with a ‘*’ have featured in this list for at least three of the last four years.
15). Bodies failing to meet the Local Authority Code requirements
– Burnley Borough Council
– Cheltenham Borough Council
– Cheshire West and Chester Council
– Chief Constable for Avon and Somerset Police
– Chief Constable for Essex Police
– Chief Constable for Lincolnshire Police
– Chief Constable for Nottinghamshire Police
– Chief Constable for Wiltshire Police
– Devon and Somerset Fire and Rescue Authority
– Humber Bridge Board
– Police and Crime Commissioner for Avon and Somerset
– Police and Crime Commissioner for Essex
– Police and Crime Commissioner for Lincolnshire
– Police and Crime Commissioner for Nottinghamshire
– Police and Crime Commissioner for Wiltshire
– Rossendale Borough Council
16). The Audit Commission’s role is to protect the public purse. We do this by appointing auditors to a range of local public bodies in England. We set the standards we expect auditors to meet and oversee their work. Our aim is to secure high-quality audits at the best price possible. We use information from auditors and published data to provide authoritative, evidence-based analysis. This helps local public services to learn from one another and manage the financial challenges they face. We also compare data across the public sector to identify where services could be open to abuse and help organisations fight fraud.
17). A full list of the organisations named in the report, and the reasons for this, are available in appendix 3 of the report.
18). All information was correct at the time of publication.
[4] Local Authority (Scotland) Accounts Advisory Committee
For more information please contact:
Nick Rigg
Communications
Audit Commission
Direct line: 0303 444 8284
Mobile: 07920 581190
Press office: 0303 444 8282
Email: n-rigg@audit-commission.gsi.gov.uk