Audit Commission

Local public bodies improved their financial reporting since last year and achieved earlier publication of audited accounts, the Audit Commission has found.

The Commission has published 'Auditing the Accounts 2009/10', its report on the quality and timeliness of financial reporting. The annual overview summarises the timeliness of bodies' accounts and auditors' work on the financial statements of councils, police authorities, fire and rescue authorities and other local public bodies.

Audited accounts are the main way public bodies discharge their accountability for the stewardship of public money. By law, the bodies included in the report must publish their accounts six months after the end of the financial year. There is no statutory deadline for accounts to be submitted for audit. Last year the Commission named bodies that failed to publish audited accounts by 30 November 2009. This year it has brought the 'naming, deadline forward to 31 October.

The report congratulates seven councils, one police authority and three local government bodies for early publication. Chief Executive of the Audit Commission, Eugene Sullivan says:

'There is great interest in financial transparency by public bodies at the moment. Early publication of audited accounts is an important contribution to openness and accountability.'

The Commission reports that auditors were unable to give opinions on the accounts by 31 October 2010 at seven councils (2 per cent of the total) and 11 local government bodies (12 per cent). The report also names two councils where the auditor gave a qualified opinion.

All police authorities and fire and rescue authorities published their audited accounts by 31 October and none received a qualified audit opinion.

The publication of last year's report underlined the importance of timely and high quality financial reporting. Eugene Sullivan adds:

'It is pleasing to see that more audited bodies have achieved earlier publication. The majority of bodies are publishing their audited accounts by the statutory deadline, which is six months after the end of the financial year. This is significantly longer than other public sector bodies which are required to publish within three to four months. We think all bodies should be able to meet the current deadline. In this report we highlight eight bodies which have shown that it can be done. Early publication is essential if citizens are to have the information they need to hold their local public bodies to account.'

There is an added challenge for bodies to implement International Financial Reporting Standards from 2010/11. In next year's report the Commission will continue to name those bodies which have not published audited accounts by 31 October. For the first time it will also name larger internal drainage boards and larger town and parish councils. These were exempt from naming in this report because they were still managing the impact of introducing a new accounting framework (Financial Reporting Standard for Smaller Entities).

Last year the Commission called for a review of the current regulatory requirement for elected members to approve draft accounts before they have sight of the auditor's findings. Forty-four per cent of bodies included in the report made changes to the figures in the 2009/10 accounts to correct errors identified by auditors. The changes total £2.5 billion to the income and expenditure account and £4.6 billion to the balance sheet.

Chief Executive, Eugene Sullivan says:

'The amount of changes made to the accounts as a result of the audit means that the draft accounts approved by members at almost half of local public bodies were incorrect. This is an area where there is still room for improvement in financial reporting.'

Auditors also issued value for money conclusions to audited bodies, reporting whether they had made proper arrangements for securing economy, efficiency and effectiveness in their use of resources. Ninety per cent of councils, 92 per cent of police authorities, all fire and rescue authorities and 68 per cent of local government bodies received an unqualified value for money conclusion.

Eugene adds:

'Qualified value for money conclusions were most often the result of problems with financial reporting, financial planning and risk management and internal control. These factors are essential features of a well run body.'

Notes to editors

Read the full report at 'Auditing the Accounts 2009/10'

The bodies included in the report have a statutory duty to publish their accounts by 30 September, whether they have been audited or not. In the Commission's view, the publication of accounts without an auditor's report on them does not provide any assurance to local taxpayers. For that reason it encourages auditors to issue their opinions, wherever possible, to enable bodies to publish audited accounts by this date.

For the purposes of this report, the Audit Commission has taken 31 October as the date by which it considers all bodies should have been able to publish audited accounts.

Parish councils that fall within the Commission's limited assurance audit regime are those with gross annual income or expenditure below £1 million.

What is a qualified opinion?

Auditors will issue a qualified opinion if 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.

Bodies listed in the report for early publication of audited accounts

City of London Corporation, Greater Manchester Passenger Transport Executive, Greenwich London Borough Council, Kent County Council, Newham London Borough Council, Nexus (Tyne and Wear Passenger Transport Executive), Oldham Metropolitan Borough Council, South Yorkshire Pensions Authority, Transport for London, West Mercia Police Authority and Worcestershire County Council.

Bodies named in the report with a qualified audit opinion or audit opinion not issued by 31 October

* At two of the seven councils where the auditor was unable to issue the opinion by 31 October, there were outstanding objections to the accounts which prevented the auditor from issuing an opinion. The Commission has not therefore named these councils in the report.

** The auditor issued an adverse opinion which relates to the fact that Northumberland Council was unable to prepare group accounts for a reason outside its control. This was an outstanding legal issue associated with a private company in which one of the former district councils, which demised because of local government reorganisation, had a controlling interest.

For further information please contact:

NICK RIGG
Communications Account Manager, Audit Commission
Millbank Tower, London SW1P 4HQ
Direct line 0844 798 2916 / 24hr Press line 0844 798 2128
E-mail n-rigg@audit-commission.gov.uk