Grant Thornton recently issued statutory recommendations to Slough Council after finding that: 

• the finance team had insufficient skills or capacity to produce financial statements or working papers of a reasonable quality;
• reserves had fallen to an unsustainably low level; and, 
• the council had inadequate governance arrangements over subsidiary and joint venture companies. 

Section 24 of the Local Audit and Accountability Act gives local authority auditors the power to issue written recommendations, which must be published and considered at a public meeting within one month from the date of issue. Slough Council held its public meeting on 18 May and has accepted the recommendations.

The recommendations relate to the still unfinished 2018-19 audit, despite the 31 July 2019 deadline for the council to publish audited accounts. In contrast to the penalties for missing filing deadlines for private companies and their directors, there are no penalties in the legislation for councils that miss the deadline. A recent NAO report found that 55% of local authorities missed the extended 30 November deadline for the 2019-20 accounts.

As councils have faced significant financial pressure in recent years due to a reduction of central government funding of 55% since 2010-11, many have tried to find savings in back-office functions such as finance, reducing their capacity and capability to produce good quality, timely accounts. The NAO report cites limited availability of sufficiently skilled staff as one of the key causes of the delays.

These savings are, however, often a false economy as councils incur additional costs trying to resolve subsequent audit issues. As set out in Grant Thornton’s audit findings report, a critical 50-page document detailing the audit shortcomings of Slough Council, the audit fee will increase by at least £223,000 above the initial fee of £98,000 to reflect the additional work done by the auditor.

More fundamentally, the lack of accurate and timely financial information has clearly hindered Slough Council’s financial planning and decision making. The council’s 2020-21 budget report included £8.2m in general fund reserves but this had to be revised down to just £550,000 after the audit revealed that the income from the council’s 50% stake in Slough Urban Renewal in error was overstated by £7.6m. As a result, the council has had to seek emergency financial assistance from the Ministry of Housing, Communities and Local Government.

Inaccurate financial information harms the ability of elected council members to make effective decisions, risking further waste. Grant Thornton stated the finance team informed them of errors in the asset register and property, plant and equipment balance in the financial statements, such as the misclassification of an operational leisure centre as an asset under construction and the inclusion of a school no longer owned by the council. Without an accurate asset register, it is difficult to see how councillors can make an informed decision about what future purchases, construction or disposals the Council needs to make to provide essential services.

Inaccurate or delayed information also harms the ability of voters to hold the councillors to account. Voters went to the polls in Slough in May 2021 without access to audited accounts since 2017-18. Instead, they had to rely on the unaudited versions for 2018-19 and 2019-20 to try to understand how the council spent their money and we know from the audit findings report that the 2018-19 version contains multiple material misstatements.

 Oliver Simms, Manager, Public Sector Audit and Assurance for ICAEW, commented: “Local authorities are under significant financial pressure following a 55% reduction in government funding over the last ten years but it is vital they ensure their finance team has sufficient skills and resources to produce good quality and timely accounts.

“Accounts and their audit should not be seen as a compliance exercise but rather a valuable exercise that enables effective budgeting and the identification weaknesses in financial management as well as a key source of transparency for voters and taxpayers. Grant Thornton’s critical report into Slough Council shows the consequences of an under-resourced finance team and neglecting the importance of the accounts.”