Agenda item

Officers presented the External Aduit Backstop Arrangements report which outlined the immediate actions the Government, together with the Financial Reporting Council (FRC), the National Audit Office (NAO), and organisations in the wider system were taking, which were designed to address the backlog and put local audit on a sustainable footing.

On the 10th September the Government laid in Parliament two pieces of legislation which gave effect to the backstop proposals, the Accounts and Audit (Amendment) Regulations 2024 and, on behalf of the Comptroller & Auditor General, a draft Code of Audit Practice 2024.

The legislation included backstop dates up to and including financial year 2027/28 to allow full assurance to be rebuilt over several audit cycles. It was the aspiration of the Government and key local audit system partners that, in the public interest, local audit recovers as early in this five-year period as possible.

This means if the auditors are unable to complete their work by the backstop dates, disclaimed opinions could be required. This should, in most cases, be limited to the next two years (up to and including the 2024/25 backstop date of 27 February 2026), with only a small number of exceptional cases, due to specific individual circumstances, continuing thereafter. The proposed backstop dates are:

• Financial years up-to-and-including 2022/23: 13 December 2024

• Financial year 2023/24: 28 February 2025

• Financial year 2024/25: 27 February 2026

• Financial year 2025/26: 31 January 2027

• Financial year 2026/27: 30 November 2027

• Financial year 2027/28: 30 November 2028

It was also noted in the report that while there would be modified and disclaimed opinions, auditors’ other statutory duties including to report on Value for Money (VfM) arrangements, to make statutory recommendations and issue Public Interest Reports remained a high priority.

Officers reassured members that the Council had always achieved unqualified opinions from the auditors on its accounts. With the most recent set of accounts for 2022/23 completed and the required audit opinion had been issued in May 2024, which would mean the backstop arrangements for that year would not be applicable to the Council.

The actions the Government had introduced to tackle the backlog, while vital, would not provide a long-term sustainable solution to the wider local audit system. The Government would be working with partners to on how best to achieve a long-term solution.

The potential first year where backstop arrangements may apply for Stockton would be for the 2023/24 financial year. It is hoped the Council can avoid any backstop requirements but as in previous years, issues outside of our control such as audit assurance on the pension fund may impact timeframes.

For financial years 2024/25 to 2027/28, the date by which local bodies should publish ‘draft’ (unaudited) accounts will change from 31 May to 30 June following the financial year to which they relate. This will give the Council more time to ensure they are producing high-quality accounts. This in turn will benefit auditors while still ensuring publication shortly after financial year end.

Members noted the month extension to the original deadline which was outlined in the report and agreed that it was a welcome change. Some Members enquired of Officers if there was any stigma attached to a ‘Disclaimed Opinion’. Officers were able to explain that though it could affect the Council this was unlikely due to many other authorities also having disclaimed opinions, and the Council would be able to explain why the opinion was given.

Members agreed to note the report.