A significant backlog in audit work is impacting local council accounts across the country, and North Yorkshire is no exception.
The situation is so severe that auditors may have to "disclaim" many historical accounts. This means that auditors cannot provide assurance about the financial status of these accounts.
Whitby Councillor Neil Swannick, who sits on North Yorkshire's Audit Committee, has acknowledged a "national problem with auditing". He also expressed concern about the number of accounts that may be disclaimed. The government has set a February deadline for completing these legacy accounts.
Councillor Swannick says it's worrying that so many accounts might have to be disclaimed.
The former Scarborough Borough Council (SBC) faces particular challenges, with its accounts from 2015/16 to 2022/23 being "disclaimed with [an] issue of concern" by auditors Forvis Mazars. This is due to ongoing legal proceedings related to Whitby Harbour.
The legal case involves a challenge from the Fight4Whitby pressure group, which claims that the council has taken more income from the harbour than it has spent on it. According to the auditors' report, these legal cases are evidence of "significant weaknesses in the council’s arrangements for financial sustainability and for governance".
The legal proceedings have been lengthy, and a decision is not expected imminently.
The auditors are concerned not just about the outcome of the court case, but also about "the governance of the way that the the the audits were conducted".
Cost of Legal Action
Freedom of Information requests have revealed that the former SBC and new North Yorkshire Council have spent more than a hundred thousand pounds on legal fees.
Whitby resident Sue Boyce, who has led the legal effort from its inception and has put tens of thousands of pounds of her savings into funding the proceedings, previously told the LDRS: “We wouldn’t have fought for so long or so hard if we didn’t think we were right.”
Impact of Disclaimed Accounts
The disclaimed accounts mean that auditors cannot confirm the accuracy or reliability of the financial information. According to Councillor Swannick, the situation is worrying, with "considerable disappointment that so many legacy accounts were disclaimed by the auditors". He also noted that as the decision of the court is unknown "it's an unknown".
Although the court’s ruling is currently unknown, council officers believe it is "not expected to be of such magnitude that it destabilises the new council” because of the size of the council's balance sheet.
National Audit Issues
The problems in North Yorkshire reflect a broader national issue, according to Councillor Swannick who says the audit industry is struggling to manage the volume of work it is being asked to do.
Some major firms are declining further local authority work. The government is currently consulting on reorganizing audit practices.
The National Audit Office (NAO) has also recently disclaimed the Whole of Government Accounts (WGA) for the first time due to severe backlogs in local authority audits. According to the NAO, just over 10% of local authorities submitted reliable data to the WGA.
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