In April 2024 we reviewed 92 auditors' annual reports (AARs) that we produced for our local government audited bodies, which represents approximately 30% of councils in England. AARs are the key annual deliverable relating to our value for money audit work. These AARs covered the audit year 2022/23, and thirty also covered 2021/22 due to joint reporting. They were published between April 2023 and March 2024. It should be noted that 22/23 and 23/24 were years where inflation and the cost of living crisis had a significant impact on council finances.
Where our value for money audit work identifies weaknesses in arrangements, or potential improvements, we make the following types of recommendations:
These relate to significant weaknesses reported under Section 24 (Schedule 7) of the Local Audit and Accountability Act 2014. They require a published written response.
These relate to significant weaknesses identified under the NAO code of audit practice. They set out actions the council should take, but don't require a published written response.
These, if implemented, should improve the arrangements in place at the council, but aren't a result of identifying significant weaknesses.
The reports in our sample showed an escalating rate of significant weakness in arrangements for financial sustainability. They also showed rising rates of significant weakness in arrangements for financial governance, internal control, performance management, and procurement. In our view this is because the financial pressures some councils are facing have resulted in some poor decision making and a weakening of often traditionally strong governance arrangements.
Common areas of weakness were in relation to:
When we reviewed improvement recommendations raised in relation to the 2022/23 audit year, we found that almost half of them related to the same issues as the key recommendations, but weren't as significant areas of concern. Left unaddressed, there's the risk that the councils with improvement recommendations could escalate to significant weaknesses in their arrangements by 2024/25.
Councils across England who have responsibility for a housing revenue account (HRA) need to take a strategic approach. Delaying capital investment in one year has led to increased needs for high-cost emergency repairs and maintenance work at some councils in the next year.
With new housing consumer standards being mandated from April 2024, any short-term savings in repairs and maintenance now could lead to very high costs in the future. Similarly, at some councils savings on rent collection and landlord costs in one year have led to reduced income in another year. However, at other councils, digital landlord roles are now being successfully explored. Common improvement recommendations for the HRA in our AARs for 2022/23 are:
You can find further detail in our report, including anonymised case studies and a checklist for success.
For more insight and guidance, get in touch with Paul Dossett or Guy Clifton.
