Delays cause Northampton audit bill to balloon
0Northampton Borough Council faces a large bill caused by delays to audit work on its 2016/17 accounts, which are still not formally signed off and contain an adverse value for money conclusion.
In its final audit report released this week, auditor KPMG said delays have been caused by the slow and patchy provision of information by the council and departures of key staff at the authority.
The extra work caused by the delays would more than quadruple its original fee of £71,250, it said.
The report said: “We stated during the audit committee on 26 November 2018 that this had now risen, at that date, to approximately £300,000 in total (i.e. including original scale fee).”
KPMG said it has completed further work since this date and that it would be “discussing our final proposed fee with the authority’s chief finance officer and Public Sector Audit Appointments which will reflect the additional amount of work needed to gain assurance over your financial statements.”
The quality of audit evidence initially provided by the council “did not fully align to our expectations”, according to the auditor.
Northampton failed to provide a full fixed assets register or a breakdown of fixed assets additions, the report said.
“More significantly, we were not provided with the valuation reports prior to the start of the final audit, as previously agreed with the authority,” KPMG found.
In addition, breakdowns for both debtors and creditors were incorrect and did not tie back to the accounts, and working papers for payroll did not have robust audit trails, “which made it difficult to understand what had been provided”.
The delays, meant KPMG had to spend additional time over and above what was originally planned, it said.
“These delays have had an impact on the final audit fee,” it said.
Elsewhere in the report, KPMG said that it was issuing an adverse value for money report in relation to a loan made by the council to Northampton Football Club in 2016.
In a section covering the loan and the wider loans system at the council, KPMG said: “Our findings indicate that there is an insufficiently systematic, robust, and objective due diligence process, and framework within which decisions can be made or documented.
“We are therefore unable to state that Northampton Borough Council had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people.”
In a section relating to significant audit risks at the council, the auditor said it had to complete work to ensure the council corrected errors in its valuation of council housing.
The council initially failed to comply with requirements on valuation in the Chartered Institute of Public Finance and Accounting Code of Practice on Local Authority Accounting, according to the report.
KPMG also noted that the council had used its original internal valuation of the council homes despite issues with this figure subsequently highlighted by two external valuers and the auditor itself.
This led to the value of council homes being overstated in the accounts by £6.2m, the audit report said.
A spokesperson for Northampton Borough Council said: “It is important for the residents and businesses to know that the delay in finalising our accounts is around technical accounting and presentation issues, not the financial stability of, or financial controls within the council.”
“However, during the auditing process, an error in the type of ‘discount factor’ applied to the council’s housing stock was spotted.
“Discount factors in each area tend to vary.
“Historically, the council had always used the East Midlands discount factor but the independent valuer chose to use the South East factor.
“As a result, new revaluations had to take place and before adjustments to the final account could be made.”
KPMG also said it was also required to carry out work to make a £3.5m correction to the valuation of investment properties in the council’s accounts.
Despite the problems highlighted in the audit report, the council reported a net surplus of £77m over the year.
KMPG said it anticipated issuing an unqualified audit opinion on the authority’s 2016/17 financial statements.
Despite this, it said it could not formally conclude the audit and issue an audit certificate until it has completed consideration of matters in relation to the loan to Northampton Town Football Club.
“However, we are satisfied that this work does not have a material effect on the financial statements,” it said.
