Derby City Council has been given less than a month to come up an action plan to explain how it will manage to deliver two sets of already delayed audited accounts by the end of this year.
And the council’s auditors Ernst & Young have warned issues behind the delays could affect the authority’s ability to make “informed decisions in respect of public funds and assets”.
The first set of accounts are for 2015/16, which failed to be signed off by Ernst & Young last year because they had a “significant number of errors”, and the council has now been given until September 30 to complete them.
The second set are for the current year, which should have been presented by June 30, 2017, and because of difficulties with the first set, will not be completed until December 31, according to the city council.
The failure to deliver the accounts has prompted the auditors to make a statement of recommendations, which includes advice that the council prepares an action plan for delivery no later than July 19, when it is due to be considered at a full meeting of the council.
The auditors have said they then expect a written response to their recommendation to be prepared, “setting out the actions to be taken and the time frames to be followed”, ready to be viewed by them on July 21.
Last year’s audit report by Ernst & Young highlighted major problems in the council’s process for valuing assets, including the Assembly Rooms and its car park, the latter which underwent a major fire in 2014.
The council claimed that an "oversight" from senior officers led to the car park being valued as an asset of the Assembly Rooms at £0, when Ernst and Young stated it had a value of £3 million. The company stated the Assembly Rooms building was also undervalued considerably at £300,000. This was increased to £750,000 after discussions with auditors.
The catalogue of under valuations, including Bold Lane car park, Chaddesden Park and Jubilee Park, was played down by council management as “historic” and blamed on senior officers as an “oversight”.
The report highlighted three main areas of concern: valuation of property, plant and equipment; risk of fraud through revenue being mis-stated, and risk of management manipulating accounts records. Auditors stated the council "has not put in place proper arrangements to secure value for money in its use of resources". It also noted that the council&apos;s processes for controlling cash management were "weak".
The auditors wrote to the council on September 23, 2016 with concerns about the accounts, which had failed to be ready as a draft statement by June 30 2016, and were instead produced on July 25 and the authority was also unable to meet the final deadline of September 30 for the 2015/16 accounts.
The council set itself a deadline of March 31, 2017 for the completion of audited financial statements, despite the council cabinet voting through £450,000 extra money, making £550,000 in total, to appoint external consultants to carry out the valuation of property, plant and equipment. It failed to meet that deadline also and the revised September 30 date was issued.
In its latest letter to the council chief executive Paul Robinson, which is also sent to the Secretary of State for Communities and Local Government, Stephen Clark, of Ernst & Young, said: “Although some progress has been made, it is our view that given the significance of these weaknesses, insufficient progress has been made since September 23 to address the issues.
In a statement, Mr Robinson said that the council acknowledged the findings and recommendations of the external auditor.
He said: “The council continues to take a robust approach which re-states our commitment to take appropriate action when necessary to strengthen governance and accounting processes.
Last month, the council’s director of financial services, Martyn Marples, took voluntary redundancy and the statutory officer role has been re-designated to Mark Taylor “on an interim basis whilst the council undertakes a corporate restructure”. He is currently responsible for ensuring the auditors’ deadlines are met.
Ernst and Young were appointed as the council’s auditors on April 1, 2015 and before granting a certificate, the company must assess both the financial accounts and state of governance of the council. The undisclosed fees incurred by the auditors in preparing the recommendations will have to be met by the council.