Material errors in council's accounts

THE Audit Commission says significant weaknesses remain in Warrington Borough Council’s arrangements for preparing its annual statement of accounts.
As a result, members approved a set of accounts earlier this year, which contained “material errors.”
Next year, the accounts will need to be prepared under International Financial Reporting Standards and although the council has good arrangements in place for the transition, the changes will place an added burden on its finance function, according to District Auditor Judith Tench.
She said: “I am concerned that the sale and nature of the issues identified during the course of my audit, and the new issues affecting the current financial year, the council will struggle to meet the challenges of reporting in 2010-11.”
In a memorandum presented to the council’s audit and corporate governance committee, the Audit Commission notes that the council has already embarked on an improvement programme to strengthen its overall control environment and governance framework and has made much progress.
However, a review of key financial systems and sample testing of individual transactions for 2009-10 identified control weaknesses within payroll, accounts payable, accounts receivable and the financial ledger.
Since 2008-9 the council had improved closedown arrangements and the structure of working papers. But the draft financial statements approved by members in June contained a high number of material and smaller errors.
“The council needs to improve the arrangements in place for preparing the financial statements. Without this, members will continue to approve accounts that do not present a true and fair view of the council’s financial position.”
The Audit Commission make 24 recommendations for improvement.
In her annual audit letter, Ms Tench notes that local government funding will be cut by 7.1 per cent each year for the next four years and although the precise impact on Warrington is not yet known it is clear the authority will have to make touch spending decisions in both the short and medium term.
But she adds: “Warrington Borough Council has a good record in producing and maintaining a robust medium term financial plan. My work on the Value for Money conclusion in 2009-10 and in previous periods has identified strong budget management arrangements.
“They should be well placed to meet the challenging times ahead.”
Lynton Green, the council’s chief finance officer said: “Unlike private companies, local authorities are required to produce a set of accounts prior to audit, and it is within these accounts that the errors referred to occurred. The final audited accounts were given a clean bill of health in September.
“While the Audit Commission has recognised the progression of our ongoing improvement programme to strengthen controls and governance, we acknowledge that there is always room for improvement.
“My team and I are particularly encouraged that the Commission has recognised that we are advanced in our preparations for the introduction of the new International Financial Reporting Standards, which is a substantial technical challenge.”