The cost of auditing Wokingham Borough’s Council’s accounts was raised at the recent full council meeting of Wokingham Borough Council
Philip Meadowcroft asked the executive member for finance and governance: “At the audit committee’s July meeting, Wokingham’s new auditor, KPMG, announced that its fee for the present year 23/24 will be £309,000.
“This compares with Ernst & Young’s fee of £106,000 for last year.
“There was not a murmur of challenge from the members of the audit committee, and as a Wokingham Borough council taxpayer I despair as to why the tripling of costs went unchallenged.
“That figure could go significantly higher since KPMG reminded the audit committee that the audit of Wokingham’s last two annual accounts had not been completed in part, according to Ernst & Young, due to delays in receiving crucial responses and paperwork.
“This is likely to create additional work for KPMG which Wokingham Borough Council will have to pay for because KPMG’s fee of £309,000 for 2023/24 excludes costs for work on prior years.
“Will the Leader of the Council please explain where at least £203,000 (and a further reserve of, say £50,000 to £100,000 to meet any prior year costs) has been found to meet this enormous increase?
In reply, Cllr Imogen Shepherd-Dubey said: “The Public Sector Audit Appointments Ltd (PSAA) is the organisation that is responsible for appointing external auditors to all local authorities, as well as setting the fees and ensuring effective management of the contracts with these external audit firms.
“The local authority is unable to challenge the level of fees, or even look for alternative providers, if they were unhappy with the one that was appointed to them.
“The fees for the 2022/23 audit, which are due to Ernst & Young, are yet to be confirmed.
“As part of the arrangements to address the backlog of audits in many local authorities, it has been explained that fees will be revised by the PSAA to reflect the level of work that has actually undertaken.
“Detail of how that will be calculated has not, at this stage, been made available by the PSAA.
“Similarly, we do not know if any additional works will be required as part of the 2023/24 audit currently being conducted by KPMG, or whether they will be required to provide additional assurances where earlier audits have not been completed.
“This has not, at this stage, been detailed or confirmed to us.
“As this detail is released, we will work with KPMG and the PSAA to understand the impacts both financially and what the workload might be.
“With regard to the general level of fees for 2023/24 – in September 2023 the PSAA consulted on proposed fees for 2023/24, explaining that they expected a significant increase.
“Whilst acknowledging the pressure on our finances, they explained that these reflected the latest prices from the audit firms and the level of work required nationally to meet the requirements of the code of audit practice.
“Wokingham’s response to this consultation aligned to the general themes of all responses including; that the level of fee increase was not acceptable, further funding was required to meet costs, that the PSAA must hold auditors accountable for the delivery and the increased fee must entail a better service from the firms.
“The PSAA explained in their response that one of the reasons for the increase in costs was their dependency on the market to supply the contracts, and this had been incredibly challenging.
“In fact, they had only received enough interest following several procurement rounds which clearly impacted on the tender prices.
“To reflect the increases in fees, officers have withdrawn a budget saving from the MTFP, expected from the improved controls and quality assurance.
“We will continue to review the position once there is more certainty, aligned to the changes being considered to clear the national backlog and reset the external audit arrangements.
Mt Meadowcrofy, in his supplementary question, said:.”Ernst and Young have made it clear to Wokingham’s audit committee that they are minded to give not one but two disclaimed Audit opinions to the two most recent annual accounts, due to insufficient or unreliable information.
“As you are no doubt aware, a disclaimed audit is the lowest status comment that any auditor can provide.
“Were Wokingham to receive an unwelcome hattrick, three of them consecutively, then the possibility emerges that Whitehall could then take over the running of Wokingham’s fiscal and day to day affairs.
“In view of the appalling consequences of Woking Council being taken over by Whitehall, including loss of services, a fire sale of assets, and huge hikes in council tax, what immediate steps is this Liberal Democrat led administration proposing to improve the situation, especially the contested property valuations?”
Cllt Shepherd-Dubey responded: “I do not think there is any risk of us turning into a Woking at this point in time.
“At the moment we do not know what the auditors are going to say to us, and what information they are going to need. Until we know that we cannot really answer it.”
