Auditor voices 'serious concerns' over historic unsigned Luton council accounts

External auditors for Luton Borough Council are on a collision course with the local authority over its historic audits, which remain to be signed off.

Ernst and Young LLP says it has “serious concerns” that the company is unable to make financial conclusions on the council’s audit for 2018/19 in a report to LBC’s audit and governance committee.

But the council responded in a statement today, with finance portfolio holder and Labour Limbury councillor Rob Roche saying: “We’re disappointed with the content and tone of the report from our auditors.

“It fails to acknowledge what’s been achieved during the last two years and doesn’t reflect the progress made to resolve a few outstanding issues before the council’s accounts for 2018/19 can be closed out.

“I want to assure everyone there’s no impact whatsoever on LBC’s revenue budget, its financial outlook or on council taxpayers, and that we are extremely close to resolving these remaining details.”

The report from Ernst and Young to a meeting tonight (Thurs 1st) explained the company has been unable to obtain “sufficient and appropriate evidence on which to base our audit opinion”.

The audit of the council’s accounts for 2018/19, 2019/20 and 2020/21 are still to be concluded.

“Our concerns relate to five areas of the council’s financial statements,” said the auditors.

“We consider that the effects from these areas and any associated undetected misstatements could be both material and pervasive to the financial statements as a whole. Our audit materiality is £6.4m.

“We’re considering issuing a disclaimer to our audit opinion on the council’s 2018/19 financial statements.”

The five areas where the firm “is unable to obtain sufficient and appropriate audit evidence” are:

over the valuation of London Luton Airport; accounting for the costs incurred on the development consent order (DCO) for airport expansion; accounting for infrastructure assets; prior period restatement in the group accounts for the net pensions liability; and adequacy of accounting adjustments and disclosures in the revised 2018/19 financial statements.

“We’re unable to conclude whether any of the £20.3m of capitalised costs have been reliably measured and accounted for as a capital asset in the group financial statements as at March 31st, 2019.”

Janet Dawson, on behalf of Ernst and Young, concluded: “Given the matters set out in this update, we have serious concerns over the council’s ability to produce revised 2018/19 and subsequent years accounts.

“We’re considering writing to the Secretary of State of Department for Levelling Up, Housing and Communities under our statutory powers within the Local Audit and Accountability Act 2014.

“We would set out our audit position and concerns, and our view of the improvements the council needs to make urgently to its financial reporting arrangements.”

Councillor Roche added: “Since the onset of the pandemic, we’ve been working extremely hard and successfully to keep Luton on a sound financial footing, securing a vital loan from the government and dealing with the impact of reduced passenger numbers passing through our airport.

“Luton is a financially well-run council, which has been acknowledged by the government, and we’re continuing to keep our auditors closely informed at every step in this process.”