Scathing public interest report by Luton council's former auditors branded 'deeply flawed' by finance boss

The local authority has written to Ernst and Young saying it “strongly believes publishing a public interest report is unnecessary, or inappropriate, at this time and would be an unfair or inaccurate reflection of LBC’s current position”.

Labour Northwell councillor and LBC portfolio holder for finance Rob Roche has described EY's decision to publish the report as "deeply flawed" and "damaging to the council's reputation".

Two council finance meetings are set to consider the implications of the report this week, which is also on the agenda of a full council meeting on Tuesday (October 15).

LBC’s former auditors Ernst and Young stated: “This public interest report has been produced prior to issuing our opinion on the 2018/19 financial statements, which haven’t been approved yet.

“The issues we’ve faced working on the 2018/19 audit of the LBC accounts renders us to conclude there’s a culture at the authority of insufficient recognition of the importance of producing high-quality financial statements in delivering value for money, promoting effective governance, allowing sound financial management and providing external accountability.

“Having considered the significant elapsed time since starting the 2018/19 audit and the inability of management to adequately address issues arising from it, or provide sufficient information to allow us to form an opinion, we made a decision to suspend work on the audit in July 2023.

“That followed receipt of the latest iteration of the financial statements. We informed management at that time we’d suspended work and would proceed with our internal consultation process to conclude on the form of the opinion.

“We felt a further significant amount of time, resource and cost to the public purse wouldn’t greatly alter the likely outcome of the 2018/19 audit and so would be poor value for money for the taxpayer.

“LBC management disagrees with our view and contends that further information has been provided to address some of the issues which have contributed to this report,” explained the company.

“These relate specifically to events after the reporting date, London Luton Airport Limited balances in the group financial statements and going concern. The local authority also says the matters raised are addressable without significant further investment.

“During the audit, we didn’t receive enough adequate evidence to address the issues noted. Based on our experience, we considered it highly unlikely that management could adequately address the matters raised or provide the information required.

“Significant weaknesses in procurement and contract management arrangements have impacted our work on the 2018/19 value for money conclusion.

“The issues, which arose in 2016, but weren’t fully investigated and reported by the authority until 2021, in our view support a wider lack of adequate value for money arrangements at the authority across informed decision-making, sustainable resource deployment, and working with partners and other third parties.

“Without a change in the culture of the organisation, we’re concerned these significant weaknesses in value for money arrangements we’ve identified will remain unaddressed.”

LBC has made a formal complaint to the Institute of Chartered Accountants in England and Wales (ICAEW).