It’s become impossible to ignore the stories about councils across England teetering on the brink of insolvency or already in serious financial distress.
This might seem like a bizarre situation, especially for business owners who put so much effort into keeping their finances healthy.
Recent coverage points to one recurring theme that businesses would do well to note, and that is the role, or lack thereof, of robust auditing.
For any business wondering why audits are important, they need look no further than the chaos of the local councils.
There are many reasons councils find themselves in this position, but weak audit arrangements have been a major factor.
When the central watchdog that used to standardise council audits was removed under the Coalition Government, the system fragmented.
Councils began procuring private audit services of varying quality, and too often the results were poor or delayed.
In some cases, audit reports were so late that they arrived years after the period they were supposed to cover.
It has been widely reported that only one per cent of local councils had their 2022-2023 audits published on time.
That delay in scrutiny has some significant consequences.
Without timely, effective audits, there is less oversight of spending decisions, and mistakes or risky choices can go unchecked until they compound into a crisis.
The lack of control over money has resulted in “a broken system that is costing taxpayers more money than it was promised to save” as many local councils are effectively operating without audits.
This situation is only going to get worse as issues like the SEND time bomb are set to have a full impact in the coming months.
The Government’s response has been to establish a new Local Audit Office to try to restore consistency and control over the audit process.
One obvious difference is that local authorities can ask the central Government for emergency funding, while businesses don’t have that safety net.
If you forgo regular audits, you’re exposing your company to far greater risk.
Small gaps in monitoring or control can expand quickly, eating into working capital and undermining your ability to invest for the future.
The local councils’ troubles are a warning about what things can look like without an auditor keeping a close eye on your finances.
Without an audit, you might not notice problems, but that doesn’t mean they are not there.
There’s a second, equally important lesson that can be learned from all of this mess.
A poor-quality audit can be almost as damaging as no audit at all.
If your audit is handled poorly, then you might not notice problems before they escalate, and you can find yourself in some challenging positions further down the line.
If you’re unhappy with the service your auditor provides, don’t just tolerate it.
Find a firm that will carry out a thorough review so you can be sure that you are getting accurate, trustworthy data with which to make important decisions.
Once you’ve had a successful audit, you should get professional advice on how to turn that information to your advantage.
Our team can help you interpret audit findings and data to address your financial concerns and strengthen the operations of your business so you can continue long into the future.
The situation facing many local councils is stark, but it doesn’t have to be your business’s story.
Make sure that your business is geared towards success by speaking to our team today!
