Our revised contractual mechanics were set in 2022 to encourage all firms to complete and deliver audits on as timely a basis as possible. When we developed them the Auditor’s Annual Report (AAR) was expected to be the final piece of the annual audit jigsaw (unless there was a change in auditor between 2022/23 and 2023/24) and so it was a logical criterion to trigger the first milestone payment against the 2023/24 audit.
However, the local audit system is currently undertaking work to determine the timing and the level of audit work required to close out the remaining elements of financial statement audits. In line with DLUHC and the NAO’s consultation proposals, many 2022/23 AARs may not be delivered until Autumn 2024, some six months later than the first floated backstop date, which itself was six months later than the Accounts and Audit Regulations publication date in place when we developed the contract.
In this uncertain environment we have taken a pragmatic decision that the delivery of the VFM arrangements commentary for all years up to 2022/23 is an appropriate alternative criterion to trigger the milestone payment for 2023/24 (where there is no change in auditor between 2022/23 and 2023/24), as it aligns with our original contractual intentions, and fits with the general intent of the February 2024 Joint Local Audit Systems Statement, including prioritising timely reporting on VFM arrangements.