Internal audit planning - Financial considerations

Despite the most significant funding increases in over a decade, Councils face considerable spending pressure.

Financial resilience

Budget plans, size of reserves, and achievement of planned savings will be vital in demonstrating to external auditors that your Authority is meeting the demand for its services within newly allocated budgets. 

Our latest Horizon Scanning report investigates the detail behind these pressures on local authorities. It covers the challenges and opportunities in 2022 with considerations identified for the Internal Audit team as they prepare this year’s audit plan.

The changing high street

Emptying retail units is not a new phenomenon, the high street has been in decline for over a decade. Bricks and mortar shops have struggled against rising costs while the online environment has flourished.  Consumers have developed a trust in online stores and have flocked to their competitive pricing and fast, easy delivery options. For councils, the impact of this cultural shift in retail is a direct blow with reduced business rates and lower parking revenues on the income statement.

Income collection and problem debt

Problem debt has added to the revenue deficit and is a growing challenge. In 2017, the Money Advice Service (MAS) reported that 1 in every six people in England struggled to cope with their debt.  The pandemic with its subsequent job losses and reduced earnings coupled with inflation rearing its head has exacerbated this issue. For local authorities, the worrying trend sits in the rising percentage of ‘debt to government.’

Good debt management is essential.  Aggressive debt collection has been proven by different bodies to be ineffective and harmful where the debtor is struggling to pay. Within the report, we break down debt collection and how to consider this within your audit plan.

Commercialism

Moving on from challenges to opportunities, new and innovative ways to reduce expenditure and generate income are being trialled, and we’ve listed guidance on where focus should be concentrated.

Supply chains and third-party risk

Finally, as restrictions lift, some businesses are finding their biggest challenge is supplier failure, as a supply failure anywhere in the supply chain has a knock-on effect. Local Authorities can implement actions to reduce supplier risk, but as these are more specific to management practice, general-themed supplier risk considerations are included along with specific areas of focus within the internal audit plan. 

To read all considerations, download our report below.

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