Oxfordshire Director of Legal

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Spending watchdog issues guide on financial reporting and management during COVID-19

The National Audit Office (NAO) has warned against any weakening of controls over spending public money as a result of pressures from dealing with the coronavirus outbreak, and has called for attention to possible new opportunities for fraud and error.

In a Guide for Audit and Risk Committees on Financial Reporting and Management during Covid-19 it said these bodies were integral to the financial scrutiny and challenge process.

Each organisation will have risk management processes in place, but risk appetite may have changed during the pandemic to allow organisations to operate effectively and respond in a timely manner.

“This may result in a weakening of controls in some areas, increasing the likelihood of other risks occurring,” the NAO said.

“Organisations will need to consider how long this change in risk appetite is sustainable for.”

The NAO, Parliament’s spending watchdog, said the potential for fraud and error could have increased “due to the pace of the Covid-19 response”.

This could arise, for example, from new supply chains being rapidly assembled with single tenders and incomplete risk assessments, and new contractors being used without due diligence.

New payment and grant systems might not have appropriate controls in place.

Despite the impact of the pandemic on public bodies’ work, the NAO said they should still ensure expenditure was made within their powers and met requirements for propriety and value for money.

It gave a specific warning to councils that have invested in commercial property to derive a new income stream.

COVID-19’s economic impact had seen “a significant slowing of the property market [which] makes it more difficult for management, and its experts, to value significant property portfolios”.

Local authority property investment has become controversial with questions raised about whether councils have been prudent and possess the expertise needed. This is currently the subject of an inquiry by the Public Accounts Committee.

There could also be issues with valuations of other assets if reliable data proved hard to find, the NAO said.