Decision status: Recommendations Approved
Is Key decision?: No
Is subject to call in?: No
The Committee received for information the External Auditor’s Indicative Audit Plan for the year ending 31 March 2023.
Officers from Grant Thornton took Members through the plan, highlighting the key matters, headlines, significant risks as perceived, and their approach to materiality which was of particular interest to the Committee.
The Committee’s attention was drawn to the risks which Grant Thornton considered were worthy of special audit attention. These were:
· Management override of controls
· Valuation of land and buildings, including council dwellings
· Valuation of investment properties
· Valuation of net pension fund liability
The Council’s requirement to prepare group financial statements which consolidated the Council’s financial information and that of its three subsidiary companies was noted.
Grant Thornton would make a thorough examination of the Council’s and Group’s financial and value for money arrangements; taking into account the Opening Balances and comparative disclosures over which there was still some uncertainty.
The Committee was advised that with the Government’s proposed backstop arrangements for outstanding audits, the Council was expected to have its 2020/21, 2021/22 and 2022/23 accounts disclaimed. This meant that the Council’s previous external auditors would not be able to provide any assurance over the accuracy and completeness of the financial statements for those years. Further, there would be no assurance over the accuracy and completeness of the 2022/23 comparative information included in the 2023/24 statement of accounts. There would, as a result, be a lack of assurance over opening balances, including the general fund and other usable and unusable reserves. It was acknowledged that this was a sector wide risk and discussions were ongoing over an agreed approach to this situation. As this had not yet been resolved by way of guidance from the FRC this significant piece of work had not been allowed for in the proposed audit fee.
In terms of materiality, Grant Thornton had determined that £650k was appropriate for the Council; this equated to 1.5% of its unaudited gross operating costs for 2022/23. The auditor was however obliged to report all uncorrected omissions or misstatements of lesser amounts, other than those deemed ‘clearly trivial’. The threshold for items considered to be ‘clearly trivial’ (as defined under ISA 260 UK), being set at £32.5k for the Council. It was confirmed that Grant Thornton would provide a list of the items below the ‘clearly trivial’ threshold for information.
There was a discussion about expenditure by the Council and how the budget book could be examined to identify potential savings. It was advised this was a separate process which fell within the remit of the Corporate Management Committee. Nevertheless the Chair endorsed the request to have sight of all ‘trivial’ entries which Grant Thornton would review with the Section 151 Officer for materiality and patterns.
Officers were asked whether they considered the fees were appropriate. These were set by the PSAA and for 2023/24 it was proposed that the Council Audit would be £199,771 with the ISA 315 estimate being £7,530. This was a considerable increase. However, it was acknowledged that previously fees had been set too low and did not reflect the amount or complexity of the work which was undertaken by the external auditors.
The Chair reminded Members of the Committee of their ability to request a private meeting with the external auditors if necessary to discuss any particular points of concern. Members were also asked to note the recent change approved by the full Council which gave the Standards and Audit Committee overall responsibility for signing off the Council’s final accounts. In addition, the Committee would be required to submit an annual report on its work to full Council. Any major issues with the final audited accounts would also be reported to full Council.
There was some concern expressed about the new 30-year capital programme. Officers explained that the 10-year indicative programme still existed, but that the 30- year plan sat behind it and provided an opportunity to look at projects and potential expenditure that might be needed over the lifespan of many of the Council’s investments and operational assets.
Officers were thanked for their report which was duly noted.
Report author: Ade O Oyerinde
Publication date: 02/08/2024
Date of decision: 17/07/2024
Decided at meeting: 17/07/2024 - Standards and Audit Committee
Accompanying Documents: