Agenda item

To receive an update from the Executive Head of Finance on the Statement of Accounts and Audit Opinion 2019/20.  A representative of Ernst & Young will be joining the meeting for this item.

 

The Chairman welcomed to the meeting Adrian Balmer (Senior Manager) and Justine Thorpe (Audit Manager) of Ernst & Young (EY) via Microsoft Teams to update the Committee on the Draft Audit Results Report for the financial year ended 31st March 2020. 

 

Mr Balmer referred to the Executive Summary which stated that the audit had been carried out in accordance with the audit scope for the audit of the 2019/20 financial statements.  As a result of Covid-19, new regulations – the Accounts and Audit (Coronavirus) (Amendment) Regulations 2020 No. 404, had come into force on 30th April 2020.  The Regulations announced a change to the publication date from 31st July to 30th November 2020 for all relevant authorities.  It was noted that 30th November 2020 was not a statutory deadline for the completion of the audit of the Council’s 2019/20 financial statements.

 

As a result of Covid-19, Mr Balmer gave further details of changes made to EY’s risk assessment in respect of the following:

 

·              Valuation of investment properties and property plant and equipment

·              Disclosures on Going Concern

·              Adoption of IFRS16

 

Reference was also made to changes in materiality.  EY had updated its planning materiality assessment using the draft financial statements and had also reconsidered its risk assessment.  Based on its materiality measure of gross expenditure on provision of services, EY had updated its overall materiality assessment to £1.512 million.  The basis for this assessment had remained consistent with prior year at 2% of gross expenditure on the provision of services.  This had resulted in an updated performance materiality of £1.135 million and an updated threshold for reporting mis-statements of £75.6k.

 

In respect of the status of the audit, the draft Audit Results Report stated that, subject to satisfactory completion of the remaining areas of the audit to be completed, EY expected to issue an unqualified opinion on the Council’s financial statements.  However, it was noted that until the work was complete, further amendments could arise.  Outstanding work included:

 

·         Property Plant and Equipment and Investment Properties valuation – the provision of source valuation information

·         Going Concern – some final information required from the Council

 

Mr Balmer referred to the sections in the Executive Summary of the Audit Report concerning control observations and other reporting issues.  It was noted that EY had no other matters to report in respect of the Annual Governance Statement and the National Audit Office Whole of Government Accounts submission.

 

Once outstanding queries had been answered, EY would review the final position on the concluded work, audit adjustments and reporting (including financial instruments, journals and income).  Together with Council’s management team, the final version of the accounts would be produced and reviewed.  Completion of subsequent events procedures to the date of signing the audit report would also be undertaken. The Committee would also produce a signed management representation letter, with the Chairman and Section 151 delegated to sign this off.

 

Ms Thorpe drew attention to the area of audit focus in respect of mis-statements due to fraud or error and it was noted that EY had not identified:

 

·                any material weaknesses in controls or evidence of material management override

·                any instance of inappropriate judgements being applied

·                any other transactions during the audit which appeared unusual or outside the Authority’s normal course of business

·                any errors or fraud issues

 

In addition to giving an audit opinion, EY was required to consider whether the Council had put in place ‘proper arrangements’ to secure economy, efficiency and effectiveness on its use of resources (the Value for Money conclusion).   The Committee noted that the value for money risk assessment at the planning stage of the audit had considered both the potential financial impact of issues facing the Council and also the likelihood that the issues would be of interest to local taxpayers, the Government and other stakeholders.  At the time of planning, EY had identified one significant risk relevant to its ‘Value for Money’ conclusion, which was the effectiveness of the Council’s Governance and Risk Management Framework.  EY had concluded that the Council’s risk management arrangements were adequate and recognised that there had been improvements in the Council’s Governance and Risk Management Framework during 2019/20.  EY had made some suggestions in the draft Audit Results Report that the Council might like to consider  to further embed risk management in the day-to-day business and reporting of the Council.   It had further been suggested that disclosures in the draft 2019/20 Annual Governance Statement could be improved so that the Statement better described the effectiveness of the Council’s governance arrangements in the year in question and any significant weaknesses and action plans for the resolution of prior year issues and issues going forward.  EY had also considered that the Council could better disclose how the Council’s risk management framework enabled the Council to achieve its strategic objectives and address areas for improvement.

 

In respect of the assessment of the internal financial control environment, EY had made recommendations in respect of:

 

·                ensuring that appropriate documentation was retained and accessible in relation to property, plant and equipment and investment properties held;

·                reviewing policies and procedures to ensure these were kept up-to-date;

·                appropriate officer capacity to respond to audit queries within agreed timelines; and

·                the collection and retention of all Declarations of Interest forms for all Members and key Officers

 

The Executive Head of Finance advised the Committee that progress had been made in terms of responding to the outstanding issues.  Discussion would be required on the draft Audit Report by the management team.  The Committee also noted that a draft timetable had been agreed by EY and the Council for the 2020/21 audit.  The Council would be putting resources in place to respond to audit questions and it was hoped that EY would respond positively and timely when information had been provided. 

 

During discussion, questions were raised regarding: risk management; the updating of the Council’s policies and procedures; asset valuations; and, EY’s audit fees.  The Committee requested a breakdown on the final audit fee from EY.

 

The Chairman thanked Mr Adrian Balmer and Ms Justine Thorpe for their presentations.

 

RESOLVED:  That the update be noted.