Agenda item

To consider a report by the Chief Finance Officer which presents Grant Thornton’s Annual Audit Letter and provides a summary of the key external audit findings in respect of the 2018/19 financial year.

The report also presents an update report on progress towards the 2019/20 audit.

(Report attached)

The Chair welcomed to the meeting Gareth Mills, Engagement Lead (Grant Thornton) and Perminder Sethi, Engagement Senior Manager (Grant Thornton).

The Chief Finance Officer submitted a report which presented Grant Thornton’s Annual Audit Letter and provided a summary of the key external audit findings in respect of the 2018/19 financial year. A second report from Grant Thornton was also included, which provided an update on progress towards the 2019/20 audit. In introducing the reports, the Principal Financial Manager referred to the Redmond review into local government audit quality, and asked whether Members would wish to see and comment on the council’s response to this consultation. Members responded that they would like to do so.

Addressing the reports Mr Mills explained that during the year Grant Thornton issued an unqualified opinion on the 2018/19 Statement of Accounts, and concluded that the council’s Whole of Government Accounts return was consistent with the audited accounts. Grant Thornton’s review of the council’s Annual Governance Statement found that it was consistent with their understanding of the council. The Annual Audit Letter summarised their audit approach and findings in relation to the audit of the financial statements.

  Grant Thornton also issued an unqualified opinion on the Council’s arrangements to ensure economy, efficiency and effectiveness in its use of resources. They identified financial resilience as an ongoing key risk, and recommended that the council should keep under review the adequacy of its level of reserves. The Annual Audit Letter outlines this aspect of the audit and its conclusions.

  Mr Mills reported that Grant Thornton’s planned audit fee for the year was £178.6k. The Audit Report presented to the July meeting of the Committee advised the Council that Grant Thornton intended to propose an additional fee of £5k for their work. The submitted Annual Audit Letter confirmed that an additional audit fee of £9k had been proposed, which was subject to approval by Public Sector Audit Appointments Ltd (PSAA). Mr Mills reported that he had recently been advised that this fee had been approved by PSAA.

  Referring to the Audit Progress Report and Sector Update Members were informed that Grant Thornton’s Audit Progress Report outlined the intended scope and timescales for their audit work for the 2019/20 audit. It also highlighted a number of current issues which may be of interest to the Committee.

Commenting on the Annual Audit Letter, the Chair asked if the Committee could expect high quality work from Grant Thornton

In responding Mr Mills said he believed Grant Thornton had performed well on the work undertaken so far and that the Committee could expect high quality work.

The Chair accepted the introduction of additional fees on the outcome of McCloud case which could be viewed as unforeseen, but questioned the justification of additional fees to ensure audit quality for pensions and property, plant and equipment valuations which could be perceived as part of the expected work to be carried out by external audit.  The Chair asked that Grant Thornton explain in what way the requirements exceeded expectations of the work required to provide satisfactory assurance in line with best practice

Mr Mills explained the additional work was carried out on areas of significant risk and was identified as being required by the Financial Reporting Council (FRC), which is the national regulatory body for local government audit quality. It was noted that these were not issues which affected the financial standing of local authorities, and that the Redmond review would include consideration of the regulator’s role for local government audits. The fees were subject to approval by the Public Sector Audit Appointment Ltd (PSAA)

Members queried if there would be additional fees in the 2019/20 audit.

Members were informed that at this stage it was unknown if additional fees would be included in the 2019/20 audit.

Officers were asked to circulate the PSAA process for charging additional fees to Members of the Committee.

In addition the Chair requested officers to contact the PSAA and seek clarification on the process for charging additional fees and express the Committee’s concerns with the way in which the additional fees appeared to have been approved without the involvement of the Council.

The Chair thanked Mr Mills and Mr Sethi for their attendance and contributions.

RESOLVED –

(i)    To receive the Annual Audit Letter, noting the conclusions   arising from the 2018/19 external audit process

(ii)    To receive and note Grant Thornton’s Audit Progress Report   and Sector Update

(iii)    To note the introduction of additional fees on the outcome of   McCloud case which could be viewed as unforeseen, and with   discontent also those additional fees relating to requirements   imposed by the Financial Reporting Council.

(iv)    That the Chief Finance Officer be requested to contact the   Public Sector Audit Appointment Ltd (PSAA) and seek   clarification on the process for charging additional fees and to   express the Committee’s concerns with the way in which the   additional fees appeared to have been approved.