Agenda item

To consider a report by the Chief Officer Financial Services which informs the Committee that in accordance with proper audit practice, Grant Thornton (External Auditors) have issued their Annual Audit Letter 2019/20, which provides a summary of the key audit findings for the financial year.

Appended to the report is the Annual Audit Letter (Appendix 2). The letter confirms that Grant Thornton were able to provide an unqualified opinion on the council’s financial statements for 2019/20 and an ‘except for’ opinion on the council’s arrangements to secure value for money for 2019/20.

(Report attached)

The Chief Officer Financial Services submitted a report which informed the Committee that in accordance with proper audit practice, Grant Thornton (External Auditors) had issued their Annual Audit Letter 2019/20, which provided a summary of the key audit findings for the financial year.

Appended to the report was a copy of the Annual Audit Letter. The letter confirmed that Grant Thornton were able to provide an unqualified opinion on the council’s financial statements for 2019/20 and an ‘except for’ opinion on the council’s arrangements to secure value for money for 2019/20.

Addressing the report Mr Perminder Sethi (Engagement Senior Manager – Grant Thornton) explained that Grant Thornton issued an unqualified opinion on the 2019/20 Statement of Accounts. Grant Thornton’s review of the council’s Annual Governance Statement found that it was consistent with their understanding of the council.

Members were informed that at the time of drafting the Annual Audit Letter Grant Thornton’s audit of the council’s WGA (Whole of Government Accounts) return for 2019/20 was not completed, and that auditors were not permitted to certify that the audit for a financial year was completed until the WGA audit has been concluded. Mr Sethi now confirmed that the Council’s WGA audit had since been completed and the Council’s final WGA return was submitted on 4th June, and the Audit Certificate relating to the 2019 audit had been issued and the audit closed.

Members were informed that Grant Thornton issued an ‘except for’ opinion on the Council’s arrangements to ensure economy, efficiency and effectiveness in its use of resources. They identified that the council’s level of general fund reserves had been insufficient to manage the financial impact of an event on the scale of the covid pandemic without taking unplanned short term measures, and recommended that the council should continue to keep under review the adequacy of its level of reserves and the potential to reduce expenditure.

Referring to the outturn position for the 2021 budget, recently considered at the Executive Board, Cllr Bentley suggested that the outturn position for 2021 was very different from that expected in terms of a number of budget assumptions.  Given the level of usable reserves was higher than anticipated he questioned the scope for revisiting the budget assumptions made for the 2021/22 budget.

The Chief Officer Financial Services said the authority was not in a substantially different position from that forecasted. Although the council was in a better position than anticipated, this meant that the council did not have to borrow against reserves, and the reserve could therefore be maintained giving time to manage the ongoing pressure against the base budget.

Referring to the ‘except for’ position in relation to the allocation of reserves, Cllr Truswell noted that funds allocated to the reserves are diverted from front line services, and asked what level of reserves would be considered appropriate by the council’s external auditors.

In responding Mr Sethi said that all local authorities should have capacity for unforeseen events, there was a need to have financial resilience, the responsibility of which was the City Council’s Section 151 Officer, who had the authority to decide on the level of resilience, through a combination of analysis of risk and looking at the medium term financial strategy.

The Chief Officer Financial Services confirmed that an analysis of budget risks and the requirement to achieve a sustainable budget is undertaken annually and reported to Council, and forms part of the Medium-Term Financial Strategy.  It was confirmed that it is recognised that the council needs to build up its reserves, but that this must be done in balance with the need to deliver front line services.

Referring to the external audit value for money conclusion, Cllr Foster enquired as to what level of reserve in percentage terms would be considered adequate? 

In responding Mr Sethi indicated that the Council should revisit the 5% level to determine whether this was adequate.  The distribution information relating to core city reserve levels contained in the ISA 260 report, received by the Committee at its February meeting would give further context.

Members sought clarification around the audit fee and in particular how fees for additional work were agreed

Members were informed that the Public Sector Audit Appointments (PSAA) who appoint the Council’s external auditors fix the audit fee in advance by reference to a scale, but that fee variations are permissible within the scheme where additional work was required.  The external auditors propose the additional fee and provide evidence of the work, and the PSAA determine the request, taking into consideration comments from the audited body (the Council) as to whether the additional work is necessary and appropriate.  Payment of the external audit fee is the delegated responsibility of the Chief Officer Financial Services as the Council’s Section 151 Officer.

RESOLVED –

(i)  To receive the Annual Audit Letter

(ii)  To note the conclusions arising from the 2019/20 external audit process.