Appendix 2 – External Auditor’s Audit Findings Report 2020-21

The Senior Finance Manager (Client) introduced his report setting out an updated Statement of Accounts for 2020/21 together with the Audit Findings report from Grant Thornton, the External Auditor.

The Senior Finance Manager (Client) advised the Committee that:

·  The external audit was still in progress but approaching its conclusion.  The most significant outstanding issue related to the accounting treatment for the housing developments at Brunswick Street and Union Street.  The necessary adjustments were being finalised.  Whilst the numbers involved were material, the outcome of these adjustments would not impact on the General Fund Balance.  The impact would be substantially on the Balance Sheet and the expenditure would remain classified as capital spend.  It was therefore proposed that recommendation 1 set out in the report be amended as follows:

  That the Statement of Accounts 2020/21 attached at Appendix 1 to the report of the Senior Finance Manager (Client) be approved subject to the satisfactory resolution of the capital accounting issues referred to in the Audit Findings report by the Director of Finance and Business Improvement in consultation with the Chairman of the Committee.

·  As requested at the last meeting, the report included additional information regarding the accounting treatment of the pensions liability and the arrangements for funding the deficit.  Information had been received from the actuary explaining the significant increase in the liability in 2021.  This was largely because of assumptions made around inflation and changes made by the actuary for accounting purposes.  These were reflected as accounting adjustments in the Statement but did not impact directly on the Council’s financial position.  The report also included details of the funding arrangements which were based on triennial valuations.  These were separate to the accounting arrangements and enabled the Council to ensure that adequate budgetary provision was in place to meet the pensions liability and repay any deficit on the Fund.

Mr Trevor Greenlee of Grant Thornton, the External Auditor, provided a summary of the Audit Findings report.  He explained that work was still in progress but there was nothing that he needed to draw Members’ attention to at this stage.  Discussions would continue with the Finance Team regarding, inter alia, the accounting treatment for the housing developments at Brunswick Street and Union Street.  There was a revised approach to the Value for Money work for 2020/21 following the introduction of a new Code of Audit Practice and the expectation was that the Value for Money conclusion would be issued no more than three months after the opinion on the financial statements.  The delay in providing the Audit Findings report within expected timescales reflected the difficulties being experienced in the external audit sector linked to the pandemic and other issues around the extent of regulation and expectations.

In response to questions:

·  Mr Greenlee provided an update on the situation regarding ongoing slippage within the timescales for completion of external audits.

·  The Director of Finance and Business Improvement explained that in terms of the pensions liability and the action taken to fund that liability, there were two separate calculations, albeit generated by the same actuary.  He would be happy to arrange a Member briefing on the subject of the pensions liability and the funding arrangements.

RESOLVED:

1.  That the Statement of Accounts 2020/21, attached at Appendix 1 to the report of the Senior Finance Manager (Client), be approved subject to the satisfactory resolution of the capital accounting issues referred to in the Audit Findings report by the Director of Finance and Business Improvement in consultation with the Chairman of the Committee.

2.  That delegation to approve any further non-material changes be given to the Director of Finance and Business Improvement in consultation with the Chairman of the Committee.

3.  That the External Auditor’s Audit Findings report, attached at Appendix 2 to the report of the Senior Finance Manager (Client), be noted.

4.  That the Letter of Representation, attached at Appendix 3 to the report of the Senior Finance Manager (Client), be approved.

Note:  Mr Paul Dossett of Grant Thornton, the External Auditor, had hoped to address the Committee but lost connectivity.