Contact your Parish Council
Agenda item
Progress Report on External Audit
- Meeting of Audit, Governance and Standards Committee, Monday 14th November, 2022 6.30 pm (Item 56.)
- View the background to item 56.
Minutes:
The Director of Finance, Resources and Business Improvement introduced the report providing an update on progress with the audits of the 2020/21 and 2021/22 accounts. It was noted that:
· Grant Thornton had now completed their audit of the 2020/21 financial statements. The Audit Findings Report setting out the results of the audit and the External Auditor’s Annual Report setting out recommendations arising from the audit on economy, efficiency and effectiveness had been circulated.
· There was no decision for the Committee as it had approved the accounts in November 2021 and delegated approval of any further non-material changes to the Director of Finance, Resources and Business Improvement in consultation with the Chairman.
· As set out in the Audit Findings Report, there had been some changes to the accounts, but they had not changed the fundamental figures within the accounts.
· In November 2021, the Committee had also approved the Letter of Representation setting out that the Council had provided the External Auditor with the information they needed to form their opinion. That Letter had changed in one minor respect acknowledging that there had been some amendments to the accounts.
· The final audit of the accounts for 2021/22 had not yet started, so there was no prospect of meeting the deadline of 30 November 2022.
Mr Paul Dossett of Grant Thornton apologised for the late circulation of the reports and advised the Committee that:
· The Audit Findings Report detailed the various accounting issues that had held up the completion of the audit. Local authority accounting was extremely complex. The accounting for capital projects had to be in accordance with International Financial Reporting Standards and it was a time-consuming process. Most of the time spent on the audit over the last six months plus had been about resolving these accounting issues. For example, the appropriate accounting treatment for construction costs relating to the Brunswick Street and Union Street housing developments, the arrangements for accounting for capital receipts and the calculation of the Council’s capital financing requirement. Amendments had been made to the accounts as a result of this work.
· The 2021/22 accounts would be updated to reflect these changes and as the audit of those accounts moved forward, the technical accounting issues would be addressed at the front of the process.
· He was required to advise the Committee that the External Auditor’s work on investment properties had identified one asset where the value had been understated by £211,000 due to an error in the valuation calculations by the Council’s external valuer. As the impact of the error was not material, management had decided not to adjust the accounts.
· Under the National Audit Office Code of Audit Practice, the External Auditor was required to consider whether the Authority had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources and to report their commentary on the arrangements under specified criteria (Financial Sustainability, Governance and Improving Economy, Efficiency and Effectiveness).
· The External Auditor’s Annual Report had provided a clean bill of health in relation to the Council’s value for money arrangements. Some ‘Improvement’ recommendations had been made which, if implemented, should improve the Council’s arrangements, but they were not as a result of identifying significant weaknesses in those arrangements.
· Taking the two reports together, the External Auditor would be able to close the audit and certify it closed. He anticipated that this would happen within the next few days.
In response to questions, Mr Dossett advised the Committee that:
· Major changes, for example in the rate of inflation, could affect the assumptions made by the actuary in relation to the net pension liability.
· Prior period adjustments that would be of particular concern would be those that impacted on the General Fund. The prior period adjustments referred to in the Audit Findings Report were technical adjustments, which were not material to the General Fund balance.
· The audit had taken considerably longer than expected, but any additional audit fees would need to be agreed with the Council and Public Sector Audit Appointments Ltd (PSAA). In terms of fees going forward, PSAA was proposing significant increases for contracts going beyond 2023/24. Since a number of the technical issues had been addressed already, the 2021/22 audit should not take so long and the aim was to report the findings to the Committee in March 2023.
· Once the audit had started, a detailed timetable could be provided.
· The resourcing position in all audit firms was challenging. Grant Thornton had now embarked on a significant recruitment exercise, investing in its Indian team as well as recruiting from overseas. The ambition was to clear the backlog of work by early 2024.
During the discussion, Members thanked the Director of Finance, Resources and Business Improvement and his team for their work on the accounts. The Director of Finance, Resources and Business Improvement particularly wished to acknowledge the work undertaken by Paul Holland, Senior Finance Manager (Client), and to emphasise that the complexity of the work had arisen out of the accounting framework within which the Council was required to operate, and which was disproportionate for a small District Council.
The Chairman thanked Mr Dossett for his attendance at the meeting.
RESOLVED:
1. That the External Auditor’s Audit Findings Report for the year ended 31 March 2021 and the External Auditor’s Annual Report 2020/21 be noted.
2. That the position regarding the external audit of the 2021/22 accounts be noted.
Supporting documents:
- External Auditor's Progress Report and Sector Update, item 56. PDF 140 KB View as HTML (56./1) 59 KB
- Audit Findings Report 2020-21 Maidstone updated 14 November 2022, item 56. PDF 6 MB
- MBC Auditor's Annual Report 202021 November 2022, item 56. PDF 5 MB