Statement of Accounts 2020/21
The Director of Finance and Business Improvement introduced his report providing an update on progress with the audit of the 2020/21 financial statements.
It was noted that:
· In accordance with the Accounts and Audit Regulations, the Council was required to have its audited Statement of Accounts for the 2020/21 financial year approved by the Committee by 30 September 2021.
· The draft financial statements were prepared by the Finance team and presented to the Committee in July 2021, with audit fieldwork commencing in late August. An updated version of the statements was then presented to the Committee on 28 September 2021. At that time, Grant Thornton advised that insufficient work had been completed to issue an audit opinion by the statutory deadline of 30 September 2021, but they anticipated that outstanding work would be completed during October 2021.
· The updated Statement of Accounts and Grant Thornton’s Audit Findings Report were presented to the Committee at its meeting on 15 November 2021. The Audit Findings Report stated that the audit was substantially complete, and Grant Thornton anticipated issuing an unmodified audit report. Some further adjustments relating to the capital accounting entries were required, and the Committee approved the accounts subject to the satisfactory resolution of these issues by the Director of Finance and Business Improvement in consultation with the Chairman of the Committee.
· An update from Grant Thornton was provided at the meeting of the Committee held on 17 January 2022. This stated that subject to the completion of outstanding work, Grant Thornton anticipated giving their audit opinion on the 2020/21 financial statements by 31 January 2022. However, Grant Thornton had still not issued an opinion.
· From the Council’s point of view, the Finance team had responded to Grant Thornton’s queries promptly whenever asked and, it was understood, did not have any outstanding queries with Grant Thornton.
Mr Paul Dossett of Grant Thornton attended the meeting to explain the reasons why an audit opinion had still not been issued. Mr Dossett advised the Committee that:
· All of the audit firms had experienced significant challenges in delivering audits. As at the end of January 2022, Grant Thornton had signed off 60% of its audits for 2020/21 and the rest of the firms had achieved 36% between them.
· Whilst there had been some technical, capital accounting and valuation issues, the main reasons for the delay in issuing the audit opinion related to increased regulatory challenges faced by audit firms driven by failures within the commercial sector and, in the case of Maidstone, capacity challenges within Grant Thornton with the Audit Manager and supporting team. The supporting team had moved to other parts of Grant Thornton or left the firm, and the Audit Manager was trying to manage four audits, all delayed, and had faced other challenges that had delayed him in completing his work. The delay did rest with Grant Thornton and the firm was trying to conclude the matter as soon as possible, although he was unable to say when that would be.
In response to questions:
Mr Dossett explained that:
· There were separate teams within Grant Thornton dealing with commercial and local authority audits. Whilst there were some delays in completing commercial audits, there was a very specific delay with local authority audits. Local authority accounts were very complicated relative to the degree of risk.
· The market was very constrained at the moment. Grant Thornton was having to recruit qualified staff from overseas to do this work and it was difficult to retain staff post qualification because there were many opportunities within and outside the firm that looked more attractive than a career in local authority audit. It was a problem that would take time to resolve.
· Some progress had been made on the audit since the last meeting and he estimated that it would take 5-10 days to complete the work. He would be prepared to provide an update for Members on progress between now and the end of the month.
· Following the abolition of the Audit Commission, a clearly defined systems leader was needed. The idea of the Government was to vest that leadership in the Financial Reporting Council which would be replaced by a new regulator, the Audit Reporting and Governance Authority, next year. A Director of Local Audit had been appointed to provide that systems leadership. He (Mr Dossett) was hopeful that the new regulator would provide that systems leadership and enable auditors to focus on what mattered.
The Director of Finance and Business Improvement explained that:
· The Kent Finance Officers (S151 Officers at the Kent Authorities) were very concerned about the situation regarding the auditing of local authority accounts and had written to the PSAA. The Council could not penalise Grant Thornton financially for the delay in signing off the accounts. The issue was that the longer the delay, the more local authority audit was devalued. It was a reputational issue as a set of accounts that was over a year late had much less credibility. The issues had been aired in the local government press.
During the discussion, the Committee was concerned to hear that the team which had started the audit of the Council’s accounts was no longer working on local government audits. Grant Thornton’s HR policies allowed employees to move onto other assignments having given the appropriate notice.
It was suggested and agreed that Grant Thornton be requested to undertake a review of its HR policies to ensure that they engender loyalty to and support the delivery of audit projects given that the Council’s audit opinion had been delayed by staff moving on within the firm.
1. That the update on progress with the audit of the 2020/21 financial statements be noted.
2. That Grant Thornton be requested to undertake a review of its HR policies to ensure that they engender loyalty to and support the delivery of audit projects given that the Council’s audit opinion has been delayed by staff moving on within the firm.