Agenda item

The Director of Finance, Resources and Business Improvement introduced his report providing an update on progress with the audit of the 2021/22 and 2022/23 financial statements.  It was noted that:

·  The external audits of the 2021/22 and 2022/23 accounts were still to be completed.  Whilst this was in no way an acceptable position for the Council, it was worth pointing out that it reflected the broader crisis affecting local government audit.  As a result of this crisis, the Government and the National Audit Office were proposing to set a series of statutory deadlines for accounts preparers and auditors to clear the backlog of delayed audits for the financial years 2015/16 to the present.  The current indications were that the statutory deadline for completion of the 2021/22 audit was likely to be 31 March 2024.

·  At the last meeting of the Committee there had been a lot of discussion regarding the 2021/22 audit and, in particular, Grant Thornton’s requirement that the Council provide an updated valuation of its pension assets and liabilities (IAS 19 report).  It was agreed that Grant Thornton be asked to reconsider this request as obtaining an updated IAS 19 report would lead to additional costs for the Council and further delay to completion of the audit.  However, the firm had indicated that it was not prepared to do so, and the Director of Finance, Resources and Business Improvement had concluded with reluctance that in the interests of obtaining a clean audit opinion, the Council should accede to the External Auditor’s request.

·  Grant Thornton had now indicated that they were close to completing the 2021/22 audit and hoped to bring an opinion to the November meeting of the Committee.  There had been a suggestion at the last meeting that the Council should accept a qualified set of accounts.  However, it would be a black mark for the Council to have a qualified set of accounts.

·  The audit of the 2022/23 accounts was now likely to start in January 2024 and it was Grant Thornton’s intention to bring an audit opinion to the Committee in March 2024.

In response to questions/comments, the Director of Finance, Resources and Business Improvement advised the Committee that:

·  The External Auditors were appointed by Public Sector Audit Appointments (PSAA), a subsidiary of the Local Government Association, so if the Committee wished to make a complaint about the performance of the External Auditor, it should be addressed to the PSAA.

·  It was beneficial to have continuity in the staff undertaking the audit and he would push for that.  It was understood that the Council would have the same audit lead for 2022/23 as it had for 2021/22 which would be helpful, but Grant Thornton did have problems relating to the turnover of staff which made it difficult for them to ensure continuity.

·  The issue of qualifications was relevant not just to Maidstone but to the sector as a whole.  The Government was likely to set hard deadlines for completion of audits and there was speculation in the sector that Auditors might, in the worst-case scenario, issue a disclaimer of opinion and not complete the audit.  It would be worth writing to the PSAA to emphasise that the Council does want to see the audit completed and a clean audit opinion obtained because he had every confidence that the accounts were sound.

·  There were two types of cost that the Council would face in relation to the additional work on the 2021/22 audit.  The first related to the provision of a new report from the actuary and the second related to Grant Thornton charging extra because the work was not in their original budget.  The Council would have an opportunity to challenge the extra costs with the PSAA.

·  He did believe that Grant Thornton was trying hard to complete the 2021/22 audit in time.

During the discussion:

·  Members expressed concern about the further delay and unnecessary additional costs associated with obtaining an updated IAS 19 report as requested by Grant Thornton and the External Auditor’s policy to close the previous year’s audit before starting on the next set of accounts.

·  It was pointed out that Grant Thornton had now indicated that they hoped to be able to sign-off the 2021/22 accounts in time for them to be presented to the November meeting of the Committee and that it was their intention to bring an audit opinion in relation to the 2022/23 accounts to the Committee in March 2024.  The Council should be robust in its response if Grant Thornton failed to meet the November deadline and made aware in good time if there was going to be any delay in the completion of the 2022/23 audit. 

·  It was suggested that there was a need to balance the potential reputational risk for the Council arising from delays in signing-off the accounts against the black mark the Council would have if it accepted qualifications to move forward.  However, reservations were expressed about the implications of having a qualified audit opinion, potentially, for example, with regard to borrowing.

·  The Committee expressed its dissatisfaction with Grant Thornton’s performance and considered what options might be available to it in the future, including recourse to the PSAA.

·  It was considered in the first instance that Grant Thornton should be informed that the Committee expects full audited accounts for 2021/22 in time for its November 2023 meeting which requires delivery of their report by 31 October 2023 and that the Director of Finance, Resources and Business Improvement should be kept informed of progress.  Further, if the Director of Finance, Resources and Business Improvement is not satisfied with the information received, an emergency meeting of the Committee should be convened.

RESOLVED:

1.  That Grant Thornton be informed that the Committee expects full audited accounts for 2021/22 in time for its November 2023 meeting which requires delivery of their report by 31 October 2023 and that the Director of Finance, Resources and Business Improvement be kept informed of progress.

2.  That if the Director of Finance, Resources and Business Improvement is not satisfied with the information received, an emergency meeting of the Committee be convened.