The External Auditor reported that the Pensions Fund audit report was complete and ready for signing.  However, the updated report on the Council’s Financial Statements is not final, work is ongoing.  The deadline of 30 September 2021 had not been met. It was noted that only 9% of local government audits had been signed off. 

There were 2 key issues that had led to the deadline not being met; black box gap in new isa540, (work is now complete and no issues for Council).  The Property Plant and Equipment valuation has work ongoing; when it was received in October, it highlighted a number of queries, variances and assumptions in which EY and the Council have differing opinions.  In order to reach an agreement between the council and EY valuers, additional samples were considered.  These further samples brought up a further issue, and work continues to be in progress.  The External Auditor is unable to issue an audit opinion as the ongoing work is likely to lead to a material difference in financial statements that will need corrected before the audit opinion can be issued.

EY have raised an internal control recommendation to ensure council tax and NDR debtors are fully reconciled to the general ledger, noting that they had grown from the previous year and will need to be fully reconciled for next year.

In response to Member questions, the External Auditor apologised for not meeting the 30 September deadline and explained the timings of the receipt of the reports and the additional information required and flagged up as a result to the additional work had meant that work is ongoing. 

Although EY started working on the reports in July, the EYRE report should have come back in August to allow a month, but it hadn’t been received, the Auditor also advised that, the firm is understaffed and this had caused delays.  EY were looking to change processes and formats to standardise across councils.

There was a change in 2017/18 in how schools assets are classified, the council values the land at a lower band than EY.  In previous years, it hasn’t been an issue because it was a low risk consideration.  EY and the council have interpreted the RICS guidance slightly differently, if council valuers won’t change their approach, then it is likely to require a modification by EY as it is likely to become a material difference.

The Assistant Director for Resources confirmed that the council is now trying to positively engage and valuations teams, looking at requirements coming through from EYRE and looking at a revision once the difference and the size of the gap were understood.  A lot of effort goes into evaluation of assets to ensure an accurate figure in our accounts but doesn’t necessarily impact council decisions.

The Director for Corporate Services confirmed that the problems highlighted had lead to restating three years’ worth of accounts, work which had commenced but also impacts on the work that had already started on valuations for this financial year.  If officers were able to have the accounts signed off before Christmas, with a meeting of the Committee not due until March, the committee could delegate authority to sign off the accounts to officers or could call a special meeting or sub-committee meeting to address that.

The External Auditor confirmed that the additional work required would mean an additional charge to the council.  This would have to be discussed and agreed with Finance officers before bringing to the committee

The External Auditor advised that while everyone who is working on valuations is RICS qualified, there is room for difference in opinion and in these cases the work is in making sure these differences are within an acceptable level of variance. 

The Director of Corporate Services expressed their disappointment that the deadline had not been met and outlined the work the Council had done to try and resolve the issues that had been raised.

At the request of the Committee, the External Auditor committed to seeking to create a protocol outlined expected standards agreed by both parties to prevent future issues.

RESOLVED

1.         That the Commitee received a verbal update from EY on the current position relating to the audit for year ended 31st March 2021.

2          That the Committee noted EY’s updated Audit Results Report (Appendix 2) for the Pension Fund accounts under the International Standard on Auditing (ISA) 260.

3.         That the Committee noted EY’s updated Audit Results Report (Appendix 1) for the Statement of Accounts under the ISA 260.

4.         That the Chair was authorised to sign the Letters of Representation (Appendices 1 and 2) for the Statement of Accounts and Pension Fund Accounts

And

5.         That the Standards and General Purposes Committee delegated authority to the Director of Corporate Services to sign off the final accounts once completed, subject to the Committee receiving a copy for inspection prior to signing.