Agenda item

The Committee considered the External Audit - Council and Pension Fund Audit Plans and Informing the Audit Risk Assessment.

Mark Stocks, Key Audit Partner and Terry Tobin, Senior Audit Manager from Grant Thornton, the Council’s external auditors introduced the report.

In the ensuing debate, the following points were made:

·         Had remote working impacted on the process of the auditing of accounts? Mark Stocks explained that remote working had not been an efficient or effective way of working. It was time-consuming which had been reflected in the increased external audit fee. This fee increase was also intended to encourage councils to end remote auditing practices. It was important that external auditors were able to work on site and interact face-to-face with the Council’s finance team. Michael Hudson welcomed the return to on-site audit work because it enabled a speedier turn-around of queries/information between the external auditor and the finance team than was possible working remotely. The finance team had been working and would continue to work face-to-face with external audit and this had been reflected in the external audit fee

·         In relation to a query about the valuation of the Energy from Waste plant, Michael Hudson explained that a technical issue concerning how PFI Credits were recorded in the accounts had been raised nationally by Grant Thornton

·         Mark Stocks explained that following a series of corporate failures, there had been an increase in the auditing expectations placed on councils. Grant Thornton placed great importance on the accuracy rather than timeliness of the accounts. Public sector accounts were incredibly complex in nature which meant that they were time-consuming and therefore costly to audit

·         The proposed changes to the accounting treatment and disclosure of infrastructure assets in the financial statements had huge implications for top-tier authorities in terms of additional work, cost and delays to the accounting timetable. What happens if the current national rulings on the application of IFRS requirements on the treatment of Infrastructure assets meant that these changes went ahead? Mark Stocks advised that Grant Thornton had made representations nationally to try to avoid this scenario.

·         What benefits did the changes to the accounting treatment of infrastructure assets provide for the Council? Michael Hudson responded that there would not limited benefit to the Council and certainly not VFM. The Council was prepared to do the work and staff would be made available, but the Council did not have the necessary data available. There were two possible outcomes should the proposed changes be introduced, either a delay of the signing off of all the accounts including the pension fund and district councils which would mean that the deadline would be missed; or a qualification be granted for upper tier authorities. It was estimated that to gather the data for the audit of infrastructure assets would cost the Council approximately £40/50k which would greatly increase if these arrangements were back-dated. It was agreed that it appeared this change was a technical auditing issue that had no impact/benefit to the council tax payer. It was important that the sector stuck together to challenge this change

·         What was the timetable for the IFRS to make a decision on the changes to the auditing arrangements for infrastructure assets? Mark Stocks commented that CIPFA, rather than the IFRS were the code setters. Dependent on the national ruling, CIPFA would be left with the following options: either accept the changes; move to qualification; or request a statutory override by the Government

·         In response to a query about cyber security, Terry Tobin commented that there were no issues with this Council’s accounting arrangements. It should be recognised however that nationally greater attention was being given to cyber security.

RESOLVED thatthe content of the external audit plans and the Informing the Audit Risk Assessment reports be noted.