Agenda item

To consider the Audit Completion Report for Year Ended 31 March 2024 from the Council's appointed independent external auditor - EY (Ernst and Young).

Debbie Hanson from Ernst & Young, the Council’s Appointed Auditors, presented the report to the committee.

Members asked questions, made comments and received responses as follows:

·         Councillor Christy stated that with regards to the specific weakness which has been identified concerning governance, the words used appear to be quite forceful and, therefore, in his view, it is important for it to be placed on record so that other people understand what that actually means in terms of the impact on the Council. He referred to the recommendations listed on page 62 of the report which also refer to the identified weakness. Debbie Hanson explained that she has highlighted that there have been a number of councils where there appears to have been some slippage in arrangements for production of financial statements over the last few years. She added that it forms part of the national issues with delays in local audits and those delays are combined system issues and are not purely issues related to audit forms and are also related to Council departments capacity and are related to the complexity of Local Government accounts and the CIPFA Code. Debbie Hanson added that as part of the Local Government reset there were some backstop dates introduced for audits up to 2022/23 which was the 13 December and the backstop date for 2023/24 was the 28 February. She agrees that it is a strong term to highlight a significant weakness, however, the wording is determined by the National Audit Office’s Code of Practice and she is guided by that code. Debbie Hanson explained that when looking at the different criteria significant weakness is the terminology that is used, if weaknesses are identified in those arrangements where it is felt that they need reporting in the audit opinion. She made the point that the reason it is felt to be important is due to the fact that the Council’s Finance Team is relatively small and there a lot of competing priorities and, in her view, she feels that it is important that the organisation, as a whole, recognises the importance of supporting that team to enable the accounts to be produced in a timely basis meaning that the accounts for 24/25 are finalised by the end of June in order that the audit can be completed before the next backstop date which is February 2026. Debbie Hanson stressed that it is vital that the local audit system is brought back to a reset and, therefore, it was felt important for it to be highlighted. She added that had it only been for one year where there was a delay then it might not have been necessary to highlight it, however, in her view, there have been a number of years where the accounts have been later than they should have been.

·         Peter Catchpole stated that he has had discussions with the External Auditors and added that there have been some conscious decisions made not to publish the accounts due to competing priorities, but he does recognise the point that Debbie Hanson is making. He added that he also notes that efforts should be made to publish the draft accounts by the prescribed deadlines, but at the time there were numerous competing pressures including new members of staff joining the team. Peter Catchpole added that he is confident that there is adequate staff in place in order to meet those deadlines and he stated that he made a decision when he knew that full audits were not taking place that the focus would not be on the draft accounts particularly in order to take some of the pressure off of the Finance Team. He made the point that he acknowledges the points made by Debbie Hanson and the wording has been revised and whilst he thought it was somewhat harsh initially, he recognises that the deadlines are in place, however, he made a conscious decision not to publish the accounts. Peter Catchpole stated that it is now hoped to get back on track with the 2023/24 accounts being signed off tomorrow and then the focus will be on the accounts for 2024/25. He explained that a further resource has been added into the Finance Team due to the upcoming retirement of Mark Saunders, the Chief Accountant, and there is a plan to do things slightly differently going forwards in order to reprioritise.

·         Councillor Christy stated that the report refers to uncorrected differences and he asked Debbie Hanson whether she can provide her view with regards to the materiality of those differences and what that actually means to the Council? Debbie Hanson explained that the differences were identified as a result of the basic checks which were undertaken on the financial statements which identified some differences which were corrected but it does highlight that there were errors in the draft accounts that were published in October 2024. She made the point that ideally she would not expect to see errors within the accounts of that nature and that should be something for the Council to reflect on for the accounts for 2024/25 and to ensure that whatever issues resulted in those differences do not occur in the 2024/25 financial statements.

·         Claire Sulam from Ernst & Young added that from recollection the differences identified were not significant in value, but they have been highlighted to the Finance Team so that they are aware of the casting errors in order that they can be amended in the final accounts.

·         Councillor Christy made reference to the fact that it has been mentioned that it is a disclaimed audit, and he asked for clarification as to what the material bearing of that actually is on the Council and whether it is a negative bearing. Debbie Hanson explained that in the prior year of 2022/23 the Council also received a disclaimed audit due to the fact that audit procedures were not undertaken. She added that when considering the current year, wherever an audit was disclaimed in 2022/23, the Council would again be receiving a disclaimed opinion because there would be no assurances in place over any opening balances or comparators. Debbie Hanson explained that the slightly different position that Fenland finds itself in this year, compared to some other councils who are being audited, is that there were no detailed audit procedures around individual balances in order to start to rebuild that assurance. She added that as a result it was acceptable to use the term of a ‘full disclaimer’ as she is making the point that they have not undertaken any audit procedures and, therefore, cannot provide any real assurances over the balances. Debbie Hanson explained that when reviewing the 2024/25 financial statements, there will be two years of having no assurance, which makes rebuilding the assurance for future years more challenging. She added that Fenland is not the only council to be in the position where there have been no audit procedures undertaken for 2023/24, but there are also a number of other councils where she has undertaken quite a substantial amount of work to try and rebuild that assurance and, therefore, that is probably the main implication in terms of the rebuild programme which will have to be considered in future years.

·         Councillor Christy stated that the report also states that there are no other matters to report under ISA 260 and refers to financial stability and no significant weaknesses which have been identified, and he expressed the view that it is a very good indication of the financial stability of the Council and is worthy of recognition.

·         Councillor Mrs French stated that she notes that Peter Catchpole has advised that there are adequate staffing resources in place.

Members noted the contents of the report.