Agenda item

For information purposes.

Members considered the Audit and Risk Management Committee Work Programme.

Peter Catchpole highlighted that the work plan is lighter than normal, with it containing very little from External Audit, with it now being out to consultation again on what is happening with External Audit, which the Council will be responding to but they are referring to these end dates now for undertaking certain years, but it looks very unlikely that this Council will have a full audit for 2022/23. He stated that the Council has just published it 2022/23 draft accounts on the website, which do not have to come before this committee, but a copy will be sent to members, with the auditors having undertaken some work on 2022/23 but just for a Value for Money report, which is still awaited. Peter Catchpole expressed the opinion that it looks unlikely that there will be a full audit for 2022/23 and the Council’s auditors are now focussing on 2023/24, which was also the change over if you had new auditors under the PSAA but this Council still uses Ernst Young, which is good as if they are not undertaking a 2022/23 audit how would opening balances be checked. He made the point that the Council has been very fortunate with Mark and the team that there has been clean audit reports for many years but they are looking at September 2024 as being one of the first deadline dates for completing audits up to 2022/23 but it is believed that this Council is working to 2023/24 for a full audit so it is unknown what will happen for 2022/23 and what will be brought to this committee, but there will be a Value for Money report when this is received

Councillor Booth questioned the value for money report and asked will there not be the audit of the housing benefit account as there is never a clear audit of this due to the way that legislation is made so are they not even doing this audit this year? Peter Catchpole responded that he believes the Council will receive this. Mark Saunders added that External Audit will carry on doing these audits but they are some way behind and the consultation talks about the backlog of the audits, with up to 2022/23 being complete by September 2024 but that will involve auditors providing qualified opinions and not full opinions and they will provide opinions based upon the work that they have actually managed to do on that audit so there will be lots of disclaimers and it is a way for them to fast track the audits of those accounts, with them concentrating heavily on the 2023/24 accounts undertaking preliminary walkthroughs with them of all the systems prior to the end of year to get ready for the 2023/24 audit. He stated that there has been no indication from them exactly when the 2023/24 audit is going to be undertaken, the draft accounts are due for publication at the end of May, but this could slip given the timescales of everything else and officers are just continuing with what they need to undertake. Mark Saunders expressed the view that he is unsure why they are consulting again as these dates have been around for a while as there needs to be a stage where everything is on an even keel and one of the biggest reason why it has got out of sync is they mentioned various regulation changes but it is the fact that the way they conduct the audit on some of these issues and the two biggest issues that effect virtually all councils which caused untold delays and problems are asset valuations and pension valuations and they need to address this issue because if they do not in 3-4 years’ time it could be the same situation again because every authority employs experts to provide these valuations and the auditors spend endless amount of time checking what other experts have undertaken and then if they disagree there is a whole rigmarole that has to be undertaken. He expressed the view that the process needs to address things on two fronts, getting back up to date and then getting back on track, addressing it from the reporting and disclosure side, which they have said they are going to do but they have also said this for a number of years now in trying to simplify the accounts and make them easier to understand. Peter Catchpole referred to audit fees as he previously advised the committee the fees were rising by 151% and the Council’s average audit fee going forward would be approximately £155,000 from a base of about £34,000 and he is not sure what will happen with audit fees and, in his view, if they are not doing the work the Council cannot be expected to pay but this is another issue as the Council still accrues the full fees.

Councillor Booth stated that the other knock-on effect is if the auditors have not undertaken a full audit for 2022/23 it is going to be extra work the following year so, therefore, the fees for that year are going to be even higher. He asked if any feedback has been provided to them? Peter Catchpole responded that feedback is provided all the time, and the consultation will also be responded to, but the answers will be the same, particularly that the accounts are too complicated and also the Council is having to paying twice for experts. He feels that virtual auditing is causing all sorts of problems because there is no substitute for having auditors on site to deal with an issue rather than having to scan documents to them and going backwards and forwards. Peter Catchpole expressed the view that the whole process needs a reset, but it is not just about dates but also about the work, simplification of the accounts and the way audits are carried out.

Councillor Booth made the point that pension valuations are only as good as the day they are calculated anyway because the way the stock markets moves. Peter Catchpole agreed this is part of the problem as the valuation is undertaken and the auditors do not come in until later and they want to see what changes have happened, there is a post balance sheet events and the longer that period between signing those accounts off the more things change. Mark Saunders added that it is incredibly volatile and the pension valuation for 2021/22 was £46 million at the end of the year and for 2022/23 it was £8 million and there are more statutory overrides around how it is accounted for, so it does not impact on the revenue account.

Peter Catchpole referred to the fact that it said there would be some training on the Statement of Accounts, but it was not felt prudent to do this at this time so hopefully this will be provided later in the year when it is relevant. Mark Saunders added that this is part of the audit process as well, so committee have seen the accounts, have a chance to go through them and ask questions about them prior to the auditors undertaking their work to give committee a better understanding of the accounts.

Peter Catchpole referred to an action of the appointment of an Independent Member and at present legislation does not say that the committee has to have an independent member, it seems to be going this way and when the Interim Internal Audit Manager undertakes his audit opinion that will probably talk about an independent member as well. He stated that a report will be brought back to the committee, possibly in July, to get a steer from committee on how this wants to be taken forward. Councillor Christy supported this approach.

Members noted the workplan and for it to be updated as appropriate.