Audit Completion Report 2020-21
To receive the external auditors report. (Report to follow).
Minutes:
Audit Completion Report 2020-21 and Progress Report
Members received the external auditor’s reports (a copy of which has been filed with the signed minutes).
C. Waddell, External Auditor drew members’ attention to the main points of each report.
Regarding the Audit Completion Report it was confirmed that most of the work was now complete for the year ended 31 March 2021. One key piece of work still to be resolved was infrastructure. National guidance on this matter had been received and work was ongoing. As the 2020/21 audit was still open officers needed to adjust the numbers through 2020/21 and 2021/22 accordingly. There was also some work to be done to review the Advance Northumberland audit file that had been haltered and exit packages.
External Audit were liaising with officers around the wording within the accounts regarding value for money.
It was reported that External Audit would be issuing a significant weakness in relation to governance and would be making recommendations. It was important to get the recommendation correct to ensure the Council was moving forward while still maintaining the oversight and scrutiny in relation to last year’s Section 114 notices and the Solace report. It was noted that a separate report was to be prepared on this.
There were no significant changes to the audit approach but there had been a revised assessment of materiality. It was reported that Members would continue to receive updates on any materiality changes upon completion of work and receipt of the final revised financial statement.
The Audit Completion report outlined the following significant findings: -
Management override and controls. There were no significant issues arising from External Audits work that was required to be reported.
Pensions. There was material variance between estimated assets used by the Actuary and the actual assets at the year-end based on the draft Pension Fund accounts.
Valuation of property, plant and equipment including investment properties. There had been a few issues identified mainly around the valuation of property and the differing techniques used to value those assets and the report highlighted the conclusions reached.
Valuation of current and non- current debt.
COVID-19 grant recognition. There were no significant issues arising from External Audits work that was required to be reported.
Valuation of Airport shares. There were no significant issues arising from External Audits work that was required to be reported.
The Council’s accounting policies and disclosures were concluded. It was reported that they complied with the 2020/21 Code of Practice on Local Authority Accounting, appropriately tailored to the Council’s circumstances. It was recommended the Council review policies and disclosures and delete non-material policies and disclosures, as part of streamlining the financial statements.
Significant matters discussed with management. Including the valuation of PFI waste facility for which the Council engaged its own expert due to the specialist nature of the asset.
Wider responsibilities. It was reported that External Audit had not exercised any of these powers as part of the 2020/21 audit. The 2014 Act also gave rights to local electors and other parties, such as the right to ask questions of the auditor and the right to make an objection to an item of account. No such objections had been raised.
The report detailed the internal control findings and recommendations, summary of misstatements and value for money. Assurance was given that all aspects would be followed up as part of the completion of the 2021/22 audit and again in 2022/23. On the summary of misstatements, it was advised that most of the adjustments would not be part of usable resources, therefore not impacting on Council Tax.
Councillor Jackson asked when the value for money comments would be drafted. In response it was confirmed that External Audit were currently working through this, and it was envisaged that this would be ready for the next meeting of the Audit Committee. Currently it was thought that External Audit would be able to issue one weakness and one recommendation that covered both 2020/21 and 2021/22 and then 2022/23 would follow up progress made. However, the 2019/20 account would be slightly more difficult as issues around governance arrangements and the Council’s arrangements in relation to Advance needed to be worked through. It was felt that this could result in an adverse value for money conclusion being reached for 2019/20.
P. Topping spoke about the management response to the issues regarding exit packages and the level of assurance sought on the changes that had been put in place to ensure such matters did not happen in the future. He questioned why Audit Committee had not received a response on this issue yet, but External Audit had. In reply it was confirmed that External Audit were looking at the issues from a slightly different viewpoint. Evidence that had been made available and gathered throughout the audit showed that there were exit packages in the accounts that had not gone through the correct procedures. This was not being disputed by the Council but going forward measures would need to be put in place to ensure these issues did not occur again. This was different to examining why and how the exit packages issues had happened which would be picked up separately through the Section 151 Officer investigation and the Head of Internal Audit and Risk Management report.
Councillor Dale commented on the significant findings on the valuation of property, plant and equipment including investment properties. In response it was reported that detailed guidance had been released from CIPFA. The Council had applied for the statutory override. It was noted that this was a national problem and most authorities had opted for the override option. Discussions continued to take place regarding a permanent solution.
Councillor Jackson asked about the post balance sheet for Advance Northumberland and whether any legal claim settlement would affect the accounts being discussed today. C. Waddell briefed members on IAS 37 which outlined the accounting for provisions, together with contingent assets and contingent liabilities. He advised that any settlement would sit within the Group account. As there was still an ongoing legal claim the Chair asked that Members refrain from discussing further.
Councillor Dale sought clarification about needing to consider revising the annual governance statement (AGS) at the point of sign off to cover the period up to and including when the auditor’s opinion was signed. It was advised that given the elapsed time since the AGS was produced, some amendments were anticipated.
It was reported that Advance Northumberland’s Audit Committee had signed off their accounts which would allow the review of their file to be completed by External Audit.
Regarding the Audit Completion Report, C. Waddell gave an update on progress in delivering the 2021/22 audit and assurance work. He also gave a summary of recent relevant reports and publications for information.
RESOLVED that the Audit Completion Report for year ended 31 March 2021 and External Audit Progress Report be noted.