Agenda item

Report of EY, external auditors, providing an update on the audit progress for the year ended 31 March 2021

Members received the External Audit Report from Ernst & Young LLP which provided the Audit Committee with an update on the EY 2020/21 Audit Plan for the year ended 31 March 2021. The external auditor stated the audit process was half completed at the end of June/ start of July with the second half of the work to commence in early October. Members noted an additional risk that would be audited, which related to rental income from property and any provisions the Council had set aside to manage any potential liability. The external auditor reminded Members that the National Audit Office Code covering Value for Money had been reissued in 2020, which had changed how the auditors undertake their risk assessment and report Value for Money assessments. The external auditor confirmed that housing compliance issue would be looked at through the auditors examining how the Council as a whole monitors compliance issues through its governance arrangements. The External Auditor confirmed that this work was underway and would be concluded after the second visit is completed.

The following points were highlighted and noted:

-                  In the context of recent media reports of failings by external auditors, the external auditor assured Members of the confidence they had on the scores published and the quality of its audits.

-                  Members asked for elaboration about the impact of Covid19 and the absence of a final figure for associated fees. The external auditor explained that the audit had not been completed and the impact of Covid-19 related activities, such as the administration of Covid grant schemes and additional work required to facilitate remote auditing was not yet fully known to enable a fee to be confirmed at this point.

-                  Members asked about the fraud risk concerning revenue. The external auditor stated that they are required to look at the Council’s revenue recognition to assess whether the Council’s approach was in line with the risk profile for the different types of activities undertaken and that income had been reported in the correct period.

-                  Members discussed the Council’s bad debt provisions and the way in which this was managed. Members asked how aggressively the commercial rent debt was chased. The Executive Member for Resources confirmed that recovery actions were put on hold by central government in response to the pandemic.  However, the Council was now taking appropriate steps to recover the debts; including agreeing payment plans for those businesses who had faced difficulties. Nevertheless, provisions had been put in place to cover bad debts, and the external auditors would take a view on whether the provisions were appropriate.

-                  Members asked about the risks associated with the pension’s liability. The external auditor informed Members that they had yet to receive the pension auditor’s reports detailing the assessment of the assets held by the pension fund and the actuarial estimates of the specific pension’s liability for the Council. Once those reports are provided the external auditors would be able to assess the risk. Members noted that the Council had previously invested in the pension fund to reduce future liabilities.

-                  Members asked about the housing non-compliance issues.  The external auditor confirmed that their work sought to look at the general governance arrangements in place and whether there were risks associated with those arrangements, and whether such arrangements had had an impact on the Council’s ability to deliver Value for Money.

RESOLVED:

(Unanimous)

That the External Audit Progress Report by Ernst & Young LLP be noted.