Agenda item

AUDIT RESULTS REPORT - YEAR ENDED 31 MARCH 2021

Meeting of Audit Committee, Monday 28th March 2022 7.30 pm (Item 28.)

Report of Ernest & Young LLP providing the Council’s Audit results report for the year ended 31 March 2021.

Minutes:

Report of Ernest & Young LLP providing the Council’s Audit results report for the year ended 31 March 2021.

The following points were highlighted and noted:

· It was noted that the final materiality to which the EY audit was laid out, the figures were slightly lower than what was in the planning report due to final figures for the year.

· It was noted that the ongoing pandemic continued to have an impact on the way audits are carried out, with more work done virtually or remotely.

· It was noted that the audit highlighted a small number of mis-statements. These mainly related to three things, two were adjusted and one which was to do with a revised pension scheme net liability as a result of changing the asset numbers at year end of the pension scheme. The second one which was adjusted to do the appeals provision and the error in the report that was identified in relation to the specialist used to calculate that. The element that related to collection fund had been adjusted. The element that related to the balance sheet of the council had not because it was not material to the balance sheet. There was one other that was not adjusted which was the expected credit loss on some of the loans to the Now Housing.

· It was noted that in the Audit planning report, there was a new code of practice to cover 2020/21 from the National Audit Office which altered the way in which the value for money works were done. The detail of work that EY do on a value for money conclusion forms part of the auditors’ annual report which will follow completion and signing of the statements.

· The one risk EY did identify was related to Housing compliance issues. It was noted that it was not an investigation of the incident itself. EY, as part of value for money work, were required to review the arrangements in place and identify the significant weaknesses within those in order to give a conclusion of the accounts at the end of March 2021.

· In terms of the stages of the audit overall, this was confirmed to be almost complete, with the final review and pre-signing procedures outstanding. It was noted that there was a national issue which had emerged in relation to infrastructure assets which meant that currently all audit firms have paused the signing of audit opinions until the Chartered Institute of Public Finance and Accountancy (CIPFA) finds a way for this to be dealt with. It was noted that this is hoped to be resolved shortly.

· Members asked when the accounts will be finalised. The external auditor stated that they hope the national issues will be resolved in the next week or so enabling signing to take place.

· Members raised concerns around issues of increased risk of fraud for the Council housing checks and given that the Council spent money on consultants to provide a report; can Ernst and Young conclude that the value for money for that report is sound? The external auditor stated clarified that they were not coming to a conclusion in terms of value for money work: The National Audit Office (NAO) code was in relation to whether there were arrangements in place to deliver. As external auditors they were asked to comment on the arrangements the Council had in place and whether those were fit for purpose in terms of whether you would expect to deliver value for money. Internal audit look at controls that the organisation had in place and testing these controls to ensure that they are working or need improvements. External audit looks at the wider arrangements the Council has in place not specifically what it spent its money on.

· Members asked whether the external auditor could provide more detail on the value for money work? The external auditor stated that the details they were required to give in relation to their value for money work was part of the auditors annual report. In these reports, in the value for money section they have to go through in detail answering specific questions about the work they have completed.

· Members queried whether they had missed the auditors annual report and the external auditor stated that after the opinion is signed they will have to deliver the auditors annual report within 90 days of having signed the opinion. The annual report will go to the next audit meeting in the new municipal year.

· The Executive Member for Resources queried the materiality of the Gross revenues. They were about £100M including about £40M in housing benefits. With the rollout of universal credit, the £40M would disappear and when that happens the gross revenues fall to £60M. The Executive Member asked if the materiality would decrease? The external auditor stated that potentially it could decrease assuming all other things remain the same. The council could expect the other areas of expenditure and income to disappear without any impact to the tax payer. It would be a lower figure and therefore EY would audit to a different materiality.

· It was stated that the Minister in charge of Efficiency and Transformation resigned early this year because he could not get the government to fully assess the fraud in Covid relief. Members queried whether this has affected the Council as they have provided Covid relief to many organisations. The external auditor stated that in terms of external audit they were more concerned that they were accounted for correctly. The fraud the external auditors were looking at was the fraud within the financial statements and not fraud of the end user and this was within the scope of the external auditors.

· The Executive Member for Resources stated that fraud was a big problem. As long as the Council followed the procedures given to them by the government, the government will reimburse them in full for all the grants. It was noted that the Council had been reimbursed with the money.