Agenda item

To consider the external auditor’s progress report.  

17.1          Attention was drawn to Grant Thornton’s report, circulated at Pages No. 21-43, which set out the audit findings for 2019/20. Members were asked to consider the report.

17.2          The representative from Grant Thornton explained that the report highlighted the progress in delivering its responsibilities as the Council’s external auditors. The report also included a summary of emerging national issues that may be relevant to Tewkesbury Borough Council and a number of challenge questions in respect of those emerging issues which the Committee may wish to consider. Page No. 24, flagged up a change in that the audit plan, which had been due to be considered by Committee in March, had been shared electronically on 19 March, because the March meeting had been cancelled due to COVID-19. In addition, a paragraph had been included relating to the significant risks posed by COVID-19.

17.3          In terms of the completion of the Statement of Accounts, this deadline had been extended from 31 July to 30 November due to COVID-19 and the Council was on track to sign off by that date. The External Auditor’s detailed report findings would be submitted to the November Committee meeting. The value for money work had made good progress with most of the work completed; this would be reported in November. External Audit was awaiting an update of the Medium Term Financial Strategy for COVID-19. Referring to Page No. 25, the Grant Thornton representative advised that the National Audit Office consultation on a new Code of Audit Practice had concluded and, with the new Code having completed its approval process in Parliament, had come into force on 1 April 2020 for the 2020/21 audit year onwards. The most significant change under the new Code was the introduction of an Auditor’s Annual Report which would contain commentary on arrangements to secure value for money and any associated recommendations; further details would be communicated to the Committee within the next update. This meant that, from 2020/21 onwards, there would be a change in the value for money reporting; currently the main focus was on the conclusion but from next year, rather than a conclusion, there would be a set of recommendations which would form part of the annual report rather than being a separate audit findings report within the accounts work. Page No. 26 provided an update to the timings of the housing benefit audit which was usually completed by the end of November but had been extended to the end of January 2021 due to COVID-19.

17.4          In terms of audit fees, the impact of changes in respect of additional and more robust testing in financial reporting; improvements in financial reporting on items such as property, plant and equipment and pensions; and an increase in the complexity of local government financial transactions and reporting, had been reviewed in terms of both the cost and timing of audits. This had been discussed with the Section 151 Officer, including any proposed variations to the scale fee, and had also been communicated through the audit plan. Public Sector Audit Appointments (PSAA) had now approved the fee variation in principle and the final fees position would be reviewed at the conclusion of the audit.

17.5          The impact of coronavirus and any subsequent changes to opinions/reporting requirements had been detailed on Page No. 27. One key thing as part of the final report was the significant area of risk in respect of plant equipment where a material uncertainty report would be issued. This was standard practice and something the Council had in its accounts as a material uncertainty; more information would be provided in the report to the November meeting of the Committee.

17.6          Pages No. 29-35, set out several COVID-19 related updates which had been put together by Grant Thornton’s Public Sector Audit team using its ‘insight tool’. The idea was that this would give the sector an insight into what may happen in the future; although, obviously, information changed quickly so it would continue to be monitored and additional ‘insights’ reported as appropriate. Page No. 36 onwards set out a general local government sector update and included non-COVID related insights which Members could read for information should they so wish. One thing that had not been included in that update was that the Redmond Review on Local Audit had now concluded – this could be shared with the Committee following the meeting – and had set out a number of high level recommendations which included: that a new regulator should be put into place; scope should be available to amend the audit fee structure as currently it was not always possible to deploy adequate resources; that the September deadline for signing off accounts should be reinstated to enable more time for the audit process; accounts should be simplified and templates reviewed; the role of the authority in recognising and reporting findings needed to be acknowledged; and recognised audit account summaries should be introduced to help the user of the accounts. The review recommendations were not law yet, but the Committee would be kept updated as the process moved forward. In response, a Member queried what the impact of the statement of accounts deadline being changed to November this year would be for next year and whether the new timeframe for the signing of the accounts would be implemented for September 2021. In response, the Grant Thornton representative explained that this year’s timescale would not have a significant impact on the work for next year. At this stage it was Grant Thornton’s intention to complete the statement of accounts work by the end of September 2021; although, there was no confirmation of the deadline yet. The next stage, in terms of the Redmond Review, was for the Ministry for Housing, Communities and Local Government (MHCLG) to consider the recommendations and they would then be formally consulted upon. It was clear from the context of the report that pace was a necessity and there was a willingness to see what could be implemented urgently but in the first instance a response was awaited from the MHCLG. It was anticipated that the September deadline would come to fruition, but a statutory process had to be followed to enable that. In terms of the changes to the value for money audit, it was confirmed that the scale fee, set initially by PSAA, did not reflect the new requirements for the work and, as such, had to be amended; an update would be provided to Members in due course which would give a flavour of the new approach.

17.7          Referring to the property, plant and equipment trigger date, a Member questioned how the external auditors were assessing the impact, and when the Council would book any potential provisions against the value of assets if COVID-19 had a negative impact in terms of recoverability given that lockdown had come into effect two weeks before year-end. In response, the Grant Thornton representative advised that this was why the report included a significant material uncertainty; all available data had been assessed at the time but there was not enough data in terms of the amount that COVID-19 would impact the value of investments, so the assumptions used by the valuers had been assessed and challenged on what had been done and why. The auditor was satisfied that the valuers had taken into account as much as they could. It had certainly been more difficult because of COVID-19 but every year the values were estimates so the process had largely not changed very much for the current year. The accounts template included a section to report ‘post balance sheet events’ and, depending on their significance, this was where items were disclosed that occurred after the year-end; those inclusions tended to be discussed towards the end of the audit process. Members were advised of the importance of drawing a distinction between a post balance sheet event and things that happened beyond the balance sheet date but had an ongoing impact.

17.8          Members thanked Grant Thornton for the clear and easy to understand report. Referring to the sector updates, a Member questioned whether the section on health and wellbeing was sufficiently covered by ‘backlog of operations/diagnosis’. In response, the Grant Thornton representative advised that this was summarised information and not an exhaustive list; however, specific observations about the information were welcomed so they could be fed back to the insights team to help with future reporting. In terms of the environment, a Member felt that opportunities had been missed to capitalise on the lower level of car use during lockdown now they had returned to normal and was of the view that the best and worst case scenarios should be shared with the consultants that were working on the Council’s climate change Agenda.

17.9          Accordingly, it was

                 RESOLVED           That the external auditor’s progress report be NOTED.