Agenda item

To consider the external auditor’s report on progress against planned outputs.  

31.1          Attention was drawn to Grant Thornton’s report, circulated at Pages No. 18-48, which set out the audit findings for the year ended March 2020. Members were asked to consider the report and progress against planned outcomes.

31.2          The representative from Grant Thornton explained that the report set out the audit findings and served two purposes: to summarise the outcomes of the audit work for the 2019/20 financial statements; and to summarise the work on the value for money conclusion. The headline messages were set out on Page No. 20 and as alluded to at the last Committee meeting, it was clear that the COVID-19 pandemic had a significant impact on the normal operations of the Council. An audit plan addendum had been issued in May to identify different risks arising from COVID-19. Despite having to operate virtually, the external auditors were pleased with how the audit had progressed and they offered their thanks to the Finance Manager and her team for their assistance in ensuring the audit went well. When the report had been written, the audit was 85% complete and good progress had been made on clearing the outstanding areas of work since, with the only outstanding areas being housing benefit information; three investment confirmations from other local authorities; some documentation from the IT department in relation to control work; and an assurance letter from the external auditor for the Gloucestershire pension fund to confirm the operation of the fund in relation to Tewkesbury Borough Council. The audit itself had identified very few issues and only a small number of audit adjustments were required, none of which were of a size material to the Council. In addition, there were a small number of disclosure items that management had agreed to process. Based on the work completed, it was anticipated that an unqualified audit opinion would be issued. Due to some of the uncertainties of COVID-19 an ‘emphasis of matter’ would be made which drew attention to the property valuations material uncertainty because of the conditions that existed at that point in time. In terms of the value for money conclusion, the auditors had looked at the Council’s arrangements and concluded it had adequate arrangements so issued an unqualified opinion. In respect of statutory duties, while the external auditors could issue an opinion in line with the statutory deadline, the audit could not be closed, as a submission had to be made to the National Audit Office on the whole accounts and this could not be certified as complete until an assurance statement had been submitted but the guidance on that statement was needed before it could be completed. In drawing attention to Page No. 26, there were two items highlighted as being ‘in progress’: IFRS 16 (a new accounting standard) – the Council and the external auditors disagreed as to whether this should be included as it was a standard that had been issued but not yet adopted, and further technical consultation was being sought on that; the Committee would be updated once the way forward was ascertained. In addition, last year’s audit findings report had identified a small unreconcilable item in the cashflow work and a recommendation had been included for this to be resolved. The Council had commissioned additional tools from the Chartered Institute of Public Finance and Accountancy (CIPFA) and, in doing that exercise, had identified some analysis of cashflow that needed to be amended in both the current and prior year financial statements which had resulted in material changes and therefore a ‘prior period’ restatement had been required - work on that had not been concluded at the time of writing the report but the external auditors were now satisfied with the approach taken.

31.3          During the brief discussion which ensued, a Member expressed the understanding that IFRS 16 was a revision of an existing standard rather than a new one and he questioned whether there was an impact on the financial statements of the Council. In response, the external audit representative explained that this was a new leasing standard which required the Council to include operating leases e.g. rental for assets when those assets were not on its balance sheet. The impact would depend on the nature and number of those leases. It had been recognised, in light of the COVID-19 pandemic, that the formal inclusion of the standard in the CIPFA Code would be deferred for a year but it was Grant Thornton’s view that it was still a standard that had been formally issued and therefore should be referenced. The Finance Manager confirmed that Officers had done a lot of work on this prior to COVID-19 and were happy there would be no material impact.

31.4          The Chair thanked the external auditors for their work, and it was

                 RESOLVED           That the external auditors progress report be NOTED.