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Agenda item

External Auditor's Findings

To consider the external auditor’s findings 2020/21. 

Minutes:

25.1          Attention was drawn to the external auditor’s findings report, circulated separately, which Members were asked to consider.

25.2          The representative from Grant Thornton advised that the external auditors had two key responsibilities: the Council’s financial statements and issuing an opinion on the 2020/21 accounts; and value for money.  A considerable part of the report before Members focused on the findings of the audit.  In terms of the overall headlines, based on the work completed, Grant Thornton was proposing to issue an unqualified audit opinion i.e. a ‘clean’ opinion.  It was important to highlight that an Emphasis of Matter paragraph would be included – this was used to draw attention to something of significance within the accounts; in this instance, it related to the valuation of assets.  The Council had commissioned an external valuer to undertake valuations and the report as at 31 March 2021 had highlighted a material uncertainty.  A valuer used the market to identify similar sales and market data in order to assist with valuations and, in this case, the information supporting the valuation of the Council’s car parks was not reliable enough so there would be specific reference to that uncertainty within the audit opinion.  In terms of value for money, this had been covered under the previous Agenda Item in relation to the management assurance statements and Grant Thornton would be starting work on that over the coming months after the accounts audit had concluded.  Whilst adjustments had been identified, the representative from Grant Thornton wished to put on record her appreciation to the Finance Manager and her team for their continued support over the course of the audit process.

25.3          Moving on to the detail of the report, Members were informed that the materiality thresholds, set out at Page No. 6 of the report, would be familiar from the audit plan and had not been changed.  Anything above the triviality threshold of £37,000 was reported as an issue.  Pages No. 7-10 of the report outlined the details of the significant risks identified within the audit.  Specific attention was drawn to the risks at Pages No. 9-10 of the report which related to the material uncertainty regarding the valuation of the car parks and the valuation of the pension fund.  Members were advised that the car parks had not been used for a significant amount of time during the year due to the pandemic, therefore, there was no real data to create an estimate as would be the case in a normal year.  In terms of the pension fund net liability, Grant Thornton relied on assurances from the Gloucestershire Pension Fund Audit Team in relation to that and was awaiting receipt of assurance from the Pension Fund Auditor – these were expected in the coming weeks and were required before the audit was finalised.  Page No. 11 of the report set out new issues and risks identified this year and a major change for the Finance Manager and her team was the administering and financial reporting associated with the COVID-19 grants.  The team assessed each individual grant received and whether the Council had control over it as that impacted how it was treated in the accounts.  As set out in the right hand column, there had been a slight error in the presentation of this within the financial statements which had been amended.  Pages No. 12-14 of the report set out the key judgements and estimates in the accounts.  Page No. 16 of the report reflected a significant change this year in terms of an adjustment to the going concern.  In the past, this had focused on financial sustainability and the ability of the Council to continue to operate for at least two months after the accounts had been finalised.  There was now an emphasis on service provision which had resulted in a huge shift in relation to the going concern work as Grant Thornton was very certain Tewkesbury Borough Council would be providing services for at least 12 months after the date of signing.  As referenced earlier in the meeting, the Auditor’s Annual Report would be brought to the Committee in December.  Two significant weaknesses had been identified which related to the Council’s arrangements for securing financial sustainability into the medium term and the Head of Internal Audit limitation in scope opinion as outlined at Page No. 19 of the report.  Page No. 20 of the report set out the independence and ethics which were standard disclosures similar to previous years.  Various appendices were attached which detailed specific adjustments above the responsibility threshold and attention was drawn to Page No. 24 of the report in relation to the grants amendment which had already been mentioned.  Page No. 28 of the report gave information on adjustments identified during the prior year audit which had not been made within the final set of 2019/20 financial statements and needed to be considered in terms of their impact on the 2020/21 financial statements.  Specific reference was made to the net pension liability which had been adjusted in-year. The actuary had provided an estimated report and an actual report and, although there was movement between the two, it was not significant in financial terms and did not require an amendment to the accounts.  Fee details were set out at Page No. 29 of the report and the management letter of representation and the audit letter in respect of the delayed value for money work were attached at Pages No. 30-32 and Page No. 33 respectively.

25.4          A Member asked for an explanation of the impact of COVID-19 on the assessment of materiality thresholds given that there was a lot more money being received by the Council than in previous years due to the government grants.  The representative from Grant Thornton explained that COVID-19 and its impact was considered as part of the calculation of materiality; however, the Council treated the majority of grants on an agency basis which meant they were not named on the comprehensive expenditure statement and were instead included further down as money administered on behalf of the government.  The materiality thresholds were fairly consistent with the previous year as there had only been small changes to grant income in the accounts.  The Member asked what specific risks were associated with agency money and was informed that the risk itself was not necessarily any greater than with normal grants administered by the Council – they were administered in a very similar way and the conditions set by the government were so strict that there was not a lot of judgement involved.  A Member noted that the deadline for the value for money work had been extended until December and she questioned what impact that would have on next year’s audit.  In response, the representative from Grant Thornton explained that it was not expected to have an impact and the normal planning work would be done around February/March. 

25.5          The Head of Finance and Asset Management wished to comment on the production of the accounts which was a significant task for local government at the best of times and COVID-19, along with changes to ways of working over the last 18 months, had only added to this.  There had also been changes in staffing and significant procedural amendments; however, regardless of this, the accounts had been provided in May 2021, two months ahead of the rescheduled date.  To then receive an audit findings report with only minor adjustments and a recommendation for an unqualified opinion was a fantastic achievement and he was very lucky to have such a dedicated Finance team which was essential to producing good quality accounts.  The Chair agreed that the team had done a brilliant job against the difficult backdrop of the pandemic and he thanked them on behalf of the Committee.

25.6          It was

RESOLVED           That the external auditor’s findings 2020/21 be NOTED.

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