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Agenda item

External Audit Results Report 2018/19

The National Audit Office’s Code of Audit Practice (the Code) requires the Council’s external auditors to report to those charged with governance – the Audit Committee – on the work they have carried out to discharge their statutory audit responsibilities together with any governance issues identified. The report TO FOLLOW summarises the findings from the Ernst and Young 2018/19 audit.

Minutes:

The Council’s external auditors, Ernst & Young, submitted a report which detailed the outcome of their 2018/19 audit of the Council’s Statement of Accounts. The representative of Ernst and Young reported that they still needed to close the file on the audit of the Council’s 2018/19 accounts however they would sign the unqualified audit opinion on the financial statements.

 

The two main differences from the draft Financial Statements related to net pension liability and consolidation of the group accounts, however the External Auditor was not aware of any issues.  They would bring back to the Committee any reporting misstatements, however the only anticipated change was to the reporting threshold.

 

The Pension Liabilities issue was linked to the recent “McCloud Ruling” linked to age discrimination in the pension fund and this had led to an additional £840k being added to the Council’s pension liabilities.  The level of risk was required to be noted and the report and impacts had been reviewed.  Other areas such as the risk of fraud, valuation of property, plant and equipment had also been reviewed.

 

Changes, such as the implementation of IFRS 9 Financial Instruments and IFRS 15 Revenues from contracts with customers, had not raised any concerns.

 

The Committee queried the changes due for IFRS 16 Leases next year.  The External Auditor responded that this would impact on the way that Leases would be accounted for and potential bring more things on to the balance sheet.  Setting a suitable de minimis amount for the consideration for chattels such as photocopiers was given as an example of the potential challenges.

 

The Committee asked about Value for Money judgements and the level of risk related to partnerships and whether using public or private sector partners and shared services had an impact, for example with the levels of inherent risk.  They were informed that the arrangements and agreements in place often had more of a bearing than the structure.  Members then broadened this to look at how resource sharing arrangements, including expenses, were scrutinised and managed.  The External Auditor noted that their scope was limited to the governance over operations as a whole; therefore they would monitor how the Council dealt with the outcomes of the governance report.

 

Members queried what a reasonable timescale for implementation might be and why there was no note on materiality or the forgone income due to the Governance of Council owned companies report.  The External Auditor responded that the materiality issue only applied to financial statements and that the Value for Money was not a quantitative driven exercise but linked to risks which were significant to the Council as a whole.  As such they would look at the arrangements in place and although it was non-statutory would expect the report to be dealt with quickly and efficiently.

 

The External Auditor reported that as part of the process they had reviewed all 77,542 journal postings using a system which had then highlighted those to check manually.  This had resulted in 48.9% by value being manually checked.  In response to a query the Committee was informed that the working papers and systems were in good condition, being both thorough and consistent.  On occasion information had had to be requested in a different format however the responses from the Council Officers were fast and efficient which was important with the accelerated audit timetable.

 

Finally the Committee sought reassurances as to the level of political independence of the External Auditors.  The External Auditor responded that the PSAA terms of appointment included restrictions on the roles that auditors could hold.  This included activity in the county, for example as school governors, and formed part of the officer code of conduct which required a positive assertion on an annual basis.  They could not however restrict party political membership.

 

RESOLVED that the report of Ernst & Young detailing their approval of the 2018/19 accounts, be noted.

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