Issue - meetings

Representatives from Ernst and Young (E&Y) attended to provide an update regarding the External Audit Plan for 2019-2020. These were Janet Dawson, Hannah Lill and Adrian Balmer.

Ms Dawson outlined the key areas of risk as assessed by E&Y. 

These were:

·  Misstatements due to fraud or error

·  Incorrect capitalisation of revenue expenditure

·  Asset valuations

·  Pensions valuations and disclosures.

The first two risks noted were common risks associated with local government generally. Asset valuations would need particular attention to detail, due to the historic problems with these valuations, and due to the effects of the pandemic. The IOCS (Institute of Chartered Surveyors) had issued a statement which said that they would expect their advisors to note an aspect of material uncertainty in their valuations because of the Covid pandemic,

The Committee noted that Pensions Valuations and Disclosures had also been classed as a significant risk. This was not to be taken as indicating that the external auditors saw anything wrong with the Pension Fund or its valuations, but rather that this was an area that was generally complex to value; it was also an area that would have been affected by the Covid 19 pandemic and the volatility of the financial markets.

Ms Dawson drew attention to another key area of risk which was identified as ‘Going Concern Compliance with ISA 570’. This was a new area of focus and essentially meant that it would increase the workload of auditors in the UK when they assessed whether or not councils were financially viable. Ms Dawson had therefore considered it necessary to draw the Committee’s attention to this fact.

The effects of the Covid 19 pandemic were listed as a separate risk factor. 

Ms Dawson drew attention to the section of the papers dealing with ‘Value for Money’ where it was noted that E&Y had to consider if LBB had put in place proper arrangements to secure economy, effectiveness and efficiency in the use of its resources.

Ms Dawson highlighted page 40 of the pack which explained the ‘Materiality’ reporting levels that would be adopted by E&Y. It was noted that ‘Planning Materiality’ for 2019/2020 had been set at £5.49m. This had been calculated as 1% of the Council’s gross expenditure for the previous year which was £549m. (‘Planning Materiality’ was the amount over which the external auditor felt that a mis-statement could influence the decisions of a user of the financial statements).

The Chairman asked Ms Dawson if LBB should expect a ‘qualification’ on the accounts, and the response to this was that this was not expected.

The Chairman asked if Ms Dawson could shed light on any proposed increase to LBB’s fees as a result of the extra work involved in the audit and the closer monitoring of external auditors by the Financial Reporting Council (FRC). Ms Dawson replied that she had been in general discussion with LBB’s Director of Finance concerning this matter and talks would continue going forward.

The Chairman referred to the Pensions  ...  view the full minutes text for item 42