Agenda item

The external auditors (Ernst & Young) were represented by Janet Dawson who explained that the purpose of the E&Y Audit Briefing Paper was to try and facilitate the completion of the 2019/2020 audit of accounts and to provide a status report. The purpose of the briefing paper was also to explain where delays in the sign off of the 2019/2020 accounts had occurred and to focus the energies of the Committee in supporting the finance function of the Council so that the audit could be completed.

Ms Dawson said that no further progress had been made recently and that E&Y were waiting for the revised statement of accounts. She referenced the national issue that was affecting all councils and causing delays at the moment and this was the matter of how councils valued infrastructure assets. Ms Dawson said that it was her understanding that the Department for Levelling Up was going to issue a statutory instrument which would allow Councils to correctly value infrastructure assets and this would allow for revised accounts to be submitted by all councils in the new year.

The Chairman wondered how councils could be expected to value assets such as roads when in reality they were a cost to the Council. Ms. Dawson replied and said the Council should record what they spend on those assets and then take into account depreciation. If the Council enhanced the road, then that should be recorded. It was the case that councils (nationally) were not recording their highway assets properly. One of the few organisations that were valuing highway assets correctly was TfL.

The Chairman wondered what the purpose was in doing this. Ms Dawson explained that there was a view in the Treasury that the Government should be able to look across the whole of government accounts and be able to understand the correct value of its infrastructure assets. She commented that the value of this accounting process to councils was a matter of ongoing debate. 

A Member referred to the external auditor’s comment that if matters could not be resolved in a timely manner, then a Schedule 7 report may be issued. He referred to previous concerns that were raised by Ernst and Young with respect to the Council's lack of responsiveness to queries and also to the lack of capacity within the Council’s Finance Team. He asked if Ms Dawson felt assured that these issues had been resolved. She replied that she still did not feel fully assured. E&Y were waiting for the accounts to be revised and she still had concerns at what she perceived was a lack of resource in the Finance Team, particularly as there was a backlog of work that had accrued in finalising the accounts. The Head of Corporate Finance & Accounting responded and explained what was being done by the Finance Team to deal with the backlog of work. The Member said that he would be speaking to the Director of Finance to obtain assurances that sufficient resource existed to deal with the backlog of work and to finalise the auditing of the Council’s accounts.

Ms Dawson explained that at the moment her focus should be on finalising the accounts for 2021/2022, so having to still deal with the finalisation of historic accounts made matters more difficult. She suggested that the Council use additional resources and set up another team to deal with the backlog of work. This would probably be a small team of 2/3 specialists. Ms Dawson stated that if Ernst & Young used their statutory powers and made a statutory recommendation, then this would mean the matter would need to be considered by Full Council and a response received within 30 days; the matter would also be referred to the Secretary of State. The Head of Corporate Finance & Accounting assured that additional resources would be brought in as required to complete the work within a reasonable time-scale. 

It was noted that the external auditors had first mentioned the possibility of the use of Schedule 7 in November 2021. Ms Dawson said that her outlook was more positive now than at that time and she was less inclined now to pursue the idea of issuing a Schedule 7, but she still remained very concerned.

It was asked why the pension fund had been red flagged by the external auditors, because the fund was 110% funded. Ms Dawson explained that this was because the opinion of the external auditors had not yet been signed off. A Member commented that the next meeting of the Audit and Risk Management Committee was not scheduled until March 2023. She asked if it would be possible to have a meeting before this, (in January 2023), so that progress could be reviewed. The Chairman said that he would be reluctant to do that just for a progress report. Janet Dawson was allowed to comment on this by the Chairman and said that she would encourage the Committee to meet earlier if they were in a position whereby the 2019-2020 accounts could be signed off. This would allow everybody to move on. The Head of Corporate Finance & Accounting agreed with this. A Member suggested that if an early meeting was going to take place it should occur just before a Full Council meeting, so that Full Council could agree to the signing off of the accounts.

Resolved that the Ernst and Young audit briefing paper be noted