Agenda item

To receive a report from Grant Thornton (External Auditors) providing an update on the 2021/22 Audit Findings.

The Committee then moved on to consider in detail the report, introduced by Ciaran McLaughlin, Grant Thornton External Audit, outlining the key issues and findings in relation to the current position on the statutory audit of the Council’s 2021-22 Statement of Accounts.

In considering the report the Committee noted:

·               In terms of journals, debtors and creditors, this work had been completed subject to final review. Income and expenditure testing was being discussed with management but these issues were not expected to result in the need for any significant adjustments.  Subject to completion of this process and resolution of the accounting requirements in relation to highway infrastructure assets it was anticipated that an unqualified audit opinion would be issued.

·               In terms of the initial Value for Money assessment no significant weaknesses had been identified to date, with the final outcome due to be reported to Committee once completed.

·               Moving on to materiality, having been advised of the approach adopted and revisions in relation to the financial statements and performance members were advised that no major issues had been identified in terms of the assessments and qualitative factors considered.

·               The review undertaken as part of the audit in relation to the following areas of significant risks identified within the Audit Plan:

Ø   Fraud in expenditure recognition – whilst a projected misstatement had been identified in relation to an insurance policy this had been recorded on the unadjusted error schedule and at this stage no other issues had been identified in respect of the risk identified;

Ø   Valuation of land and buildings – whilst identifying a control point in relation to the Council needing to obtain a formal valuation certified by their valuer when applying indexation to determine the year end valuation of land and buildings this was not expected to have any significant impact and no other issues had been identified to date in relation to the risk identified;

Ø   Valuation of pension fund net liability – with no significant issues based on the revised IAS 19 report identified in respect of the risk identified;

Ø   New Oracle Cloud system implementation – subject to the internal control issues identified in the audit Action Plan attached as Appendix A to the report which included recommendations in relation to the segregation of duties; audit logging; monitoring of scheduled processes and secure maintenance of project documents on which management actions had already been identified, no other issues had been identified;

Ø   Valuation of Council dwellings - whilst identifying a control point in relation to the Council needing to obtain a formal valuation certified by their valuer once indexation had been applied, no other significant issues had been identified to date;

·               The key estimates and judgements considered as part of the enhanced audit requirements, as detailed within Section 2 of the report.

·               The assessments provided in relation to the Council’s Internal Control mechanisms and accompanying recommendations and Action Plan detailed in response to the issues identified during the course of the audit.  These included:

Ø   Income Population Listing (High Risk);

Ø   Review of opening & closing balance (High Risk);

Ø   IT Audit Control Findings re Oracle Cloud (High Risk);

Ø   PPE Valuation findings;

Ø   Oracle New System Implementation - reconciliation

·               The matters which had been identified as significant for discussion with management during the course of the audit, which had been focussed around:

Ø   the impact of the war in Ukraine on the Council’s budget and cost of living crisis, with it having been assessed that the Council had established reasonable arrangements to mitigate against the associated risks identified;

Ø   Value of infrastructure assets and presentation of gross cost and accumulated depreciation in the PPE note – with a formal update of the CIPFA code awaited in order to review compliance;

·               The communication requirements identified during the audit process with sufficient audit evidence having been provided to enable a conclusion that no material uncertainty in relation to going concern had been identified and that use of the going concern basis of accounting in the preparation of the financial statements was appropriate.

·               The confirmation and assurance provided in relation to the independence and ethical standards of the auditors.

The Chair then invited the Committee to raise questions on the report, with the responses summarised as follows:

·               In response to a query relating to the adequacy of internal controls around implementation of the Oracle Cloud system, members’ attention was drawn to the management actions identified within the Audit Action Plan included within Appendix A of the report.  The actions being taken to address the issues identified in relation to the segregation of duties, audit logging and monitoring of processes had been acknowledged with further assurance provided in relation to the level of testing undertaken on journals (particularly those identified as high risk areas) and no issues having been identified as a result.  It was also recognised that initial implementation had been based on a “lift and shift” approach from the previous system with further reviews now underway in relation to use of additional functionality taking account of cost, system performance and dependencies.  Confirmation was also provided that similar issues and risks in Oracle Cloud implementation had been identified within other local authorities when switching to the new system.

·                In response to a query regarding the valuation of dwelling, land and buildings, it was confirmed these assets had been subject to valuation by a professional valuer.

·                A query was raised on the valuation of properties and to what extent expert valuers were factoring in the issue of climate change.  Members were advised this had been recognised as an issue in terms of accounting requirements with initial guidance having been issued in relation to Financial Statement reporting and the main focus on Value for Money considerations.  Confirmation was provided that these issues had been raised with the valuers to ensure they were following the relevant guidance and it was anticipated that this focus would increase as part of the asset valuation process and considerations in relation to remediation works.

As no further issues were raised the Chair thanked officers and the External Auditors for their efforts and it was RESOLVED to note the contents, key issues and findings contained within the Audit Findings report.

In terms of next steps, the Committee were updated that a Letter of Representation from management would be required before the audit and Statement of Accounts could be formally signed off.   As completion of the audit had needed to be paused, however, the Committee was asked to consider making the following recommendation to the Audit & Standards Committee in relation to the sign off process, which it was RESOLVED to agree:

On the basis of the discussion and comments made at the Audit and Standards Advisory Committee, the Audit and Standards Committee agrees authorising the Chair of that Committee to sign the required letter of Representation and Statement of accounts, which are expected to be unqualified, subject to a written assurance being provided that all outstanding matters and adjustments contained in the audit findings report had been made. If there were any material adjustments required following the resolution of the infrastructure assets issue, these would be brought back to the next Committee for sign off and also sent to the Chair of the Audit and Standards Advisory Committee and the Independent Advisor to the Committee.