Agenda item

This report presents the draft London Borough of Brent External Audit Plan 2023 - 24.

The Chair welcomed Sophia Brown (Key Audit Partner, Grant Thornton) to the meeting and invited her to introduce the External Audit Plan providing an overview on the planned scope and timing for the 2023-24 audit process.

In presenting the report the following key areas were highlighted:

·             The key matters identified in terms of both the national and local context relating to the Council’s current financial position in terms of the General Fund, Capital Programme, Housing Revenue Account (HRA) and Dedicated School Grant (DSG) and impact of the ongoing economic pressures being experienced.

·             The scope and timescale of the planned audit and outline provided of the significant risks identified (along with the reasons and key aspects of the proposed response) which included revenue recognition (rebutted), management of override controls, valuation of land and buildings, valuation of council dwellings and valuation of net pension fund liability.

·             The approach identified towards materiality, which at the planning stage of the audit had been set at £16.1m for the group and £16m for the Council equating to 1.5% of the prior year gross expenditure.  The Committee were reminded that external audit would be obliged to report uncorrected omissions or misstatements other than those which had been identified as “clearly trivial” with that level set at £0.8m.  Whilst these levels were the same as 2023-24 the assessment of materiality would be kept under review throughout the audit process with the Committee advised of any adjustments, should they be required.

·             The approach adopted in relation to the Group Audit scope and risk assessment, which had not identified any changes from the previous year.

·             The additional audit responsibilities identified including review of the narrative report and Annual Governance Statement to ensure they met CIPFA requirements along with outline of the IT audit strategy.

·             The response and progress identified against prior year audit findings and recommendations, as detailed within pages 20 – 24 of the report.

·             The approach towards assessment of the arrangements to secure Value for Money as detailed on page 26 of the report with the risk assessment not having identified (at this stage) any significant weaknesses.

·             The background to the audit fees which, whilst having increased to £503,089 (with an additional £12,550 for the ISA 315 work) for the 2023-24 audit, it was noted had been determined in accordance with the scale of fees specified within the current PSAA contract.

·             The planned approach outlined towards assessing the work being undertaken in preparation for implementation of IFRS 16 (Leases & related disclosures), as detailed on page 31 of the report.

·             The assurance provided in relation to the independence of the auditor and audit services.

Having introduced the report the Committee was then invited to raise any comments/questions, which are summarised below:

·             Whist noting the scope of the audit, the opportunity was also taken to remind the Committee of the importance of its role and responsibilities in relation to ensuring the proper arrangements remained in place for the conduct of the Council’s business and the safeguarding and proper accounting of public funds.

·             In response to a request for further detail in relation to the approach being adopted within the audit towards the concept of materiality and triviality, Sophia Brown outlined the process under which the assessment of materiality had been undertaken, as detailed within pages 9 – 11 of the report.  The Committee were advised that whilst the audit procedures were designed to identify misstatements that were deemed to be material to the audit opinion on the financial statements as a whole, any unadjusted misstatements or omissions of a lesser amount would also be reported to the Committee to the extent there were identified through the audit work unless classified as trivial.  As further clarity, the Committee was advised that this definition included those matters that were clearly inconsequential, whether taken individually or in aggregate and whether judged by any quantitative or qualitative criteria.

·             Further details were sought on the basis of the risk identified in relation to the management override of controls and to what extent this assessment had been influenced by the issues identified within other local authorities nationally.  In response, Sophia Brown advised that whist aware of the issues being faced by other local authorities the approach adopted within Brent reflected that followed in previous years, focussed around the non-rebuttable nature of the risk presumed under ISA (UK) 240 with the main focus  on journals, management estimates and transactions outside the course of normal business for both the Council and group.  This would involve not only an assessment of the design effectiveness of management controls but also the testing of a range of journals using a risk-based approach in terms of their selection.

·             In response to a further query regarding the basis of the risk identified in relation to the valuation of Council dwellings, the Committee was advised that this reflected the significant size and nature of the year end valuation for inclusion in the financial statements and its sensitivity to changes in key assumptions rather than any specific concerns identified. The approach adopted would include an evaluation of the management processes and assumptions used as the basis for the calculation and review of the method undertaken by the valuation expert including sample testing of the detailed property valuations.

·             Following on from the update provided on the progress in addressing a recommendation made in the previous year’s audit relating to the treatment of intangible assets on the fixed asset register, further details were also sought on progress with the overall review of the Council’s Asset Register and Property Strategy.  In response, the Committee were advised of the progress made in development of the updated Property Strategy which had included an assessment of the Council’s commercial assets and was shorty due to be presented to the Council’s Resources & Public Realm Scrutiny Committee for review prior to the strategy being finalised.

·             In considering the approach identified towards the assessment of the Council’s Value for Money arrangements including the focus around financial sustainability, details were sought on the extent to which this would be focussed on future as well as current activities. In responding Sophia Brown advised that whilst the process would involve an element of forward focus e.g. plans to increase the balance on the HRA the main assessment would, by its nature, need to be based on activities during the current audit period.

As no further issues were raised the Chair thanked Sophia Brown for the update provided and it was RESOLVED to note the content of the Draft 2023-24 Audit Plan with the Committee advised that the Draft Pension Fund Audit Plan 2023-24 was due to be presented to the next Committee in March 2024