Agenda item

The Council’s External Auditor (Grant Thornton) will submit their Annual Audit Letter summarising the key findings arising from the work undertaken for the Council and its subsidiaries for the year ended 31st March, 2020, detailing the reports issued including those submitted to Council on the 26^th November and this Committee on the 28^th October, 2020, the audit fees charged (including the way these have been calculated) and outlining the scope of the audit and the arrangements for undertaking additional work for which separate fees were applicable.

The Council’s External Auditor (Grant Thornton) submitted their Annual Audit Letter summarising the key findings arising from the work undertaken for the Council and its subsidiaries for the year ended 31^st March, 2020, detailing the reports issued including those submitted to Council on the 26^th November, 2020 and to this Committee on the 28^th October, the audit fees charged (including the way these had been calculated) and outlining the scope of the audit and the arrangements for undertaking additional work for which separate fees were applicable.

Mr G Mills, representing the External Auditor, explained the following:

·         this was a high-level summary of the ISO 260 report previously submitted and was indeed the last annual audit letter that would be submitted as, because of a change in the way audits were to be undertaken, it was to be replaced by an auditor’s report

·         a clean unqualified opinion had been issued on the Council and the Group’s financial statements on the 30^th November, 2020.  This was particularly pleasing given that over half of Local Authority Audits had not been singed off by the deadline date

·         there had been an emphasis of matter paragraph included within the report in respect of the uncertainty over the valuations of the Council’s land and buildings and the Authority’s share of the pension funds property investments given the Coronavirus pandemic.  This was, however, fairly typical of a number of audits undertaken throughout the year

·         in relation to the Whole of Government Accounts (WGA) review, this was still ongoing the work for which was now largely completed.  It was hoped that these would be completed by the end of the month, but this was dependent upon the resolution of an IT issue which was preventing the accounts being uploaded.  This was a national issue rather than being Barnsley specific.  He also reported that it was fairly typical for the WGA audit to be undertaken a month or so after the main audit.  Once this was concluded the audit certificate would be issued which would formally close the 2019/20 audit.  The External Auditor was satisfied, however, that the WGA work had no bearing on the opinion issued on the main accounts and the Value for Money Conclusion

·         the Auditors were satisfied that in relation to Value for Money arrangements the Council had put in place proper arrangements to ensure economy, efficiency and effectiveness in its use of resources

·         the Appendices highlighted a summary of the reports issued together with the overall audit fee and the variation for the 2019/20 year. 

·         Arising out of the above, there was a discussion of the fees and additional charges within the context of the additional work that had been undertaken. 

o   An explanation was provided of the way in which fees were set together with the rationale for the amounts charged. 

o   In relation to the variations of fees against the PSAA scale fee, these were discussed with the Service Director Finance/Section 151 Officer who could either agree or disagree with the proposal.  Grant Thornton then smutted them to PSAA informing them whether or not the Section 151 Officer agreed or disagreed.  Ultimately, PSAA reached a view on whether to approve or reject the fee variation.  Whilst the fee variations looked significant, Mr Mills believed that these needed to be considered in the context of where scale fees were now compared to 5-10 years ago – on average 50% lower.  Additionally, in the last 3-4 years the expectations from the Financial Reporting Council (the External Auditors Regulatory) on audit quality and documentation had rightly increased significantly.  This had resulted in significant levels of audit challenge and work done particularly in respect of Property, Plant and Equipment and Pension balances in the accounts.  Again, this was set out in the Redmond Review report.  It was also pointed out that the Ministry of Housing, Communities and Local Government had recently made £15m available to support local authorities with expected increases in audit fees for 2020/21.  In relation to the 2020/21 audit fee, it was anticipated that similar levels of variation would apply given the Financial Reporting Council’s continued focus on Property Plant and Equipment and Pensions, increasing areas of focus in respect of other estimates and judgements (the new ISA540), testing for fraud and also the revised Value for Money Conclusion audit work.  The fees would be discussed with the Service Director Finance/Section 151 Officer shortly

o   It was anticipated that a formal decision on the variation of fees would be made towards the end of February.  Grant Thornton and most other auditors within the sector had been highlighting the additional work undertaken and PSAA had been discussing with CIPFA and the Ministry of Housing, Communities and Local Government the implications of that.

Mr Mills asked to place on record this thanks and appreciation to the Service Director Finance and his staff for the work they had undertaken in order to meet the deadline of 30^th November, 2020.  The Chair reminded Members that he had made similar comments at the Council meeting on the 26^th November, 2020 when he had commented the work of both Council Officers as well as that of the External Auditor.

Written responses to questions asked by Members of the Committee were provided as follows (where not referred to above):

·         The fact that well over 50% of Local Authorities had not had their accounts singed off by the required deadline reinforced the view that Grant Thornton had performed to a very high standard in terms of the timetable

·         In relation to training provided on financial statements and annual reporting, it was noted that annual accounts and financial reporting workshops were held for local authority clients.  Separate ones were provided for NHS clients.  These typically took place in February and were attended by client contacts at Deputy Section 151 Officer and Chief Accountant level and were well received by clients.  BMBC colleagues were invited and were always well represented.  Invitations for the 2020/21 client workshops had been issued and it was anticipated that BMBC staff would once again be in attendance

·         The national 2020/21 accounts and audit timetable hadn’t been finalised yet, however, given the backlog of 2019/20 audits still ongoing, the impact of home working, the small pool of public sector auditors to draw from (all issues highlighted within the Redmond Review Report), it was very unlikely that the audit date would return to 31^st July.  There was a suggestion that this could be 30^th September as reported above.  Clearly Grant Thornton would do their best to work to whatever deadline was issued, however, this would be dependent upon their overall resourcing position as a national public sector team, their ability to perform appropriate audit planning by the end of April across the client base and the delivery of the NHS audits, prior to commencing the local government year-end audits (again, all the challenges flagged by the Redmond Report)

RESOLVED that the Annual Audit Letter be received.