Agenda item

To review and note the External Audit Results Report.

The EA introduced the report and noted that it had been presented at the December 2022 meeting with an expectation to sign-off accounts by Christmas, though it was frustrating that it had taken another nine months to achieve sign-off. He added that the Chairman of the Committee had been granted delegated authority to sign-off the accounts, but given the time that had passed, it was appropriate to provide a further update that appropriate assurance could be given. It was noted that over this period a high number of adjusted differences had arisen. The EA stated that new adjustments were listed in the report, and efforts had been focused on resolving issues with property, plant and equipment, and grant income areas, with the first matter relating to the fixed asset register which had required significant work to answer audit queries. He added that whilst the necessary information was now available, there was a recommendation for further improvements to ensure that the fixed asset register was fit for purpose. It was noted that some officers responsible for financial reporting in 20-21 had left the organisation which had added to delays, but only closing procedures were left to complete, including an update on the pension fund liability. Following which, EY would be able to provide an unqualified audit opinion on the financial statements and a value for money rating.

Questions and Discussion

       i.          The Chairman referred to issues with the pension fund liability, and asked whether this could be quantified and whether the position would change further. The EA replied that he was unable to quantify the situation as EY were still seeking this assurance, but he could provide context. He added that ordinarily the pension fund was valued by the actuary on a three year cycle, with March 2022 being the most recent valuation, but it had been found that assumptions made as part of the valuation process had changed, therefore checks were required to determine whether the fund had been under or overvalued. It was noted that the amount of over or undervaluation was key to determining the level of assurance provided. The Chairman noted that the fund was run by NCC, and therefore questioned how much influence NNDC had over the fund. The EA replied that the actuary acted as experts for NNDC, but the Finance Team still had to understand the assumptions that had been made and what impact this would have on the Council’s accounts. He added that rather than being a funding issue, it was more about balance, as the Council would not be required to pay-out its full liability, but did need to understand how the balance was funded.

      ii.          Cllr C Cushing stated that pension liabilities were the obvious question, and asked whether this was an accounting issue, or whether the Council would be required to find additional funding. The EA replied that it was an accounting rather than a funding issue, but the purpose of the tri-annual review was to update funding levels. He added that if the accounting differences were not material, then the impact would be limited and assurance could be provided relatively quickly.

     iii.          Cllr C Cushing referred to comments in the report that suggested external auditors had not been able to progress work due to limited officer availability, and asked whether NNDC resourcing impacted the external audit process. The CE replied that the Council were currently recruiting for a Chief Technical Accountant, with further requests made for an additional accountant. He added that there had been resourcing issues in the Finance Team over the past year, but efforts were being made to address requirements going forward.

    iv.          Cllr C Cushing stated that he was under the impression that there were more audit differences this year than last, and asked whether this was valid and whether it was a concern. The EA replied that this was the result of differences with property, plant and equipment related to the fixed asset register, with issues identified covering a number of assets with a multiplying effect. He added whilst the number of differences was greater, they were related to a specific area of the fixed asset register, so as long as Members were comfortable that remedial actions were adequate, there was no immediate need for concern. Cllr C Cushing suggested that there were learning opportunities for the Finance Team, and asked whether these changes would be taken on board for the following year. The CE replied that staff were already updating the fixed asset register, taking into account EY’s recommendations, and was therefore confident that it would not be a significant issue going forward.

      v.          The Chairman asked whether officers were confident to proceed with EY’s recommendations, to which the CE replied that with the resolution of the pension fund issue, the Council would be in a position to sign-off the 20-21 accounts by the end of the week, with all other issues addressed.

    vi.          The Chairman referred to the audit fee and asked whether the Council had budgeted for the increase in costs, to which the CE replied that it was not a cost that could be challenged, and he was therefore confident that provision had been made.

RESOLVED

To review and note the External Audit Results Report.