Agenda item

To review and note the External Auditor’s Annual Report for 2021 - 2023 and the accompanying Auditor’s certificate.

The Chair invited the External Auditor, Mr Riglar to speak to the Committee on this item.

The External Auditor explained that since he attended Committee in September back stop dates have been put in place for the auditing of the 2021/22 and 2022/23 accounts. These will be given a disclaimed report based on the statutory instrument.

100s of Councils are in a similar position and this is not unique to NNDC.

Report includes:

·       Executive summary – local and national context.

·       Legislation gives a mechanism to sign off the accounts and conclude the audit process, what it doesn’t do is remove the responsibilities under the auditing standards. Minimum procedures are required in order to provide a disclaimed opinion. 

·       Work plan – limited procedures completed to identify risk.

·       Results and Findings – high level observations of the statement of accounts, no detailed work has been carried out.

·       Value for money – no change in the findings since July GRAC meeting.

·       Appendices – set out other requirements regarding reporting.

Cllr Vickers asked for further clarity to be provided as to the risks and context involved in the statements on Page 50 and Page 52. Page 50 stated that there is a weakness in proper arrangements for timely financial reporting and Page 52 of the report  stated that the External Auditors are not satisfied the Council has made proper arrangements for economy efficiency and effectiveness in use of its resources for the year ending 2022/23.

The External Auditor responded to say these statements are linked to the production of the accounts and are associated to the External Auditors’ Value for money responsibilities. The National Audit Office set three high level areas and a number of sub criteria on which the External Auditor must report. One of these areas is the Council’s arrangements for preparing and publishing financial statements. Capacity issues within the Council meant that financial statements for 2021/22 and 2022/23 were not published in line with statutory regulations. What is more important is the Council has addressed their weaknesses with regard to this as a number of accounts have now been produced in a relatively short space of time and this negates the need for further escalation of this issue.

The External Auditor was confident that this issue has now been resolved.

Cllr Cushing asked for an understanding on how much work the External Auditors had completed to write the report and whether this provided sufficient assurance moving forward.

The External Auditor confirmed that an audit of the financial statements had not taken place. However, due to the cross over with value for money arrangements and one of the sub criteria relating to financial reporting, minimum procedures have been completed to give some level of assurance over the arrangements that are in place.  The statement of accounts have had basic arithmetic checks carried out, they have been checked to the last set of audited accounts to ensure that the figures have flowed through as would be expected. A comparison has been completed to the CIPFA disclosure check list

There are three levels of assurance – One is internal assurance through an adequately resourced finance team and the statement of accounts being a prominent document within the organisation – these have both been confirmed.  The second level is then the checks carried out by the Internal Auditors and the third level is the external auditors carrying out checks. It is the first two levels of assurance where the committee should focus their attention. External audit should then just come in a verify the procedures that are in place.

The Independent Person asked what actions the Council should take on the back of the report and what the risks were for the Council of having a disclaimed report?

The External Auditor explained that there would be consequences for those Council’s who are unable to meet the backstop dates for preparing their statement of accounts, but it is not yet known what these consequences might be.

The Director of Finance updated the Committee that the finance team has been fully staffed since the appointment of an Ernst and Young audit specialist as chief technical accountant in July 2024. Following his recent promotion to AD Finance and Resources recruitment will be started to refill the chief technical accountant position. It is hoped however that the 2023/24 accounts will be completed and published by the end of this calendar year and for the 2024/25 the team hope to work to a completion date of 31 May 2025.

Cllr Fletcher asked whether the Committee should be concerned about the current deficit within the Pension Fund.

The External Auditor explained due to the levels of estimation involved there is always an audit risk to the Pension Fund. The actual figure within the pension fund will fluctuate year on year, but it will not impact the general fund.

Cllr Butikofer said that while committee members were concerned about the teams inability to meet the reporting deadline, they are pleased to hear the team is now fully resourced and should be able to meet these deadlines moving forward.

Cllr Butikofer ask whether the financial recompense the External Auditors are looking for will be fair given the fact that had the accounts been completed on time the External Auditors probably wouldn’t have been able to audit them anyway.

The External Auditor explained that had the 2021/22 accounts and supporting records been complete the audit would have been undertaken. But the 2022/23 audit would have been in a similar position because the legislation came in to reset the system.  PSAA are currently working out a way a fair fee can be determined for the work the External Auditors have performed.

Action

The Director of Resources to provide an update each month to let the Committee know if we are on track to meet the publication dates for the statement of accounts and if not, why not.

The Committee noted and agreed the External Auditor’s Annual Report for 2021-23.