To receive a verbal update from the Council’s External Auditor
Minutes:
The EA gave a verbal update. He reminded the Committee that the report in June had raised 6 risks on the financial statements and one risk on the Value for Money conclusion (VFM). The EA explained that they had been working with the finance team to ensure they maximised the completion of planned procedures. The last time the Council received a full audit was for year 2021 due to delays in publishing accounts and new legislation that had been put in place. The final element of the audit for the 24/25 accounts had begun with a backstop date of the end of February 2026.
The Chair then invited questions from the Committee.
In response to a query from Cllr Penfold regarding what had happened to the Council’s accounts between 2021 and 2024, the EA explained there was a backlog across the whole sector, not just in North Norfolk. The 2021 accounts were signed off in 2023. Last year was the first year EA could fully update before the first backstop. Accounts between 2021 and 2024, hit the first backstop before they had time to complete an audit and went straight to disclaim as they could not form an opinion on them. The year 2024/25 was the first year they were trying to build assurance on. In 2025/26 they would carry out a risk assessment to see where the gaps were.
The Chair was concerned how long disclaimed reports might go on before the Council could be in acceptable place for a full audit and asked for an assurance from the EA and the DRC that everything was being done to ensure the Council would be in that place as soon as possible. The DRC reiterated that the finance team and audit team were working closely to seek clarification as to when they needed to provide suitable evidence to be able to close an item off, they were doing so in sufficient time with all the correct information required. It that wasn’t provided then auditors would move on to another section due to the small window they had to complete the audit. The DRC said the finance team was quite new with many officers never having been audited before, but they were doing as much as they could to support those officers through that process.
The DRC explained that the opening balances from April 2024 were not certain as they had not done all the required tests to verify them due to not completing an audit for the previous three years.
The EA agreed and said the optimum time for returning to a clean opinion was three years but would depend on how successful they were in completing the planned procedures they were currently working through. The EA was comfortable that they had the capacity and resources to get through that work. It was in the EA’s opinion that a step forward would be to see a significant portion of the assurances, on the balance sheet significant accounts, turning green, as previously they were all red due to having to disclaim them.
Cllrs Holliday and Cushing asked if they could see the delay in concluding the audits within the corporate risk register or, if not, should they be adding one for the potential black hole in the Council’s finances for the period of three years where no assurance was given. The EA said that he had seen some councils add it as a risk, but the Committee would need to think about what the risk was. As the external audit was the final check, all the internal procedures should give assurance that the final statement of accounts was correct. Otherwise, it would be a risk indicating a flaw in the Council’s own internal procedures, and if that was the case, members would need to agree what would be done to mitigate that risk.
The Chair was concerned that the Committee could hinder the work of the audit team by adding in actions, such as additional checks and balances as that would delay getting the figures to the external auditors resulting in them running out of time to audit the accounts themselves.
Cllr Cushing felt that a risk could be added, and that the mitigation would be the work carried out by the auditors to audit the accounts and no delay would therefore be incurred. He felt that it was far more of a risk if they didn’t add that onto the register when they knew there was a potential for a black hole being there.
The DRC sought to clarify If the black hole that Cllr Cushing was referring to, was an asset that was over-valued or a liability that was under-valued and explained that if this was the case then there were processes and financial controls set up to help mitigate that. Also, the EA would focus on the most material transactions and balances on the balance sheet to avoid that risk.
The IP was interested in knowing if the risk could potentially jeopardise the Council’s relationship with Central Government or key stakeholders in which case the IP felt it should be on the risk register and the Council taking mitigating action. The EA said that they needed to do the 2024/25 accounts and then size up any scale of the potential risk but it was important to remember that when the draft accounts were issued by the Council they were issued as being materially correct.
Cllr Penfold asked, with the fees being paid to the EA by the Council in mind, what, if any, processes were completed for those missing three years of accounts. The EA confirmed no audit was completed because the time was reduced up to the backstop date for those years. Certain procedures, such as value for money, were completed and had to be, along with one or two other procedures, to disclaim an audit; they also did limited procedures on the accounts, such as were they compliant with the disclosure checklist issued by The Chartered Institute of Public Finance and Accountancy (CIPFA), and that was reported. In terms of the fee being paid that was all determined, as to what was reasonable and fair, by the Procurement Services Agreement (PSA) for those years.
The Chair took a vote and asked for those in favour of a risk being added to the risk register, with 2 votes for and 4 against.
The DSD said the Council’s Corporate Leadership Team (CLT) reviewed risks on the register regularly and they would consider forming a view internally, whether a risk needed to be added.
The Chair suggested they review again once the 2024/25 accounts had been reported back on and they bring both Committee and internal viewpoints together to discuss.