Issue - meetings

Before this item was presented the Chair advised the minutes of 4 June (published on the website) required an amendment for item 20/22/Civ under the recommendation iii (additional text underlined, deleted text struck through) which both the Chair and Opposition Spokes had been consulted on.

iii.   Delegate to the Chair of the meeting and in consultation with the   Opposition Spokes to approve any amendments to the Statement of Accounts arising from remaining audit procedures, provided that these do not have a material impact on the Council’s reserves or result in any changes to the Auditor’s report opinion.

Resolved unanimously to note the change.

The committee received a report from the external auditor which summarised their approach to the audit of the financial statements and value for money (VFM) conclusion for 2019/20. The plan also highlighted what EY considered to be the most significant audit risks.

In response to Members’ and the Independent Person’s questions, the Head of Finance, Head of Shared Internal Audit Service and Deputy Head of Finance said the following:

      i.         Investment properties made up a large proportion of the balance sheet and was an area of risk highlighted by the auditors.  Due to the effects of Covid-19 it will be difficult to give the normal level of assurance on the valuations regarding the investment properties.

    ii.         The review of the valuations of properties had shown that COVID-19 had not had the same impact on dwellings as it had on retail; therefore, the valuation methodology on the dwellings side had not seen significant changes.

   iii.         There had been a further decrease in the valuation on dwellings based on the national house price index which had been used by the valuers to base their opinions, therefore there would be a small decrease similar to that of 2018/19.

  iv.         Discussions had taken place with the valuers to ensure that the same audit issues did not occur as last year; checks were in place to make sure the relevant documents were up to date to support their judgements.

    v.         The valuations of investment property are more volatile with valuers typically forming their opinion on values based on the capitalisation of future income streams. Therefore, the valuers had formed their opinion on the impact that COVID-19 had by reducing the rental income expectations, by between three to six month lost rent.

  vi.         There would be no impact on the council’s useable reserves because of the decreases.

 vii.         More confident this year there was enough resources in the finance team to manage the budget and the audit simultaneously, although there was concern there was not much room between the two deadlines.

viii.         Currently the finance team were on course to meet the July deadline but were doing so using all the hours available.

The Associate Partner of Ernst and Young and the Manager of the audit said the following:

      i.         EY had recognised the need for continuity within their audit team for the council which was part of the reason for a split visit in August and then in October / November.  Two members of staff had been retained from the 2018/19 audit to work on the 2019/20 audit. There would also be the same Associate Partner and Manager of the audit.

    ii.         Confirmed only one assessment of performance materiality level was permitted.

   iii.         EY uses 2% of gross revenue expenditure on the provision of services for the council as the benchmark for materiality.

  iv.         The fee negotiation had been discussed with officers to seek agreement but the PSAA (Public Sector Audit Appointments) made the final decision.

    v.         The last EY tender was in 2017, since that time one audit had been completed.  The bases for the increased fees was due to an escalation in audit quality expectations, such as the rise in workloads on the testing of valuations which was significantly different to that in 2016/17.

Resolved (unanimously) to:

Note the contents of the external audit plan 2019/20.