Agenda item

Interim Auditor's Annual Report on Medway Council 2021-22

This report presents the interim findings of the Council’s External Auditors, Grant Thornton, in their audit of the Council’s Statement of Accounts for the financial year 2021/22.


The Chief Operating Officer introduced the report and informed Members that the external audit of the Council’s financial statements 2021-22 had not yet been undertaken. However, there were significant delays nationally in completing external audits and the government was consulting on proposals to remedy the delay.


The Engagement Lead, Grant Thornton reported that the work related to the Council’s 2020-21 financial statement was almost complete and would be finalised in the new few weeks.


He explained that this was the second year of reporting under the current arrangements and the conclusion had identified two significant weakness recommendations. In 2019-20 The audit highlighted a significant weakness in Children’s Services due to the results of the inspection by the regulator. The report noted the progress made in 2021-22 and the Children’s Services improvement journey but not all of those weaknesses had been addressed and the significant weakness reported in 2019-20 remained in 2021-22.


The second identified significant weakness was in governance caused by the delay in production and auditing of the Council’s annual accounts. External auditors were completing their work for 2020-21, however, there was an expectation that the Statement of Accounts would be completed within statutory timescales. This had not been possible, so it was a significant weakness.


The report also set out some improvement recommendations which had been made and accepted by management.


Members then raised comments and questions which included the following:


Delay in publishing accounts – In response to a query why the Council’s accounts had been delayed, the Head of Corporate Accounts advised 2021-22 accounts were nearing completion, however, production of group accounts created an added new workload for the team which had not previously had experience of group accounts. He added the delay in completing 2021-22 had a knock-on effect for the 2022-23 financial accounts.


The Chief Operating Officer advised there had been issues within the team which included staff sickness and turnover at a critical period. In addition, the balance from the previous year’s accounts had to be brought forward to the following year, so the delay to the previous year’s accounts had a knock on effect for the completion of 2021-22.


He explained the Council had a plan to complete the outstanding work. However, this had been superseded by the ongoing consultation the government was undertaking.


The Engagement Lead Grant Thornton provided an update on the ongoing consultation stating the government was considering imposing a deadline for completion of each year of accounts to clear the backlog. Under the proposals If enough work on the statement of accounts had been completed then the auditor could give an unqualified opinion, or if the auditor had not completed their work they could provide a qualified opinion. If work had not progressed to a satisfactory position, an extreme disclaimer opinion would be provided by the auditor. Dates had not yet been finalised, however, a deadline of March 2024 to complete accounts for the financial year 2012-22 was under consideration, with further dates for completion of the 2022-23 and 2023-24 accounts also to be decided.


In response to a question whether additional staff would solve the issue, the Chief Operating Officer told the Committee that a restructure took place last year which provided additional resources to that part of the finance team. The Council had planned to complete parallel accounts to reduce the delay and if this was required further resources would be put in place. However, if the result of the current consultation was as proposed this would no longer be required and the 2024-25 financial statements would be completed on time.


Children’s Services – In response to a question regarding Children’s Services, the Chief Operating Officer explained the improvement journey continued into 2022-23 so the significant weakness recommendation in relation to Children’s Services would be reported in 2021-22 and 2022-23 Statement of Accounts.


NHS Audit  - The cause of delay to the completion of the 2020-21 audit prior to the external auditor pausing work to undertake the NHS Audit was queried. In response the Engagement Lead, Grant Thornton explained that there had been an attempt to complete the audit prior to the end of April when the auditor had to focus on the NHS audit. All parties were aware of the deadline, however, it had not been possible to complete the required work. The NHS audit had now been completed and the auditors would be in a position to complete the 2020-21 audit shortly.


Timescales for audit – In response to a request for clarification on completion of the 2020-21 audit and start of work for the 2021-22 audit, the Engagement Lead, Grant Thornton undertook to complete the 2020-21 audit within the following two weeks and work on the 20221-22 was scheduled to begin in November.


2021-22 Audit – In response to a question whether a commitment could be made to completing the 2021-22 Audit by March 2024, the Engagement Lead, Grant Thornton told the Committee he could not provide a guarantee. The work was scheduled to begin in November and completion in four months was feasible but challenging.


It was queried whether the start date could be brought forward to ensure the March 2024 date was met as this was the proposed date for completion of 2021-22 accounts. The Chief Operating Officer undertook to finalise a commitment to specific dates for the start and completion of the 2021-22 Statement of Accounts with the external auditor and inform the Committee outside of the meeting.


Pictures – It was commented that the pictures used in the report were generic or not engaging to the reader. The Head of Corporate Accounts noted the comments.


Housing Infrastructure Fund (HIF) – In response to a question whether any recommendations could have been made to reduce the risk of loss to the Council in relation to HIF, the external auditor stated that it was clear at the time the Council was aware of the risk associated with the decisions made at the time.


The Chief Operating Officer added that HIF had ceased, and funding withdrawn. The risk was that the Council would be liable for costs incurred however, an agreement had been reached with Homes England that it would honour the costs incurred up to a maximum of £3.2m which was in line with Council estimated costs.




a)              The Committee noted the draft Interim Auditor’s report at Appendix 1.

b)              The Chief Operating Officer will agree dates for the start and completion of the 2021-22 Audit and inform the Committee.

c)               The external auditor to complete the 2020-21 Audit by 15 August.

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