Agenda item

This report presents the opinion of the Council’s External Auditors, Grant Thornton LLP for the financial statements for 2021-22 and 2022-23.

Discussion:

The Head of Corporate Accounts introduced the report which presented the opinion of external auditors Grant Thornton for the financial statements 2021-22 and 2022-23. The Committee was asked to note the audit findings report with associated opinions and approve the letters of representation for those years.

The Engagement Lead Grant Thornton explained that the current position built upon the information provided at previous Audit Committee meetings, namely that auditors were unable to complete audits for the years 2021-22 and 20022-23 and similar backlogs was experienced by many local authorities across the country. The Government had put in place a backstop for all auditors to provide an opinion on financial statements up to and including 2022-23 by 13 December 2024. It was necessary to not complete audits of for 2021-22 and 2022-23 to reset and recover the audit position and a disclaimer position would be issued for those years.

Auditors were now able to provide the disclaimer opinion for the years 2021-22 and 2022-23 subject to the Council’s agreement of letters of representation in the appendix to the report and receipt of the signed set of accounts for those years. The opinion outlined that the auditors had not undertaken sufficient work and did not hold sufficient evidence to provide an opinion on the accuracy of statements for those years. It was hoped this would be completed by 29 November. The disclaimer letter is a standard format provided by Grant Thorton to authorities.

The following issues were discussed:

Resourcing – in response to a question whether the lack of Council resources which was one of the causes of the inability to complete the audits had been addressed, the Head of Corporate Accounts confirmed that the department had undertaken rightsizing to ensure it had the required resource going forward.

The Engagement Lead, Grant Thorton added that there were several factors which had caused the national issues in completing audits. Audit standards had been raised in recent years, which required some issues to be considered in greater depth, both Grant Thornton and local authorities had initially struggled to meet those additional requirements. In addition, Grant Thornton had some staffing issues, and the Council had struggled to provide group accounts. In his view all stakeholders, the Financial Reporting Council, Grant Thornton and the Local Authority had contributed to the national problems in completing audits.

2023-2024 audit backstop - it was commented that the government’s 28 February 2025 revised audit backstop date for the financial year 2023-2024, was significantly earlier than the initially proposed date of 31 May 2025, it was asked whether it was realistic for the Council to meet the new date. The Head of Corporate Accounts agreed was a challenging deadline, but it was a date which had been decided nationally and he was confident that it would be met.

The Chief Finance Officer added that the earlier deadline wasn’t designed to be punitive, it was changed following consultation with local authorities to avoid the purdah period and local elections.

The Engagement Lead, Grant Thornton, commented that it was likely a disclaimer opinion would also be required for the 2023-24 report as it would require three to five years to fully recover the audit position. This would be the position of many local authorities, whilst some elements of assurance could be recovered quickly, some areas such as brought forward balances would be more difficult.

The Chief Finance Officer added that the auditors being unable to provide assurance was not a report that the Council’s financial statements were incorrect. The Council had completed its financial statements, undertaken internal assurance process and had an experienced team. She was confident that the Council’s financial statements were correct and the Council would be reassured that the same team which had previously completed statements which had received a positive audit had completed the financial statements for those years which auditors were unable to complete.

Fees – in response to a question why there was a significant rise in fees, the Engagement Lead, Grant Thornton explained that fees were determined nationally by the Public Sector Audit Appointments (PSAA) following consultation. He acknowledged there had been a significant rise in fees year on year, however, this reflected that fees were previously unsustainable and public sector fees remained low compared to those in the private sector.

Communications – it was noted that there had been turnover in the team at Grant Thornton which undertook the audit and that communications between the auditors and council were not always effective. It was asked whether a dedicated team would be in place to undertake future audits. The Engagement Lead, Grant Thornton acknowledged that changes in staff made communication more difficult, however, this was related to the general delay in the completion of audit. Audits were scheduled to take three months, where there were delays, staff would be required to complete other commitments and this exacerbated issues.

A Member asked if the Committee could receive a detailed audit plan to meet the required timescales and avoid delay. The Chief Finance Officer stated that an audit plan will be brought to the Committee for consideration.

Disclaimer Letter -  a Member commented that in her opinion the disclaimer letter did not reflect the extent of the issues in the sector and identified the Council as the principle cause of delay. It was asked whether the letter was an industry standard or had each firm completed their own wording. In response, the Engagement Lead, Grant Thornton explained that each firm had devised their own template letter, however, it had not been Grant Thornton’s intention to attribute blame for the audit outcome but to explain the causes

Decision:

a)          The Committee noted the audit findings report 2021-22 & 2022-23 combined as detailed at Appendix a.

b)          The Committee noted the disclaimer of audit opinion due to backstop 2021-22 as per Appendix b.

c)          The Committee noted the disclaimer of audit opinion due to backstop 2022-23 as per Appendix c.

d)          The Committee approved the draft management letter of representation 2021-22 as per Appendix d.

e)          The Committee approved the draft management letter of representation 2022-23 as per Appendix e.