Agenda item

[At the request of the Chairman, and as agreed at the previous meeting, the Director of Corporate Resources advised Members that the external auditor’s fees had now been agreed.  The fees had increased by circa £12,000 as opposed to £20,000 as originally proposed.  (Minute 52 of the previous meeting refers.)]

The Committee received a report from the Director of Corporate Resources which set out the County Council’s response to its external auditor’s (Grant Thornton UK LLP) Risk Assessment for 2019/20 and also included an update made by Grant Thornton to its External Audit Plan for consideration and comment.  A copy of the report marked ‘Agenda Item 7’, is filed with these minutes.

The Chairman welcomed Mr John Gregory and Mr Avtar Sohil of Grant Thornton UK LLP to the meeting.

In introducing the report, the Director highlighted that due to the impact of the Covid-19 pandemic the Accounts and Audit (Coronavirus) (Amendment) Regulations 2020 were issued in April 2020 which amended the deadlines for the completion and external audit of the financial statements to allow additional time, during the 2019/20 financial year only.  The revised deadlines meant that the draft accounts would now be required to be published by 31 August 2020 and subsequently the completion of the External Audit by 30 November 2020. The Council was currently on track to meet the revised deadlines.

In presenting its External Audit Risk Assessment, Mr Gregory of Grant Thornton LLP advised:

(i)         Having considered the County Council’s responses to its risk assessment, Grant Thornton had been satisfied with the arrangements the Council had put in place and the assurances provided by officers. 

(ii)    Audit plans for the local authorities audited by Grant Thornton for 2019/20 had been adjusted to include an additional key risk around the impact of the Covid-19 pandemic. The risk, as set out in the revised Audit Plan for the Council, marked Appendix B to the report, considered a wide-range of situations and scenarios including logistical aspects (such as the compilation of information to finalise the accounts being completed remotely and the potential of staff sickness absences), and the financial impact to the accounts.

(iii)   The lack of certainty around whether local authorities would receive further future funding from the Government made it difficult to be fully conclusive on the financial position.  The current impact on Leicestershire County Council was very significant, but not as dire as it was for some other local authority areas.  Some council’s Section 151 officers were on the verge of issuing Section 114 notices where it was believed the budget could no longer be balanced.  Guidance was in the process of being amended to ensure those councils had escalated the matter to the Government and fully discussed the options before they proceeded with issuing such a notice.  Much analysis was being undertaken by Grant Thornton around the additional costs being faced by local authorities to contribute to the financial returns being submitted to Government. 

(iv)   A key issue for the 2019/20 financial year would be the valuation of assets and liabilities as these would be much more difficult to estimate post Covid 19. This contributed to a much higher level of uncertainty in the accounts for both the County Council, particularly around the valuation of land and buildings which was based on market value, and the Pension Fund, particularly the value of pension fund investments which was also subject to a great deal of fluctuation and uncertainty.  Members were assured that conversations between Grant Thornton and the Council were ongoing to regularly review and identify these risks and assess the impact on the Council’s finances.

In response to a question regarding IRFS 16 leases, it was confirmed that the adoption of the new standards had been deferred for 12 months across the whole of the public sector as a consequence of the Covid-19 outbreak. Much information was required to be collated from across the whole of the Authority, so the extension would provide additional time for officers to work through the detail. 

RESOLVED:

That the contents of the report by Grant Thornton (the Council’s external auditors), ‘Informing the Audit Risk Assessment for Leicestershire County Council 2019/20 and the Audit Plan 2019/20’, be noted and the responses provided by officers to the questions raised by the external auditors, as set out in their report, be supported without amendment.