Agenda item

The Committee considered a report of the Director of Corporate Resources which set out the key findings from the external audit of the 2019/20 financial statements and sought approval of the draft letters of representation to Grant Thornton UK LLP, the County Council’s external auditors. The report also provided an update on the National Audit Office’s (NAO) guide for Audit and Risk Committees on financial reporting and management during Covid-19. A copy of the report marked ‘Agenda Item 7’, is filed with these minutes.

The Chairman welcomed John Gregory and Avtar Sohal of Grant Thornton UK LLP, the County Council’s external auditors, to the meeting.

In presenting Grant Thornton UK LLP’s Audit Findings report, John Gregory highlighted the following points:

(i)    Work would be undertaken by Grant Thornton UK LLP (Grant Thornton) over the coming days to finalise the external audit. A substantial amount of work had already been undertaken with very few amendments made to the work carried out earlier in the year, and, subject to any outstanding queries being resolved, it was anticipated that the County Council would receive an ‘unqualified’ audit opinion overall.

(ii)   The Emphasis of Matter (EoM) that Grant Thornton had included in its audit opinion regarding the valuation of land and buildings was not a qualification of opinion, but simply an additional paragraph to acknowledge the material valuation uncertainty in the property markets brought about by the impact of the Covid-19 pandemic and the effects of this on the valuation of the County Council’s land and buildings and its share of Pension Fund property investments as at 31 March 2020.

(iii)  The Council continued to face financial uncertainties and with the long-term effects of the Covid-19 pandemic largely unknown it was anticipated that even with the financial resilience the Council had shown over the years, there could still be significant challenges ahead. Although, in comparison to some other local authorities who were already suffering sustainability issues, the County Council was regarded as being in a relatively strong position to deal with them. 

The Committee expressed disappointment with Grant Thornton’s proposal to further increase its fees on the financial statements audit. The Director added that although he understood the Covid-19 pandemic had created additional costs for many, the fee proposed was higher than some social care providers had charged at the beginning of the pandemic. Members noted that although initial discussions had taken place between the County Council and Grant Thornton regarding the fee increase proposal, formal negotiations were still to take place.

Arising from discussion and questions regarding this matter, Mr Gregory advised the following:

(iv)   The increase was necessary due to the additional work on the audit that had arisen from the impact of the Covid-19 pandemic and the effects on efficiency due to remote working because of the national Covid-19 restrictions.

(v)    Whilst it was acknowledged that councils were not able to pass on their costs, local authorities had received additional funding from the Government during the pandemic whereas other organisations, such as Grant Thornton, had not. It was also important to note that the increase to the amount proposed (15%) was less than half of the extra costs Grant Thornton had itself incurred.

(vi)   It was questioned whether Grant Thornton had business interruption insurance in place to cover the additional costs. Mr Gregory confirmed that Grant Thornton had not suffered a business interruption as such and therefore no cover had been in place for such a scenario.

(vii)  As Grant Thornton’s contract was held with Public Sector Audit Appointments (PSAA) and not directly with the County Council any fee increase negotiated between the Authority and Grant Thornton would require formal approval by the PSAA at the final stage. Early conversations that Grant Thornton had held with the PSAA suggested that the levels of increase proposed to date were more than reasonable.

In concluding the item, the Director thanked the external auditors for the work they had undertaken and the level of assurance the audit opinion had provided so far.

RESOLVED:

(a)    That the key findings from the external audit of the 2019/20 financial statements carried out by Grant Thornton LLP UK be noted;

(b)    That the letters of representation be approved;

(c)    That the update on the National Audit Office’s (NAO) guide for Audit & Risk Committees on financial reporting and management during Covid-19 be noted.