The report of the Council’s external auditor (Mazars) is enclosed.

The Committee considered the report of Council’s external auditors (Mazars) that provided the Committee with an update on audit work carried out. The Committee was reminded that the external audit of the Council’s 2019/20 financial statements and value for money conclusion in November 2020 and the signing the audit

report on 30 November 2020. An updated Audit Completion Report with the completed audit findings had been circulated to all members of the Audit Committee. The external auditors are currently waiting to receive the Council’s Whole of Government Accounts (WGA) submission. This work will be carried out to instructions issued by the National Audit Office (NAO) and a report will be submitted to the NAO on the conclusions. Any significant findings from this work will be reported to the Audit Committee in a subsequent Audit Update Report.

The process of audit planning for the 2020/21 audit will start in January/February 2021 and the Audit Strategy Memorandum will be submitted at the March meeting of the Committee.

Reference was made to the National Audit Office updated Code of Audit Practice that has now been applied from 2020/21. The new Code changes the work that auditors will be required to do, and the related reporting, on Councils arrangements to deliver value for money in their use of resources. The changes to the reporting requirements will mean that from 2020/21 a value for money conclusion will not be included within the Financial Statements Audit Report. A commentary on the Council’s arrangements to deliver value for money will now be included in a new Auditor’s Annual Report

(which replaces the Annual Audit Letter). The NAO Code requires that where auditors identify weaknesses in Council arrangements they should report recommendations to the Council promptly throughout the year.

The Chair invited questions from members of the Committee.

A member referred to point 8 of the report and requested further explanation of the five themes outlined in the MHCLG's response to Sir Tony Redmond’s independent review.

It was reported that the themes had been produced in order to provide more central co-ordination by bringing together the various strands of government. The Committee was informed that it would be unlikely that a single regulator would be established and new more simplified process would be introduced to help local authority accounts to be more accessible. Other recommendations included the importance of appointing independent members to audit committees, member training and the processes used by auditors and the meeting of the responsible council officers at least once a year.

A member referred to the Value for Money opinion provided by the external auditor and asked what the arrangements will now require.

It was reported that the new arrangements would require greater engagement with the Council on the arrangements to deliver value for money rather than to present an opinion. A longer narrative report will be submitted to provide a balanced assessment of the arrangements and processes to highlight changes, to promote good practice or actions needed for improvement. 

The City Treasurer reported that the impact of Covid19 would be addressed in the opinion provided by the Council’s Internal Audit. The recommendations of the Redmond report were largely welcomed and work on those had already started in respect budget preparations, value for money opinion and the Council’s financial resilience.

A member referred to the issues reported on by the external auditor including the valuation of property, pensions and other group audits and asked whether this is a common theme with other local authority audit work. Reference was also made to demise of the Audit Commission and the use of private audit companies providing services for the public sector and the challenge for companies to access this very specialist market. Reference was also made the deadline for annual accounts and if this may be amended and if so what would the likely outcome be to producing final accounts on time.

It was reported that this work was common to local authorities and auditors were addressing the work to find means to make improvements in those organisations. The public sector is reliant on the use of private external audit firms, however the PSA did provide a level of independence and controlled the appointment of auditors through a tendering process. The tendering process had drove down fees which was helpful for local authorities but in doing so may have made the market for that work less attractive to private companies. The deadline for the completion of final accounts is something the external auditor works toward and the pressure to complete local authority/health service audits is considerable due to capacity issues. There were concerns that the pressure for external auditors to meet current deadlines is unreasonable and the issue if extending the deadline for completing audits had been raised. The Committee was advised that accounts will not be signed off until the external auditor is satisfied that the audit has been properly completed but work would be ongoing to ensure that deadlines are achieved.

Decision

The report was noted.