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

The Committee considered the Annual Audit letter for the year ended 31 March 2020 which summarise the work undertaken as the external auditor for Manchester City Council (the Council).

In line with the Local Audit and Accountability Act (2014) and the Code of Audit Practice issued by the National Audit Office (NAO), the Audit Letter set out key findings arising from audit activity in the following areas:

·         Audit of Financial Statements

·         Other information published alongside by the audited Financial Statements

·         Value for Money Conclusion

·         Reporting to the Group Auditor; and

·         Statutory Reporting

The Letter also provided information on the increased fees for additional work undertaken as the Council Auditor around valuations and pensions liability and outlined the implications of recent changes to the Code of Audit Practice (April 2020) in relation to the Value for Money arrangements for the 2020/21 municipal year. It also made reference to the impact of the recent Redmond Review.

Karen Murray (Mazars) introduced the Letter explaining that, under usual circumstances, the findings would conclude the audit work undertaken for the 2019/20 municipal year however this had been delayed. Mazars had yet to conclude their work on the Council’s Whole of Government Accounts return due to difficulties with the system that had recently been implemented. As a consequence, the Council had not yet been able to finalise its return due to a number of queries and was awaiting a response from the Treasury. However, Mazars were generally satisfied that proper arrangements were in place.

The Chair invited Members of the Committee ask questions / comment on the Letter.

On seeking assurances around the Council being unable to finalise Whole of Government accounts on time, Ms Murray indicated that the likelihood of penalties was very low since a number of Local Authorities had reported technical difficulties of a similar nature with the new system. She added that Mazar’s had confidence in the Authority’s position such that the return would be ready for sign off as soon as those technical difficulties were resolved. She explained that the report was largely a repeat of the Audit Completion report that was submitted to the Committee’s November 2020 meeting in respect of issuing the Audit Opinion and the Value for Money Conclusion.

The Committee asked about the implications of the recent changes to the Code of Audit Practice. Ms Murray explained that in essence it represented a shift from the binary conclusion to determine whether or not proper arrangements had been put in place. She summarised the change in the Code as meaning that the external auditor will no longer provide a Value for Money conclusion and would instead provide a commentary which sets out all of the work undertaken over the course of the year provides a view on overall arrangements for delivering value for money. From the 2020/21 municipal year onwards, where a significant weakness in value for money arrangements had been identified, auditors would be required to quickly notify Local Authorities of those weaknesses and provide a series of actions to address those weaknesses. Ms Murray confirmed that Mazars remained generally satisfied that proper arrangements are in place based on the work done so far but that this was continuously under review.

There was a discussion about the implications of the Redmond Review and reference to the proposal to create the Office of Local Audit and Regulation (OLAR), which was subsequently rejected by MHCLG . Ms Murray explained that the intention behind OLAR would have been to coordinate and regulate audit practices and achieve better coordination of what is expected, when and by whom to meet the challenges within the sector. The Committee noted that the matter was currently under consultation for another body as wider government reforms of the audit market.

Decisions

To note the report.