Report of: The External Auditor, Ernst & Young

Purpose of report: To update the Audit and Governance Committee.

Recommendation(s): That the Committee resolves to:

1.    Notes and discusses the report.

The External Auditor had submitted a report to?update the Audit and Governance Committee. The External Auditor (AB) was present to respond to questions.  

The External Auditor (AB) provided a comprehensive summary of the report, noting that the audit is ongoing and the report presents the status at this point in time. The Committee heard that since July, the assessment of materiality has been updated which now reflects an increased higher gross expenditure, upon which the draft accounts have been based. Since the report’s publication, the testing of pensions has progressed, and other audits have concluded as listed in appendix A to the report. The External Auditor (AB) also provided a summary of the new government measures which seek to clear the audit backlog; the Committee understood that the reset and recovery process has installed a series of back-stop dates for audits to be completed by which has placed additional pressure on the council and the auditors. Finally, the Committee heard a summary of the report findings and recommendations which focused on capacity constraints and the need to better allocate responsibility within the council for responding to audit queries. Specific emphasis was placed on the contents of page 477 and 478.  

The Group Finance Director responded to the External Auditor’s (AB) summary and noted that the council has experienced a period impacted by decreased capacity and depleted resources within the finance team which directly impacted on efficiencies in closing accounts and producing working papers. The Committee heard that the responsibility is shared across team managers in the council and training is being offered to support cost centre tasks. The Group Finance Director noted that standards have increased in recent months, and close working has taken place with the External Auditors to make the necessary improvements in relation to the disclaimed opinion. The Committee understood that council officers are now required to submit more samples to the External Auditors, and this has been a big undertaking; additional support from the External Auditors was requested with this endeavour.  

The Chair queried the status of vacancies within the finance team at present, to which the Group Finance Director noted that three new officers have been hired, and one vacancy remains. It was noted that temporary resources would be brought in to plug any gaps in the immediate future.  

In response to a comment from the Chair regarding page 478, The Financial Accounting Manager also noted that improvements must be made in relation to the concentration of information in various areas of the council, in order to improve general understanding across the workforce. The Committee heard of measures, including training with management accountants and service manager, which are being taken to support the audit processes.  

Councillor Smith thanked all officers for their open and transparent reflections on the audit results and emphasised that the Committee need to be clear about conclusions given by EY and take the situation seriously.  

At Councillor Smith’s suggestion, the Committee agreed to highlight to the Cabinet members responsible the conclusions of this report.  

The Senior Information Governance Officer left and did not return.  

The External Auditor (AB) committed to providing additional support to the Council for the work required by council officers during the audit process and noted the collective interest EY shares with the Council.  

The Chair and Councillor Smith emphasised that the Chief Executive must also be made aware of these audit results.  

The Committee reviewed and noted the report.