Agenda item

Grant Thornton - External Audit Progress Report and Sector Update


The External Auditor from Grant Thornton presented a report on progress in delivering the external audit function for the Council and provided a wider audit sector update.


It was noted that the issues with respect of the 2020-21 financial statements and the transfer of data from the legacy financial ledger system, eFinancials, to the new TechnologyOne system that was undertaken in February 2021 were summarised at the last Committee meeting on 1st June 2023.


It was reported that some progress had been made since that meeting. The External Auditors were able to verify and gain assurance that data reports from the legacy eFinancials system for periods 1 to 11 of the 2020-21 financial year provided real financial data. The data for periods 1 to 11 was now available in the format appropriate for its audit.


It was not possible to date for the Council to provide auditors with data included in period 0 of 2020-21 financial year. As a result, External Auditors had not yet been able to undertake any work on the balance sheet as period 0 transactions were critical for understanding the balance sheet position (the opening position). The Council continued attempts to reinstate their business objects licence for the eFinancials system in order to run a period 0 report and export it into an excel file, as currently the SQL script was returning nil entries for period 0. This would enable work on verification of period 0 balances to be started.


Alongside the work to progress the audit of the data transfer, the External Auditors had undertaken work on specific areas of the 2020-21 financial statements for two weeks from 14th August 2023. This included land and building valuations, the defined benefit pension liability, payroll, senior officer remuneration and housing benefit expenditure. The External Auditor reported that on 15th August 2023 a decision was taken to redirect the audit team to other work as insufficient working papers were provided to External Auditors.


It was reported that the External Auditors would resume work on the 2020-21 financial statements audit in October 2023, with the timeline for audit completion now estimated to be March 2024. With regards to the issue of audit delays across the local government sector, it was reported that the Department for Levelling Up, Housing and Communities (DLUHC) was looking to implement backstop dates for when audits of accounts had to be completed. It was highlighted that this measure was not in place at the moment and would require a change in legislation in order to come into effect. However, the plans were highlighted as, if passed into legislation, the measure might result in a number of local authorities across the country being issued with disclaimer opinions on their accounts – this was as a result of the scale of the backlog in the audit of public bodies accounts across England.


It was stated that a joint Auditors Value for Money Annual Report for 2021-22 and 2022-23 financial years would be prepared and it was expected that this would be reported to the Audit, Standards and Governance Committee in this calendar year. It was noted that issues with respect to a lack of timely and relevant financial monitoring reporting that were identified in the interim Auditors Annual Report for 2020-21 had now been largely addressed through regular financial monitoring reports to Members. However, this would again be reported as a governance weakness in the Joint Auditors Annual Report for 2021-22 and 2022-23 because this concerned the financial year 2021-22.


It was reported that the External Auditors had certified the Authority’s annual Housing Benefit Subsidy claim as in accordance with procedures agreed with the Department for Work and Pensions (DwP). The work on 2021-22 subsidy claim certification was expected to be concluded within the next month.


Members asked a number of questions of the External Auditors and Council Officers to which the following responses were provided:


·       With respect to the July 2023 meeting between the External Auditors and key members of the Council’s finance team, ICT, and the project manager involved in the implementation of TechnologyOne ledger system, it was questioned why representatives from the company (TechnologyOne) were not in attendance. It was explained that because the Council had a ‘software as a service’ contract with TechnologyOne, the company’s representatives were not obliged to attend Council’s internal or committee meetings.

·       In respect of the possibility of the External Auditors not being able to obtain verifiable financial data for period 0 of the 2020-21 financial year, the External Auditor stated that at this point their expectation was that conclusion on data migration would be in place by the time External Auditors would resume their work on the Council’s financial statements in October 2023. Officers added that the licence with the providers of legacy ledger system, eFinancials, had now been reinstated for 5 years, which was to allow the Council to regain access to business object reporting data on that system with respect of period 0 of 2020-21 financial year. Two more technical experts would also be engaged by the Council to speed up work in this area.

·       With respect to the insufficient quality of data provided to External Auditors in August, it was stated that quality of information with respect to pensions, payroll, and land and buildings valuations among others was deemed of insufficient quality for External Auditors to start work in August. Officers stated that the Council was in the process of providing papers but that some data was deemed of insufficient quality by External Auditors, for example with respect to land and property valuations as the Council had the documents in a text formatting file version rather than the final portable document format (pdf) required. Members expressed concern about the fact that auditors were withdrawn from audit because of a lack of appropriate document versions. It was clarified by the External Auditor that the lack of this document version for land and property valuations was indicative of a wider set of issues with quality. The External Auditor stated their audit work dates were planned in advance, and it was company policy to move staff to other audit work in such situations. However, this was not an indication that work on the Council’s Accounts would be paused indefinitely or stopped.

·       It was highlighted that delays to the audit process resulting from insufficient data would result in audit fee cost implications. It was estimated that the audit of 2020-21 Accounts could result in a cost to the Council exceeding £100,000. It was reiterated that any fee payable would need to be agreed through Public Sector Audit Appointments (PSAA) adjudication process.

·       Members were reassured that there was no impact to residents, including in terms of payments, as a result of the national delays to certification work on Housing Benefit claims.

·       With regards to legacy issues with financial monitoring reporting, it was stated that the auditor was required to report on any issues as soon as they come to light under the Value for Money arrangements. The financial monitoring issue, although now largely resolved, would need to be reported again in the Joint Auditors Annual Report for the 2021-22 financial year as this was the period in which the issue was occurring.

·       It was underlined that significant audit delays were experienced across the local government sector with over 500 outstanding sets of local authority accounts still to be audited.


RESOLVED that the External Audit Progress Report and Sector Update be noted.

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