Agenda item

Report number: PAS/WS/20/014

[Councillor Karen Richardson joined the meeting at 5.15pm during the consideration of this item, and prior to the vote being taken].

The Committee received Report number PAS/WS/20/014, which presented the results from Ernst and Young’s (EY) audit of the 2019-2020 financial statements for West Suffolk Council.  The report set out issues they were formally required to report on to those charged with governance.  EY were also required to report on the results of the work undertaken to assess the council’s arrangements to secure value for money (VFM) in the use of its resources.

The councils’ unaudited 2019 to 2020 Statement of Accounts, signed by the Chief Finance Officer (Section 151 Officer) on 9 July 2020, had been updated to reflect adjustments recommended by EY over this period as a result of their audit work.  Members were informed that these adjustments did not affect the councils’ overall financial position and were in most cases merely presentational changes.

At the time of writing the report, it was not anticipated that there would be any significant issues with the accounts and the auditor expected to issue an unqualified opinion on the financial statements for 2019 to 2020.

A copy of the Audit Results Reports dated 5 November 2020, attached at Appendix A to the report was presented to the Committee by Mark Hodgson (Associate Partner).  Attached at Appendix B to the report was West Suffolk Council’s Letter of Representation, on behalf of the Council in accordance with the audit of the financial statements for West Suffolk Council for the year ended 31 March 2020.  EY had also now issued their final fee letter (Appendix C) in relation to the audit of the 2018 to 2019 financial statements.  It was a requirement that the letter was presented to the committee in order to complete the formal reporting process. 

Mark Hodgson presented the report and explained that the results report should be taken in the context of the impact of Covid-19, namely that the draft financial statements had wholly been produced during lockdown, and the whole of the audit had to be conducted remotely.  There had been additional financial reporting considerations as a result of Covid-19 and therefore, additional audit procedures were required.  The overall message was that the Committee could take a lot of assurance from the report and from EY’s findings.  He then drew the Committee’s attention to the following key matters:

1)        Page 18 (Changes in materiality) – EY was working towards an overall materiality assessment of £1.98m.

2)        Page 19 (Status of the audit) – property, plant and equipment valuations: EY’s valuers had now reported and EY had four audit queries with officers which were or were about to be responded too, which EY needed to conclude on.

3)     Page 19 (Status of the audit) – Pensions liability – EY had now received the necessary assurances from the Suffolk Pension Fund auditor, and that had raised 3 factors which needed to be taken into account:

-      McCloud judgment – In July 2020 there was a remedy which impacted on how actuaries estimated the assumptions behind the liability, and that had seen a reduction in the liabilities of £252k.

-      There was a new pension challenge called the “Goodwin Case”, which had the effect of increasing the pension liability by £118k.

-      The audit of the pension fund found that that the pension fund assets were understated by £1.079m, of which West Suffolk’s share was 6.2% or £69k.  This meant the pension fund liability would go down by £203k and that adjustment was now being amended by officers.

4)     Page 19 (Status of the audit) – investment confirmations – there was still two outstanding queries and officers were chasing these with the necessary financial institutions.

5)     Page 19 (Status of the audit) – payroll – This was now completed and there were no further matters to report. 

6)     Page 23 (Fraud risk) – EY had not identified any incidents of management override or financial misreporting as a result of EY’s procedures.

7)     Page 30 (Pension liability) – This resulted in an adjustment of £203k.

8)     Page 31 (Going concern disclosure) – Officers had provided a detailed going concern assessment which EY had proof reviewed and stress tested in order to get part assurance, with a specific focus on future reserves and liquidity of the Council to be able to continue to provide its services.  EY’s conclusion was that this was robust and there were no further reporting requirements as a result of this work.

9)    Pages 38 to 39 (Audit differences) – There were no unadjusted audit differences to report.  Mr Hodgson concluded that he was therefore able to issue an unqualified opinion on the financial statements.

10)Pages 41 to 42 (Value for money) – There were no significant matters to report, which meant EY was able to issue an unqualified opinion on the value for money conclusions.

11)This year there was one specific representation which EY had requested in relation to the valuation of the West Suffolk Hub.  At the time of incorporation into the Council’s accounts, the asset had not been subject to revaluation and as a result the value of the asset stated was not materially different from the cost. 

Mark Hodgson concluded his presentation by stating the council was in a good place ahead of the 30 November 2020 deadline; there were lots of assurances set out in the report, and it had been a good audit process given the lockdown and remote working since April 2020 impacting on both the preparation and the audit of the accounts.  He then wished to thank the Assistant Director (Resources and Performance) and her team for their assistance during the audit.

The Committee considered the report and asked questions to which Mark Hodgson duly responded.  Discussions were held on the total audit fee code work in relation to the additional fees.  The Committee noticed an anomaly in the calculation of the figures in an overcharge of £200.  EY confirmed this was a typographical error and the council had not yet been invoiced for the fee work, and the additional fee figure would be corrected from £28,255 to read £28,055.  However, the final agreed fee was still being worked through with officers.

Councillor Victor Lukaniuk then moved the recommendations, this was duly seconded by Councillor Karen Richardson, and with the vote being unanimous, it was:

          RESOLVED: That

1)     The External Auditors unqualified audit opinion, as of today (19 November 2020) on the Financial Statements for West Suffolk Council for 2019 to 2020 (Appendix A) attached to Report number PAS/WS/20/014, be noted.

2)     The External Auditors had no matters to report on the council’s arrangements to secure economy, efficiency and effectiveness in its use of resources, issued by the Auditor, (Appendix A) be noted.

3)     The Letter of Representation on behalf of West Suffolk Council (Appendix B) attached to Report number PAS/WS/20/014, be approved, before the Ernst and Young Associate Partner issues his opinion and conclusion.

4)     The Chief Finance Officer, in consultation with the Chair of the Performance and Audit Scrutiny Committee be given delegated authority to conclude the signing of the 2019 to 2020 accounts.

5)        The Committee notes the Final Audit Fees letter (Appendix C), in relation to the audit of the accounts of St Edmundsbury Borough Council and Forest Health District Council for 2018 to 2019.