To provide the committee with a progress update of the work being undertaken by the external auditor, Grant Thornton.

Grant Thornton presented the report and highlighted that there were no issues to report to the committee at this stage of the audit.  

It was noted that as indicated at the January meeting of the committee, there had been change to the materiality levels.    The materiality figure had been increased and had been signed off by the technical team at Grant Thornton. 

Grant Thornton reported that the change of materiality was a pilot and that Herefordshire was the only council within the pilot.   It was explained that in comparison to other councils, Herefordshire had a large asset base compared to expenditure.   Traditionally, materiality was based on expenditure which meant that more work was required on the Herefordshire external audit in relation to property, plant and equipment.    The outcome of this pilot would be reported in the summer and if it was successful would be sent to the Financial Reporting Council (FRC) for approval for use across all councils who were clients of Grant Thornton and would potentially be adopted by other regulatory bodies.    

A member of the committee requested that as Herefordshire would be the only council in the pilot that Herefordshire was not used and that the current materiality level was used. 

A member of the committee indicated that there was little justification provided as to why there should be a change in the materiality level, especially as there was a 50% increase in materiality.   It appeared that the only reason was that Grant Thornton had needed to undertake further work as part of the 2017/18 audit which had incurred a cost to the council.   

It was noted that Grant Thornton’s professional opinion was that the change in materiality was the best approach for Herefordshire.  The committee agreed that it would be helpful if a training session on materiality could be arranged prior to the July meeting.    

Grant Thornton confirmed that they had already undertaken some tests in this year’s audit based on the new materiality levels.  

It was confirmed that as part of the July report to the committee on the audit of the accounts, there would be a number of appendices which would include audit adjustments over £500k and non-adjustments to the accounts.    Where there had been no adjustments, it would be at the committee’s discretion as to whether there were amendments  to the accounts. 

The committee were advised that the determination of the level of materiality was a matter that rested with the External Auditor.

Councillor EJP Harvey proposed and Councillor EE Chowns seconded the following:

That Grant Thornton be asked to consider maintaining the level of materiality for 2018/19 accounts for reporting purposes at same level as previous years

Vote:  

6 for

1 Against.

RESOLVED

That:

(a)  The report be noted; and

(b)  Grant Thornton be asked to consider maintaining the level of materiality for 2018/19 accounts for reporting purposes at same level as previous years