To consider the external auditors audit findings report for the year ended 31 March 2021.

The committee considered the audit findings report for the year ended 31 March 2021.

Jon Roberts (Key Audit Partner, Grant Thornton) introduced the report, the principal points included: the National Audit Office had changed the timeline to enable focus on the financial statements, providing a three month window for the completion of work on arrangements to secure value for money; the report provided commentary on the risks identified in the Audit Plan; reference was made to the revised standard on accounting estimates, ISA 540; a new tool was being utilised to drill down into the council’s journals; the outstanding matters identified in the ‘Headlines’ section had been cleared down since the publication of the agenda and final review steps were underway; and the audit opinion would include an ‘emphasis of matter’ paragraph on the valuation of retail and specific trading related assets, reflecting the fact that the valuer had highlighted a material valuation uncertainty - in line with the position advocated by the Royal Institute of Chartered Surveyors - due to the unknown impact of the Covid pandemic.

Responses were provided to questions from committee members, the key points included:

i.             The council’s current Minimum Revenue Provision (MRP) (agenda page 45) had been benchmarked and it was in line with other authorities.  It was noted that the external auditor would want to engage closely with officers on any changes, as this was a critical area of financial strategy.

ii.            It was acknowledged that the findings report identified that a ‘verbal update’ would be provided to the committee in a couple of instances and, with work completed to the satisfaction of the external auditor, the document would be updated accordingly and a final version would be circulated.

iii.          An overview was provided of the treatment of depreciated replacement cost (DRC) for land and buildings (agenda page 41) in terms of the balance sheets and the different approach to asset valuations for insurance cover purposes.  Issues around business continuity planning and interruption insurance were briefly explored.

iv.          With reference made to the identified risks to financial sustainability (agenda page 51) in terms of the Court judgement for Children’s Services and the write back of the by-pass costs, Jon Roberts said that it would be expected that any other expenditure incurred would be disclosed in future accounts or as post balance sheet events.

v.           It was noted that the inclusion of ‘Commercial in confidence’ in the header to the report was an error and this should have been removed prior to publication.

RESOLVED:   That the report of the external auditor has been considered.

Action(s):

Action 127      That the final version of the external audit findings report be issued to committee members, with modifications highlighted.

                        Link: The Audit Findings for Herefordshire Council report 2020/21 (final)