To review and agree the external auditor’s draft audit plan for 2021/22.  The external audit of the council’s statement of accounts for 2021/22 is due to commence in July 2022 and their approach and plan is attached at Appendix A.

The Key Audit Partner for Grant Thornton presented the external auditor’s draft plan; the ‘Audit Plan for the year ending 31 March 2022’ was provided in Appendix A and the ‘Informing the audit risk assessment for Herefordshire Council 2021/22’ was provided in Appendix B to the report. 

The key points of the ‘Audit Plan for the year ending 31 March 2022’ included:

i)             External audit had determined planning materiality to be £7.864m for the group and £7.7m for the Council, with any figure over this to be subject to detailed testing. 

ii)           The risks requiring special audit consideration and procedures to address the likelihood of a material financial statement error were identified as: management of override of controls; valuation of land and buildings and investment properties; and valuation of pension fund net liability.

iii)          The risk assessment regarding arrangements to secure value for money (VFM) had identified the following risks of significant weakness for the council: the failure to meet the statutory needs of children in its care; the lack of effective contract management arrangements for its public realm and facilities management contracts; the contract appointment and management arrangements; and a repeated history of not learning from past events.  External audit would work with the officers to understand how each of these areas had been progressed and continue to be progressed.

iv)          Attention was drawn to audit logistics (agenda page 54), noting that the draft financial statements for 2021/22 were due to be provided to the external auditor on 1 July 2022, and to audit fees (agenda page 55), noting that this reflected the need to undertake additional and more robust testing and the quantity of work required on VFM.

The Key Audit Partner responded to questions and comments from committee members, including:

1.           In terms of the audit fees, the role of the external auditor was becoming more involved, there was a shortage of skilled auditors, and the baseline fee may increase in future years.

2.           The purpose of VFM in the context of the public sector was outlined; this focussed on financial sustainability, governance, and improving economy, efficiency, and effectiveness. 

Referring to Action 109, the Chairperson noted that the committee had requested training on the changes to the regulations, particularly in relation to VFM.

3.           It was recognised that the ‘Auditor’s Annual Report 2020/21’, presented to the committee at the meeting on 10 May 2022 (minute 95 of 2021/22 refers), had taken longer to prepare than expected due to it being the first year of the new VFM arrangements.  The aspiration to present the 2021/22 report before the end of the 2022 was noted.

4.           The statement ‘No specific work is planned as the presumed risk has been rebutted’ was explained in relation to ‘Presumed risk of fraud in revenue recognition ISA (UK) 240’ and ‘Presumed risk of fraud in expenditure recognition ISA (UK) 240’, and the committee was assured that external audit would look at all areas of key expenditure.

5.           It was confirmed that  ...  view the full minutes text for item 7