To review and agree the external auditor’s audit plan for 2020/21.

The committee reviewed the external auditor’s audit plan for 2020/21.

Jon Roberts, engagement lead for Grant Thornton, presented the report, with attention drawn to: the significant risks requiring special audit consideration; the changes arising from the new Code of Audit Practice and the new auditing accounting estimates standard; and the audit fees section.

The chairperson commented on the need to engage with the council’s valuers and actuaries to enhance the understanding of the committee.  In response to questions from the chairperson:

·                The chief finance officer said that he was content that the ‘risks of significant VFM weaknesses’ (agenda page 229) were a fair reflection of the council’s position and noted that financial sustainability was a live topic for all local authorities and the council had its own financial pressures.

·                Jon Roberts said that he would confirm whether the council’s counter fraud specialist had been involved in the fraud risk assessment (agenda pages 250-255) and commented on fraud risk assessment from an accounting perspective.

Questions and comments were invited from committee members and responses were provided, the principal points included:

1.         In response to a question from the vice-chairperson regarding the difference in the scale fee published by Public Sector Audit Appointments Ltd (PSAA) of £95,792 and the total audit fees of £156,792 (‘Audit fees – detailed analysis’, agenda page 233), Jon Roberts: confirmed that the quantum of work expected by the regulator had increased; commented on the findings of the ‘Independent Review into the Oversight of Local Audit and the Transparency of Local Authority Financial Reporting’ by Sir Tony Redmond; and, in response to the findings of the Redmond Review, the government had announced additional funding in 2021/22 to support local bodies to meet the anticipated rise in audit fees; noted the potential impact of other standards going forward, such as the International Financial Reporting Standard 16 relating to leases; and said that he would provide further clarification on ‘local risk factors’.

2.         It was noted that there were some erroneous references to this committee being the ‘audit and procurement committee’ and not the ‘audit and governance committee’.

3.         In response to a question from a committee member, the chief finance officer provided a brief overview of the council’s involvement in Hoople Ltd, said that this was reflected in the group financial statements, and noted that an undertaking had been given to provide the committee with an overview of how the company operated and managed its risks.  It was noted that the council was also involved in a range of partnerships.  In response to a further question from the vice-chairperson on a point made in the annual governance statement 2019/20 (agenda supplement page 37), the chief finance officer confirmed that a project board was to be established to manage the council’s relationship with Hoople Ltd.

4.         In response to a question from a member in attendance about the risks associated with the governance of the Public Realm contract and the Hereford City Centre Transport Package (agenda page 229), Jon Roberts said that the reviews were likely to look at the arrangements ensuring that the regularity of budget setting and reporting were preserved.

5.         In response to further questions on the audit fees, Jon Roberts confirmed that the line for ‘Covid-19’ related to the additional risk based work arising from the pandemic and noted the potential for further work to be undertaken on grants accounting.

Resolved:  That:

a)      the proposed external audit plan 2020/21, at appendix A to the report, and associated informing the audit risk assessment, at appendix B to the report, be approved; and

b)      the committee did not determine any recommendations and it wished to record the following actions to be undertaken by the external auditor:

i.          confirmation be provided about whether the council’s counter fraud specialist had been involved in the fraud risk assessment;

ii.         further clarification be provided on the ‘local risk factors’ identified in the ‘Audit fees – detailed analysis’ section; and

iii.        references to the ‘audit and procurement committee’ be amended.