To consider the external auditors audit finding report for the year ended 31 March 2022.

Appendix A - The Audit Findings for Herefordshire Council 2021/22 is included in the supplement.

The Key Audit Partner for Grant Thornton presented the external audit findings report for the year ended 31 March 2022; Appendix A and Appendix B had been circulated in a supplement to the agenda.  The principal points included:

i.             The post-statements audit commenced in late June 2022, one of the first in the country, and the time taken reflected that audits were more involved, with significant inputs required from external audit and from the finance team.  It was noted that there had been personnel changes, with a higher degree of challenge and level of adjustments.

ii.            Attention was drawn to the ‘Conclusion’ section (supplement page 21) and it was reported that, since publication, a number of outstanding items had been completed.

iii.          Attention was drawn to the ‘Headlines’ section (supplement page 19) which reported that ‘… work to date had identified one material error and a resulting prior period adjustment in the financial statements that have been corrected in which related to the reclassification of the council’s Energy from Waste asset, previously reported as a land and building asset, as an item of plant and machinery in 2021/22’ and an overview was provided of the reasoning for this adjustment.  An adjustment in relation to capital financing requirement was also explained.

iv.          It was reported that there had been reclassifications of some assets from land and buildings to investment property and vice-versa but there was minimal net effect.

v.           It was noted that the receipt of the letter from the pension fund auditors was awaited.

vi.          The committee was advised about a national, technical issue that was preventing the 2021/22 accounts being signed off by any council with infrastructure assets.  It was reported that the Chartered Institute of Public Finance and Accountancy (CIPFA), following consultation, was seeking a temporary statutory override to remove infrastructure from the coverage of the audit.  A resolution was expected before the end of the calendar year.

vii.         It was reported that work had commenced on the value for money opinion.

viii.       Attention was also drawn to the ‘Fees’ section (supplement page 51) and it was noted that the final fees were to be confirmed, due to the work that was ongoing.  It was reported that considerable extra time had gone into discharging auditing responsibilities.

In response to questions from the Chairperson, the Head of Strategic Finance advised that the reclassification of the Energy from Waste asset had no impact on the net book value, and that depreciation was linked with the asset and not the category.

The Key Audit Partner responded to other questions from committee members, the key points included:

1.           Further background was provided on the technical issue with infrastructure assets.  It was noted that the rate of degradation of local infrastructure was a service quality issue rather than an accounts issue.

2.           The appendices had been published in a supplement to the agenda to ensure that the papers were as complete as possible, and an overview was provided of the audit process timeline and associated challenges.

3.           Further background was provided on the reclassification of assets, and on the process for confirming the final fees.

It was noted that a summary of the value for money findings would be provided in the ‘Auditor’s Annual Report’ item identified in the committee’s work programme, with the aspiration that this could be considered at the 30 January 2023 meeting; however, the External Audit Plan may need to be considered at a subsequent meeting.

RESOLVED: 

That the report of the external auditor has been considered.