To report progress on the external audit of the council’s 2022/23 financial statements. 

The Head of Strategic Finance introduced the report, it outlined the progress of the external audit of the Statutory Accounts for the year ended 31 March 2023.

The following points were highlighted:

·       The council prepared the draft Statement of Accounts for 2022/23 and published them on 31 May 2023, in line with the statutory deadline.

·       Hereford Council were one of only 30% of UK local authorities that had met the deadline.

·       The statutory audit commenced on 3 July 2023, performed by Grant Thornton (GT) and their team.

·       The council’s Finance Team had worked hard to provide high quality working papers and responded to audit requests through the provision of evidence.

·       GT had made significant progress to date and it was noted no material errors in the statements had been found.

·       As a result of a number of challenges, GT were not able to present the 2022/23 External Audit Findings Report as previously planned and the statutory deadline to deliver the audit opinion on the financial statements by 30 September 2023 will now not be met. These challenges included staff resources, multiple sickness absences and issues with the skills and experience of the junior members of the audit team.

·       The Director, Grant Thornton (DGT), expressed their disappointment in the positon they were currently in and not as set out in the plan that was put to the committee in June. It was highlighted that the challenges were exclusively with GT and it was important to note that the co-operation from the council’s Finance Team had been excellent.

·       The DGT echoed the Head of Strategic Finance and provided assurance that they had made significant progress to date and it was noted no material errors in the statements had been found.

·       The DGT drew attention to “Appendix A: Grant Thornton Progress Report September 2023” (Pg 128) and the declining performance against the target date for publication of audited accounts in recent years. It was thought that very few percent of authorities would meet the required deadline of 30 September.

·       The DGT assured the committee they were committed to completing the audit to be brought before them at the 24 October meeting.

·       The DGT informed the value for money (VFM) statement was underway and working to the deadline of the end of the year.

In response to committee questions it was noted:

1.     GT were committed to ensure that the audit finders report is as complete as possible and provided the council with as much assurance as possible. The DGT confirmed he would be in attendance in person at the meeting on 24 October 2023.

The committee noted their disappointment with the delay with the accounts being signed off and frustration that the Council could not hold GT to account. 

The Chairperson would write to the PGAA and Secretary of state. 

2.     The DGT explained, the GT contract to undertake the work as an external auditor for the Hereford Council is with the Public Sector Audit Appointments (PSAA). The PSSA holds GT to account and actively manages delivery and works with GT to help deliver timely audits.

3.     The DGT recognises a delay in a large number of audits, but assures that GT consistently outperformed every other firm in terms of timeliness of accounts.

4.     The DGT explained the ramifications of not meeting deadlines is factored in to future tendering processes. It was explained the PSAA contract runs for five years and Councils have the option to “opt out” and go out to appoint an independent external auditor. It was confirmed that GT had tendered for accountancy work for audits for those who appointed outside of the PSAA previously, but are not looking to tender for any further appointments moving forward.

5.     The DGT confirmed that Hereford Council were prioritised and will have accounts signed off significantly ahead of the majority of GT’s other local government clients.

6.     In response to a question raised around proposed PSAA fee increases and whether this would result in receiving timely reports, the DGT thought unless there was a change to the current requirement in terms of audit procedures, he would be surprised if there was any short-term Improvement in delivery.

7.    The Council are working with GT to follow up on previous recommendations and management actions

8.     The DGT confirmed that all individuals engaged on the audit are GT employees, there are members based in Bristol and India. A large element of the work is resourced from India but this is not subcontracted out because they are employed by Grant Thornton LLP.

9.    With regards to issues recently highlighted in the press surrounding a council falling into financial difficulties, the DGT explained the process undertaken by auditors and the statutory recommendations that are issued, the DGT would circulate “Lessons from recent Public Interest Reports”.

Resolved

That:

a)    Audit and Governance Committee note the progress of the external audit of the Statutory Accounts for the year ended 31 March 2023.

2023/24-009 A letter to be sent by the Chair of the Committee to the PSAA and secretary of state.

2023/24-010 DGT to provide the committee with the “Lessons from recent Public Interest Reports”.