Agenda item

Mark Russell presented the 2020/21 External Audit Plan. It was noted that an additional column showing the 2018/19 fees had been included in a supplementary version of the Audit Plan.

Audit fees

Councillor Heather Williams asked why the proposed audit fees for 2020/21 were usually at the top end of the scale. Mark Russell explained that the estimates had been based on costs incurred for the 2019/20 audit. The actual cost would be lower that the estimates if the audit went to plan, but costs increased if queries were found.

Valuation of investment properties

Councillor Heather Williams asked whether the amount spent on audit fees on investment properties was taken into consideration when assessing their profitability. The Head of Finance explained that usually the audit costs were charged centrally and not to specific budgets, but these costs could be considered when evaluating profitability in the future. However, he added that the audit fees would be higher in the year the property was purchased than in subsequent years.

Mark Russell explained that the investment properties were valued according to accounting standards, which took into account the possible future income of the asset and this could be different from the market value. The Head of Finance explained that the assets were valued every year and the Council’s investment properties had increased in value. It was noted that the recent sale of a property provided evidence for the valuation of the properties that the Council still owned.

Covid-19 grants

In response to questioning from Councillor Helene Leeming, the Head of Finance explained that the Covid-19 grants, which were funded by the Government, were worth tens of millions of pounds. Mark Russell explained that these grants were either classified as principal, meaning that the Council decided who to award them to, or agency, meaning that the Council merely paid out the grants on instruction from the Government. The external auditor already had experience of this issue from auditing other local authorities and this council had provided evidence relating to the grants’ classification. He expected the audit of this matter to go smoothly and no additional audit fee had been allocated. In response to questioning from Councillor Richard Stobart, the Head of Finance agreed to consider what lessons could be learned from the ways in which these grants had been awarded.

Audit timetable

Mark Russell confirmed that the 2020/21 audit was due to start in a week’s time and the working papers had been provided to allow this to happen in accordance with the schedule.

Value for money

Mark Russell explained that for the Council to achieve an unqualified audit opinion on value for money the authority will need to provide accurate financial statements and prompt officer support with any resulting queries. It was noted that the auditors would be using a different set of criteria from previous years.

Assessing materiality

Mark Russell explained that planning materiality was the figure used by the auditors to determine which errors needed to be included in the final audit. The auditors would be using the performance materiality, which was 50% of the planning materiality, whilst carrying out the audit and querying the figures provided. This was the same level applied in previous years. Any unadjusted errors within 5% of planning materiality would be reported to the Committee.

Responding to auditor queries regarding valuation

Mark Russell reported that auditing the pension scheme had been made simpler as the auditors had already gained experience by auditing other local authority’s pension schemes for the year 2020/21.

Mark Russell reported that the auditors had already received estimates regarding the investment properties valuation. Any queries from the auditors’ valuers would then have to go to via the auditors to the Council’s valuers and attempts had been made to improve this process.

The Head of Finance stated that he had liaised with the property valuers who confirmed that they were ready to respond to any queries from the external auditors. Key officers of the Council had also been informed that responding to any queries from external auditor must be a priority.

The Committee noted the report.