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The Committee received report ES/1878 of Councillor Vince Langdon-Morris, Cabinet Member with responsibility for Resources and Value for Money.
Councillor Langdon-Morris introduced the report, the purpose of which was to provide the Committee with an update on External Audit work, including information on the conclusion of the 2020/21 audit, an update on the proposed scale fee variation for 2020/21, an update on the Department for Levelling Up, Housing and Communities and National Audit Office’s proposal for dealing with outstanding audits and plans for 2021/22 and 2022/23, an update on Value For Money work for 2021/22 and 2022/23, and an introduction to the Audit Plan for 2023/24.
David Riglar, Partner at Ernst and Young, updated the Committee on the conclusion of the 2020/21 Audit. The majority of this had been signed off in December, as part of this process Ernst and Young would issue an Auditors Annual Report and finalise the fee for this audit. Both of these documents were included in the agenda.
The Chair invited questions.
Councillor Byatt referred to the section of the Auditors Annual Report which summarised a significant weakness in governance arrangements relating to social housing, and asked whether the Council could now be assured that this would not happen again. Officers stated that the Committee had received several updates on this issue and that Ernst and Young considered that this had been resolved.
Councillor Lynch referred to Appendix A of the Auditors Annual Report which stated there was a weakness in relation to how the Council monitors and assesses risk and gains assurance over the effective operation of internal controls, including arrangements to prevent and detect fraud. Councillor Lynch stated that the Internal Audit team had always given a good report relating to fraud control, and this gap between the reports received from Internal Audit and Ernst and Young was concerning. Councillor Lynch asked what fraud had been found that the internal team had not found. The Chair stated that he agreed with this concern, especially in light of delays to the external audit which could mean that any gaps were not highlighted to the Committee for a number of years.
Mr Riglar stated that the Department for Levelling Up, Housing and Communities and National Audit Office had recently consulted on a proposal to reset the audit system in light of these delays which were affecting the whole sector. There was a need to get auditors back to auditing the current years data as auditing two or more years behind was not providing necessary assurance. The proposal from the the Department for Levelling Up, Housing and Communities was that backstop dates would be introduced for outstanding audits and an opinion would be issued for outstanding audits on this date. Ernst and Young had started work on the current years data and refocussed on audits in the remaining years, focusing on nearly complete audits, outstanding Value for Money work and completing pension fund work. Assuming the proposal from the Department for Levelling Up, Housing and Communities was passed then the Councils 2021/22 and 2022/23 Audits would be disclaimed, although there would be a full suite of Value for Money work. Mr Riglar stated that this would still include basic checks, but the detailed testing would be skipped. This would apply to all Councils.
Councillor Speca stated that a conversation had taken place at the last meeting about the Council's risk register and whether risks were being adequately captured. Regarding comments in Appendix A on monitoring and assessing risk, Councillor Speca asked what actions had been taken in this area, and whether there were any learnings from this about how the risk register could be improved. Mr Riglar stated that the weaknesses in detecting fraud referred to the issue in the housing rent non compliance which was tied to this area. It was not that case that there were weaknesses in the Councils counter fraud arrangements.
Councillor Gandy referred to an increase in fees following Covid-19, and it was concerning that the Council was still in a position where audits had still not been carried out. The Chair stated that costs had gone up, but he would like to understand why there had been such a significant increase on this audit, and what this would mean for following audits when recent inflation would become an issue. The Chair asked if there was any indication of what the cost of upcoming audits would be. Mr Riglar stated that there were a number of things that could arise which would result in a change in the fees. Any additional fees that were submitted were challenged and sense checked to make sure any changes were justifiable.
Councillor Byatt referred to the Audit Planning Report for the year ending March 2024, which referred to a risk associated with Property, Plant and Equipment and Investment Property Valuation and a need for enhanced procedures in this area. Councillor Byatt asked if this was a change in risk compared to previous years.
The Chair expressed frustration at the delay in audits which would inevitably end up requiring more work and costing the Council more money. The Chair asked for clarification on the timeline for audits going forward. Mr Riglar stated that the 2021/22 Value for Money was nearing completion and a report would be received at the Committee's next meeting, there had been some delay here as the issue on rent non compliance had still applied. The 2023/24 audit plan was presented in the documents before the Committee. Mr Riglar summarised the steps in this plan, and noted that this could change depending on implementation of the proposal for dealing with delays to external audits. The risk areas where additional work would be done were set out, several of these were the same as in previous years as they were considered high risk areas, there were three additional areas relating to Property, Plant and Equipment and Investment Property Valuation, the creation of East Suffolk Services Limited, and finance data migration. The aim was to complete 2023/24 audits by the end of November. The fees for this were still to be confirmed. Mr Riglar also highlighted Appendix C of the 2023/24 Audit Plan which detailed the introduction of IFRS 16 standard, and ISA 315 both of which would impact the accounts.
Councillor Lynch referred to the proposed timeline for the 2023/24 audit and asked if this was on schedule. Mr Riglar confirmed that it was and that some work had been bought forward.
On the proposal of Councillor Lynch, seconded by Councillor Thompson it was
RESOLVED
That the Audit & Governance Committee:-
1. Note the proposed scale fee for the 2020/21 audit.
2. Note Ernst & Young’s plans for the audit of 2021/22 and 2022/23 in relation to the consultations from the Department for Levelling Up, Housing and Communities and National Audit Office’s proposals in dealing with outstanding audits.
3. Note the progress on Value for Money work for 2021/22 and 2022/23.
4. Note the Audit Plan for the 2023/24 audit of accounts.