7
The Committee received the report of the Cabinet Member with responsibility for Resources who explained that the Comptroller and Auditor General's Code of Audit Practice required Ernst & Young LLP (EY) to report to this Committee on the work they had carried out in respect of East Suffolk Council to discharge their statutory audit responsibilities together with any governance issues identified.
It was noted that, at this time, the audit of East Suffolk Council's Statement of Accounts for 2019/20 was substantially completed. As stated in the EY Provisional Audit Results Report 2019/20, no issues had been identified to date that would lead to a qualified opinion. There were also no audit matters arising with regards to arrangements to secure economy, efficiency and effectiveness of the Council's use of resources. Members were informed that, to date, EY had not identified any unadjusted audit differences which the Council had chosen not to adjust for. Since publication of the Draft Statement of Accounts, the Council had identified three adjustments to be made and the audit work of EY had identified one further adjustment which had been agreed with the Council and was detailed in Section 4 of the Provisional Audit Results Report. EY were aiming to finalise their work at the end of March 2021. On completion of the audit, the Audited Statement of Accounts for 2019/20 would be presented to the Committee at the earliest opportunity for comment and approval and this would include an update on any further audit differences not reported at this stage. In the meantime, therefore, the Committee was recommended to note the external auditors' findings within the Provisional Audit Results Report 2019/20.
Debbie Hanson from EY went through the Provisional Audit Results Report in detail. She commented that the accounts had been well prepared and there were very low levels of differences and errors. Members' attention was drawn in particular to the Executive Summary and the Committee noted that there were now some changes to EY's provisional planning report considered at their September meeting in relation to the reporting timescales because, as a result of Covid19, new Regulations had changed the publication date for final, audited accounts to 30 November 2020. In addition, EY had carried out additional audit procedures on Group accounts which had not been included in the Audit Plan considered in September. EY had also identified changes to the risk assessment in relation to bad debt provision and the need for enhanced disclosures on going concern as a result of Covid. In addition, attention was drawn to a material uncertainty in the valuation of land and buildings and Council dwellings, as well as investment property, due to the impact of Covid. Ms Hanson also explained that IFRS16 had been dropped from the Audit Plan as it had been deferred to April 2021 due to Covid.
EY had also reconsidered the performance materiality which had been set at 50% of planning materiality in order to reflect the fact that 2019/20 was the first year of East Suffolk Council. In relation to Information Produced by the Entity (IPE), due to Covid, Microsoft Teams had been used to evidence the re-running of reports used to generate information for the audit. It was noted that EY also had additional consultation requirements due to Covid in relation to the going concern point and the valuation uncertainty in relation to land and buildings and investment property. It was confirmed that the key area outstanding was the valuation work on property plant and equipment, and investment property which could result in additional changes to the audit work. Ms Hanson confirmed that EY had not identified any unadjusted audit differences which management had not amended, although she pointed out that there could be issues arising from the remaining work that require some further changes. Attention was drawn in particular to the areas of audit focus in relation to risk and there were no significant issues. Members were informed that the Value for Money work had not identified any significant risks, therefore, an unqualified Value for Money conclusion would be issued. Ms Hanson highlighted the Draft Audit Report - Emphasis of Matter - Impact of Covid19 on page 173 and page 178 in relation to the Summary of Adjusted Differences which noted some adjustments to the accounts regarding pension liability, imbalances regarding the settlement of the Felixstowe Docks appeal and Suffolk County Council Coastal Defence capital spend which should have been revenue expenditure. She clarified that none of these would impact on the position of the Council. She stated that this concluded her report which she hoped had drawn attention to the changes management had made and that Members noted that EY had identified only a small difference of £212,000 in relation to the Council's share of reserves and associates. In conclusion, Ms Hanson stated that these were a very good quality set of accounts to date with very few amendments required.
The Chairman stated that these were very positive provisional results especially given the circumstances and that he was pleased with the query regarding valuation but, given the mix of assets East Suffolk had, he queried if EY was happy the valuations would not be any major issue. Ms Hanson responded that it was difficult to say until the valuers had completed their work but given the level of investment property was only £2.9m this was not significant. She stressed that she did not want to second guess the valuers' conclusions especially given she knew there had been some questions for management.
The Chairman also queried the audit timings for 2020/21 and whether they would be late which might cause the Council some problems. The Chief Finance Officer clarified that the proposed phasing would put East Suffolk in the November/December timescale and, therefore, he and Ms Hanson had discussed whether it would be possible to bring this forward to July/August to enable East Suffolk to get back into the normal cycle. Obviously that depended on whether the 2019/20 audit had been concluded and if other Authorities agreed to the re-phasing. Ms Hanson stated that phasing had been introduced as it was impossible for EY to deliver everything in the period up to end of September, however, they would take on board the comments made by the Chairman and Chief Finance Officer to see if it would be possible to bring forward the work for East Suffolk, although this would depend on EY being able to finish the 2019/20 audit work in relation to the valuations.
On the proposition of Councillor Back, seconded by Councillor Cooper, it was
RESOLVED
That the External Auditors' findings to date within the Provisional Audit Results Report for 2019/20 be noted.
The Finance Officers and Ms Hanson left the meeting at this point.