Agenda item

The Committee is asked to consider the 2021/22 Audit Results Report and, if needed to address changes of a minor nature arising after the meeting of the Committee, to delegate authority to the committee Chairman to approve and sign-off the final text.

The Committee is also asked to review and comment on the 2021/22 Draft Auditor’s Annual Report from the External Auditor Ernst & Young (EY).

23.1     The Committee considered the 2021/22 Audit Results Report and the 2021/22 draft Auditor’s Annual Report from the External Auditor Ernst & Young (EY) (copies appended to the signed minutes).

23.2     Mrs Thompson (EY) began by introducing the 2021/22 Audit Results Report and explaining that in September the audit had been completed except for the outstanding issue relating to the reporting of infrastructure assets.  CIPFA had issued an update to the Code of Practice on Local Authority Accounting and the Department for Levelling Up, Housing & Communities (DLUHC) had issued a statutory instrument to allow for resolution of the issue. CIPFA had subsequently issued guidance on the update to the Code.  Mrs Thompson commented that the challenging audit had been greatly helped by the support from County Council officers.

23.3     Mrs Thompson explained that EY were likely to issue an unqualified audit report whilst they worked to finalise the audit over the coming weeks.

23.4     Mr Mathers (EY) spoke through the summary of risks in the audit and that there were no areas of concern.  Recommendations had been made and accepted in areas such as the approach used for the valuation of solar farms; and in the quality assurance measures for data inputs for valuation processes.

23.5     Mr Mathers reported that the County Council had responded to the CIPFA guidance on infrastructure assets and produced a paper outlining its approach.  The paper was currently with EY for assessment.

23.6     The Committee made comments including those that follow.

·     Noted that the audit last year raised issues with school valuations, and that valuation processes had been also raised in this audit; and queried if there was a wider problem with County Council valuations.  – Mr Mathers confirmed that the previous school valuation issue had been resolved.  It was explained that the County Council held over £1.7bn of assets which covered a broad range, for which the County Council relied on specialists for valuations.  Processes could be improved to assist with what information was passed on to valuers, and how the County Council could challenge valuer reports.  Mr Mathers highlighted that the County Council officers took a proactive approach and sought to raise issues as they arose in this area, having previously raised the school issue themselves for EY’s attention.

·     Sought clarity over the infrastructure resolution and if the solution was temporary or long-term.  – Mrs Thompson confirmed that the solution was temporary for financial years up to March 2025.  For April 2025 onwards a final solution would be agreed from the three proposals currently under consideration.  The County Council was recommended to consider how they would respond to the three proposed solutions.  Mrs Eves added that many local authorities were in the same position and so discussions would take place to collaborate on approaches to the solutions.  Mrs Thompson highlighted the importance for authorities to respond to the CIPFA consultation.

·     Queried if any processes had changed in response to the infrastructure issue.  – Mr McEwan, Finance Manager (Financial Control), explained that officers reported according to the Code and so no change would be made in approach until the Code was updated.  Mrs Thompson added that officers should record infrastructure details now in preparation for an agreed solution.

·     Requested details of the sample of related party disclosures which were reviewed.  – Mr Mathers explained that a sample of non-return disclosures were checked and it was confirmed that no transactions had taken place.

·     Asked for details on the school bank reconciliation.  – Mr Mathers confirmed that EY were satisfied that differences highlighted were not material.  Mr McEwan explained that the reconciliation has been looked at over a number of years and was a complex piece of work to cover multiple school transactions.  The work on SmartCore would assist in future year’s reconciliations.  If write offs occurred they would be appropriately recorded.

23.7     Mrs Thompson introduced the 2021/22 draft Auditor’s Annual Report and explained that the opinion had not been issued yet as so some areas of the report would require final updating.

23.8     Mr Mathers reported that EY was preparing to report no matters to report by exception.  Recommendations had been made within the value for money section on governance arrangements.

23.9     The Committee made comments including those that follow.

·     Raised concerns that issues of non-disclosure had been found within the related party transactions work.  – Mr Mathers confirmed that recommendations for improvement had been made in this area which had been accepted.  Mrs Chuter confirmed that work was happening with Human Resources and Organisational Development to improve processes when people left the authority.  Mr McEwan added that the issues raised during the audit did not imply that members or officers had failed to make disclosures which were asked of them; rather, that the survey should be expanded so that all interests (regardless of materiality of transactions) are declared.

·     Sought clarity over the definition of materiality for declarations.  – Mr Pitman, Head of Southern Internal Audit Partnership explained that work by the National Fraud Initiative looked into payroll every two years as an additional check, which added reassurance to the processes in place.  Mr Hunt confirmed that the code of practice had been followed correctly, but acknowledged that there was areas to improve on.

23.10  Resolved – That the Committee:

1.   Notes the content of the 2021/22 Audit Results Report and, if needed to address changes of a minor nature arising after the meeting of the Committee, agrees to delegate authority to the committee Chairman to approve and sign-off the final text.

2.   Notes the 2021/22 Draft Auditor’s Annual Report.