Agenda item

The Committee is asked to consider the reports from the External Auditor Ernst & Young (EY).

11.1     The Committee considered the draft audit reports from the External Auditor Ernst & Young (EY) (copies appended to the signed minutes).

11.2     Mr Lazarus (EY) began by thanking County Council officers for their work on the 2023/24 Financial Statements.  Mr Lazarus gave a summary of EY’s findings within the County Council draft Audit Results Report and confirmed elements such as the increase in materiality based on benchmark calculations.  It was confirmed there was no change in methodology.  No additional risks had been discovered to bring to the attention of the Committee.  The risk for Oracle Fusion had been retained for 2023/24.  The impact of progress made on the project to implement Oracle would be seen in the 2024/25 reports.  No significant change in fees was expected from the Public Sector Audit Appointments (PSAA) work.

11.3     Mr Lazarus confirmed that EY had maintained their independence when working on the West Sussex accounts.

11.4     The Committee made comments including those that follow.

•      Sought Mr Suarez’s thoughts on the proposed audit fee.  – Mr Suarez, Interim Director of Finance and Support Services, confirmed that he was comfortable with the fee range and would accept it.

•      Queried the wording that would be used in the disclaimer for the 2022/23 Financial Statements.  – Mr Lazarus confirmed that the legislation on this was still outstanding.  EY would be able to act when the legislation was live.  A draft disclaimer had been circulated within EY, but pending the final legislation.  Once the legislation was confirmed, a draft would be shared with County Council officers.  Work would follow the disclaimer to rebuild assurance.  Mr Suarez confirmed that he would work on the wording with the Chairman and Vice Chairman in advance of the November meeting.  Mr Lazarus confirmed that a high number of disclaimers would be issued for 2022/23, and so this would not be held against local authorities.  Challenges would be made if disclaimers continued.

•      Queried if a lack of opinion on the accounts would impact any commercial activities.  – Mr Suarez confirmed that officers had undertaken an exercise to look into this.  No covenants would be broken on any large contracts.  There may be some loans taken out in the future  with the Public Works Loan Board, but the industry was aware of the situation and sector issues.  Assurance was given to the Committee that no issues were foreseen for any covenants linked to audited accounts.

•      Sought clarity over EY’s interaction with Internal Audit.  – Mr Lazarus confirmed that there were strict rules concerning this.  Mr Wilkins explained that there was no reliance on Internal Audit controls.  However, their reports were looked at to consider internal controls, governance issues and any related risks.  The Internal Audit work on Smartcore had been useful to look at.

•      Queried how Edes Estates was considered within the financial statements.  – Mrs Chuter, Financial Reporting Manager, confirmed that the company was 100% owned by West Sussex County Council.    Mr Lazarus explained that on a quantitative level it was immaterial with regard to audit.  However, other issues were considered such as reputational areas. 

11.5     Mr Lazarus reported on the draft Pension Fund Audit Results report and confirmed that the pension fund was substantially complete.  There were no reportable differences  to highlight.  With regard to Private Equity, EY had spoken with fund managers and the actuary to gain assurances.  Ey were comfortable with the valuations and so there were no differences to report.  It was confirmed that the Pension Fund accounts would continue to be merged with the County Council accounts for now with one joint opinion.  For the audit reports, it would be clear that the Pension Fund had been audited, but would formally be part of the disclaimer as it was joined with the County Council accounts.

11.6     Mr Wilkins confirmed that EY maintained their independence when working on the West Sussex Pension Fund accounts.

11.7     The Committee made comments including those that follow.

•      Queried the reporting thresholds for the pension fund.  – Mr Lazarus confirmed that anything over £2m was reportable.  £40m was the trigger for noting within the accounts.

•      Queried the test for liquidity of assets.  – Mr Lazarus confirmed that EY had a specific pension team which considered liabilities.  A scale approach was undertaken for the types of funds seen.  Ms Quaid, Finance Manager - Pension Fund, confirmed that Private Equity funds were defined as illiquid assets with agreed investment times; they were not considered as part of cashflow considerations.

11.8     Resolved – That the Committee notes the draft Audit Result Reports.