Agenda item

External Audit

The Committee is asked to consider the report from the External Auditor EY.

Minutes:

13.1   The Committee considered the Annual Audit Letter from EY (copy appended to the signed minutes).

 

13.2   Mrs Thompson (EY) introduced the letter and highlighted the executive summary which outlined the unqualified opinion given to the financial statements, although there was a qualified value for money exception reported on Children’s Services following the inspection report. The 2018/19 audit was now closed and planning had begun for the next audit with work looking at risk considerations.

 

13.3   The Committee made comments including those that follow.

 

    Queried EY’s concerns with Contract and Whole Council design processes. Mrs Thompson confirmed that EY were satisfied that adequate processes were in place.  It was noted that progress was being made, but slower than expected.

    Raised concerns on the identified weaknesses in performance monitoring and risk arrangements and proposed that this could be an area that the Performance and Finance Select Committee (PFSC) be asked to review. Mrs Thompson explained that during the audit EY would not have looked into the details of Children’s Services.  Value for money processes looked to ensure that appropriate processes were in place.  EY looked at arrangements, not outcomes.  Mr Hunt (Cabinet Member for Finance and Resources) highlighted that the letter referred to the previous year and confirmed that six months on work was progressing to address identified issues.  The Committee agreed that the Chairman should write to the Chairman of the PFSC to raise concerns with regard to Children’s Services and the Fire and Rescue Services and the failure with appropriate performance monitoring and risk arrangements.  PFSC should be asked to look into the current measures which were not fit for purpose.

    Noted the issues raised by EY and queried the likelihood of further issues being widespread. Mrs Thompson explained that their work generally found that issues can either highlight issues elsewhere; or the identified issues are bespoke and localised.  There was no indication of other issues other than those identified from EY’s point of view.

    Sought clarity on the considerations for informed decision-making arrangements being in place. Mrs Thompson explained that value for money conclusions for arrangements could result in one of three opinions; unqualified, except for or adverse.  Whilst some issues had been identified with the processes around informed decision-making, there were sufficient indications that arrangements across the whole council were in place and so EY had chosen to give an except for conclusion.  EY had reported on the concerns identified with Children’s Services and the Fire and Rescue Service by other inspectorates, the results of which had been reflected in EY’s work.

    Queried the impact of International Financial Reporting Standard (IFRS) 16 Lease arrangements on the balance sheet. Mrs Chuter, Financial Reporting Manager, explained that a disclosure note would need to be added to the accounts for 2019/20, but the impact of IFRS 16 would be implemented in full in the 2020/21 accounts.  The work would not be part of the asset strategy as one of the main changes arising from IFRS 16 covered smaller scale, operational type leases; such as photocopier leases.

    Asked if training would be required for the new conceptual framework. Mrs Chuter commented that this could be picked up in the annual June training session.

    Queried where the County Council’s Chief Executive’s relocation payment would be reported. Mrs Thompson explained that EY had looked into the payment with regard to their criteria.  The payment was not considered material from their work as it was less than £22m.  It was therefore not included within the audit report.

    Praised the recent transfer of Pension Administration. Mr Hunt reported that further progress had been made since the audit and praised the work of Hampshire County Council and County Council officers.

    Sought clarity on the issues raised by EY on permanent staffing issues.  What level was the issue, was it a national issue and what assumptions had been made that processes would improve when staffing levels improved. Mrs Muschamp, Head of Finance, explained that recruitment for procurement and contract was a challenge and an area where is was difficult to attract and retain professionals.  Progress was being made.  Members noted that a task and finish group was looking into a new staff structure for the contract service.

    Queried the Capital budget and the slippages in the programme. Mr Hunt confirmed that this area was considered by the PFSC via a quarterly report.  Delays in the programme were linked to issues such as planning and weather.  Faithful+Gould had been appointed to help with this and address the concerns.  Mrs Thompson confirmed that the level of slippage was typical and that EY checked that appropriate measures were in place to account for this.  Mrs Muschamp confirmed that lessons were learned from processes to make improvements going forwards.

 

13.4   Resolved – That the Committee note the report and that the Chairman should write to the Chairman of the PFSC to raise concerns with regard to Children’s Services and the Fire and Rescue Services and the failure with appropriate performance monitoring and risk arrangements.  PFSC should be asked to look into the current measures which were not fit for purpose.

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