Agenda item

Report now attached.

Mr Smith, Key Audit Partner attended the meeting remotely to answer any questions.  He introduced the report and confirmed that many areas of the audit had been completed which included processing samples of debtors, creditors, income and expenditure which had been identified as an outstanding matter on page 97 of the agenda pack.  Other items outstanding included completing work on journals, PPE valuations and pension valuations, a response from Lancashire County Pension Fund auditor to a request for assurance over IAS 19 was awaited and clearance of issues from the audit quality review process.  Mr Smith advised that it was more difficult to deliver the audits remotely but there was a lot of hard work being done to meet the deadline of Thursday, 30 September 2021.  Mr Smith then introduced Mr Ayre, Audit Manager to present the report.

Under the statutory Code of Audit Practice for Local Government bodies the Authority’s external auditors, Grant Thornton were required to issue a report to those charged with governance summarising the conclusions from their audit work. 

Mr Ayre advised that at the time of writing the report the audit work was substantially complete and there were no matters of which they were aware that would require modification of the audit opinion or material change to the financial statements, subject to outstanding matters, as mentioned previously.

There was one recommendation relating to self-authorisation of journals as set out on page 20 of the report (page 114 of the agenda pack): -

“Our risk assessment of journal controls noted that there are no automated controls on the finance system to prevent members of finance staff approving their own journals. Whilst our audit work on journals so far has not identified any significant issues as a result of this weakness in internal controls, we recommend that the authority establishes an authorisation control to reduce the risk of financial reporting fraud and/or error in future.”

The response to this was “We have considered the recommendation. We believe our financial monitoring processes are sufficient to identify if such an instance occurred. Neither ourselves, nor internal and external audit, have discovered any instances of error or reporting fraud that the implementation of this would have prevented. Hence, given the size of our finance team (3.5 FTE including the Head of Finance), we don’t feel that introducing further controls is practical or proportionate to the risk.”

There were no adjusted misstatements impacting the key statements. There were several minor disclosure omissions in the draft accounts which had all been rectified.

The Director of Corporate Services advised that the deadline to publish the audit findings report was Thursday that week.  If this was not possible it would be necessary to publish an explanation as to why there was a delay and then publish the report when able.  He advised that it was expected there would be many authorities unable to publish on time.  Mr Smith advised that incomplete audits was a current issue across the public sector with less than 25% audits signed off.  This was due to the challenges set out in the Redmond Review and the recruitment of qualified and experienced auditors.  He apologised for the delay and advised that they were making every effort to meet as many deadlines as possible. 

In response to a question from County Councillor Singleton, the Director of Corporate Services advised that the £15m that the Government had put aside for councils following the Redmond Review had yet to be allocated.  The Chairman requested a report to a future meeting on the allocation of the £15m.

In response to questions from the Chairman, Mr Smith advised that a response from Lancashire County Pension Fund auditor was expected before the deadline however, time would be needed to consider it.  In relation to the valuation of buildings, he advised that this should be cleared in good time before the deadline.  He confirmed the audit would not be completed before Thursday and was subject to no major issues arising.

In response to a question raised by County Councillor Clarke, the Director of Corporate Services advised that the information was awaited from the Lancashire Pension Fund, which was for support staff not firefighter pensions.

The Chairman and Vice-Chairman were concerned that all the information was not available for the meeting.  The Vice-Chairman stated that the audit fee was £38.9k which was a lot of money to pay for something that was not available on time.  The Chairman advised that the provision of external auditing services would be re?tendered and re?considered in the near future.

RESOLVED: -   That the Committee: -

i)   Noted and endorsed the matters raised in the report;

ii)  Noted the anticipated “unmodified” audit opinion on the financial statements;

iii)Noted that the auditors had not yet completed all of their value for money work and so were not in a position to issue a report on that;

iv) It was agreed that in the event the External Auditors found anything significant from the matters outstanding the Chairman and Vice?Chairman of the Committee would consider and note relevant action or determine whether to convene an urgent meeting.