Agenda item

Georgia Jones, Key Audit Partner presented the Audit Findings report to the Committee.

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.

Georgia Jones 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 listed below:-

·        responses from the pension fund auditor to gain assurance on underpinning controls and supporting data for the pension fund net liability;

·        receipt of management representation letter;

·        review of the final set of financial statements; and

·        final quality procedures.

There were two recommendations relating to Oracle password configuration set out on page 20 of the report (page 38 of the agenda pack), and the Self-authorisation of journals set out on page 21 of the report (page 39 of the agenda pack: -

1.     “We identified a weakness in Oracle password configuration. The password length is set to 6 characters and does not include a minimum password length of 8 characters as per leading practices.”

Members were informed that it related to the existing finance system which was being replaced in December and, as such it was not proposed to amend this within the existing system.

2.     “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 the authority establishes an authorisation control to reduce the risk of financial reporting fraud and /or error in future."

The response to this was consistent with previous responses “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, we do not feel that introducing further controls is practical or proportionate to the risk.”

There were several disclosures and misclassification changes required, as set out on page 22 (page 40 of the agenda pack), and three adjusted misstatements, as set out on page 23 (page 41 of the agenda pack), the majority of which were identified by the Authority during the audit process.

There was one adjusted misstatement as set out on page 23 (page 41 of the agenda pack), which related to the treatment of potential future costs of claims relating to pensionable allowances, and specifically treating it as a creditor as opposed to a provision. Given it was below the Service’s materiality threshold, the Treasurer had not amended the accounts to reflect that.

Georgia Jones drew the Members attention to Page 36 which detailed independence and ethics which disclosed the following:

“The Authority took on a Chief Accountant on April 18, 2022. In May the Authority advised Grant Thornton that this individual was registered as a benched contractor for Grant Thornton. After Internal consultation, it was determined that as the individual was considered an officer of the Authority, this would be determined as a breach of FRC 2.53.

We can confirm that as a benched contractor the individual has not worked on any assignments for Grant Thornton and the audit team have not had any communication with them as part of the delivery of the audit. We further mitigated any threat however by removal of the individual from the bench, effective July 13 2022.

We do not consider that there has been a compromise to independence. However, this is a breach of FRC 2.53 and therefore reportable to the Financial Reporting Council (FRC).

We confirm that we have implemented policies and procedures to meet the requirements of the Financial Reporting Council’s Ethical Standard as we as a firm, and each covered person, confirm that we are independent and are able to express an objective opinion on the financial statements.

Further, we have complied with the requirements of the National Audit Office’s Auditor Guidance Note 01 issued in May 2020 which sets out supplementary guidance on ethical requirements for auditors of local public bodies.” 

An audit fee of £40.8k had been agreed as part of the Audit Plan. The final fee would be confirmed once the audit was complete.

The Director of Corporate Services advised that the deadline for the accountants approving the audit had been brought forward for next year and that he felt the revised deadline would be extremely challenging for the Authority. He emphasised that, overall, it was a positive report given that it had been a challenging year, as it would be next year.

The Chairman agreed that the report was very positive and thanked Georgia Jones for being forthright.

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.