Agenda item

Warwickshire County Council - Audit Plan and Fee Letter

The report and appendix are attached.

Minutes:

John Gregory (Grant Thornton) introduced the item, stating that levels of materiality and significant risk were broadly consistent with previous years. An updated auditing standard on accounting estimates was now in place; this required closer examination of assumptions underlying estimates and internal financial reporting processes. This was pertinent to auditing of pension liability as well as property, plant, and equipment (PPE) valuations.

 

John Gregory advised that a revised approach to value for money assessments was in place. At this stage, no significant risks had been identified. A baseline commentary of arrangements across key criteria was required under the new Code of Audit Practice, including financial sustainability; governance; and arrangements in place to secure economy, efficiency, and effectiveness in the use of resources.

 

John Gregory highlighted the increased audit fee. He directed members’ attention to the findings of the Redmond Review which had examined external auditing arrangements within local government and concluded that fees were insufficient to meet increased demands on external auditors. Additional government funding had been made available to local authorities of offset increased costs. WCC officers had acknowledged the justification for an increased fee.

 

The Chair stated that regulatory changes had resulted in a significant amount of extra work for the external auditor. There were areas of local government activity that should be subject to a higher level of scrutiny and the Committee had expressed its support for this approach.

 

Councillor Kettle stated that members’ understanding of the scale of financial matters under consideration would be improved by the provision of specific figures within the Audit Plan to provide context.

 

Rob Powell (Strategic Director, Resources) advised that the Audit Plan was not orientated to provide a breakdown of the Council’s Budget, but rather to provide an assessment of materiality set against gross revenue spend. The Council Budget set out the quantum of specific cashflows and cost pressures, including the overall deficit position of the Dedicated Schools Grant (DSG). Specific details could be provided following the meeting if required. 

 

In response to Councillor Kettle, John Gregory advised that the duties placed upon the Audit & Standards Committee referred to within the Audit Plan had been introduced to ensure compliance with the new requirements specified by the International Standard on Auditing (UK) 540. He suggested that these duties provided an effective framework to enable members of the Committee to scrutinise the draft Statement of Accounts at its next meeting. He commented that the estimates under consideration were substantial, including net pension liability and PPE valuations.

 

Councillor Kettle stated that provision of supporting evidence would enable the Committee to balance its responsibilities more effectively. In response to the Chair, John Gregory stated that the external auditor would seek to supply details of an order of magnitude provided this did not detract from the core message of the Audit Plan.

 

Andrew Felton (Assistant Director, Finance) advised that a training and development session would be provided to outline the role of the Committee and support members’ scrutiny of accounts.

 

In response to the Chair, Sarah Duxbury (Assistant Director, Governance and Policy) advised that the Committee’s previously scheduled meeting on 27 July 2021 had been converted to a training and development session. This would cover information relating to the Dedicated Schools Grant and Pension Fund accounts.

 

In response to Councillor Horner, John Gregory advised that a level of materiality set at a threshold of 1.5% of gross expenditure was utilised to detect errors in accounts. If an error was detected below this level, it would be reported but would be unlikely to have a substantial impact on accounts.

 

In response to Councillor Kettle, Rob Powell advised that the cumulative impact of misstatements judged to be trivial would not be overlooked. The external auditor would report errors below the materiality threshold, enabling a judgement to be made on the overall balance. In these circumstances, appropriate action would be taken, and the Committee would be notified as considered necessary.

 

There was discussion of the use of the term ‘trivial’ in this context. Councillor Gifford emphasised that this was a technical term; it was important to reassure Warwickshire residents that public money was not treated casually.

 

In response to Councillor Feeney, John Gregory advised that an assessment of economy, efficiency, and effectiveness was reached by consideration of the balance of these three elements within the context of the Council’s overall position and Medium Term Financial Strategy (MTFS). Grant Thornton would seek to measure the organisation’s performance against stated objectives, assess where obstacles were foreseen, and analyse priorities. The process was not orientated to squeeze costs; it sought to clarify what the Council hoped to achieve within the available financial envelope.

 

Resolved:

 

That the Committee notes the Annual Audit Plan for 2020/21 from the External Auditors.

 

Supporting documents: