Agenda item

 Members received a report from Virginia Rennie (Strategy and Commissioning Manager) which asked them to support the appointment of Grant Thornton UK LLP as the Council’s external auditors for the period spanning the audits from 2023/24 to 2027/28.

Virginia Rennie outlined the proposal and reminded the meeting that the Council had agreed to opt-in to the sector-led body procurement for the appointment of external auditors from April 2023.  The procurement had been led by Public Sector Audit Appointments Limited (PSAA) and had resulted in Grant Thornton being proposed as the Authority’s auditors for the next five years.

Members noted that the fees would increase by 150% and would be included in the Medium Term Financial Strategy forecast moving forwards.  Officers were content that a good working relationship existed with Grant Thornton and this proposal would maintain consistency with that.

In response to a question from the Chair, Virginia Rennie explained that were an authority to undertake its own procurement, the same specification as PSAA would have to be used and could not be changed.

Councillor Hammersley acknowledged that good working relationships had been formed and whilst the cost increase was high, this was not due to any fault on Grant Thornton’s behalf.  He was concerned that each time a change was implemented via legislation, it had the potential to impact on the Council’s finances.

Councillor Feeney also recognised that there was a requirement to increase auditor’s costs nationally and the Council had no choice but to accept this.  She also highlighted the fact that Grant Thornton had a good working knowledge of the Council’s processes and systems.

Councillor Kettle requested assurances from Grant Thornton that they would be ready to start on the auditing work as soon as the accounts were in a position to be signed off.  He expressed concern that there had been delays in the past due to ‘post-Covid hangovers’.  Councillor Gifford also highlighted the issue that residents may find it difficult to understand why costs for the services had increased, and whilst he recognised the national reasons for the delays, he did not feel it was easy to explain the re-appointment to constituents.

In response, Virginia Rennie advised that the procurement exercise undertaken by PSAA had increased auditing fees across the board and reminded Members that it was important to separate the two issues.

Rob Powell (Strategic Director, Resources) addressed the meeting and reiterated that the cost increase was driven by increased regulatory requirements which led to additional audit work, and that whilst he shared member’s concerns, this was being driven nationally. He reminded the meeting that the Authority was still under pressure to make around £70million worth of savings through the next five year MTFS and in that context the increase in audit fees was both very disappointing and difficult to see as a priority for scarce resources. He supported Virginia Rennie’s comments relating to the need to avoid conflating two separate issues; unforeseen delays due to the impact of Covid, staffing pressures and additional delays brought about by Government implementing the Statutory Instrument to deal with the national issue with infrastructure valuations. He did not feel that any auditor would be able to guarantee that delays would not happenagain.

In response to a query from Councillor Feeney relating to lobbying against increased fees, Rob Powell assured her that officers had fed the Council’s strong views against the increased fees but to no avail.  He referred to the impact of changes to the audit market from 2010 which had resulted in a more fragile market which had now become a material risk to the local audit sector. There was now a need to put the public sector audit market back on an even keel. In support, Virginia Rennie referred to the Redmond Review which investigated simplifying local authority accounts and if successful would reduce the time it took to produce them.

Councillor Hammersley agreed with the comments from Councillor Feeney regarding the long process of repeatedly checking and auditing local authority accounts.

Councillor Kettle requested clarification on who out of the ten suppliers had not been awarded contracts and, if they were the larger firms, the reasons for not awarding.  He noted that Grant Thornton would be undertaking a 36% share of local authority audits and queried if they had adequate resources to deliver this.

Avtar Sohal (Grant Thornton) explained that companies had the opportunity to opt in to the PSAA procurement process and there was limited expertise in relation to local authorities.  He reminded the meeting that it had been Grant Thornton’s strategic choice to reduce their market share to ensure they had sufficient resources available.

In summary, the Chair proposed the recommendations subject to members’ reservations being expressed.

Resolved

That the Committee supports the appointment of Grant Thornton UK LLP as the Council’s external auditors for the period spanning the audits from 2023/24 to 2027/28.