Agenda item

The Head of Finance and Chief Accountant introduced the report which presented the council’s plan for the audit of the Statement of Accounts for 2020-21, which included the Housing Revenue Account and Haringey Pension Fund. It was explained that the plan had been updated and set out the approach that the auditors would be taking, including the highlights of the audit and the proposed audit fee. It had been noted that the deadline to complete the 2020-21 audit was 30 September 2021 but that only about 9% of local authorities had met this deadline.

David Eagles, the Audit Partner from BDO, noted that the materiality levels for the audit had increased slightly compared to the previous year to reflect the increased gross spend for the year and were set out on page 224 of the agenda pack. It was also noted that the timeline for the audit was set out on page 231 of the agenda pack.

It was stated that the significant risks for the purposes of the audit were identified in the report and included management override of controls, revenue recognition, expenditure cut-off, valuation of non-current assets, valuation of pension liability, reconciliation of bank accounts, allowance for non-collection of receivables, and sustainable finances (use of resources). It was commented that the risk relating to management override of controls was a standard risk in most audits and was not related to any particular concerns in Haringey and that the risk relating to related parties was not considered to be a significant risk but that there had been some issues in the past and this area remained under closer review.

It was highlighted that some issues had been identified in relation to IT general controls and that the complexity of this issue meant that specialist IT auditors were required. The specialist audit had identified areas of weakness where there was potential for manipulation and it was believed that stronger controls would be required to mitigate this risk. This required additional testing which would impact on the audit and would need to be discussed with management. It was clarified that officers would be working to complete as soon as possible but wanted to inform the Committee that there was a real risk of delays.

In response to a question from the Committee, David Eagles stated that the audit deadline was unrealistic as authorities were still catching up from the previous audit period, which had been significantly disrupted by the Covid-19 pandemic, and had therefore been given a shorter time scale for the 2020-21 audit. David Eagles was not aware of any penalties for local authorities who completed their audit after the deadline and it was noted that the regulators were being understanding in acknowledging that there was an ongoing national crisis.

Some members of the Committee noted that the outturn position for the Dedicated Schools Grant (DSG) was a £6.8 million overspend and it was enquired whether there would be a review of the strategies to close the budget gap. David Eagles explained that the focus of the auditors was to assess the arrangements that the local authority had in place and to consider the reasonableness of any assumptions. It was noted that the auditors could identify any areas of weakness but could not provide options.

The Chair drew attention to page 249 of the agenda pack which identified a significant control deficiency in relation to the implementation of IFRS 16 (leases) and it was enquired whether this would impact the audit timeline. David Eagles explained that IFRS 16 would be implemented from 1 April 2022 and would be a significant change to the financial reporting requirements for the council. It was noted that there had been a number of deferrals for implementation but that the auditors would be looking at the council’s preparations as part of the 2020-21 accounts.

It was noted that the additional audit fees appeared to be very round numbers and it was enquired how these were calculated. David Eagles explained that the scale fees were based on a position dating back to 2010 and that the fees had not changed but that any additional costs related to different levels of work that were required. David Eagles believed that the fee was a round number as it had been negotiated to a lower cost. It was noted that the exact costs for this year were not known yet and that there may be some adjustments based on additional controls work.

RESOLVED

To note the contents of the report and to note the further oral updates provided by BDO LLP.