Agenda item

Report to follow.

The Committee noted the late submission of the report, leaving very little time for the Committee to consider the documentation.

Ms Rachel Britton, BDO, introduced the report.

The meeting heard:

·         The disclaimer opinion that BDO would give would state that there was no assurance over the balances within the stated years. The new auditor, KPMG, would undertake an audit for the 2023/24 financial year. As part of that audit, they would do their normal audit and they would be able to get assurance over the closing balances for the 2024 financial year. There was likely to be some form of modification of their opinion. There was guidance in place for this. The Government had set out some recovery guidance on building back to full assurance. The way the accounts worked, the open balances would still have questions and there would probably be some form of qualification modification over the opening balances. The following year, the Council would be able to build further, as the closing balances would become the opening balances and it should take around two years to get back to a clean opinion position.

·         In relation to the three objections received, there was one in relation to the purchase of a site in Woodside ward. The Council had undertaken a full investigation into that. The other two related to parking charge notices (PCNs).

·         In relation to assurances, this was a question that could be examined in the January meeting of the Committee when KPMG present their findings and provide an idea about the assurance on the closing balances. It became apparent approximately nine months ago that lots of local authorities were going to be in difficult position over this and therefore it would take that number of years for the Council to get full assurance. A disclaimed set of accounts was slightly different to a qualified set of accounts. A disclaimed set was when work had not been undertaken. A qualified set was where, usually, the detailed work had been undertaken.

·         This was the first full audit that the Council had been through for three years. At this point, there was nothing specific that needed to be disclosed to the Committee.

·         Within the guidance that was issued, there were two exemptions; if there was material objection to the financial statements or indication of non-compliance with laws and regulations. In this case, the Council would have to publish a notification on their website to say why the process was not completed by 13 December 2024 and then the process would have to be completed as quickly as possible. This was to have more time fully investigate and resolve the potential material issue before an opinion on the financial statements could be issued.

·         Efforts would be made to resolve any objections by 13 December 2024. The Council ideally did not wish to publish the notice on the website. The Council had provided everything required and this was subject to some internal checks at BDO. 

·         If there was anything of a significant change between the reports submitted for this meeting and the final set, then officers would notify those changes to the Committee via email.

·         In terms of the audit fees, these were agreed by an organisation called PSSA. Once the process was completed, a discussion could be held with the PSSA regarding fees and the work that had been undertaken over the last three years.

·         Before the letter was signed on 13 December 2024, an email would be sent to members of the Committee even if it was just to say there were no changes.

·         Within the 2021 Council report, some recommendations had been in relation to IT general controls. They did not currently have management responses. KPMG would have their own processes in relation to how they undertook their audit, but they may not follow them up in the same way. The Council had acted on some of the recommendations, so the report from KPMG may reflect this in their own recommendations.

·         In relation to the IT recommendations, BDO had its IT specialist team come in and do the work around logical access control, change management and all the things that happened behind the systems. Issues such as passwords may seem trivial, but actually formed the things that enabled the ‘back end’ of the systems to be secure. KPMG may take a slightly different approach. In terms of valuation of assets, this was an area of contention in local government and was also something that CIPFA were looking into. The way accounting standards worked, there was a lot of estimate and judgment in valuation of property. Councils had lots of these types of assets and, for auditors, there were always risks around valuation. A small difference in an assumption could be a material amount. Until CIPFA came through with a proposed change in the way that accounting standards were applied, the valuation of property equipment would always come through as a risk.

·         There was a difference between operational valuation and valuations that were done for financial statements purposes. BDO’s risk was purely around applying those valuation standards which were very complex and needed specialist involvement from qualified valuers. Every local authority would have valuation of assets as a risk because of the level of judgment required. 

RESOLVED:

To note the report.