Report by Grant Thornton.

The Committee considered Grant Thornton’s External Audit Findings Report (circulated previously).

The External Auditor (MB) explained:

·         The original report submitted and included on the agenda had been a draft version. The final version (dated 19^th July 2019) had been submitted subsequently. 

·         The report gave a positive message on the Authority’s work.

·         The Devon Pension Fund Assurance letter had been received today.

·         Works on Property, Plant and Equipment, and the McCloud judgement were close to completion.

·         The approach to materiality figure was £1.153m.

In relation to the “Significant Findings – Audit Risks” section of his report, the External Auditor confirmed that:

·         Having considered the risk factors set out in ISA240, they were happy that the risk was low and good controls were in place.

·         No issues had been identified in relation to “Management Override of Controls”.  The Auditors had examined the judgements made.

·         “Valuation of Land and Buildings” was currently in progress. No issues were anticipated.

·         “Valuation of Pension Fund Net Liability” was nearing completion and would be reviewed soon.

·         “Potential Impact of the McCloud Judgement”: The Government had applied to the Supreme Court for permission to appeal this ruling but permission to appeal had been unsuccessful.  The implications of this were still under discussion. Legal ruling around age discrimination could have implications for pension funds and schemes where transitional arrangements on changing benefits had been implemented.  Discussion was ongoing. It was acknowledged that there were uncertainties in relation to the estimation of the impact on the Council’s liability.  Therefore an unadjusted misstatement had been included within appendix C of the report.

·         Cut-off testing had identified an invoice of £0.006m which related to 2018/19 which had not been accrued. A further case had been identified in the sample checked. 

The External Auditor (MB) explained:

·         In relation to the Value for Money (VFM) work, the External Auditors had identified Financial Sustainability as a significant risk.  The Council’s Medium Term Financial Strategy (MTFS) had shown a cumulative budget gap of £0.666m by 2022/23.  Grant Thornton had concluded that this risk was significantly mitigated and potential schemes to bridge the shortfall had been identified.

·         There had been no issues with the ‘other Communications requirements’ as the team at the Council were very quick to provide any information requested by the Auditors.

·         Previous recommendations for increased reporting arrangements to Members regarding the 21:21 project could be further improved.  Updates on individual projects had been made within the Quarterly Performance and Financial Management Reports but this did not formally report on the programme as a whole.

·         An adjustment had been identified which concerned the audit fee disclosure note for the Housing Benefit certification for 2017/18. The note should have included the fee for 2018/19 of £21k. It was the view of the management that to include the fee would have had the effect of overstating the audit costs of the work, and, as the work would not be performed until the autumn of 2019, it had not been included.  This would not be adjusted.

·         There had been an error identified on the calculation of a prepayment (of £2,670) which, if extrapolated, the extent of the error could be deemed to be £437,888.  As the original error was not material no adjustment would be required.

·         The total Audit Fees had increased to £40,999 as this had now included an additional fee which had been incurred due to additional works on the assessment of the impact of the McCloud ruling, the Pensions IAS 19, and the PPE valuations work.

The Head of Resources confirmed that the Members would be presented with a full disclosure note within the accounts on the McCloud ruling at Full Council on 24^th July 2019. Detailed notes explaining its impact and the decision not to adjust the figures due to their non-materiality would be provided.

RESOLVED that the External Audit Findings Report be noted.