Report by Grant Thornton (attached).

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

The External Auditor (PB) explained:

·         The Audit Findings Report set out the key findings for 2019-2020.

·         The deadline for the sign-off of the accounts had been extended due to the challenges presented by the Covid-19 pandemic.  The revised date for the sign-off of the accounts had been moved to the end of November. 

·         The external auditor was pleased that the audit was substantially completed and wished to thank those concerned at the Authority for their works in enabling this to happen.

·         The report provided the Auditor’s opinion and the Value for Money conclusion.

The External Auditor (PB) wished to draw the attention of the Committee to the following details:

·         The materiality level for the financial statements had reduced to £1m and the accounts would be signed off to that level of accuracy.

·         There were no material errors or uncertainty in the draft accounts for 2019/20.

·         The opinion on the accounts would be that of ‘Unqualified’.

·         The Auditors were satisfied that Authority had the appropriate governance in place.

·         Property, Plant and Equipment represented the largest figure at the top of the balance sheet.  Therefore even a small movement could have material effect.  This work remained in progress.

·         Covid 19 had an impact on the ‘emphasis of matter’ on the value of land and buildings in the accounts.  Notes had been added to the accounts, since the pandemic started, to reflect this in the revised statements.  This was consistent in the accounts of all Local Authorities.

·         The Pension Fund net liability was considered a significant estimate due to its value (£55.6m) in proportion to the overall balance sheet.

·         The Devon Pension Fund had been contacted by the External Auditor in relation to the accuracy of the Pension Fund liability. It was anticipated that there may be a change to the value of investments. A response was expected by the end of the month.

·         The Value for Money Conclusion was that the Council had adequate arrangements in place to deliver financial sustainability during 2019-20.  The Council delivered against budget with a surplus of £0.241m.  Covid had brought challenges and would add additional financial burden.  The Medium Term Financial Strategy (MTFS) had already indicated a shortfall of £2.7m by the year 2023/24 which would now be exasperated by Covid 19.  It was expected that the additional Central Government funding would offset some of the shortfall in the year 2020/21.

·         The Value for Money Conclusion was that adequate arrangements were in place with appropriate responses to Covid 19.

·         There would be a need for difficult decisions moving forwards as Government reduced central funding, whilst expectations from the general public increased.

In response to questions from the Committee, the Head of Resources confirmed that:

·         Debtors outstanding on the Car Parking system could still be recovered as the historic data was retained on a back-office system.  The figure in the accounts was an extract of the outstanding balance recorded at the year end.

·         A workshop had been arranged with the Senior Management Team (SMT) to look at the current MTFS in light of the effects of Covid 19 on the finances of the Authority, and any changes to Government funding.  The MTFS would then be re-presented to the Members, at Full Council, via the Strategy and Resources Committee.

·         The Council would need to plan ahead to try to limit the impacts of significant reductions in income. The MTFS showed that the original budget gap was a shortfall of £2.7m in three years’ time.

·         Options regarding commercial ventures would be considered, although he noted that some Authorities had suffered from the loss of commercial rental income which would not be recompensed by Central Government.

In response to a question from the Committee, the External Auditor confirmed that many Authorities were looking at different strategies to reduce costs.  Some difficult decisions lay ahead. Authorities faced financial challenges pre-Covid, which now have been increased. Many were waiting for further clarity from Central Government before further action. The ramifications for the medium term would need to be assessed. 

                        RESOLVED that the External Audit Findings Report be noted.