Report by External Audit, Ernst & Young.

Mark Hodgson, the External Auditor presented the report and highlighted the following matters.

On page 92 of the agenda pack, the materiality level had been updated to £1.415m on receipt of the draft financial statements that was marginally different from had been planned and was therefore reporting anything above £70,000 for this audit difference.

In respect of the ‘Status of the Audit’ section on 93 of the agenda pack, Members were provided with an update on all of the outstanding audit procedures, most had now been closed/completed and therefore there were no issues to report, subject to:

·        Accounts Payable - Completed and one further issue to report. An April 2021 invoice was found in respect of the PFI Leisure contract that should be a 2021/22 item. It had been included twice in short-term debtors and once in short-term creditors. It should be only be shown once in short-term debtors as a pre-payment. The amount of £182,000 had therefore been overstated in both debtors and creditors and an adjustment for the difference would be made.

·        Property, Plant & Equipment. Additions all complete. Test checking was being carried out on some valuations in respect of floor areas of which the valuations had been based. There were some assets held by the Council that did not include floor areas/plans and procedures were being deployed by the External Auditors to gain assurance.

In response to an observation made by the Chairman, the External Auditor explained that investment property, in particular, had increased and clearly a great deal of those assets were driven by yield, hence the floor area was now being taken into account and was an international auditing standard that applied not just for Breckland Council.  

·        Pension Liability –the necessary assurances from the Pension Fund auditors had been received but assurances in respect of the emerging issue set out on page 103 of the agenda pack were still awaited.

·        Whole of Government Accounts procedures - the guidance from HM Treasury had not as yet been received but was expected in December 2021; therefore, this could not be completed but it did not impact the audit opinion or VFM arrangements work; however, closure of this audit could not be certified.

All risks and assurances had been completed (see page 96 of the agenda pack) subject to the property plant and equipment and pensions issues. 

Attention was then drawn to page 115 of the agenda pack, there were still no uncorrected audit differences to report except for the two adjusted differences in respect of the pension liability and the PFI contract and these were explained.

Taking all the above into account and once the pension and property, plant & equipment issues had been closed an unqualified opinion would be proposed.

Members were informed that a valid objection to the accounts had been received (see page 120 of the agenda pack) but no issues of significance had been found and the objection was dismissed.

The audit opinion should have been signed off at this meeting; however, further time was needed to close off the outstanding issues.  A letter had been provided to the S151 Officer so that the correct wording could be added to the Council’s website to meet the publication requirement deadline, and subsequently, a small change to the recommendation in respect of the approval of the Statement of Accounts would be required.

Councillor Kybird mentioned the issue about the whole of government accounting and asked how this would be dealt with. Members were informed that this was not a responsibility that went into the Council’s financial statements.  Attention was then drawn to the closing paragraph under Section 3 of the report.

Mr Plaskett had concerns about the number of items still outstanding at the date of this report compared to previous years and asked if E&Y still had staffing issues or whether this was pandemic related.  He asked what assurances could be provided to the Committee that next year, E&Y would be in a better position.  Members were informed that a plan had been agreed by all clients in February 2021 about the phasing timetable in which the audits would be undertaken and delivered and the auditors had performed the audit within that window but clearly any audit was dependent on a number of factors and this list was extraordinarily longer than what Members had been used to, but no-one had been operating in a normal world this year. He felt that the assurances that had been provided at this meeting was a good position to be in albeit 48 hours from signing and did not deter from the publication requirements.

Councillor Birt said that this had been mentioned before about the challenge to the accounts and he was interested in how much this was going to cost this Council. Also, in respect of PFI and the significant investment that was going to be needed to improve the Council’s Leisure Centres and their carbon impact and asked what happened when this agreement came to an end.  The Chairman said that this question did not specifically relate to these accounts and was not pertinent to this particular agenda item and therefore a response would not be provided.

The report was otherwise noted.