Agenda item

The Committee received an update on the External Auditor’s 2021-22 Audit Plan for the year ending 31st March 2022 which provided an overview of progress on their work in delivering its responsibilities as the Council’s External Auditor.

Gareth Mills, Key Audit Partner and Engagement Lead and Perminder Sethi, Engagement Senior Manager, Grant Thornton, were in attendance and outlined some of the key messages from the report.

Members’ attention was drawn to key matters, setting out the Council’s outturn position for 2021/22 which had shown an underspend of £8.9m. The Council was to update its Medium Term Financial Strategy (MTFS) during the summer in preparation for the 2023/24 budget setting process. Since the approval of the Council’s budget in February 2022, the financial outlook had worsened due to inflation and the impact of rising energy and fuel costs, and also the recent pay award for local government sector employees had created significant financial pressures on Local authorities budgets. However, it was reported that Doncaster was in a better position than other local authorities in terms of the budget. It was reported that a key area of focus for External Audit next year was Children’s Services in terms of the Value for Money arrangements. As part of the Council’s requirement of the Group Audit accounts, financial Statements had been prepared for St. Leger Homes of Doncaster (SLHD) and Doncaster Children’s Services Trust (DCST). The External Auditor would be undertaking targeted audit work regarding the key material differences between the group accounts and the Council accounts in relation to pension liability of these respective organisation. The External Auditor outlined the significant risks for the Council with regard to management over-ride of controls, valuation of land and buildings, and valuation of the net pension fund liability.

Members were informed that there has been a reduction in materiality of the Council to that of previous years, which was because of changes to the way materiality was calculated which had been brought in to line to that of other authorities by using the net gross expenditure. In relation to Value for money arrangements, the Auditors had not identified any significant areas of risks or weakness to date. This would be kept under review as the audit progressed and the Committee would be kept informed of any issues arising from this work.

With regard to audit logistics, External Audits interim visit had taken place in March and April 2022 and it was envisaged that the audit work be completed by the end of September, to be finalised by end of October and November 2022. The ISA 260 report would be presented to the Audit Committee in October 2022, followed by the Council’s VFM arrangements report in January 2023. It was noted that the 2022/23 financial year would be the final year of the 5-year contract that Grant Thornton were awarded by the Public Sector Appointments Committee (PSAA). Grant Thornton had submitted a bid to the PSAA for the next round of contracts covering the audits for financial years 2023/24 to 2027/28 and was happy to answer any questions from Members regarding the tender.

In response to questions from the Chair, the External Auditor confirmed that they were not envisaging any changes in materiality would significantly impact on Grant Thornton’s work.  The Chair made reference to the significant risk identified by the External Auditor last year, who had challenged the Council’s land and asset valuation assumptions, and asked whether the Council had put arrangements in place to improve the Council’s processes for the calculation of the valuation of the buildings and property assets. It was reported that the Council had challenged the Council’s internal valuers and external valuers about the information and assumptions used in relation to property valuations, and had taken additional steps to ensure that the valuations of Council buildings were accurate. Members were informed that the property valuations in Doncaster had increased significantly this year, with Doncaster’s housing market had risen at a greater pace than the rest of the country, which had confirmed to the Council that the valuations received from the Council’s District Valuer were accurate. The External Auditor explained the rationale for the impairment or changes in the value of Council assets in particular, those relating to new property assets such as schools and hospitals. It was noted that the regulator would closely scrutinise the External Auditor’s work with regard to Council land and buildings and pension liability which can result in material changes to the accounts. The External Auditor would be challenging the Council on these 2 areas of the accounts.

Further to clarification being sought by the Chair, the External Auditor explained the reasons why the External Auditor’s annual report on VFM arrangements was to be presented to the Committee in January 2023, instead of being presented alongside the audit of accounts to the Committee in November 2022. It was noted that the deadlines for the accounts and VFM work had previously taken place at the same time.  However, due to operational challenges faced by auditors in preparing the accounts as a consequence of the Covid-19 pandemic last year, the introduction of the new VFM Code of practice and due to the timing of the signing of the accounts in the Local Authority sector, the National Audit Office, as a temporary relief, had agreed a range of measures to support the timely completion of the accounts. Therefore, had extended the statutory deadline for publishing the accounts by 3 months to 30th September, which subsequently had been further extended to 30th November 2022 by the DLUHC, and that the VFM deadline moved to February 2023. This meant that the deadline dates for the accounts and VFM work had been separated to that of previous years. The interim audit report had been presented to the Audit Committee in April. The Chief Financial Officer and Assistant Director of Finance gave an undertaking to provide a copy of this report to Councillor Healy and Dr Green. It was further noted that the external audit market was under significant pressures to complete audits. It was anticipated that both the deadline of the audit of the accounts and VFM work would be brought back under one deadline date in 2023/24. 

RESOLVED that the External Audit Plan for 2021-22 be noted.