Agenda item

The External Auditor submits a report, which summarises the key findings and other matters arising from the statutory audit and the preparation of the financial statements for the year ended 31 March 2019.

Grant Patterson (Grant Thornton) submitted the External Auditor’s Annual Governance Report, which summarised the key findings and other matters arising from the statutory audit and the preparation of the financial statements for the year ended 31 March 2019.

In terms of the Financial Statements it was reported that the external auditor was required to report whether, in their opinion, the Council's financial statements gave a true and fair view of the financial position of the Council

and its income and expenditure for the year and had been properly prepared.

It was also reported that there was a requirement to report whether other information published together with the audited financial statements was materially inconsistent with the financial statements or materially misstated.

It was confirmed that the audit work was completed on site during June and July 2019 and the summary of findings identified four adjustments to the financial statements, none of which had resulted in an impact on the Council’s net reported surplus for the year.

It was therefore concluded that the anticipated audit report opinion would be unqualified.

In submitting the detailed information from the findings, it was reported that with regard to ‘Value for Money’ a risk based review of the Council’s arrangements had been undertaken. It was concluded that the Council had proper arrangements to secure economy, efficiency and effectiveness in its use of resources.  An unqualified value for money conclusion was anticipated.  With regard to ‘Statutory Duties’ it was confirmed that no additional statutory powers or duties had been applied.

In concluding the summary of the Annual Governance Report, it was clarified that the majority of work had been completed but the completion certificate could not be issued at this stage, as the Whole of Government Accounts work was yet to be concluded

The audit approach was explained and it was noted that this was based on a thorough understanding of the Council's business and is risk based.  In particular the evaluation of the Council's internal controls environment, including IT systems; and substantive testing on significant transactions and material account balances.

It was confirmed that audit plan, as communicated to on 6 March 2019 had not been altered.

The audit was substantially complete and there were no matters which required modification of the audit opinion or material changes to the financial statements, subject to the satisfactory resolution of some outstanding matters, as outlined within the report.  It was confirmed most had now been covered since submitting the report. 

The Committee was also informed that the Council had repaid debt listed on the London Stock Exchange in January 2019. As a result the Council is no

longer classified as a “Public Interest Entity” and an Extended Auditor’s Report, as provided by the predecessor auditor, was no longer required.

In terms of significant risks during the course of the audit, the Council had sought a revised report to account for the impact of the recent ‘McCloud’ judgement. It was reported that in January 2017, the Employment Tribunal ruled that transitional provisions in the New Judicial Pension Scheme (NJPS) were unlawfully age discriminatory because they were not objectively justified.

It was confirmed assurances had been sought from the auditor of the Leicestershire County Council Pension Fund as to the controls surrounding the validity and accuracy of membership data; contributions data and benefits data by the pension fund. Subject to satisfactory receipt of this assurance an impact upon the audit opinion was not envisaged.

The Chair thanked the external auditor for submitting the Annual Governance Report and summarising the work undertaken.

The Committee considered the report and its findings in detail and sought assurances in particular concerning the adjustments to the accounts relating to pension contributions, arising from the ‘McCloud’ judgement.  It was noted that the pension fund net liability, reflected in the balance sheet, represented a significant estimate in the financial statements due to the size of the numbers involved and the sensitivity.

It was therefore acknowledged that the valuation of the pension fund net liability had been identified as a significant risk.

In terms of the outstanding matters assessed as ‘amber’, assurances were also sought concerning the Council’s PFI model for schemes in accordance with Building Schools for the Future.

Committee members also raised the issue of the recent joint local review by CQC and OFSTED of the Council and CCG’s SEND services. It was reported that this review led to the requirement for a written statement of action because of significant weaknesses.

The external auditor had sought assurance from senior officers of how the Council was ensuring that the outstanding actions were being undertaken and how they were progressing against the plan.[CS1] 

An assurance was provided that regular reporting processes were adequate, and it was confirmed that progress had been recognised.  The question of the Council’s apparent ‘self-review’ was raised and in reply it was reported that the LGA had also undertaken a separate independent review which had concluded that satisfactory arrangements were in place. 

The external auditor also explained that such arrangements were positive, allowing the Council to examine its own process and procedures. It was accepted that the performance of the service was appropriately monitored.

RESOLVED:

                        That the External Auditor’s Annual Governance Report be                             received and noted.