To receive a verbal update on the progress of the audit of the Council’s 2019/2020 accounts.
Minutes:
The Committee received an update in respect of the progress of work to audit the Council’s financial statements for the 2019/20 financial year.
It was reported that although that Council’s annual accounts for the financial year ending 31st March 2020 remained unaudited it was not a situation unique to Surrey Heath and there were a significant number of local authorities in England in the same position. These delays, which had initially originated from a shortage in resources and recruitment difficulties for the external audit firms who serviced local government audits, had been recognised in a recent review by Sir Tony Redmond, for the Department for Levelling Up, Housing and Communities (DLUHC). The situation had been further exacerbated by the Covid-19 pandemic and the associated Government restrictions which had impacted on the ability of council finance teams to prioritise the annual statements over new burdens for making support payments to residents and businesses, monitoring grant funding, acting as a payment agency for central government and completing a significant number of new government returns whilst still ensuring the probity of public monies. Similarly the need to work remotely had made the audit processes more time-consuming and impeded effective communication between finance officers and the external audit team.
The publication of the first draft of the Council’s accounts for 2019/20 had generated a number of audit questions from our external auditors which is not uncommon in the process of moving from draft to final accounts. With a number of concerns being raised about the accounting treatment for the Jersey-based Property Unit Trust and how it had been presented within the Council’s formal statement of accounts. Over the past six months, Council finance officers had been in close dialogue with the audit team at BDO and have now agreed the accounting treatment approach with them. The latest draft Statement of Accounts had now been passed to the external auditor for their review and a copy had been published on the Council’s website. Officers would be working with BDO to ascertain when the Auditor would have the resources available to complete the audit process so that Council resources could be made available to respond to any questions and queries in a timely manner.
Concerns about the mis-posting of £40million between the publication of the draft accounts and the publication of the latest revised draft accounts were noted. It was clarified that this mis-posting had originally occurred when, during the production of the original draft accounts, money had been incorrectly categorised as being available in the useable reserves budget. This mis-posting had been rectified and the money was now correctly assigned to the unusable reserves budget in the latest draft accounts. It was stressed that the true position of the Council’s reserves balance had always been between £35 and £40million, a sum that was considered sufficient to support the Council’s current budget.
It was clarified that although regular meetings had taken place with the Auditors and a range of officers including the Section 151 Officer, the Chief Accountant and members of the Finance Team. It was noted that meetings had only been held when there had been matters to discuss or resolve and consequently meetings whilst regular they had not been the weekly ones specified by the Audit and Standards Committee.
The statutory requirement for local authorities to publish an audited set of accounts was acknowledged however it was stressed that at the current time there were no sanctions that could be applied to a local authority if this was not done.
The amount of time that was required to audit a local authority’s account varied according to the size and complexity of the local authority in question. However for an organisation of Surrey Heath Borough council’s size six weeks would normally be considered to be sufficient.
The Committee was informed that it would not be possible to run the audit of the 2020/21 accounts concurrently with the 2019/20 accounts audit because the opening position of the 2020/21 balance sheets would not be available until after the completion of the audit of the 2019/20 accounts.
The Committee agreed that it would welcome the opportunity to discuss what input of the relevant Executive Portfolio Holder had had into the situation. It was agreed that the Chairman would invite the Portfolio Holder to meetings of the Audit and Standards Committee.
It was agreed that:
i. A log of the outstanding queries submitted by BDO would be circulated to the Committee.
ii. Monthly progress updates would be provided to the Committee
iii. The Finance Portfolio Holder would be invited to the Committee’s meetings