Agenda item

The BDO representative updated the Committee on the position relating to the external audit of the Council’s and its companies’ accounts.

The Council published draft Accounts for 20219/20 in August 2020, but these were not complete as the Group Accounts were still outstanding. Consequently, BDO could not fully commence its audit until the Group Accounts were received, which was not the case until February 2021, by which time 50% of the time allocated to the audit had elapsed.

The BDO representative recalled that the interim audit completion report, which was presented to the Committee in March 2022, reminding the Committee that:

·  The draft financial statements were not materially accurate,

·  There were 13 misstatements that were corrected, of which three were material,

·  There were 10 unadjusted misstatements at that point; and 

·  There was still no resolution to the accounting treatment of infrastructure assets by the Financial Reporting Council (FRC) and Chartered Institute of Public Finance Accountancy (CIPFA). 

CIPFA issued a bulletin in January 2023 explaining to councils what was required to respond to the temporary solution on infrastructure accounting. Infrastructure assets being material. To dateBDO had not received the infrastructure assets working papers from the Council and the BDO representative emphasised that they could only audit what had been received, adding that receipt of information was only the beginning as enquiries had to be made, responses received, eliciting further enquiries.

BDO acknowledged that there had been some issues on their side with staffing owing to illness whilst the issues with infrastructure assets, which was a national problem beyond the power of BDO or the Council, had contributed to delays during 2022 before issue of the January 2023 solution.

BDO emphasised that material misstatements and non-compliance with the code of local authority accounting by the Council had also contributed to the delay, and that there had been incomplete information provided.

The fieldwork had been largely completed, though there were still issues relating to property, plant and equipment (PPE).  It was noted that the CIPFA solution to accounting for infrastructurewould require sensitivity analysis and determining a new method for calculating the useful economic life for PPE, which the Finance team had not been previously required to do.

BDO indicated that, provided there were no further issues relating to misstatements and document submission, the 2019/20 audit should be completed by November 2023. The Chair indicated that an additional meeting would need to be scheduled to consider the report, but this would not be confirmed until the position was updated by BDO at the next meeting of the Committee in October 2023.

BDO then outlined their indicative plans for the 2020/21, 2021/22 and 2022/23 audits stressing that this would depend on resourcing at both BDO and the Council. The aim was to start the 2020/21 in early 2024.The next audit would commence immediately thereafter, and it was intended that all three audits would be completed by mid-2025. BDO cautioned that these timelines would need to be kept under constant review.

Following a request by the Committee, the Strategic Director of Finance and Investment (SDFI) explained that the subsidiaries, which were independent of the Council, do add complications and time delays as they need to provide their accounts which are then used to create the Group Accounts. The SDFI acknowledged that there had been delays caused by the Council, such as providing working papers, and these were being addressed. In response to further questioning, the SDFI added that there were new procedures in place regarding the production of the Group Accounts, however where issues arose such as staffing for example, there would be delays to the process. That said, he felt that the process had been improved and added that, as subsidiary companies were subject to Companies House, they faced legal sanctions if accounts were late.

The Chief Accountant (CA) echoed the SDFI’s comments, adding that the fieldwork relating to the Group Accounts had now been completed and that the outstanding issues related to PPE. He stated that the draft accounts for 2020/21, 2021/22 and 2022/23 had been published, however for 2022/23 the subsidiaries had still not completed their accounts and therefore the draft Group Accounts had not been completed.

The Committee noted the update.