Agenda and draft minutes

There were no declarations of interest.

The minutes of the meeting held on 30 January 2024 were confirmed as correct.

Yinka Ehinfun, Interim Chief Accountant presented a covering report attaching as appendices Grant Thornton’s proposed approach for delivering their responsibilities as the Council’s appointed external Auditor for the 2023/24 financial year (Appendix A), an up-to-date summary of emerging national issues and developments within the sector (Appendix B), and details of the Council’s management responses to key questions (Appendix C) as part of GT’s risk assessment procedures to obtain an understanding of management processes and the Council’s oversight of general enquiries of management, fraud, laws & regulations, related parties, going concern, and accounting estimates. 

Paul Dossett, GT Key Audit Partner, explained that they had prepared their workplan as presented in the context of not finalizing all of the planning work and so it could change, although he did not envisage any major changes. He highlighted the significant risk areas which were standard to all audits, seen as the risk of management override of controls and the potential for materially misstating the valuation of Council assets, investment properties and net pension fund liabilities. These would be assessed against the most recent set of audited accounts, those being the 2019/20 semi completed set. The Group Accounts would also be assessed taking into account the consolidation of all the Council’s significant subsidiaries as listed.

Finally in terms of timetabling, planning visits were noted as taking place between February and March with a final visit expected in July 2024, subject to the 2023/24 draft financial statements being produced by the Council. 

In response to the presentation a number of questions and comments arose as follows:

The presentation referenced the significant risk areas including the valuation of Council assets in respect of which GT’s views were sought as to whether the Council had this right.  It was noted that GT were intending to engage an expert valuer to assess the valuations prepared by the Council’s valuers and for which the auditor expert fees would cover. This piece of work was required so as to be compliant with accounting and auditing standards. However, this was not viewed as high risk in relation to either the General Fund or the HRA, as valuations would not have any material impact on service provision. There would of course be issues where assets were disposed of, and that was something all Councils would be expected to reflect on as there would be a risk to the public purse if the valuations were not right. From GT’s perspective they would be focusing on whether the numbers in the Council’s Accounts were right. What was important would be the valuation of investment properties as the Council would be looking for these to produce a year-on-year yield as well as maintaining their value for the long term.

Members were interested as to how prepared were the officers to meet the requirements/deadlines set by GT for the 2023/24 Accounts audit. GT had been liaising closely with Council officers in the Finance team during the planning stage of the audit. Monthly meetings were scheduled in calendars to  ...  view the full minutes text for item 29.

The Interim Deputy Section 151 Officer presented a covering report summarising BDO’s progress report (Appendix A) in relation to their audit of the Council’s Statement of Accounts for 2019/20 including an update on the timetable to complete the audit which was broadly in line with that last reported in January 2024. BDO’s key outstanding tasks related to their internal review process, and in that context, it was noted that there were no matters outstanding from the Council’s perspective.

BDO have proposed to issue the annual report and commentary on VFM for the 2020/21, 2021/22 and 2022/23 Statement of Accounts by September 2024. This will be subject to the outcomes of consultations on changes to the Accounts and Audit Regulations 2015 to introduce the backstop arrangements, and the National Audit Office Code of Audit Practice to support auditors to meet the backstop date and promote more timely reporting of their work on value for money arrangements.

Finally in respect of the breakdown of the 2019/20 additional fees, despite assurances provided at the last meeting BDO in referencing the fee in their report, had still not provided an indicative figure as to the final fee.

Michael Asare Bediako, BDO confirmed that they had no concerns as to meeting the deadline reported at the last meeting, and therefore they remained on track to complete the 2019/20 Accounts by the end of August 2024. In respect of the additional fees for the said year he apologized for omitting in error from the published report, the indicative figure for the additional fee, which he verbally reported as £233k. He qualified that this was not the final fee as there was still more work to be done, and it was necessary to provide management with a detailed breakdown of how the final fee breaks down.

Having been challenged as to when the Council could expect the final additional fee, he stated that he expected Steve Blandon, the senior Partner at BDO now leading the audit, to be in a position to present it at the next meeting in June.

The Chair expressed her disappointment that Mr Blandon was not present this evening as she wanted to challenge him on a number of issues including when he anticipated completing the partner review and whether in the review, he had identified anything requiring more work to be done from BDO’s end. As far as Mr Asare Bediako was aware from the review work he had not raised any issues or concerns, albeit there were a number of minor issues that were being concluded which officers were aware of. All indications were that he would complete the review work by June, allowing sufficient time to prepare the final report and meet the August deadline to conclude the audit.

The reported additional fee was a substantial amount and BDO were asked as to whether it was their standard practice not to finalise their costs and provide a breakdown so late into the audit, especially seeing the Council needed to budget  ...  view the full minutes text for item 30.

The Head of Assurance (HoA) reported that he had reviewed and updated with minor track changed amendments the Internal Audit Charter (Appendix 1), which defined the purpose, activity, and responsibility of Internal Audit activity.

The HoA then discussed the Internal Audit Strategy 2024/25 set out in Appendix 2, which detailed how the Internal Audit Service was delivered, in line with the Charter. The Strategy had been updated to reflect minor changes in working practice as a result of the recent external assessment against the Public Sector Internal Audit Standards. The service was provided by a small inhouse team supported by externally provided resources. It was proposed that the existing arrangements to co-source external support from both Mazars and PwC via appropriate framework contracts be continued into 2024/25.

The scope of the Strategy covered all LBBD activities, including those provided by external providers and legal entities. As such the Internal Audit Plan referred to below included risk-based audit activity in the Council’s companies.

The Internal Audit Plan which was compiled annually prior to the commencement of each financial year and was developed in line with the Charter and Strategy. The Plan also detailed the manner in which Internal Audit resources would be used including draft audit titles and proposed audit objectives. 

As part of the risk-based approach 120 of the 865 audit days within the Plan had been held back in the event that some, as yet unspecified, risk emerged during the year which required an immediate response. The Plan was set out in Appendix 3.

The Committee in recognising the crucial importance of Internal Audit questioned the size and capacity of the team to deliver what amounted to an ambitious Audit Plan, and within that context what the extent and cost of external support was. The HOA recognised that the team was not big enough to deliver the Plan in isolation, and therefore was reliant on external support. However, he made the point that it did not all come down to staff resources, as a number of the audits were of a specialist nature and consequently that specialism was not always available in house. Most London Boroughs did buy in services from Mazars and PwC, and many bought them in a greater number of days than LBBD. That said steps were being taken to build in house resilience. In the past it had proved difficult to fill the more senior posts and so by reducing vacancies to trainee auditor levels, the HOA had recruited two apprentices via the Pan London Apprenticeship Scheme that had proved very successful. Both were doing well, practically and exam wise and with the right structure in place, this would allow for career progression. 

In light of the above response a question was raised as to the ability of the team to provide consultancy services, given the size of the team. The HOA stated that the majority of this work tended to be around control design. For example, when a new IT system was due to  ...  view the full minutes text for item 31.