Agenda item

The Chief Accountant presented a report on the Statement of Accounts and the Council’s external auditor’s Audit Completion Report. He stated that it was with much regret that he was not able to present the Committee with a Statement of Accounts (which was marked as ‘to follow’ in his report) as some aspects of the audit were still outstanding. He confirmed that the unadjusted errors identified in the audit were below the materiality threshold, which was an important milestone, as the aim of the audit was to ensure that the accounts were free from material errors. The audit was almost in the position of receiving official sign-off and he would endeavour to provide the Committee with sufficient opportunity to read the Statement of Accounts before presenting them for approval at a future date.

The Senior Manager at BDO, the Council’s external auditor, confirmed that the Audit Completion Report (ISA260) appended to the Chief Accountant’s report was a draft version. The final version, along with the audit opinion was yet to be issued as there was work remaining. He presented an overview of the key changes to the audit since the interim audit findings report was presented to the Committee, confirming that the work relating to significant risks identified was almost complete, except matters relating to the group accounts. An overview of the following outstanding matters was provided:

·  Completion of group accounts audit;

·  Review of final set of financial statements;

·  Partner and Quality Reviewer reviews;

·  Clearance of review points arising from reviews; and

·  Subsequent events (this could not be completed until the date of signing).

The Senior Manager stated that he and other BDO colleagues working on the audit would be on annual leave during various parts of August 2020 and that plans were in place to ensure the audit was progressed smoothly, with the aim of providing the audit opinion by the end of the first week of September 2020.

The Chair stated that as the Statement of Accounts had not been provided, clearly the Committee was not in a position to make a decision on it, as recommended in the report. She stated that although the Committee understood that there were a number of challenges in completing the audit this year, there had been substantial delays in progressing the audit. The Committee was very disappointed that the Statement of Accounts had not been presented, despite being reassured of this previously. The Committee was concerned that the completion of the audit was now being pushed to September, and this would potentially impact the audit of the 2019/20 accounts. The Chair requested that:

·  Following this meeting, an annotated version the Statement of Accounts be provided so that Members could see the key differences between the draft version that was provided to the Committee in July 2019 and the proposed final set;

·  Officers share their response to the recommendations made by BDO regarding the lessons learnt from the current audit so that the Committee could have reassurance that the issues identified would not recur when the audit of the 2019/20 accounts took place; and

·  Officers provide a realistic date to hold a meeting of the Committee whereby the Statement of Accounts for 2018/19 may be presented for approval so that the Committee was not put in this position again.

The BDO Partner confirmed that the main difficulty in completing the audit had been the group accounts, referring to the draft Audit Completion Report which gave an overview of the extent of the difficulties that arose. However, the group accounts were now at a stage where a final set of amendments could be made and the impact this would have on the single entity accounts could be reviewed. BDO’s Assistant Manager would be working with the Council’s Chief Accountant to ensure the audit process was complete by this week so she could review the work prior to her going on annual leave. The quality reviews of the audit would then take place and BDO’s Senior Manager would ensure this process progressed smoothly in her absence. He would update her on the quality review outcomes when she returned to work on 19 August, and the audit work would be brought together to present a set of accounts that could be considered materially accurate.

In response to a question, the Assistant Manager for BDO stated that he felt it was realistic to aim for a date in September to present the Statement of Accounts to the Committee. The work that was outstanding in relation to inter-group transactions and other consolidation adjustments that needed to be verified, were minor, and he was confident that they would be resolved imminently. Following this, BDO would need to review the final group accounts and then a quality review process would be undertaken.

In response to questions and comments, the Council’s Finance Director stated that the finance team was working hard with BDO to ensure the audit of the accounts could be finalised as quickly as possible. Whilst it was disappointing that the audit completion was now heading towards September, the audit of the single entity accounts was almost there. He reiterated that the main reason for the delay was the audit of the group accounts which had been very complex, due to the nature of the Council’s structure and 2018/19 being the first year of preparing them. He confirmed that the Chair’s request that the Committee receive an annotated version of the accounts, which would show the changes made since the version the Committee received in July 2019, would be adhered to. The Director also assured Members that he was committed to undertaking a ‘lessons learnt’ review with BDO’s specialist team which would be in addition to the responses given to BDO as a result of recommendations made by them as part of the 2018-19 audit process. This work would take place in September so that the lessons learnt from this audit could be applied to the 2019/20 accounts audit process, to help ensure past mistakes were not repeated. The Director stressed that the Chief Accountant had been extremely thorough in working through the 2019/20 accounts, undertaking quality assurance to ensure the errors identified in the 2018/19 accounts were not repeated.

In response to questions, the Finance Director stated that:

·  September was a better time than August to seek the Committee’s approval for the 2018/19 accounts as this would allow officers time to present the papers to the Committee in way that would facilitate the Committee making an informed decision;

·  The Government had given local authorities an extended deadline to publish their 2019/20 accounts due to the Covid-19 pandemic, which somewhat mitigated the impact of the delay in completing the 2018/19 audit. Also, as BDO would have already undertaken an audit of the Council’s accounts, they would be acquainted with how the accounts were set-up, which should smoothen the audit process for the 2019/20 accounts;

·  The Chief Accountant and his team were separate from the team which kept oversight of the spend incurred by the Council’s services; and

·  Over 10% of local authorities’ 2018/19 audits were outstanding at the end of May 2020 and he knew of some London boroughs who did not expect to have their accounts audit approved until later in the year. Whilst the Council’s position was not desirable, it was certainly not alone in facing complexities in its audit process for the 2018/19 accounts.

The Independent Advisor to the Committee stated that clearly the Committee was disappointed by the prolonged audit process; however, it was refreshing to see a clear commitment for resolution at this meeting. He agreed that an over-ambitious timescale to present the accounts for approval could risk the outcome desired by the Committee. He welcomed the ‘lessons learnt’ review referred to by the Director and suggested that the outcomes from this work could be shared with Committee outside of the formal meeting process before its meeting in November 2020, which would consider the approval of the 2019/20 Accounts.

The Committee resolved to agree that the Statement of Accounts be presented to the Committee at a meeting in September 2020, to be arranged.