Agenda item

To discuss the External Audit Plan for 2024/25.

Debbie Hanson from Ernst & Young, the Council’s Appointed Auditors, presented the report to the committee.

Members asked questions, made comments and received responses as follows:

·         Councillor Christy referred to the two new inherent risks which Debbie Hanson had highlighted, and asked whether they had also been included within the Council’s own risk register and what steps are being taken to make sure that any errors or inefficiencies within the reporting standards on leases and the payroll system migration are captured? Stephen Beacher explained that it is not within the Corporate Risk Register, but it should be included within the Service Register for both Human Resources and Payroll and Accountancy and he agreed to confirm that this is in place.

·         Councillor Booth stated that, with regards to valuations of land and buildings, it would seem that External Audit appear to be taking a great deal of assurance from the previous work which has been undertaken, however, for clarification why does it appear to be highlighted as an inherent risk as there must be a number of inherent risks within the finances. He stated that it is pleasing to hear that External Audit recognise the fact that there is a great deal of assurance already in place as it has been discussed on numerous occasions at the committee. Councillor Booth stated that emphasis appears to have been placed on the data transfer for the new payroll system and the processes involved. He questioned how much of a deep dive is going to be undertaken with regards to how the system is being used including the competency of the staff using the system as it can often be the case where staff are not fully competent in the use of new systems when errors can occur. Debbie Hanson explained that, with regards to the point concerning property plant equipment and investment property valuation, the balances are normally by far the largest balances on the Council’s balance sheets. She explained that they are subject to different valuation methods depending on the nature of the asset and are subject to assumptions and judgements made by the Council’s valuer when providing the figures. Debbie Hanson added that if the figures are material, which they always are, then it would always be shown as a higher inherent risk in any audit plan due to the fact of the size of the values and that there is a degree of estimation within their which triggers the higher risk assessment. She made the point that it was not classified as a significant risk which is where it is assessed that there could be a higher risk of error in the figures and should that risk of error materialize then it would be material and due to the previous track record and the fact there have been no major issues with the valuations it has not been necessary to elevate it to the higher level and it has been left as a higher inherent risk. Debbie Hanson made the point that once the financial statements are received there will be some initial planning procedures on those balances and if there is anything that comes out of that which indicates that there is an elevated level of risk then the risk may be elevated to significant but until she receives the draft financial statements she does not know what the PPE figures are looking like. She stated that with regards to the payroll system, her team would not be testing the operational controls and that is something that she would expect the Council’s Internal Audit Team to have done particularly with a new system, with them probably looking at the payroll system on a frequent basis anyway. Debbie Hanson explained that as part of the work her team will undertake it will include looking at any work that Internal Audit have undertaken on the data transfer and also on the new system to see if they have identified any issues or risks. She explained that the testing approach she uses for payroll is generally substantive and normally she would choose a number of payroll items and check those back to source documentation as well as some substantive analytical review procedures. Debbie Hanson explained that she would also look at trends, unusual fluctuations and unusual monthly movements to gain assurance over the material accuracy of that balance that may identify some issues but that is not the purpose of the testing, which is to gain assurance over the material accuracy of that expenditure item in the Council’s accounts.

·         Deborah Moss, Head of Internal Audit, explained that her team are in the process of completing the payroll audit which includes the data migration accuracy and also includes user training and support and payroll is also included in the audit plan as it is a high risk, high bill area and an audit should be undertaken more frequently than it has over the last few years.

·         Councillor Booth referred to the timescale for testing, and he asked what assurances are in place to ensure that the Ernst&Young will be on site as previously visits have been cancelled at very short notice. Debbie Hanson explained that the timings shown in the report are those which have been agreed and at the present time a final review is being undertaken on all the sites they cover, which her team have got from all the company’s offices. She explained that now her target was to complete all of the audits before the end of December and the statutory backstop date set in the regulations is the end of February 2026, however, it is hoped to be able to finish before then so that the team could start to bring audits forward and start to do planning earlier next year. Debbie Hanson explained that it is proving to be somewhat of a challenge and there is some risk that those timescales could move slightly but if it does move then that will be known within the next few weeks. She expressed the view that she understands the point made by Councillor Booth with regards to last minute changes concerning timings which are not helpful, but she added that if there is a need to make a change then that will be communicated in a timelier basis. Debbie Hanson stated that with regards to the point made concerning being on site, remote working has been in place for the last few years and there has been a definite benefit of getting back out onto clients sites by being in the same place as the actual Finance Team and discussions are due to take place with the Finance Team with regards to how many days a week they would be able to come on site with a view to being in the Council offices one day a week.

Members noted the content of the report.