Agenda item

Mr Barber presented the report and appendices.

Appendix 1 was the Audit Progress Report for the Council and Avon Pension Fund. Draft audit plans for the 2019/20 audit of the Council and the Pension Fund would be presented at the next meeting of the Committee. At the previous meeting it had been reported that work was ongoing in relation to Housing Benefit Subsidy claim and on the Teachers’ Pension claim. Work on these were now completed. There had been a great improvement in the compilation and accuracy of the 2018/19 Teachers’ Pension claim compared with previous years, and the External Auditor had been able to sign it off without any adjustments or amendments.  Information had been given to the Committee at the previous meeting of some of the challenges relating to the Housing Benefits Subsidy claim. The External Auditor had found many income and pension errors in the initial testing. Errors had been compounded by a technical issue that was not the fault of the Council, namely that the Excel workbooks supplied by DWP were corrupted. These were returned to DWP and the problem was corrected. Following completion of the work the claim was qualified and the amended claim signed off on 9^th January, one day before the extended deadline. Errors noted are listed on agenda pages 20-21. There would be an additional fee for this work. Mr Barber drew attention to the information about the Redmond review of local audit given on agenda page 24.

Appendix 2 was the Fees Letter. This explained the increasing pressure from various quarters for more detailed and challenging audits and set out the areas in which more detailed work will be required in future. There would need to be additional work on Value for Money, for example. Pressure on resources meant that the External Auditor was already unable to complete audits for all its clients by the target date of the end of July; an audit for one client had only recently been signed off, six months late. However, Grant Thornton completed more audits by the deadline than any other audit firm. The External Auditor had to recruit additional staff with the appropriate skills, though that was difficult in this highly specialized area. Fees would need to be increased substantially for 2019/20.

The Chair responded that while he Committee wanted a quality audit that gave assurance about the soundness of the Council’s financial statements, and understood that there had to be additional fees for specific additional work, it seemed that what was being proposed was a 20% increase in the general level of fees in relation to a financial year that was almost complete, for reasons that were entirely outside the control of the Council, during the life of an existing audit contract. A Member suggested that the changes in audit requirements were regulatory changes that the Auditor simply had to accept as part of the framework within which it operated. Mr Barber explained that the External Auditor did not have a contract with the Council, but with Public Sector Audit Appointments (PSAA), and that the contract contained terms relating to changes in regulations and requirements. The Chair asked how the additional £23,000 increase in fees would be paid for, given that there was no provision for it in the 2019/20 Council budget. The Head of Corporate Finance confirmed that the increased fee could be paid from contingency without taking money from another service. The Interim Director – Finance said that officers were reviewing the impact and cost of future audit requirements and had had a meeting with Tony Redmond. Things would become clearer after his review had been completed. The Chair asked whether the issuing of the fees letter was the reason why the audit plan had been delayed. Mr Barber said this was not the case; the reason for the delay was simply because of the level of work. There had been a lot of additional work last year, and the External Auditor’s staff had been working very long hours during the summer, including at weekends. The deadline for closing of Council accounts had been brought forward from June to May, so the External Auditor had less time to work and it was simply not possible to complete work for all clients by the deadline. The Chair asked whether the public sector was paying a price because of criticism of the inadequate auditing of private companies. Mr Barber agreed that this was to a certain extent the case. The Service Director – One West asked what would happen if the Council declined to pay the increased fee. Mr Barber said that PSAA would recommend that the External Auditor had discussions with the Council to explain the reasons for the increase, and would, if necessary, contact the Council to clarify its concerns, but they would certainly not condone the Council refusing to pay the fee for an audit done to the required standard.

A Member noted that PSAA was supposed to be an interim body. He also asked whether the External Auditors would support future scale fees that incorporated flexibility to allow charging for significant extra work for specific local factors. Mr Barber said they would certainly advocate this. He observed that PSAA had a staff of six; the External Auditors would advocate a more robust body to replace it that had stronger decision-making powers. There were currently many unknowns for the future of local audit, and he was not sure that the existing five-year audit contracts would last for the full five years. Mr Barber agreed with the Member that a replacement body for PSAA would have to be established by statute, and that, given the time required to implement legislation, there could be an overlap between two audit regimes.

When the discussion was concluded, the Committee RESOLVED to note the report and appendices and to express concern about the increase in audit fees, which will be kept under close review.