Agenda item

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The External Auditor presented the report and highlighted the key areas.

The Chair thanked the External Auditor for the report and invited questions and comments from the Committee as summarised below.

In response to a question from Councillor Bearshaw, the External Auditor explained that the Council had slightly missed the deadline for the current accounts and that the priority was to complete the current year’s audit before building assurance over previous periods.  The lack of audits in recent years had created a learning curve for the Council.

In response to a question from the Chair, the Assistant Director for Finance and Deputy Section 151 Officer reported that the Council had moved to a new finance system, and further transactional analysis would follow due to the auditors’ focus on balances.  The Assistant Director for Finance and Deputy Section 151 Officer highlighted learning around data extraction and communication with auditors, and that the audit timetable had clashed with budget setting.  The backlog had created learning opportunities for the finance team, with support from Ernst and Young, and confirmed was satisfied with the progress made.

The Chair asked if the council were entering 2025/26 with a high degree of assurance as the opening balances.  The External Auditor explained as the 2024/25 audit procedures were not fully completed, assurance could not yet be given on historical balances from the four unaudited years.  This affected the 2025/26 opening balances, meaning they could not currently be relied upon.  The External Auditor reported that the firm would publish a sector?wide report in March summarising findings from all 2024/25 local government audits.

In response to a question from Councillor Kunes, the External Auditor confirmed that the issue was not unique to the Council and explained that delays in Ernst and Young’s audit timelines had created a national backlog, which in turn led the government to commission independent reviews.

In response to a question from Councillor Long, the Deputy Chief Executive and Section 151 Officer explained certain areas had not been progressed due to the team recognising early in the process that there was insufficient capacity to produce the required working papers and advised deferred areas would be revisited in the next audit.  The Deputy Chief Executive and Section 151 Officer reported that Ernst and Young would provide workshops to support council staff in producing high quality working papers from the outset.

Councillor de Winton asked whether Ernst and Young had sufficient capacity to undertake the audit.  The External Auditor confirmed they had adequate resources but stressed the need for greater efficiency to reduce the volume of queries to the finance team.  The External Auditor explained that each significant account area would only be reviewed once, and if working papers were not of the required standard, that area could not be completed. The External Auditor emphasised the need for improved preparation of working papers and financial statements across all councils.

In response to a question from the Chair, the Deputy Chief Executive and Section 151 Officer explained that 2024/25 was the first year the Council had used an external organisation for property valuations.  The timing of receiving this information caused delays in finalising the draft statement of accounts.  It was noted that publishing the draft accounts without the valuation data would not have provided a true and fair view.

The External Auditor explained that it was common for valuation experts to have different assumptions.

In response to a question from the Chair relating to pensions, the Assistant Director for Finance and Deputy Section 151 Officer explained that each year the Council was invited by the County Council’s pension fund actuary to agree a timetable for the actuarial pension asset valuation.  The report for 2024/25 arrived late, which delayed publication of the draft accounts.  The Assistant Director for Finance and Deputy Section 151 Officer confirmed that the Council would seek improvements in this process.

The Chair referred to page 20 of the report and sought clarification on the £30?million overstatement relating to actuarial gains and losses on pension assets and liabilities.  The External Auditor explained that this mainly arose from the required asset?ceiling adjustment.

In response to a question from Councillor de Winton, the Deputy Chief Executive and Section 151 Officer confirmed that Ensors undertook the independent audit of the Council’s wholly owned companies.

The Portfolio Holder for Finance commented that no significant issues had arisen from the audit and that the outcome provided confidence in the Council’s governance.

RESOLVED: The Audit Committee noted the contents of the report.