Agenda item

Grant Thornton LLP is the Council’s appointed auditor responsible for the audit of the accounts for the periods 2019/20 through to 2022/23. As part of the preparation for the 2021/22 audit, Grant Thornton has followed its risk assessment procedures to obtain an understanding of management processes in several areas. This report shares the information provided by the Council’s management to help inform this risk assessment.

The Corporate Finance Manager provided an introduction to the report: 

·         Senior Management of the Council had contributed to the responses to the range of questions passed to officers by the auditors. These responses were set out in the report.  

·         The questions followed a similar trend each year but there were some additional new questions added this year.  

The Director from Grant Thornton provided a further introduction to the report: 

·                     Each year auditing standards required that a number of questions were posed by Grant Thornton to management who then provided responses. The paper then comes to the Audit and Governance Committee as it is the body charged with governance at the authority. The Committee is then asked to consider whether the responses from management are in line with their understanding of the authority. 

During the Debate 

·                     It was asked about the bad debt provision expected credit losses and what type of bad debt would be written off and how it would be deemed irrecoverable. Officers responded that debts on both the General Fund and Housing Revenue Account were looked at. The older a debt was the less likely it was to be repaid. Calculations were done using formulas to work out the likelihood that debts would not be repaid. Debts were not looked at on an individual basis but rather on a group basis for doubtful debt. When debts were considered for being written off debts were looked at on an individual basis. 

·                     It was asked if in the external auditor’s opinion, they would advise the Council to exit the commercial Investment portfolio it had and sell all properties. The Grant Thornton Director responded that it was not their place to answer that. Looking forward nationally the view of the sector and government bodies was that investments of the same commercial nature should not be made by local authorities. Selling all properties immediately could however also be a risk particularly if all other local authorities decided to do so at the same time.  

·                     It was asked if the external auditors felt that actions taken by the Council in response to the auditor’s recommendations had reduced the risk of the commercial investment. It was responded by the Grant Thornton Director that the recommendations were there with a view to reducing and highlighting risk and to encourage officers and councillors to recognise that risk and take action to respond to it. It was a democratic decision to invest or not. The guidance from government was not to invest in properties for yield. Officers responded that the purchase of Commercial Investments by the Council had been completed and there were no plans to purchase any more commercial properties. The purchases had been completed before the new prudential code was established. It was the prudential code which now outlined guidance not to invest 

·                     The granularity of the report was praised.  

·                     It was asked about the separate approval threshold for journal transactions over £50,000 and whether that was the correct level in terms of threshold as well as how long that limit had been in place. It was raised that it would be worth some of the journals below the limit being reviewed in order to reduce the risk of fraud. Officers responded that they believed the threshold had been set based on risk. They would provide a full written response after the meeting. The Grant Thornton Director raised that any journal needed to be approved. Most authorities would not authorise all of their journals, only those over a certain value. This was considered during audits and as part of risk assessments.  

·                     Regarding non-current asset valuations, it was asked what the tender process was for appointing valuers. Officers responded that they believed it would go out to tender but would provide a full response following the meeting. Contracts over a certain value had to go through a tender process and the value of the contract was likely above that threshold.The Grant Thornton Director responded that in house valuers had also previously been used as part of valuation programmes.  

The Audit and Governance Committee resolved to carry the recommendation in the report:  

2.1 The Committee notes the information provided to Grant Thornton LLP to inform their risk assessment in advance of the 2021/22 audit, and considers whether the responses are consistent with its understanding and whether there are any further comments it wishes to make.