Agenda item

2020/21 Audit Results Report

To receive the 2020/21 Audit Results Report (report of EY enclosed).


Consideration was given to the South Holland District Council Audit Results Report for the year ended 31 March 2021, produced by Ernst Young.


The Associate Partner (EY) provided the following update:


·         The report provided assurances in order that the financial statements could be approved at the next agenda item.

·         The main points of the report were:

·         The materiality level being worked to was £1.133million – anything above this amount that was wrong would impact on the ability to issue an unqualified audit opinion, and any audit differences above £57,000 were being reported;

·         Updates to the risk assessment following release of the Audit Plan in July 2021 were around pension risk, which had increased to ‘significant’ due to a change in actuary at the pension fund (the risk was that the actuary was not providing a full and complete data set upon which it could make liability judgements – EY had undertaken some checks to ensure that this data transfer was in order and satisfactory responses  had been received). 

·         Outstanding items – Fraud letters were received on 15 March (there was nothing further for EY to do upon receipt of these); responses to Value for Money queries were received on 7 March (follow up questions had been issued and responses received yesterday) – as a result there were no significant risks to the Value for Money conclusion and no additional work was required.  No further items had to be raised for attention within the audit report and an audit results addendum had been issued today to this effect.

·         Areas of audit focus were summarised and the conclusion to this was that all procedures had been completed and all required assurances had been provided.  There were a limited number of disclosure differences identified through performance of these procedures, and there were three audit differences.  Sufficient information had been received to provide an audit assurance.

·         With regard to audit differences, these were detailed within Section 4 of the report – 1) There were two unadjusted audit differences (totalling £375,000, below the materiality level and would not impact the audit opinion, but was above the reporting threshold), and these were detailed within Section 4 of the report.  The Committee would need to agree with management’s decision not to alter the financial statements, and the rationale would need to be included in the Letter of Representation; and 2) There was an adjusted audit difference of £1.216million resulting from the audit of the Lincolnshire Pension Fund.

·         In conclusion, the draft Financial Statements were robust and supporting information received throughout the audit was equally as good – the Committee could therefore take assurance from this.  An Unqualified Audit Opinion had been given and further information on this was provided at Section 3 of the report.

·         The Associate Partner (EY) thanked the Assistant Director Finance and Deputy Chief Finance Officer (Corporate) for their support with the audit.

·         The Associate Partner (EY) advised the Audit Certificate could not be issued alongside the Audit Opinion because HM Treasury and the National Audit Office had not issued guidance on the thresholds for who and who not to audit for that.  All auditors were awaiting this guidance before the Audit Certificate could be provided.


The following points were raised:


·         Was the £1.216 million difference in liability because of assets (audit difference with regard to the Lincolnshire Pension Fund) reviewed every three years, or annually?

  • The Pension Fund was subject to a valuation performed by the Actuary every three years, and that valuation drove the level of contributions made by admitted bodies (employers’ rate paid into the fund to support future payments to pensioners). The figures quoted in the report were as a result of the annual review undertaken by EY as part of the Pension Fund audit. The difference between the two reviews was that the Actuary was looking at the income being received in year from employers/employees to fund it, and the EY audit was looking at asset values and what this meant for the pension liability.

·         In response, members asked whether future contributions would be affected.

  • The Assistant Director Finance reiterated the point made by the auditor regarding the three-year review and advised a meeting had been held recently with the Actuary to discuss the next three-year review and how the fund was currently performing.


·         Members noted that within Section 7 of the report, EY had been unable to complete the audit, and asked for some indication regarding the fees.

  • The auditor responded with approximate figures for the planned fee for 2020/21 – Group account consolidation was a requirement and the amount would be as stated; changes in work required would be a minimum of what was determined last year (at least £19,934 of the figure quoted of £26,540); additional procedures such as Government Grants, new standards and the Value for Money conclusion were at least £8,500 (a standard).  The audit had gone well, but there had been some delays in receiving information, which would need to be reflected.


·         Appendix A referred to an opinion of doing the accounts as a ‘going concern’ - what was the alternative, and did most councils run their finances as a going concern?

  • Every council prepared their accounts on a going concern basis (there was no option under the Code).  There was a legal and an accounting view with regard to this.  Preparing accounts under ‘going concern’ was the legal view as services to local residents would always have to be provided.  From an accounting perspective, a level of funds to support this was required – not just a level of reserves, but the cash flow to pay salaries etc.




That the 2020/21 Audit Results report be received.

Supporting documents: