Agenda item

To receive a report from the External Audit Manager E.Y. (enclosed).

Consideration was given to External Audit Completion Report 2022/2023, produced by Ernst Young (EY).

The Senior Manager (EY) introduced the report which included the following main areas:

• Executive summary:
  • A background to the disclaimer audit opinion for the 2022/23 financial statements was outlined;
  • Following the anticipated backstop legislation being enacted by central government on 30 September 2024, and a new National Audit Office Code of Audit Practice linked to the new legislation being enacted on 14 November 2024, EY had now completed its work on the 2022/23 audit; and
  • A final piece of information to be provided by central government and the National Audit Office was imminent which would inform whether the whole of government accounts could be concluded as outlined.
• Work Plan:
  • Minimum procedures had been undertaken regarding the financial statements for the production of the disclaimer, in line with the legislation enacted in September 2024 (statutory instrument 907);
  • Procedures undertaken on the financial statements related to: audit risks, materiality, understanding the working methods of the council in order to identify fraud risks, communications relevant individuals to assist with the identification of risks which may have arisen; and
  • No issues were identified regarding EY’s ‘independence’ status with the council.
• Results and Findings:
  • Due to the limited audit procedures performed, there were no control observations regarding the financial statements, and no audit differences had been identified for 2022/23; and
  • EY recommended that the council checked the casting of the accounts to ensure that comparators correctly referred to audited accounts of previous years, and to check movements from the draft statement of accounts published on 18 July 2024.
• Audit Report:
  • Narrative regarding the draft disclaimer audit opinion was provided.
• Value for money:
  • An interim report to management had been issued on 24 May 2024;
  • No new risks had been identified since the interim report was issued; and
  • A ‘significant weakness’ risk had been identified due to the delays in the production of the draft financial statements 2022/23. In respect of the governance arrangements of this matter, EY had given a recommendation that the council re-assessed the capacity of the finance team and support arrangements provided by PSPS.
• Responsibilities of the council to conclude the 2022/23 statement of accounts were in hand and included that:
  • The council notify EY of any adjustments made since the draft accounts were published; and
  • The council submit a Management Representation Letter to EY.

Regarding the appendices:

• A Management Representation Letter example template was at Appendix A;
• Information regarding fees was at Appendix B;
• Required communications with the Governance and Audit Committee were outlined at Appendix C;
• Non-Compliance with Laws and Regulations (NOCLAR) was outlined at Appendix D; and
• PSAA Statement of responsibilities was at Appendix E.

Members considered the report and made the following comments:

• Members sought clarification for the delay in the audited accounts for 2022/23 which was one year behind expectations.
  • The Senior Manager (EY) stated that:
    • The delay was due to a known backlog of completion of local authority audits nationwide which had led the backstop legislation being enacted by central government;
    • Where 2022/23 audits had not been completed, the new legislation allowed for the production of a disclaimer opinion which would enable future audits to progress in line with scheduled expectations;
    • The disclaimer did not qualify the 2022/2023 accounts (as the information had not been made available) and therefore KPMG, as the current External Auditors, would be required to perform assurance tests on the opening balances for 2023/2024.
  • The Chief Finance Officer (PSPS) added that:
    • KPMG were performing the audit on the 2023/24 financial accounts, which was substantially complete, and an update would be coming to the committee at agenda item 9 of the current meeting;
    • Following the nationwide delays in the completion of local authority audits, local government agencies were monitoring the status of audits and recent data had shown that:

In respect of 2022/23 accounts:

In respect of 2023/24 accounts:

• Members queried the ‘31 March 2024’ date noted on page 7 of the report.
  • The Senior Manager (EY) responded that the date would be corrected to read ‘31 March 2023’.

• Members requested clarification of ‘reliability of financial data provided by PSPS’ as stated on page 33 of the report, and queried whether this referred to incomplete or incorrect data.
  • The Senior Manager (EY) responded that the narrative referred to incomplete data due to the delays in the production of the draft financial statements.

• Members observed the council’s positive working processes with external and internal auditors.

AGREED:

That the External Audit Completion Report 2022/2023 be noted.