To receive any announcements from the Chairman.
Minutes:
The Chairman made the following announcements:
· Public Sector Audit Appointments (PSAA) Update
Following on from the approval of the Committee to join the PSAA national contract for external audit services from the accounts for the financial year 2023/24 onward, the Chairman confirmed that the procurement process had been concluded and the PSAA had offered contracts to six suppliers. Services from three existing PSAA suppliers had been retained, Grant Thornton, Mazars and Ernst & Young, and former supplier KPMG has also been successful in gaining a contract. Two new suppliers, Bishop Fleming and Azets Audit Services had also been awarded contracts. Our incumbent External Auditor, Deloitte were not part of this national contract arrangement and the Council would therefore have a change of auditor for the audit of the financial statements for 2023/24. The bid prices that were received in the procurement reflected a significant increase compared to the previous procurement in 2017. At this stage the advice from PSAA was to anticipate a major re-set of total fees for 2023/24 involving an increase of the order of 150% on the total fees for 2022/23. The actual total fees would depend on the amount of work required. The Council factored this increase into the working Medium Term Financial Strategy (MTFS) assumptions and the issue of the increased fees had been raised by the PSAA with Department for Levelling Up, Housing and Communities (DLUHC).
· External Audit Update from Deloitte
Ian Howse (Deloitte) explained that Deloitte did not go forward for the PSAA contract, as there were issues with the complexity of local authority accounts and the regulations they had to work within made it challenging.
Members asked officers to raise the issues regarding the regulation and standards required for local authority audits with government as many authorities were experiencing problems. Members also thanked Deloitte for their work.
Mr Howse also explained that the backlog in the accounts were a symptom of issues in the market and agreed that the system needed to change.
The 2019/20 accounts were ongoing, infrastructure assets were an issue for all accounts that were not yet signed off. Guidance was awaited but it was thought that infrastructure disclosures would need to be removed. In January 2023 the Chartered Institute of Public Finance and Accountancy (CIPFA) guidance and statutory instruments should be available and that would support working towards closing the accounts. There were still issues to be resolved, as any changes made had a knock-on effect elsewhere.
The team had been working on the 2020/21 accounts. A lot of work had bene undertaken around the fixed assets register. The 2021/22 accounts were also not complete, Deloitte would work with Wiltshire Council to develop a timeline of when these may be completed. Deloitte would issue a written report to Members detailing the above. At the end of the process a letter of representation would be issued. Deloitte would be asking the Committee to challenge officers on the work undertaken to issue the representations and to ensure that everyone was comfortable that rigorous processes were in place.
Lizzie Watkin (Assistant Director Finance and Deputy S151) stated that there was a lot of work involved for Wiltshire Council including the issues created by historical errors. There was a CIPFA checklist regarding what should be considered, and the officer was requesting teams to provide evidence to ensure that all the work undertaken could be included in the letter of representation. There was a lot of learning to do and room for improvement. Resources were an issue. A very experienced agency staff member continues to support the team and other agency staff had also been recruited to help. Even though the technical errors with the 2019/20 accounts did not affect the funding available to the council to deliver services, there were financial consequences for the council in terms of staff and agency costs.
In response to a question from the Chairman on whether there was the capacity to complete 3 audits in 1 year the officer stated that there were significant problems with a lack of experienced financial staff. The Council was trying to increase capacity so that they could get the accounts signed off.
In response to further questions from Members the officer explained that the team had covered in detail the underlying records and was hopeful that there was nothing material left where there was not confidence, but it was possible that there could be. The significance and robustness of the work undertaken with Deloitte would put them in good stead going forwards. There would be added complexity to the process with a change of auditors and a change of the financial system in the same year. The team were working with SWAP to try to ensure that additional risk was mitigated and all appropriate checks were planned to be undertaken.
It was further explained that whilst the council could go forwards on the accounts with a qualification, that would be significant and would decrease confidence in the accounts, and the work would be required in future years anyway, so it was not an option being suggested. The standards that applied to local authorities were not really reflective of the role of the public sector. Assets had to be valued commercially which was not how it worked in the public sector. They would continue to lobby government for better regulations.
Mr Howse stated that many local authorities were in the same situation, with some not yet having signed off the 2018/19 accounts. They could have issued qualifications but there are statutory requirements that they have to meet. Government wanted to produce a whole set of accounts across the board, they wanted a standard framework so were using the International Financial Reporting Standards (IFRS) but that was quite different to how local authorities work.
In answer to further questions Lizzie Watkin stated that the new Enterprise Resource Planning (ERP) system was slightly delayed. The Council was working with the implementors (Mastek) to set out a program which was deliverable. It was likely that the system would be implemented mid-year. Although that could add to the complexity of the switch over the officer was comfortable as additional reconciliation and control steps were being planned.
In response to a question Mr Howse stated that Deloitte had a contract with the PSAA. They were committed to completing the accounts prior to the contract ending. However, there could be an agreement between the Council, PSAA and Deloitte to see if the new auditors wanted to take the accounts on.
Perry Holmes (Director Legal and Governance) answered a question regarding where these risks (new auditors, delay of the ERP and agency staff) were recorded. It was stated that a Q2 corporate risk and performance report would be coming to the next Cabinet meeting. The Executive office and finance were having discussions as to whether these issues would be raised from a service risk to a corporate risk.
· Update regarding Independent Members on Audit and Governance
In March 2022 the Committee voted to approve the creation of a role for independent co-opted members on the Audit and Governance Committee. Following this Full Council resolved in May 2022 to approve the required changes to the constitution and to delegate the appointment to the Committee. The role was advertised, but no applications were received. The Independent Renumeration Panel was convened to look at renumeration of the post, following which their recommendation of £2,000 per annum was approved by Full Council in October 2022. The role went out to advert again and applications were received. The interviews for the shortlisted candidates were scheduled to take place in January 2023, with appointment to the position for the successful candidate taking place at the meeting on 8 February 2023. The knowledge and expertise of the successful candidate should mean that they can provide valuable advice to the Committee in discharging its function.