Agenda item

To meet the new external auditors (Grant Thornton) and receive the external audit plans 2023/24.

Jackson Murray of Grant Thornton, explained that Grant Thornton had been appointed by Public Sector Audit Appointments (PSAA) as the new auditors from 2023/24 onwards. This would be the first set of accounts that they would work on for Wiltshire Council. Mr Murray himself had been working on public sector audits for 15 years.

Mr Murray highlighted the progress report in the agenda pack and stated that Grant Thornton would bring one of these to each Committee they attended. The report detailed where they were in terms of progress and value for money. The report also brought to the Committees attention items related to external audit that may be of interest.

Page 40 of the agenda was explained in further detail. Some good progress had been made towards the financial statements audit. They had intended to bring the external audit plan but had not been able to progress that far yet, so were slightly behind on where they wanted to be. The backlog in signing off previous statements of accounts, (as was the case for many local authorities), made it difficult to plan. It was noted that the council was swapping to a new ERP system, and this was tying up ICT staff, so there had been difficulties getting information from ICT colleagues at the council. Questions asked of Wiltshire Council, such as those informing the risk assessment would be asked every year and these and the responses when received would be reported to the Committee. It was expected that the external audit plan could be presented to the July meeting of the Committee.

Regarding value for money, significant progress had been made in that area, with good engagement from officers.

It was expected that an interim auditor’s report for 2023/24 would be brought to the July meeting of the Committee. It was hoped that this would provide a good overview on financial sustainability, governance and value for money arrangements.

In relation to backstops for outstanding audits it was explained that a consultation on backstops had taken place in February/March, however, nothing had been officially announced since then. The consultation suggested that all the outstanding audits would need to be completed by 30 September 2024. Councils must produce draft published accounts to allow for public consultation. The wait for confirmation from government made things challenging, as what did a number of years unaudited accounts mean? If closing balances were not audited, how would they know the opening balances were correct? There had been no clarity on that. Grant Thornton would make sure closing balances as of 31 March 2024 were correct and then ensure opening balances for the next set of accounts were correct. Assuming there were a number of backstop qualified accounts it would be difficult to get an unqualified opinion for 2023/24.

The escalation policy was detailed at page 43 of the agenda as Grant Thornton wanted the Committee to understand how they wanted to work. If there were challenges identified in terms of the accounts, the policy set out how they would escalate matters. It was hoped that they would not need to use the policy.

The Chairman stated that he would welcome the progress reports going forward.

Members raised concerns that Grant Thornton had struggled to get information requested and pondered if officers understood the gravity of the situation.

Lizzie Watkin, Director of Finance and Procurement (S151 Officer), stated that she had been made aware that there were problems of information not coming through, particularly from ICT. The officer had tough conversations with staff about the knock-on effects of not providing enough information to the external auditors, so they were aware. However, ICT’s current priority was supporting the new ERP system. 

Members highlighted that the Dedicated Schools Grant - High Needs Block deficit was a national issue which government needed to look at, however Wiltshire Council were taking the risk seriously. My Murray confirmed that he understood that it was a national funding challenge, and this would be reported on further in future value for money updates.

In response to questions regarding the backstops and whether Wiltshire Council was an outliner in terms of unaudited accounts, it was explained that Wiltshire Council was not an outlier, but were in the middle. Some authorities had many years of audits outstanding, and some were up to date. The latest figures seen reported that there were approximately 600-700 audit opinions outstanding, with some going back to 2015/16. This was why the government had introduced the backstop dates. External Audit firms were talking to each other and industry bodies regarding how it would work. Many different stakeholders needed to agree the way forward and the industry really needed to see the results of the consultation. There had been lots of consultation but not much action from government. The suggested backstop for the 2023/24 accounts was 31 May 2025. It was hoped that they would not need to backstop the accounts again.

Lizzie Watkin added that in terms of the consultation, it was focused on the backstops and how to clear the accounts, but it did not cover why the situation had occurred in the first place. As mentioned at many previous Audit and Governance meetings, it was explained that the external audit market was broken, partly as there were not enough firms able to undertake local authority audits. Also, the financial reporting regulations that local authorities were expected to adhere to were incredibly complicated and impenetrable. These involved very technical things which were not actually relevant for the public to scrutinise the council’s finances. If that was not addressed, it was thought that there would likely be further backlogs. The council would work with the auditors, but they were framed by financial regulation. The value for money aspect was welcomed.

Members queried the comments in the value for money section of the report (page 40) on “2023/43 Financial Statements – pervasive and significant weaknesses in internal controls reported by previous auditor”.  Mr Murray explained that this related largely to the audit finding report presented at Audit and Governance on 7 February and the statutory recommendations that Deloitte made at the Extraordinary meeting of Full Council on 20 February. Grant Thornton would need to look at this in more detail.

Whilst Members understood the rationale of the comment, they were not sure that the comment adequately framed the situation and felt that the weaknesses in the 2019/20 accounts were recognised and that most of the actions identified had already been implemented.

Lizzie Watkin clarified that as stated at previous meetings there were errors and misstatements within the 2019/20 accounts. Numerous internal controls had been implemented and technical accounting agency staff had been employed for quite some time. However, she also felt that pervasive was not quite the right wording. It was explained that this again was to do with assets. Local authorities did not use assets like the private sector did, and how did one value a bridge or a highway? The officer felt that the 49 weaknesses identified were very repetitive. The internal controls implemented for the 2019/20 accounts had not been audited yet. They would not be independently checked until Grant Thornton looked at them. It was stated that it had been a difficult and frustrating journey. The hope was that the 2023/24 accounts could be progressed successfully.

Members commented again on the Dedicated Schools Grant and the backstops, which were outside of the council’s control, they were national government issues. Members noted that the Financial Planning Task Group (FPTG) had repeatedly flagged the Dedicated Schools Grant situation. 

Lizzie Watkin explained the Dedicated Schools Grant - High Needs Block situation in more detail. National government had changed the regulations around that. The council had signed up to the Department for Education (DfE) safety valve agreement to help with the deficit caused. The council was undertaking a lot of work on education for children with SEND, aiming for an earlier, more proactive response. So that children got the right education, in the right place, according to need. Furthermore, as part of budget reporting, Cabinet approval had been given to cover some of the deficit. It was hoped the government would provide clarity and confidence that the overrides would remain in place. In relation to audit regulations, the council would continue to lobby for changes.

The Chairman, seconded by Cllr Pip Ridout, proposed that the Committee note the Audit Progress report and Sector Updates provided by Grant Thornton.

Members briefly debated amending the motion to clarify that the comments were in relation to the 2019/20 accounts and the situation had moved on since then. However, others felt that the auditors needed to be forward thinking. So, it was decided not to amend the motion.

Mr Murray stated that there would be more details available in the external audit plan at the next meeting. So, this could be discussed further at that point.

It was,

Resolved:

To note the Audit Progress report and Sector Updates provided by Grant Thornton.

The Chairman called a short recess at 12.20pm. The meeting reconvened at 12.28pm.