Agenda item
Auditors Annual Report
Minutes:
Carolyn Haynes (Acting Head of Finance) gave context on the meeting and highlighted:
a)
Apologised for the lateness of the reports;
b)
The Chartered Institute of Public Finance and Accountancy (CIPFA)
guidance circulated to Committee Members had not been issued until
9 December 2024;
c)
The audit opinion had not been received until late on 3 December
2024 and the consequential reports then had to be written and
assimilated;
d)
As of 30 April 2024, 369 sets of local authority accounts out of a
total of 625 for the financial years 2020/21 and 2022/23 were still
waiting to be audited;
e)
Local authorities across England and Wales had experienced a
significant backlog in completion of audits for several years which
had been reported as a crisis;
f)
In February 2024 the Ministry for Homes, Communities and Local
Government (MHCLG) issued a joint statement with CIPFA and the
Finance Reporting Council (FRC) on proposals to address the backlog
as a three stage process;
g)
New statutory backstop dates for all finance years up to and
including 2027/28 needed to be established;
h)
Long-term work was required to address the systemic challenges that
had led to this audit backlog;
i)
13 December 2024 had been set as the backstop date for all
outstanding audits up to and including 2022/23;
j)
Plymouth City Council had two financial year statements affected by
the backstop for 2021/22 and 2022/23;
k)
The accounts for 2019/20 and 2020/21 would be signed off by 13
December 2024 with an unmodified opinion and were not affected by
the backstop position;
l)
Draft accounts were published on the Council’s website and
had been presented to the Audit and Governance Committee
previously;
m)
Auditors were contracted audit to professional standards and in
accordance with the code of practice;
n)
A Disclaimed Opinion from Grant Thornton was included within the
report and was worded as follows: ‘Grant Thornton had not
been able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion on the financial statements
due to an outstanding legal issue which had now been resolved and
capacity issues within Grant Thornton over the last four years, it
had not been possible for Grant Thornton to complete their work on
the audit for 2021/22 and 2022/23 and therefore they had issued a
disclaimed opinion’;
o)
The Disclaimed Opinion implications included:
i) The Council had, in recent years, received an unmodified or
unqualified opinion and the most recent accounts for 2019/20 and
2020/21 received an unmodified opinion. As this was a national
issue affecting many local authorities, the Government may have to
intervene to provide more assurance for those authorities receiving
a disclaimed opinion under the statutory back stop
arrangement;
ii) The Council would be working hard to ensure that they provided
the necessary evidence in future audits to restore public
confidence in accounts and to work towards receiving an unmodified
opinion as soon as possible;
p)
The Public Sector Audit Appointments Panel set Audit Fees at a
scale fee for 2021/22 of £111,393 and for 2022/23 of
£122,255. The Audit Fees for 2023/24 were £375,258 and
for 2024/25 were £409,064.
Councillor Lowry (Cabinet Member for Finance) added:
q)
Audits were now undertaken by private firms such as Grant Thornton;
this service used to be provided by the Audit Commission;
r)
The report was up to three years out of date and addressed issues
which were no longer relevant;
s)
Due to there no longer being an Audit Commission, and every Council
had to use private firms, there was a lack of capability and
capacity;
t)
A detailed action plan was needed from the auditors outlining what
they were going to audit, and when they were going to do it, to
prevent the delay happening again.
Paul Dossett (Grant Thornton) added:
u)
Grant Thornton had signed over 80% of audits from 2022/23 and
earlier;
v)
Plymouth City Council had complied with the regulations in terms of
producing accounts, however there had been an ongoing legal issue
which had led to the backstopping of two audits;
w) This report had been brought before the Committee previously as an ‘interim’ report, but now was able to be finalised.
In response to questions, supported by Oliver Woodhams (Head of Finance) and David Johnson (Grant Thornton) it was explained:
x)
The legal issue was resolved when Plymouth City Council was able to
redraw the accounts from 2019/20;
y)
Outside of work around value for money, no audit procedures had
been carried out on the reports from two years ago;
z)
Due to the Government implementing the backstop, Grant Thornton had
been unable to provide audit assurance on the 2021/22 and 2022/23
accounts;
aa)
Imposing a backstop did not solve the fundamental problem of the
lack of auditors;
bb) It was suggested that the Chair of the Audit
and Governance Committee would meet with council officers and Grant
Thornton auditors on a regular basis to ensure documents were not
brought before Committee so late again;
cc)
There needed to be a period of recovery in which audits would be
carried out as normal, including the in-year transactions and
closing balances, but there would also be work on opening balances
which would comments in 2024/25 and 2025/26;
dd) An Audit opinion for 2022/23 would be
received by the Council on 30 December 2024, and an Audit Opinion
for 2022/23 would be received by the Council by March 2024 for
2023/24;
ee) A ‘normal’ Disclaimed Opinion was
when auditors could not place reliance on the numbers, however this
Disclaimed Opinion was by Statute, meaning the Government imposed
the Disclaimer, preventing auditors from finishing audits and
reaching conclusions;
ff)
Closing balances and in-year transaction audits would still be
carried out in 2024/25, it was the auditing of opening balances
that there was not clarity on from the Government;
gg)
Auditing standards determines what auditors had to focus on,
although the Government might be considering another model for
local government auditing in the future;
hh) Grant Thornton would adhere to report
deadlines to ensure Councillors had enough time to read the report
before the meeting in February 2025 to approve the statement of
accounts for 2023/24;
ii)
The backstop process was unique to reset the sector and move audits
forward and all auditors would be working on one set of accounts
from 2024/25;
jj)
Audit work would be carried out on future years and levels of
assurance would increase the more years that pass from the backstop
arrangements, but the process of recovery had begun;
kk) The backstop arrangement would allow Carolyn Haynes and her team to focus on the audit for 2023/24.
During the discussion, concerns about the timing of reports were raised:
ll)
Councillors expressed their frustration and concern of receiving
reports late the evening before the meeting which did not allow
them to carry out their role properly as members of the
Committee;
mm) Councillors wanted to ensure that this issue did not occur again ahead of the meeting in February 2025 to approve the 2023/24 Statement of Accounts;
nn)
Grant Thornton had been holding regular meetings with Carolyn
Haynes and her team with regards to the 2023/24 audit and
recognised following comments made with regards to the lateness of
the reports for this meeting that appropriate resource was
allocated;
oo) Grant Thornton explained that they did not
have any concerns at the time of the meeting about not meeting
deadlines for the February 2025 meeting and the team were committed
to getting the audit progressed and completed and would comply with
reporting deadlines;
pp) Work on timeline and deadlines would be done with Grant Thornton before Christmas to ensure the timely publication of reports for the Committee meeting in February.
The Committee agreed to:
1. Note the report;
2. Recommend the creation of an Audit Plan and that the Chair of the Audit and Governance Committee should meet with Council officers and Grant Thornton auditors on a regular basis to ensure documents were not brought before Committee late again.
Supporting documents:
- Restricted enclosure
-
2021 Auditor's Annual Report, item 56.
PDF 6 MB
-
PCC 22-23 AAR for Committee, item 56.
PDF 10 MB