Agenda item

Grant Thornton

Barrie Morris from Grant Thornton introduced the External Audit Plan plus addendum.  The audit had been significantly impacted by COVID and caused some previously identified risks to increase further.  The pandemic has had a significant impact on the valuation of land and buildings at the year end, including investment properties and surplus assets, meaning that it was necessary for GT to increase the volume and scope of their audit work to ensure that adequate audit and challenge underpinned any valuations.  The Financial Reporting Council (FRC) has also indicated that it expects all external auditors to provide additional challenge and scepticism in areas such as journals, estimates, financial resilience and information provided by the audited entity, and all of these areas of additional work are likely to incur an additional fee.  The start of the statutory audit had also been impacted by the pandemic and though the council had not yet provided financial statements, GT were working with Officers to meet the revised deadlines of 31 August for the preparation and 30 November for the audited accounts.  Neither parties envisaged that meeting these new deadlines would be a problem, in fact the council were aiming to have their financial statements prepared in advance of the 31 August deadline.  In recognition of the unprecedented uncertainty that the Covid-19 outbreak posed, a new significant risk had been added, Covid-19 and the risks and proposed responses were detailed at page 71 of the pack.  Finally, it was highlighted that enhanced independence disclosures were being made because a previous employee of GT had been appointed to a role within Publica Ltd.  He confirmed that appropriate safeguards had been put in place as a result of this unusual situation and had been keen to provide these assurances to members. 

Barrie Morris provided the following responses to member questions:

• References to PPE within the report related to Plant, Property and Equipment rather than Personal Protective Equipment.
• A risk relating to the Redcar and Cleveland Council ransomware attack had not yet been identified but this was something GT could take away from the meeting. 
• The need to revaluate assets was born of the need to produce the financial statements.  Uncertainty from valuers was raising a red flag for Shareholders that some assets may not be correctly valued, as a result of their cash flow value or future rental streams having reduced drastically.  He noted that this specific issue was covered in the ‘Going Concern’ report later on the agenda and took the opportunity to give credit to the Director of Finance and Assets, for an in-depth report which had fed into returns made to central government. 
• GT were not expert valuers and therefore had to engage experts in order to provide appropriate challenge to management and their experts in terms of the valuation of assets. 

The Director of Finance and Assets reminded members that this authority’s asset portfolio was diverse and therefore it did not face the level of exposure as authorities that had invested heavily in retail property.  He also felt it was worthwhile acknowledging the delay to the audit, which was usually completed by the end of May and presented to the committee in July, which the Government had now pushed back to August and November.  He had aimed to have a draft set of accounts completed by the end of June, but this had proved overly ambitious given the changes to some mandatory grants, as well as some of the additional grants that the council needed to process.  He thanked GT for being as accommodating as they had and for agreeing a revised deadline and noted that the committee were still scheduled to meet in September to review the draft accounts, but it could be that there would be a need to defer this meeting by a month. 

The Chairman felt that it was a credit to the authority that it invested locally and commended this approach and also took the opportunity to thank GT for flagging the issue of the conflict of interest pertaining to the ex-employee, which had the potential to cause problems if unchecked.     

No decision was required.