Agenda item

Grant Thornton

Barrie Morris from Grant Thornton (GT) introduced the Audit Findings Report and noted the report was four months later than it would usually be coming to committee.

It went without saying that the council had worked hard, and done a fantastic job in his opinion, of supporting residents through the pandemic.  A great many audit opinions were not yet ready and that GT were able to present their report this evening was thanks to the efforts of Paul Jones and his team.  These were unprecedented times in terms of the work that had been required to get to the point at which they were close to being able to sign the audit opinion, particularly after the recent FRC report which was critical of local auditors, particularly around the property, plant and equipment valuations and pension liabilities and the estimation techniques used; and GT had increased their work in these areas, as Officers could attest. 

He apologised for the circulation (earlier in the day) of some revised pages of the Audit Findings report, but had wanted to provide the committee with the very latest position.  Firstly, on page 37 they had amended the list of outstanding items and were now only waiting for completion of the group audit procedures, which just related to CBH, though he had received the Hold Harmless letter earlier in the day and having reviewed this, had signed it.  Also outstanding was the Pension Fund Auditor assurances and finally the review of the final set of financial statements which they could only review after them having been considered by the Audit Committee. 

Covid had not only presented challenges in the production of the financial statements but in the financial statements themselves, with changes to liabilities in terms of pension liabilities and also the valuation of those assets.  Another challenge was around Gloucestershire Airport and considerations about its going concern assessment.  The Council were asked to undertake a piece of work to give some assurances around the impact of this on the Council’s position and though they had subsequently received the signed accounts from the auditors, he suggested that this was another great example of Paul Jones’ pre-empting issues or concerns that were likely to be raised. 

Aditi Chandramouli from GT then talked the committee through some of the key findings within the report.  She referred members to page 7, which set out the work that had been done in relation to significant risks, which included Covid-19, management override of controls, the valuation of land and buildings and the net pension liability.  There was also a material uncertainty with regards to the valuation of land and buildings, and property funds included within the pension fund assets.  Page 11 of the report set out the findings arising from the group audit work.  Their work on Gloucestershire Airport was materially complete and in terms of CBH, they were just waiting to review some of their working papers and then this would be complete also.  GT had recently received a report which had been commissioned by the council on the impact of Gloucestershire Airport and GT had now factored this into their going concern assessment and having reviewed the work of the council on their long term financial planning and cash flow, GT were happy with the going concern basis of accounting being applied.  This year, as part of their work in relation to providing a Value for Money (VfM) conclusion, GT had looked at the Medium Term Financial Strategy, as well as the council’s reliance on income from investment properties.  Members would be aware that a revised 2020/21 budget was being considered by Council on Monday (16 November) and this included savings around minimum revenue provision and flexible use of capital receipts.  This was all factored into their VfM work and though there were some recommendations coming out of this, their opinion would be unqualified.  Appendix A included the recommendations being made.

Barrie Morris wished to emphasise the work GT had done on VfM and the conclusions they had drawn based on the arrangements the council had in place, particularly in view of other Councils having issued 114 notices; which identified that technically, they didn’t have sufficient funds.  He felt that in view of these circumstances, it was really pleasing to see the financial resilience and sustainability that Cheltenham had in place.  As mentioned, there were a number of adjustments that had been identified and he highlighted the independence issue that had been reported the committee previously, reminding members of the safeguards that were in place; which they had to do for ethical reasons.  Finally, the fees were set out at Appendix D and although the final fee was yet to be confirmed, he reiterated that GT had undertaken significant additional work and as a consequence of this, there would be an additional fee. 

Barrie and Aditi gave the following responses to member questions:

• There was a whole range of reasons as to why there were so many outstanding audit opinions nationally.  However, it was a credit to the Officers at this council that work had progressed as it had over the last 4 weeks. 
• RICS guidance stated that because of the timing of the pandemic, there was insufficient evidence to be able to decide on the impact of valuations.  It was likely that some investment assets may have improved slightly, though there were clearly severe risks to some others (shopping centres and hotels for example); but there was simply insufficient market evidence in terms of whether this posed a long term risk.  Effectively what they were saying was, the council needed to draw a line as at the 31 March, when the accounts were produced.  
• The revised budget represented a good piece of work which Aditi had found genuinely interesting to read.
• GT would ensure that any decision being taken by the council was fully supported by a legal view and checking that due diligence had been done; though the Director Finance & Assets often approached GT to discuss issues in advance.  GT would then ensure that there was sufficient ongoing monitoring with the proper sensitivity analysis in place, including best and worst case scenarios. 

The Chair and Vice-Chair commended the Director Finance & Assets and his Finance Team, for their hard work and wanted to draw out the VfM conclusion, which stated that the Council had proper work arrangement for securing economy, efficiency and effectiveness in its use of resources.  They also congratulated Officers on the revised budget, which allowed the council to continue to provide high quality services, through innovative investment strategies. 

No decision was required.