Agenda item

Grant Thornton

Barrie Morris from Grant Thornton, introduced the annual audit letter, which summarised all of the work that had been done for the year ended 31 March 2020 and highlighted key issues and findings.  He referred members to page 67 and where he had previously said that the final audit fees were yet to be agreed, this provided an update which showed that there had been a significant increase from the £38k scale fee, to almost £61k and Grant Thornton had tried to be as transparent as possible about where and how these additional fees had been incurred and a detailed breakdown had been provided appendix A of the report.  In short, £7.5k had been incurred because of the increased regulation and complexity of the financial statements and with the FRC pushing for improved quality, these costs were likely to continue to grow.  In addition to this, the fees had been set before Covid and the need to work remotely had resulted in the need for increase scepticism on financial statements.  It was also fair to say that CBC had struggled with the changes, which had led to delays, where the process had previously been smoother and resulted in working papers that were not of the standard that Grant Thornton had received in the past.   However, that being said, the council had taken steps to address this and appointed a new Deputy Section 151 Officer, which only evidenced the investment and importance that the council took in addressing this issue.  The National Audit Office had introduced a new code of practice from 2020-21 which would increase the amount of work involved in the VfM, with more focus on things that were important to tax payers; looking at financial resilience, budget arrangements, financial planning and savings plans.  Another focus was around decision making and whether members were being given sufficient reports to be able to make informed decisions and were they comfortable with the financial plans that were in place.  Finally, Grant Thornton would be looking at the overall delivery of economy, efficiency and effectiveness; how were the council benchmarking to make sure best bang for money put in.  Also it needed to be said that CBC was not a benign council, not shying away from different and innovative ways in which to deliver services and invest money and that inevitably increased the complexity of some of the arrangements that Grant Thornton were having to look at, which took additional audit time, increasing the amount of audit work required and the fees that they needed to charge. That being said, Grant Thornton were very fortunate to have a good relationship with the Section 151 Officer, meaning that Grant Thornton were given plenty of notice before the council embarked on something, giving them ample time to  consider in advance,  which enabled Grant Thornton to be efficient and robust at the same time. 

The following responses were given to member questions:

·         The audit plan would set out the scope of scale of the audit work to be undertaken following regulatory changes.  The Redmond Review pointed out the complexity and length of financial statements and proposed that they be simplified to enable the public to understand the financial information, giving them greater assurance that the finances of the authority are sound.  CIPFA would review if and how this could be achieved. 

·         A large proportion of the additional costs had been as a direct result of the pandemic and it was noted that the Government had recognised this at a national level, with the Government committing an additional £15m; though whether this would go to local authorities or directly to external auditors was as yet unknown.

·         The Executive Director Finance & Assets reminded members that Audit training was included as part of the post-election induction programme, which was currently being organised.  As part of this key partners did provide dedicated sessions and this would be open to all members, not just those that had been newly elected.

·         CBC recognised that there had been shortfalls in the quality of the working papers this year and as a means of addressing this had appointed Gemma Bell to the position of Deputy Section 151 Officer.  Gemma is a 100% CBC dedicated resource. 

·         A key part of the VfM work would be consideration of the financial planning arrangements and what assumptions and sensitivity analysis had been applied, as well as what reserves and mitigations were in place.  However, there was a risk that the emergency funding would mask issues in the short term, so Grant Thornton would be looking at medium to long term arrangements.  Members were assured that from Grant Thornton’s perspective, CBC had a good proven track record in terms of developing and delivering saving plans. 

The Executive Director Finance & Assets took the opportunity to remind members that CBC had a diverse portfolio and therefore did not have significant exposure to any particular market.  The biggest hit had and would continue to be retail and CBCs exposure was predominantly secondary retail, supermarkets and shop parades, which had performed well throughout the pandemic.  He urged members to keep in mind the reasons that CBC ventured into the office market.  Cheltenham was losing significant office space to retirement flats under permitted development rights, which was driving up the price per square ft. to those seen just outside of London and in his opinion, people would return to offices once we were through the worst of the pandemic.  His main concern was car parking income, which had taken a significant hit from the pandemic, though he admitted that the reduction in use would go a way towards helping us achieve our carbon neutral target. 

A member thanked the Executive Director Finance & Assets and his team for their continued hard work and felt it was a tribute to this that colleagues across Europe were looking at Cheltenham to try and learn from us. 

The Vice-Chair reiterated his thanks to Officers and reminded members of the importance of the external auditors and the independent assurances they gave, commenting that in his opinion, it was money well spent.

No decision was required.