Agenda item - 2019/20 Audit Findings Report
Agenda item
2019/20 Audit Findings Report
To receive and consider the report from external auditor Grant Thornton
Minutes:
The Governance Committee welcomed Michael Green, Grant Thornton to present the 19/20 financial statements.
The report was undertaken against the backdrop of the Covid-19 pandemic with the audit being performed remotely. This created a challenge but was overcame using technology.
The delivery of the Audit Opinion was imminent, it was anticipated to be an unqualified opinion on the statement, with an emphasis of matter paragraph. This would direct attention to certain aspects of the financial statement to ensure understanding of the issues and circumstances of the valuation of land and buildings.
In addition to the financial statement, a Value for Money Arrangement was performed. In 2019/20, two significant risk areas were identified around financial sustainability and the purchase of Logistics House
The work on financial sustainability was concluded and there were no findings or issues to report. The financial statement due to be closed after the finaisiation of the Logistic House purchase. The audit certificate would be given at the same time as the opinion on the financial statement once work had formally closed and the audit certified.
No statutory duties had been exercised.
The audit was performed to materiality level of over £1,000,000, any errors or misstatements identified over £51,000 were to be reported back to the committee. Any errors within the renumeration disclosure over £20,000 would be reported back to the committee. There were no errors in that area.
The significant audit risk that was identified for the year was Covid-19. Within the report, the impact was detailed and outlined the procedures performed in response. There were no other issues or concerns arising from Covid-19 to report.
A standard risk that featured in all audits was management overwrite of controls, which is adjustments to the financial statement that could potentially manipulate the statement. The auditors performed numerous procedures against the risk and there were no matters or concerns to raise to Committee.
A further risk was around the improper revenue recognition. Due to the Council’s income stream, it was easy to verify and difficult to manipulate in a fraudulent manner. Multiple procedures were performed, and no issues or matters required bringing to the Committee’s attention.
It was highlighted that the delay to the Financial Statement was due to issues with the valuation of land and buildings. There were some material adjustments identified and the value of properties had reduced by £10 million. The valuer valued at cost, instead of the CIPFA code guidance to value assets in use. The approach was challenged, and the council engaged the new valuer who delivered the revised figure that resulted in the adjustment.
There was significant risk around the valuation of the net pension liability, this was underpinned by numerous estimates, judgments, and assumptions with a greater risk of error than other areas of the Financial Statement. Assurances were received from the Lancashire Pension Fund, and no issues or misstatements were identified other than the material uncertainty.
Logistics House was a focal area of the audit. The property was purchased by the Council for £34 million during the 2019/20 financial year. The valuation of the property had reduced in value from the purchase price. Management challenged that reduction, and the valuation was increased in line with the purchase price. This value was also agreed by an external valuer.
Originally, Logistics House was classified as an operational asset, this was challenged on the basis that the asset was purchased to secure future income streams and was more appropriately an investment property. It was reclassified in the amendment statement.
Value for money conclusion was ongoing. The fees for the 2019/20 audit to be finalized as additional work ongoing and then have discussion with management before coming back to Committee to be formally approved as a Public Sector Audit Appointment.
Decision: The report was noted.
Supporting documents:
- Chorley Borough Council - Audit Findings Report 2019-20 - Final, item 21.G.32 PDF 498 KB
- 20210728 Chorley BC 2019-20 Accounts Letter of Representation DRAFT, item 21.G.32 PDF 305 KB