The External Auditor Ernst and
Young had concluded the planned audit work in relation to the financial year
2020/21 and presented the Annual Report to the Committee for information and
The report included the Auditor’s
conclusions and recommendations in relation to the audit of the financial
statements and in relation to the assessment of the Council’s arrangements for
securing robust governance and Value For Money. The findings had been subject of previous
reports to the Committee over the period July 2022 and updates through to April
2023. However as the Corporate Affairs
and Audit Committee had a new membership following the local elections in May
2023, it was appropriate for the Committee to formally consider the Auditor’s
Annual Report. The External Auditor
suggested that the audit planning reports for 2021-22 should be circulated to
Committee Members for information.
The Council provided management
responses to the auditor’s 7 recommendations in relation to Value for Money in
July 2022 as set out in the Annual Report.
The Council continued to progress the delivery of its Improvement Plan
over the last year and the latest progress update was due to be presented to
Council on 5 July 2023.
The External Auditor’s Annual
Report was attached at Appendix 1 to the submitted report and included the
• Purpose and
• Value for
• Appendix 1
Members’ attention was drawn to
paragraph 9 of the covering report which set out in detail the fees for the
2020/2021 audit. The fees were
significantly higher than both the planned fee for the 2020/21 (4.5 times
higher) and the final fee for the previous year’s audit. This related primarily to the length of the
audit at just under two years, the increasing changes in both risk and
regulation involved with the audit activity, and some of the specific
governance issues which culminated in a value for money qualification for the
Council. All these points had been
raised previously by EY to both Officers and the Committee. The increase in audit fees had been
acknowledged by the Council and was being factored into the on-going
medium-term financial plan. Given the
level of increase in fees, a fee variation request has been submitted by EY to
Public Sector Audit Appointments (the regulatory body in this area). The
Council could submit its comments as to whether it accepted the fees or not and
could provide further explanation or evidence if needed.
The External Auditor drew
Members’ attention to the following aspects of the Financial Statement Audit
and provided further detailed explanation in relation to each heading:
Areas of Significant Risk:
due to fraud or error (Council and Pension Fund).
• Risk of
fraud in revenue and expenditure recognition (Council).
of land and buildings (Council only).
for infrastructure assets (Council only).
of unquoted pooled investment vehicles (Pension Fund only).
of directly-held property (Pension Fund only).
Other areas of audit focus
of defined benefit pension liability (Council only).
concern and associated disclosures (Council only).
Audit differences (Council and Pension Fund).
Value for Money (VFM) Assessment.
In relation to the longer
timescales for audit completion, the financial implications for the Council in
terms of audit fees, and whether this would be repeated in future, the External
Auditor explained that the requirements were set in legislation. Pre-pandemic, audits were expected to be
completed by July. However, in 2020 this
date was moved to November and then to September the following year. It was likely that September would continue
to be the new end date.
Regarding asset valuations, a Member queried whether there was any difference in the
Teesside Pension Fund’s valuations and EY’s.
The External Auditor stated that the Council used an external valuer to
undertake the valuation and then EY examined the work of this specialist and
the methodology. A sample of the assets
would be selected and the data tested for accuracy. EY’s own specialist would also review a
sample of the valuations.
A Member commented on the
decision making in relation to Boho X highlighted in the VFM section of the
report and EY’s view on the communication between the Mayor and a Senior
Officer which did not explicitly provide authority. Several examples were provided within the
report where Council policies and procedures were not adhered to. The External Auditor was asked whether work
was ongoing on this issue and it was confirmed that a Governance Audit was
currently being undertaken.
The Internal Auditor confirmed
that audit report on the Middlesbrough Development Company was close to
completion and would be made available to Committee Members once finalised.
AGREED as follows that:
1. the content
of the External Auditor’s Annual Report was received and noted.
2. audit planning reports for 2021-22 would be circulated to the current Committee membership.