To receive a report from Grant Thornton providing an overview of the planned scope and timing of the statutory audit of Mid Devon District Council for the year ending 31st March 2020.
The Committee had before it, and NOTED, a report from Grant Thornton providing an overview of the planned scope and timing of the statutory audit of Mid Devon District Council for the year ending 31st March 2020.
Key highlights within the report included the following:
· Those risks requiring special audit consideration continued to be in relation to the 3 Rivers Development Limited and the employer’s pension fund liability as there was a significant amount of estimation in these areas.
· There were also risks in relation to changes within the Finance team with the Group Manager and an Accountant having recently left or about to leave. This would leave a gap in terms of expertise and staff resource until replacement members of staff were fully conversant with the Council’s processes.
· The proposed fee for the 2019/2020 external audit would be £44,229.
· From Grant Thornton’s initial discussions with officers, 3 Rivers ‘work in progress’ was forecast to be c£9m. Although this did not meet the criteria requiring an external audit, it was a material balance to the group accounts and would need additional assessment by the external auditors.
· There had been a change to International Financial Reporting Standard (IFRS) 16 to do with leases. Under the new standard the current distinction between operating and finance leases is removed for lessees and, subject to certain exceptions, lessees will recognise all leases on their balance sheet as a right of use asset and a liability to make lease payments.
· The threshold for materiality would be kept at 2% of the Council’s gross expenditure.
· With regard to financial sustainability the external auditors were keen to stress that the Council continued to face significant financial challenges over the medium term.
· The interim audit would commence in the following week with the final audit commencing at the end of May. A final report would be brought to the Audit Committee in July.
Consideration was given to:
· In order for 3 Rivers Development Limited to trigger an external audit they would need to meet 2 out of 3 criteria in relation to numbers of staff (50 or more), annual turnover (of more than £10.2m) and assets exceeding £5.1m. These criteria were not currently met. There was provision within the agreement for an external audit of 3 Rivers to be undertaken by an independent external audit company but it would be a costly expense to the Council and may not represent value for money given the overall percentage spend.
· The need for more information to the Audit Committee about exactly what the Grant Thornton audit of the 3 Rivers areas entailed and the results of their necessary risk assessments.
· The Committee were keen to more fully understand the external auditor’s view of the Council’s financial sustainability but the audit needed to be completed first before the Committee could have that discussion with them.
· The number of days and weeks the external auditors would be undertaking the audit in relation to the fee they were charging.
Note: * Report previously circulated; copy attached to the signed minutes.