To present to the Committee the progress on outstanding actions identified by the Committee along with general updates on other issues that fall within the responsibilities of the Committee.
The Committee had before it a report submitted by the Assistant Director (Finance & IT) (A.3) which presented to the Committee the progress on outstanding actions identified by the Committee, together with updates on other general issues that fell within the responsibilities of the Committee.
Members were aware that a Table of Outstanding Issues was maintained and reported to each meeting of the Committee. That approach enabled the Committee to effectively monitor progress on issues and items that formed part of its governance responsibilities.
Updates were set out against general items, external audit recommendations and the Annual Governance statement within Appendices A, B, and C respectively to the Officer report.
The Committee was informed that to date there were no significant issues arising from the above, with work remaining in progress or updates provided elsewhere on the agenda where appropriate.
There were currently 3 main elements to this report as follows:-
1) Appendix A – Provided updates against general items raised by the Committee;
2) Appendix B - Provided updates against recommendations made by the Council’s External Auditor; and
3) Appendix C – Provided updates against the 2020/21 Annual Governance Statement Action Plan.
In terms of elements 1) and 2) above, the Committee was informed that there were no significant issues to raise, with actions remaining in progress. In terms of element 3), there continued to be a significant impact from COVID 19 in terms of progressing the actions as quickly as originally anticipated. However, activity remained in progress against all actions and work would continue during 2021/22, as required.
Members were advised that an External Audit Recommendation was set out in Appendix B in relation to the level of carry forwards from prior years. In previous updates to the Committee, it had been highlighted that a review of a range of funded projects had been undertaken in consultation with the relevant departments and that the sourcing of providing support across a number of areas was being investigated. Although this work remained on-going, the latest position was reported set out below:
Following the initial review by Corporate Directors / Assistant Directors highlighted above, the additional capacity that had been identified as being required primarily centred around:
In terms of procurement, as set out in a report considered by Cabinet on 17 September 2021, it was proposed to work in partnership with Essex County Council, which would allow the Council to not only access additional capacity but also specialist procurement advice / knowledge.
In terms of the other two items above, a report to the Portfolio Holder for Finance and Corporate Governance was currently being prepared to progress the required capacity building activities.
It was reported that the Statement of Accounts 2020/21 had been published and was currently subject to review by the Council’s External Auditor. Although it was required to be audited and republished by the end of September 2021, it remained subject to the conclusion of the work of the External Auditor. With this in mind, it was currently expected that a special meeting of the Committee would be required in either October or November to consider the Statement of Accounts and the associated report of the External Auditor once they had concluded their necessary audit work.
The Committee recalled that, at its meeting held in February 2021, it had considered the Government’s initial responses to the Redmond review into the effectiveness of external audit. Those responses had again been considered at the Committee’s meeting in April 2021. As mentioned in April, many of the Government’s responses indicated that they would either be liaising with the relevant stakeholders or would be considering some recommendations further.
Members were made aware that the latest position was that the Department for Levelling Up, Housing and Communities (formerly MHCLG) were undertaking a technical consultation on a broad range of implementation proposals, along with responding to an earlier consultation on the appropriate methodology for distributing £15m to support effected local bodies, as well as changes to the appointing persons and fee setting regulations that aimed to provide the PSAA with additional flexibilities.
The broad range of implementation proposals included:
· a new system leader for the local audit framework;
· proposals to strengthen audit committee arrangements within councils;
· measures to address ongoing capacity issues on the pipeline of local auditors; and
· action to further consider local audit functions for smaller bodies.
Unfortunately the Government’s consultation deadline of 22 September 2021 had not enabled this Council’s proposed responses to be presented to the Committee before they had been submitted. However, the Council’s responses had been prepared by Officers in consultation with the Chairman of the Committee and had broadly reflected the view that value for money should be at the heart of any changes proposed but balanced against strong and transparent governance where required.
It was also important to highlight that future guidance emerging from the review should not be based on the benchmark of poor performing Councils where there might be a different solution in response to any perceived weaknesses. This Council had a robust and strong approach to governance arrangements, supported by Senior / Statutory Officers along with working closely with its External Auditors, which would continue as part of any changes required as part of the Redmond review.
In respect of the distribution methodology for the £15m made available by the Government to primarily support the anticipated rise in audit fees, it was reported that this would be based each body’s scale fee as a proportion of the total fee scale that each body currently payed as part of the current External Audit contracts. The Government had also highlighted that whilst it understood that individual circumstances could vary, it was important that the methodology pursued followed a simple process which allowed for efficient payment to local bodies. The actual financial impact compared with the funding receivable under those new arrangements would be considered as part of this Council’s future detailed budget setting and financial forecast processes.
In respect of the PSAA fee setting regulations, it was reported that the Government had committed to consult on proposals to provide the appointing person with greater flexibility to ensure the costs to audit firms of additional work were met and to reduce the need for time consuming case by case consideration of fee variation requests. The majority of respondents to the associated consultation conducted earlier in the year had agreed with the Government’s proposals which were summarised as follows:-
· extend the regulatory deadline by which scale fees needed to be set to enable the appointing person to take into account more up-to-date information;
· enable the appointing person to consult and agree standardised fee variations to be applied to all or certain groups of principal bodies;
· provide clarification on enabling some fee variations for additional elements of work to be approved during the audit; and
· expressly to enable the appointing person to appoint auditors for the period that it considered to be the most appropriate, up to the maximum length of the appointing period subject to consultation with the relevant bodies.
It was felt that the above proposals built on the success of the PSAA regime and provided practical flexibilities and interventions to strengthen the stability of the local audit market and address some of the factors that could result in issues with timeliness.
Members were informed that as the Redmond Review actions continued to progress, further updates would be presented to them as deemed necessary.
After discussion it was:-
RESOLVED that the Committee notes the progress against the actions set out in Appendices A to C to item A.3 of the Report of the Assistant Director (Finance & IT).