Agenda item

To update the Committee on the Government’s consultation on proposals to address the current backlog in local audit completions across the local government sector and to enable the Council’s External Auditor Ernst and Young to present to the Committee the Audit plan covering the 2021/22 financial year.

Arthur Parker introduced Andrew Brittain, Ernst & Young, to speak to the report on the delay to the 2021/22 accounts and the implications on the 2022/23 accounts.

The 2021/22 audit had been planned and significant progress had been made on it. The audit had been delayed by a number of factors, including a reliance on the Berkshire Pension Fund’s own audit which had not been completed.

Andrew updated the Committee on the Department for Levelling Up, Housing and Communities consultation regarding local audit delays. While the audit for 2021/22 had been largely completed, it was not possible to complete the audit due to lack of assurance from the pension fund auditor for 2021/22. The Department for Levelling Up, Housing and Communities were consulting on a backstop date for any open accounts up to and inclusive of March 2023. If the pension scheme audit had not completed by the backstop date, it was anticipated that Ernst & Young would issue an audit opinion for 2021/22 limited in scope to exclude the pension fund. If the backstop date was agreed, this would result in the 2022/23 audit being incomplete and the audit opinion would be disclaimed.

In response to questions, the following points were noted:

·        Due to the delay to the 2021/22 audit, all work on the 2022/23 audit was outstanding and therefore it was not feasible to complete the work by the proposed backstop date. Ernst & Young proposed to complete the 2022/23 audit work relating to value for money in the interests of stakeholder concerns and financial stability.

·        Until the legislation was in place for the pension fund auditors to disclaim their audit, it was not possible to complete the 2021/22 audit on a limitation of scope basis.

·        All local government audit fees were centrally set to an adjustable scale and it was not clear how the fees for 2022/23 would be determined, given the national delays. It was noted that to disclaim an audit required some work.

·        The timeline for the 2021/22 audit was dependent on the backstop legislation being drafted and agreed by government before the recess.

·        The government proposed three phases to catch up audit work, with the recovery phase including additional backstop dates for the 5 years covered by the latest round of audit appointments.

·        It was not clear what would happen if the legislation was not passed by recess.

·        It was noted while that the pension fund was volatile and changed significantly year on year, the delay to the 2021/22 audit or lack of assurance on the pension fund would not significantly impact on this Council or its sustainability.

·        There would be a cost and work impact on auditors and Council officers because of incomplete accounts. It would take several years to get assurances on all opening balances and in-year figures.

·        Andrew Brittain, Ernst & Young was meeting with Andrew Cardoza, KPMG to discuss the handover arrangements for the accounts. KPMG would start the work on 2023/24 audits and the handover was progressing well.

·        Andrew Hunter agreed to explore whether any costs could be claimed against the pension fund delaying the 2021/22. (Action: Andrew Hunter / Stuart McKellar)

·        The 2022/23 audit value for money conclusion would be conducted and completed outside of the Committee cycle, to allow KPMG to work on the 2023/24 audit over the summer.

·        The audit delays across the country could be attributed to internal delays within local authorities and audit firms, the delayed impact of the pandemic, and some national technical issues which took time to resolve.

·        Auditors fees are set by Public Sector Audit Appointments on a competitive tender basis for audit firms to compete. The 2023/24 audit was the first year of a five-year cycle.