Jonathan Wilson, Assistant Director Finance, presented the audit completion report that provided Members with an update that the audit was nearly complete and specifically made reference to the unadjusted misstatement for the McCloud adjustment to the pension fund. Reference was also made to there being six adjustments made to the financial statements, of which one was material; four of the six were noted to be classification issues only with the other two relating to valuation adjustments in respect of PPE.

Lisa Clampin, Binder Dijke Otte (BDO), then introduced the report from BDO’s perspective, before the report was presented in detail by Matthew Weller. The key points highlighted were as follows:

·         Materiality was consistent with the basis previously communicated in the planning report, but had been increased to reflect the numbers in the draft accounts.

·         Triviality had been increased to a higher percentage following feedback at the previous committee.

·         The summary page included details of the adjusted and unadjusted misstatements which were discussed in detail further down the report.

·         The risks were talked through in detail. It was noted that there was nothing to raise on management override, revenue recognition or expenditure cut-off.

·         In respect of PPE valuations, we raised that the valuer had included a material uncertainty statement with respect to the valuations and an emphasis of matter paragraph would be raised in response to this. We also raised that there were a number of adjustments in respect of PPE valuations, of which the two highest value had been adjusted by the Council and the remainder were trivial.

·         For the pension fund liability, we noted that there was also a material uncertainty statement regarding the valuation of assets in this fund, which would also require an emphasis of matter to be raised.

·         On the bad debt provision, we stated that the provision had been calculated using the Council’s best estimates of the recovery rates and did not factor in historical recovery rates, for which we had raised a recommendation.

·         We confirmed we had no issues with the basis of valuation of financial instruments, but the movement in valuation for one specific asset had not been adjusted from the prior year resulting in an unadjusted misstatement being raised.

·         We confirmed that we believed the Council to be a going concern.

·         We stated that we were not aware of any fraud and asked the committee if they would like to bring any to attention. Nothing was raised.

·         A brief overview was provided of the unadjusted misstatements regarding the movement on the valuation of one financial instrument and errors identified in respect of the VAT debtor. We also raised that there was an additional unadjusted misstatement to be added to the list relating to the extrapolation of an overstatement identified on our REFCUS sample test.

·         We mentioned that the remaining three unadjusted errors were brought forward from the prior year, and that the most significant of these regarding McCloud had already been raised by Jonathan Wilson.

·         We mentioned that Jonathan Wilson had already discussed the adjusted errors and these were not covered any further.

·         For use of resources, we confirmed that there were no issues to report.

·         We confirmed that the Council was required to revalue all land and buildings assets at least once every five years, and that we had identified three which had not been valued. A recommendation had therefore been raised to ask the Council to perform a review for any other assets not revalued and schedule a valuation for 2020/21 for these assets.

·         We mentioned that for the recommendation regarding review of system access right, there was a control in place, but this control was not documented and we could not therefore evidence that it was in place. Our recommendation was therefore that the control was documented.

·         It was noted that there would be an additional recommendation raised regarding the fact that two new users were provided access to Oracle without the correct approve process taking place. We had no specific concerns regarding these users, but there was a risk if procedures were not followed.

·         The recommendation on the bad debt provision was not raised in detail as had already been discussed above.

·         The recommendation regarding payroll contracts was highlighted in that we had been unable to obtain seven of our 40 samples, and six of the 33 we did obtain were not signed.

·         We confirmed that no action had been taken in respect of the prior year recommendation raised on journals, and that the recommendation raised on the HRA were now cleared.

·         An update was provided on the outstanding items, which were largely the same as when the report was issued. It was confirmed that the significant review points had been answered, and we were still working through the less significant points which were largely tidying of the file.

Lisa Clampin subsequently clarified a few points as follows:

·         It was explained what an emphasis of matter paragraph was.

·         It was confirmed that the unadjusted misstatement for REFCUS would be added to the unadjusted list and a revised version of the audit completion report would be issued at the end of the audit.

·         It was confirmed that a number of Local Government organisations would not meet the 30 November deadline, but we do not expect Thurrock to be one of them.

Jonathan Wilson then added clarification on some of the points:

·         He told the committee what REFCUS was.

·         He clarified that in respect of unadjusted items that a decision was made based on materiality and the impact on the general fund. For items relating to valuation consideration will also be given to whether this will be superseded in the following year.

·         He clarified that if the financial instrument valuation had been adjusted for, this would have been an increase in the value of the investment but due to the accounting rules would not increase the general fund.

·         He confirmed that management had provided responses to all recommendations raised.

Councillor C Kent questioned what the timetable was for responding to recommendations, given one of last year’s had not been implemented. Jonathan Wilson stated that all recommendations were being considered. In respect of the specific point on the one from last year, he confirmed that the Council was unlikely to implement this as they believed the control environment was sufficient without implementing this point, but it would be reviewed.

Councillor Spillman thanked the auditor team and officers for the update and raised a question in regard to how much reliance could be placed on the audit given the difficulties faced in the COVID environment. Lisa Clampin responded saying BDO was using technology to good effect to counter any potential issues with audit quality and confirmed that the main impact was on the time it took to do the audit remotely.

Councillor Collins raised a question regarding what the extent of the issue with payroll contracts was. Lisa Clampin responded saying that this was not a major concern to BDO, but was a point for which a recommendation was required. Jonathan Wilson added to this by saying that there was no legal requirement for signed contracts to be in place, and also that the Council was introducing a new electronic system going forward which was expected to resolve this issue.

RESOLVED

That the Standards and Audit Committee considered the comments of the external auditors as set out in the attached report and noted their findings.