Agenda item

Report of the Deputy Chief Executive (Place) – To Follow

The Committee considered a report of the External Auditor, Grant Thornton, on the Audit Findings for the City Council for the year ending 31st March, 2019. Mark Stocks and Avtar Sohal of Grant Thornton, attended the meeting to present their report.

The report highlighted the key issues affecting the results of Coventry City Council and the preparation of the group and financial statements for the year ending 31st March 2019. It was also used to report their audit findings to management and those charged with governance in accordance with the requirements of International Standards on Auditing (UK and Ireland) 260, and the Local Audit and Accountability Act 2014.

Under the National Audit Office Code of Audit Practice, the External Auditors were required to report whether, in their opinion, the Council’s financial statements gave a true and fair view of the financial position of the Council and its income and expenditure for the year and whether they had been properly prepared in accordance with the CIPFA/LASAAC code of practice on local authority accounting and prepared in accordance with the Local Audit and Accountability Act 2014.They were also required to report whether other information published together with the audited financial statements (including the Annual Governance Statement (AGS), and Narrative Report, was materially inconsistent with the financial statements or the knowledge obtained in the audit or otherwise appeared to be materially misstated.

Resulting from audit procedures, a material adjustment of £114m had been identified in relation to the valuation of school assets, meaning that the Council would need to adjust its financial statements for the year ending 31 March 2019, and also include prior period adjustments to reflect the impact in prior years. The Council was currently undertaking its valuation process and, in order to complete this, it had been agreed that a delay of the completion of the audit would be required. Due to the complexity of the valuations, this would need to extend beyond the 31 July. It had also been agreed that the Council would make an adjustment in relation to the pensions liability resulting from the McCloud judgement, which increased the liability in the Council’s financial statements by £12m.

The anticipated adjustments to the financial statements would have no impact on useable reserves or the overall financial position of the Council. Subject to the Council making the material changes to the financial statements, there were no matters that would require modification of the audit opinion, however, as a result of the findings there were areas of work outstanding that the audit team would need to complete before an audit opinion could be issued, these
included:
- review and testing of adjustments in relation to schools valuation
- review and testing of adjustments in relation to McCloud pensions liability
- receipt of supporting documentation for some outstanding items in the sample testing
- receipt assurance letter from west Midlands pension fund auditor in respect to pension liabilities
- receipt of management representation letter
- review of the final set of financial statements.

Appendices to the report set out recommendations for management (Appendix A) and follow-up of recommendations from the prior year’s audit (Appendix B). Other information to be published with the financial statements was consistent with the Auditor’s knowledge of the Council and the financial statements they had audited. The anticipated audit report opinion would be unmodified.

Under the National Audit Office (NAO) Code of Audit Practice, the Auditor had completed the risk based review of the Council’s value for money arrangements and concluded that the City Council had proper arrangements to secure economy, efficiency and effectiveness in its use of resources. They therefore anticipated issuing an unqualified value for money conclusion.

The Local Audit and Accountability Act 2014 also required the Auditor to report if they had applied any of the additional powers and duties ascribed to them under the Act; and to certify the closure of the audit. The Auditor confirmed that they had not exercised any of their additional statutory powers or duties and had completed the majority of work under the Code. They would issue their audit completion certificate on completion over the Whole of Government Accounts audit in September 2019, in line with national deadlines.

RESOLVED that the Audit and Procurement Committee notes the Audit findings, as presented by the Council’s External Auditor, and agrees to receive the Audit Findings Report 2018-2019, together with the Audited 2018-2019 Statement of Accounts, at its 2^nd September 2019 meeting, following completion of adjustment work.