Agenda item

Officers introduced the item highlighting the two plans that had been produced, one for the audit of the Council’s accounts and one for the Pension Fund accounts. It was noted that the draft accounts were intended to be ready by the end of June, would be audited throughout July and August and were due to be signed off by the Audit Committee at their September meeting.

Representatives of Ernst & Young summarised both plans for the Committee. It was specifically highlighted that, due to the timing of the onset of the Covid-19 pandemic, the 2020/21 financial year was where the impact of the pandemic would start to be seen with regard to loss of income and grant funding from central government; because of this, there were additional risks within the audit plan but it was noted that these risks were not unique to Hillingdon. The major audit risks and areas of focus were outlined, and attention was drawn to where these risks differed from previous years due to the Covid-19 pandemic. It was noted that a change in auditing standards for identifying, assessing, and responding to risks around accounting estimates would likely result in an increase in the level of information requested by auditors going forward. The Committee were also informed that, with regard to audit materiality, there was no change in assessing materiality for 2020/21.

Regarding Value for Money, the Committee were informed that slight changes to the reporting criteria put more of an emphasis on financial sustainability rather than financial resilience. To this end, it was likely that additional audit work would be carried out around financial sustainability. Members were notified that regarding fees, Public Sector Audit Appointments Ltd (PSAA) were expected to determine proposals around increasing the base fee shortly and additional fees for 2019/20, which had been agreed with management, were also subject to approval by PSAA.

Members questioned the impact of the Covid-19 pandemic on the new significant risk around accounting adjustments made in the Movement in Reserves Statement; the Committee were informed that local authorities were limited in the ways in which they can direct influence over their accounts and movement in reserves was one of them, adopting this as a significant risk recognised that, as the financial impacts of the pandemic are felt, there would be more pressure to implement movement in reserves. It was also noted that, this judgement was being made across a number of local authorities for the 2020/21 financial year. The Committee were assured that accounting adjustments made in the Movement in Reserves Statement were being treated appropriately and all regulations to that regard were being followed.

Members queried whether auditors would be examining a council tax discount given to elderly residents of the Borough, eligibility to which had recently been reduced. It was confirmed that this would come onto the auditor’s radar should it be deemed to have a significant impact on the Council’s finances.

By way of clarification, officers informed Members that with regard to grant funding, pandemic related grants were being assessed on a case by case basis to determine whether the funding was principle or agent, and where they should be included in the Council’s accounts. The rationale for this process had been discussed with Ernst & Young and work to that regard was ongoing.

The Chairman requested a correction be made to the Ernst & Young report; the report supposedly contradicted  itself where it had stated “The value of secondary schools was understated by £4.2m…”, the report later went on to state “The value of secondary schools was overstated by approximately £4m…”. Representatives from Ernst & Young confirmed that the correction would be made.

The Committee sought assurance that the September 2021 target date for completing the annual audit would be achievable given the backdrop of the Covid-19 pandemic. Members were assured that sufficient resources had been put in place to meet this target and given the previous record of working with officers at Hillingdon, this was deemed a comfortable goal.

RESOLVED that the Audit Committee noted the content of the EY 2020/21 Annual Audit Plan & Pension Fund Audit Plan.