Agenda item

The External Auditors presented the report which outlined their audit findings for the 2021/22 financial year.

There were no significant issues found within the external audit findings and the report included adjusted and unadjusted misstatements, primarily around minor discrepancies in testing of property valuations and the result of the tri-ennial pension valuation of the LGPS.

Clarification was sought around the property valuation differences and whether it was completed on a sample, and if so, what percentage of the overall assets were looked at.

The External Auditor confirmed that only a sample of properties were tested but the population was risk assessed when the sample was picked out. The properties considered to be most ‘out of line’ of expectations were generally selected.

As part of the External Auditors concluding, they had considered whether the sample could be indicative of wider problems within the population. Assurance was given that the samples were a fair reflection of the issues within the population as a whole.

One Member noted that the pension liability had increased by £4.3m. It was requested as to what the level of risk would be around the pension liability.

The 2021/22 accounts included the tri-ennial evaluation of the LGPS which was a full evaluation of the fund, as at the 31 March 2022. It gave better information about the membership and liability of the fund as a whole than the previous information. The number in the accounts was the most accurate estimate that was possible to make of the viability.

It was queried as to whether the significant risks outlined were specific to South Kesteven District Council or whether they were general risks identified across several Council’s.

The External Auditors clarified that the significant risks identified for South Kesteven District Council were effectively the three risks usually identified across all of Local Government. Management override of controls was an assumed risk by all external auditors at all entities, regardless of sector. The valuation of the Council’s properties and the valuation of the Council’s pension liability were the two largest estimates in the accounts, therefore, generally were considered to be numbers most susceptible to error.

It was noted that the Council’s value for money arrangements had not been completed and therefore, the External Auditors were not in a position to issue the auditor’s annual report. It was queried as to whether this report had been provided and why the reasoning behind the delay of the report.

The External Auditors had not yet issued their annual report with the value for money findings within it. The delay had effectively been due to the external auditors prioritising the delivery of the financial statements audit over the delivery of the value for money work. Had any particular concerns been identified in relation to the value for money work, this would have been reported with urgency.

Work was being undertaken for a combined 2-year Auditor’s Annual report to cover the 2021/22 and the 2022/23 financial years. It was hoped to bring the report to the next meeting of the Governance and Audit Committee.

The Deputy Chief Executive (S151 Officer) thanked the Finance Team and the External Auditors for the presentation of the report.

It was queried as to whether the five individuals who had super user access to the ledger were in line with the suggestions made by the External Auditors.

Super users had a degree of access to the ledger, which normal users would not have. This inherently came with some risk around super users obtaining tasks they should not be accessing within the ledger. It was stressed that throughout the external auditor’s work of addressing the risk of management override within the financial systems, there were no concerns identified.

The Assistant Director of Finance (Deputy S151 Officer) confirmed that a review on the number of super users within the system had taken place to reduce the number of users. A monthly check would also be incorporated to review the posted journals. Assurance was provided that a journal in the system was a debit and a credit and therefore had a low risk, as it could not be taken outside of the finance system.

Concern was raised around the completeness of related party returns and risk regarding influencing decision-making. Clarification was sought around what actions had been taken in regard to the concern.

In 2023, the Council received all but one related party return was the responsibility of Members and Senior Officers to ensure these returns were completed and returned. The forms were part of mandatory training, and five reminders would also be sent to the individual.

One Member queried whether Companies House had been updated in terms of Directorship for Council owned companies.

The Assistant Director of Finance (Deputy S151 Officer) confirmed that Companies House had been updated to reflect Directorships of the Council owned companies.

It was stated that the accounts movement in reserves statement should be updated to meet all requirements of the Code. It was queried as to why the Council had not amended it yet.

The External Auditors clarified it was a presentational issue and there were no concerns with the underlying accounting, just the presentation of the statement.

It was proposed, seconded and AGREED to accept the External Audit Findings for 2021-2022.