Agenda item

To be presented by the Council’s External Auditors, KPMG.

The External Auditor from KPMG, Audit Director Salma Younis presented the draft External Audit Plan and Strategy for the year ending 31 March 2024 to the Committee.  The Audit Plan set out the risk assessment of the work carried out by the External Auditors and the significant risk areas that the Auditors would be focusing on.  Other standard risk areas would be looked at but were not included in the significant risk areas.

The Committee were referred to page 19 of the agenda pack which outlined the scope of the work to be carried out in respect of the audited accounts and the materiality levels that would be looked at.  An audit threshold of £82.5m had been set and anything audited above this amount would be reported to the Governance and Audit Committee.

Page 20 of the agenda pack listed specialist teams that supported the auditors and this included KPMG’s Pensions Centre of Excellence which would look at the balances in respect of the Council’s local government pensions scheme and also a Real Estate Valuation Team that would look at the Council’s asset valuation in respect of the audit.

The group audit scope included LeisureSK Ltd but this would be audited separately by another auditor, however, it would be looked at for the purposes of consolidating the group accounts only.

The Audit Director then referred to the five significant risk areas summarised within the Audit Plan and these were:

·       Land and buildings

·       Investment property

·       Management override of controls

·       Valuation of post-retirement benefit obligations

·       Expenditure recognition

A further audit risk was where Revenue expenditure was inappropriately recognised as capital expenditure.

The Auditor then spoke about Revenue Recognition which was a mandatory audit risk that auditors had to apply across all areas and this was explained within the plan and covered the income streams such as;

·       Council tax

·       Business rates

·       Fees and charges

·       Grant income

The rationale was included in the plan against each income stream which had been rebutted as it was felt that often, rather than income this was an expenditure risk to allow a balance budget for the end of year.

As well as auditing financial statements the auditors also looked at Value for Money (VFM) arrangements.  The risk assessment approach of the auditors was set out in the plan but unfortunately this had been unable to be progressed at the current time and the Committee would receive the arrangements at a future meeting, as they were still awaiting final documents from management.  The three areas that would be looked at covered; Financial sustainability, Governance, and Improving economy, efficiency and effectiveness.  There was no change to the framework that had been outlined by the previous auditors. 

The appendices to the plan and strategy included details on the audit team, confirmation of independence, KPMG’s Audit quality framework and the auditing standards.

The Auditor was thanked for her report and the well laid out documents presented.  Comments were made about the challenges nationally with the late sign off of accounts by Auditors and the backlog that was being experienced nationally.  South Kesteven District Council were in a better position than most other authorities.

The changing regulator requirements were unhelpful, but plans had been put in place to address the backlog with some auditors issuing Audit Disclaimers.

A question was asked in respect of actual and potential risks and the Member was referred to the plan and the risks outlined.   A further question was asked in respect of the Value for Money documentation and the Interim Head of Finance indicated that the documents would be available by the end of the week, as it was a new auditor it had necessitated a completely new document being compiled.

A comment was made about the valuation of assets and it was confirmed that the District Valuer was used to value assets for the accounts. Another comment was made about the audit risks and the overriding of controls by management to which the Deputy Chief Executive and Section 151 Officer replied that there was no concern at the present time.

Members noted the draft plan and strategy.