Agenda item

Report of the External Auditor, Grant Thornton

John Gregory, Grant Thornton External Auditor, provided a brief update formally updating the Committee on the progress of their external audit, to place on record the areas that they are most concerned about. The following information was noted:

a)  Due to the delays in the audit of the 2019/20 Financial Statements, they had been unable to complete their Value for Money (VfM) work for the year. Following revised guidance on external audit reporting Grant Thornton very likely would not be giving either a qualified or unqualified opinion but would give a narrative report of significant issues as Grant Thornton becomes aware of them.

b)  Due to the issuing of the Section 114 (S114) notice and other underlying circumstances, it had been necessary for Grant Thornton to revisit their audit assessments in respect of related party transactions, management override and journals.

c)  Three areas of significant weakness had been identified in value for money arrangements:

i)  Financial Sustainability

ii)  Company Governance

iii)  Delays in finalisation of annual accounts

d)  The significant weaknesses did not raise any specific concerns as it was anticipated that given the direction of travel these would be addressed as part of the wider journey of the Council and the current pace of change and the process put in place would be effective if properly resourced.

e)  The delay in the finalisation of annual accounts reflected the complexities of the Council; the Accounts process needed to be considered as paramount to the Council and properly resourced.

f)  Clive Heaphy Interim Corporate Director for Finance and Resources, commented that he considered the report to be fair and balanced and the aim was to get up to date with the accounts. Additional work would be needed to ensure that the Council continued to strive for VfM and to ensure best value is evidenced. All of the current work being undertaken with regards to the accounts was being closely monitored by the Improvement and Assurance Board.

In response to questions asked, the following information was noted:

g)  Transactions had been subject to ‘sample testing’ and work continued to identify how the unlawful transactions between the Council and Nottingham City Homes had occurred and why it had not been flagged earlier. Additional work would also be needed to address the financial management of the accounts stemming back to 2014 and all future accounting has due diligence.

h)  As part of writing the update Grant Thornton had incorporated consultation with members of the Improvement and Assurance Board.

i)  Materiality level for the Council’s audit is around £14m, Grant Thornton are thinking seriously about whether any facet of the HRA transactions in question should have drawn their attention. The opinion for Grant Thornton’s audit of the 2018/19 financial statements is not considered unsafe.

j)  Recommendations arising from the HRA issue were being managed via several different processes mainly within the Together for Nottingham Plan.

k)  Grant Thornton would take a proportionate approach to the objection made to an item in the 2019/20 accounts – this work had not yet started. It would consider the reasonableness of the policy approach given the information and the price paid for the social benefit.

The Committee noted the report.