Agenda item

To receive the report of the External Auditor for 2018/19.

The Committee received the report from the external auditor for 2018/19.

Subject to concluding the outstanding matters listed in the report, the external auditor expected to issue an unqualified audit opinion on the Council’s financial statements and there were no matters to report on the Council’s arrangements to secure economy, efficiency and effectiveness in the use of resources.

In summarising his report, Mr Suter reported that no material weaknesses had been identified in controls or evidence of material management override.  There were no instances of inappropriate judgements identified or any other transactions identified which appeared unusual or outside the Council’s normal course of business.  There were no matters to report on the Council’s arrangements to secure economy efficiency and effectiveness in our use of resources.  He drew attention to the main issues that had recently been resolved after detailed discussion with the Council.

The external auditor had identified the need for a post balance sheet event adjustment relating to the authority’s gross pension liability valuation figure.  This was a national issue resulting from legal judgements regarding the transitional arrangement introduced from 2015, where changes to the public sector pension schemes had been found to be age discriminatory.  This had now been amended by the Council in its final accounts so that £3 million additional liability was added to the Council’s balance sheet.

An additional issue had arisen from new accounting standards applicable in 2018/19 which meant that financial assets should be classified and measured in a different way.  There had been a difference of advice on how accounts were stated, between Ernst and Young as external auditors, and Arlingclose, the Council’s Treasury Management advisors.  This meant that the classification of investments in the sum of £13.735 million had to be amended by the Council in its financial statements.  Subject to this, this issue had been resolved.  Officers advised that a 5 year statutory override was in place to mitigate the effects of the revised accounting treatment, which would otherwise see non-crystalised gains and losses on these investment types being reflected through the Council’s surplus/deficit on the provision of services.  This override could be extended and the Council’s investment activities could look very different in 5 years’ time.  Members were keen that this matter should be kept under review.

Members queried the risk management measures in respect of Council investments.  In response, members were reminded of the strict code that the Council follows in its investment portfolio, as outlined in the Treasury Management Strategy.  The external auditor felt that the Council had good reserves and had not over-borrowed. 

Reference was made to the external auditor’s £42,000 fee for the year ended 31 March 2019 and it was queried whether this fee could be reduced by improved work on the part of NFDC.  In reply, the external auditor explained that fees were set by an external body and can vary if the scope of the audit changes.  However, he commented that the fees charged to NFDC were comparatively low for an organisation of its size, which was in some part due to the positive collaboration and assistance provided by NFDC finance officers.  He pointed out that the fee for this financial year was significantly lower than fees charged some years ago.  However he pointed out that, nationally the level of regulation was increasing disproportionately, and this might point to increased fees in future years.

RESOLVED:

That the external auditor’s audit results report for 2018/19 be noted.