Agenda item

Ernst and Young to update the Committee on:

-          2021/22 EY Draft Audit Results Report;

-          2021/22 EY Draft Pension Fund Audit Results Report

Adrian Balmer presented the Committee with the results of the 2021/22 Draft Audit Report carried out by Ernst and Young. The following points were made about the Draft Audit results:

·       The materiality for the audit remained at those communicated in the audit planning report, with planning materiality at £20.921m and performance materiality totalling £10.460m.

·       Additional audit procedures as a result of COVID-19 did not result in any additional risks.

·       There was no impact from the triennial valuation on the accounts for March 2022.

·       The Value for Money work was still ongoing and there were no risks to report to Committee.

·       The audit differences had been reported to the Committee, two particular adjustments had had to be made.

·       EY agreed with Council’s pension liability disclosures to the actuarial report with no significant issues and received the IAS19 assurance letter from the auditor of the Oxfordshire Pension Fund.

·       The draft audit opinion for 2021/22 was reported, subject to the conclusion of the outstanding matters was proposed as an unqualified audit opinion, which was consistent with 2020/21.

·       Some reclassification adjustments had to be made due to capital grants receipts in advance, but this did not impact on the balance sheet overall. Through the testing of income, EY identified one item that was related to 2022/23, but was recorded in 2021/22. The minimum value for expenditure and income for audit at the end of each year was £10,000, but this item was below the £10k de minimis. The Director of Finance pointed out that some items checked below the threshold meant a conclusion that these items should have been checked originally came to fruition. EY noted that they were working through residual errors with the Chief Accountant, with the view to getting a pre-draft opinion published in the near future.

Members of the Committee asked EY about the risks with journals and the increase of total audit fees. It was explained that the audit was still being undertaken and to date no issues had been identified. Management override was an area that carried significant risk, and this could be through journals so journal was a key risk for EY and therefore a number of criteria were in place to consider, and significant analysis could be carried out on journals. With respect to the fees, At the end of the audit, additional fees were added based upon the work carried out as well as an increase in the base fees It was clarified that additional fees are discussed with the Director of Finance and there was no issue in this particular case. The Committee were then informed that fees for audits were uplifted from 2023/24 to reflect the market situation.

Adrian Bulmer reported to the Committee the results of the 2021/22 Draft Pension Fund Report. It was revealed that only a small number of items were left to complete and as soon as the Council’s accounts were complete, the pension audit would be able to be released. The following points were made about the Draft Pension Fund:

·       The planned planning materiality was £32.80m and the final planning materiality was £32.90m. The planned performance materiality was £24.60m and the final performance materiality was £24.68m. Planned Audit Differences totalled £1.64m and ended up at a slightly higher total of £1.65m.

·       No misstatements due to fraud or error were identified in the audit work.

·       No misstatements due to the risk of inappropriate posting of investment journals were identified in the audit work.

·       Similarly, to the 2020/21 audit, EY disagreed with a number of valuations disclosed as Level 2 assets, with their judgement stating that they were more appropriate to be disclosed as Level 3 assets. This totalled £243m of pooled property funds as assets that were incorrectly classified.

EY stated that based on the work, on both reports, they had performed, that they had not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Council’s ability to continue as a going concern for a period of twelve months from when the financial statements were authorised for issue.

The Chair asked whether the 2021/22 Draft Pension Fund Report would also be sent to the Pension Fund Committee. The Director of Finance made the Committee aware that the Audit and Governance Committee were the governing body over this report and thus, normal procedure would mean it would not also be sent to the Pension Fund Committee. The Committee stressed the view that the Pensions Fund Committee needed to be made aware of this report.

The Committee thanked Adrian for presenting the report and to all of the team at EY for their hard work in compiling such a detailed report.

Action: for the Director of Finance to talk to the Chair and the Pension Fund Committee about the difference of opinion on the pension valuations.

Resolved: that the Committee noted and accepted both reports.