To receive a progress report on the Ernst & Young audit.
Minutes:
The Committee received an update on the Ernst & Young audit.
During the discussion of this item, the following points were made:
· Helen Thompson advised Members that there was little to update on since the previous Committee meeting. The report considered by the Committee at its June meeting had highlighted the identified risks to this year’s Financial Statements audit.
· Justine Thorpe indicated that the Government recognised the increased pressure on local government following the Covid 19 pandemic. As a result, the accounts production deadline was now 31 August. The accounts should be audited by the end of November.
· Ernst & Young were having regular meetings with senior members of the finance team regarding the progress of the Financial Statements. Draft Financial Statements were expected shortly with the audit beginning next week.
· Ernst & Young would complete the second part of its visit at the end of September in order to finish the audit results report. The Statement of Accounts and the Audit result report would be taken to the November Committee meeting.
· No further risks had been identified. Corroboration would be sought from the auditors of the pension funds that the indicated timescales for producing the assurance letter to Ernst & Young, would be met.
· Councillor Burgess asked how Ernst & Young would be forming its going concern opinion that year and what evidence it would be using. Helen Thompson indicated that this was an area of more focus this year. The management assessment of concern would be considered and conversations would be had with the Finance team as to the level of detail expected. There was a presumption of going concern. There was a possibility for audits such as Wokingham, which had components, that there would potentially be a material uncertainty over the financial viability of a sub. However, it was unlikely that the Council itself would be anything other than a going concern. Ernst & Young would review the level of disclosures in relation to going concern and post balance sheet events. Certain categories of council would have to go through a consultation process, to review for consistency with others.
· With regards to post balance sheet events, the current volatility of the rental market and the likelihood of the receipt of all rental income, Councillor Gee asked whether the values of commercial properties would be looked at in the audit. Helen Thompson stated that the investment properties were required to be revalued each year at fair value. Ernst & Young real estate colleagues would be involved in that element of the audit. Councillor Gee stated that she had been informed that properties that had been held for less than a year did not need to be revalued until March 2021. Helen Thompson explained that as the fair value requirement was of up to 31 March 2020, Ernst & Young would consider whether an appropriate exercise had been undertaken. Given the circumstances of the year, they would expect them all to be reviewed unless purchased very close to the issuing of the balance sheet.
· Councillor Shepherd-DuBey questioned whether the level of borrowing was as expected. Helen Thompson commented that this was perhaps a question more for Council officers; however, she could confirm that the level of borrowing may be considered as part of the value for money assessment on commercialisation and purchase of investment properties.
RESOLVED: That the update on the Ernst & Young audit be noted.