Agenda item

The Council’s external auditors present their Annual Audit Letter for 2011/12 and present their planned audit fees for 2012/13.

Declarations of interest:

None.

Officers:

Paul Grady, District Auditor, previous audit years (Grant Thornton)

Andy Mack, District Auditor (Grant Thornton)

Kathryn Sharp, Audit Manager (Grant Thornton)

Key points raised during the discussion:

1.    The new District Auditor, Andy Mack, was introduced to the Committee. 

2.    The Annual Audit Letter (AAL) was presented to the Committee.  It was noted this year’s AAL was more brief and succinct, as much of the information that had previously been reported through the AAL had been reported in the Annual Governance Report. 

3.    Paul Grady advised that it was his last report to the Committee as the external auditor.  He thanked everyone he had worked with since 2008 and noted that the Council had been through a number of changes during that time.  He had served the normal maximum 5 year period, and noted that only organisations facing disarray were allowed to continue with the same district auditor for a further period of 2 years.  Before concluding, Paul Grady said that he had experienced an open and constructive relationship with officers and Members.  The Chairman thanked the Audit Commission staff on behalf of the Committee.

4.    The external audit fee letters were introduced and showed the audit plan for the next year.  It was confirmed that under Grant Thornton the audit opinion would continue to be delivered before the end of September.  The only significant difference was the reduction in fee.  Members asked how the external auditors were confident they could make a 40% fee reduction without reducing the amount or quality of their audit work.  The Committee were informed that Grant Thornton had modern audit systems with programmes that would take over some of the ‘back office’ functions that had previously been undertaken by staff.  Secondly, there would be better management of time in terms of recognising where there were peaks and troughs in workload levels.  As Grant Thornton had workstreams across all sectors, staff could be utilised fully and efficiently throughout the year, meaning that during peak times extra staff could be brought in.  Finally, the reduced fee was based on the high quality of the last set of accounts.

5.    During the discussion, one Member pointed out that previous fees were set by the Audit Commission based on a scale.  Members were concerned that the reduced fee confirmed that the Council had paid too much, without producing any tangible benefits.  It was confirmed that there would also be efficiencies made in terms of the work produced by the external auditor.  For example, the Audit Commission used to produce national reports, a service which would not continue under the new regime.  In terms of the previous fees, it was noted that the Council had been on a journey towards improving its governance and the reduced fee was recognition of that.  If the Council had not produced such strong accounts in the previous year, the fee would not have been reduced by as much.

6.    It was reported that the relationship between internal and external audit would be different moving forward, to ensure proper governance arrangements and internal control.

7.    The District Auditor advised that the fee had been set by the Audit Commission, but that Grant Thornton had the right to come back to discuss it during the year if there were concerns about internal control.  However, it was stressed that the external auditor accepted that controls were in place and working and therefore the Council should fully benefit from the reduction.  It was noted that the 40% reduction was agreed across the country.

8.    Members queried whether the 40% would be a applied as a floor.  The District Auditor confirmed that it would be, based on the assumption that the Council would continue to perform well. 

9.    The Section 151 Officer concluded the item by thanking Paul Grady and his team.  She advised that she had met with Andy Mack and stressed the importance of continuing a strong relationship.  She informed the Committee that she had also challenged the fee and would be meeting with the Chief Internal Auditor to discuss how she could rely on the financial controls provided by the Internal Audit team. 

Actions/Further information to be provided:

None.

RESOLVED:

The Committee:

a) noted the contents of the Annual Audit Letter

b) reviewed the fee letters.

Committee next steps:

None.