Witnesses:
Ciaran McLaughlin, Grant Thornton
Anna D’Alessandro, Director – Corporate
Finance
Key
points raised during the discussion:
Surrey County Council and
Pension Fund External Audit Verbal Update – Grant
Thornton
1.
Ciaran McLaughlin, Grant Thornton, provided Members
with an update on the council and pension fund external audit.
Members noted the following details:
·
Almost all areas of the audit were in
progress, and all samples had been selected. There were minor
disclosures where work needed to be commenced. Audit aim to turn
around all sample testing in the next two weeks.
-
The audit was subject to a ‘hot review’
by Grant Thornton’s audit technical team – there was so
far nothing ground-breaking coming out of the review compared to
others
-
A small number of minor amendments and some
disclosure points had been proposed and agreed by the council.
There were no material adjustments to the accounts at this
stage.
-
In regards to journals, sampling had been completed.
There were 24 manual journals to test and evidence had been
received from Council
-
In regards to Property, Plant and Equipment (PPE),
methods for the council’s valuations had been reviewed by
Grant Thornton’s internal expert, Gerald Eve, with one key
item highlighted with regards to the valuer’s methodology of using a rating manual
for build costs.
-
In regards to surplus assets, in the draft accounts
the council had moved £11m of properties from Surplus Assets
to Investment Property which was the result of an exercise through
which the council re-assessed the portfolio. As there was no clear
in-year change of use that is required under IAS40 for such a
transfer management considered reversing the transfer. Grant
Thornton were considering this matter.
-
That the bulk of the work was completed on pension
liabilities.
-
In regards to Minimum Revenue Permission
(MRP), the Panel concluded that while the Council’s
approach was not explicitly unlawful it did lead to potentially
imprudent MRP charge in the
year. Grant
Thornton recognise that this was at odds with the views of
officers. Grant Thornton’s view was that the council’s
approach to MRP with regard to third
party loans and loans to purchase equities assumed that the loans
could be repaid in full or the assets could be sold at full value
to allow the council to repay the debt. In the current economic
environment, Grant Thornton believe that this cannot be guaranteed,
and this represents a risk to the local council taxpayers. Further
to this, the panel agreed that Grant Thornton should comment on
this in the audit findings report to those charged with governance
and should ask the Audit Governance Committee to confirm that they
were satisfied that the Council’s approach results in a
prudent MRP being recognised in the
year. It was also recommend that the Council reviewed and
considered revisions to the policy.
-
Subsidiary audits had been signed off.
-
In regards to Collection Fund Disclosures, there had
been a delay in documentation received from the
Districts.
·
In regards to Value for Money, the
existing qualification regarding children’s services would
remain due to no OFSTED update.
·
Regarding the Pension Fund, IAS19 letters
had been sent by both internal and external auditors, with their
specific requests requiring additional testing, which was in
progress. Internal review processes remain to be completed and
conclusion of some national discussions around McCloud and Goodwin
cases, among others.
2.
The Committee asked
if,hypothetically,
the council had chosen to adopt a MRP
that Grant Thornton were advocating, what the financial difference
would be. Officers stated that the financial implication suggested
would be £2.5 million. Members further noted that the council
had changed the policy in February 2019 and that there was an
intention to review the policy once the external audit had
completed. Officers stated that they still maintain that they
believed the policy was prudent at the time.
- The Committee agreed to hold a
pre-meeting prior to the next meeting to receive a briefing on the
council’s accounts.
Action/Further information to note:
None.