Meeting documents

The receive the following external audit reports

·         Somerset County Council Audit Findings Report 21/22

·         Somerset County Council Auditors Annual Report 21/22

·         Informing the Audit Risk Assessment for Somerset Pension Fund 21/22

·         Informing the Audit Risk Assessment for Somerset County Council 21/22

Somerset County Council Audit Findings Report 21/22 

Barrie Morris Director, Grant Thornton UK LLP talked members through the findings report and explained some of the recommendations for context.

·         Page 281 He explained that we are waiting for the pension fund auditor response.

·         As previously mentioned by the Chief Accountant, the final sign-off of this Audit Findings report is delayed, waiting for the statutory legislation regarding Infrastructure Assets. This statutory regulation is expected by 25th December 2022.

·         Page 282 He explained that property and equipment continue to be a challenge and made a plea via this committee to ensure this is in hand, especially as we go into unitary. He gave thanks to the SCC finance team for all their work on this.

·         Minimum revenue provision charge, benchmarking, and guidance. He explained that the amount that has been set aside is below what is expected (not prudent) by about 5million.

The Chair invited Oliver Woodhams, Head of Property SCC to briefly talk about progressing valuations. The Head of Property acknowledged that the next year is going to be very challenging. He explained that a new asset management system will be coming into use with the new authority, and this will significantly improve asset records going forwards.

Grace E Hawkins, Senior Manager of Audit at Grant Thornton UK LLP addressed the committee with more detail on some of key findings in the report including:

·         Appendix A Regarding the recommendation on journals. This is concerning over 6000 journal entries and there is a risk of management override of controls and error.

·         The work on fees and charges is complete and there are no issues arising in this area

·         A brief overview of the key adjustments.

The following comments and questions were received from members

·         Page 286 Regarding errors in journals, were these errors made by finance or non-finance officers? Is this a training issue? The Director GT confirmed that this is about ensuring the council has an efficient financial ledger. It’s not just about errors. The Chief Accountant SCC acknowledged that there are some limitations with journals on the current system but that this is firmly on the radar. He added that training for journal users is always provided.

·         How well will Microsoft Dynamics work with journals?  The S151 Officer confirmed that this was an area that would be addressed soon.

·         Page 288 Regarding land and building values, what is this based on? Is it equipment too? Does it consider depreciation? The Director Grant Thornton UK LLP explained gross and net book values and confirmed that the net book value considers depreciation and any recent valuations. He advised that as auditors they use expertise and market evidence to challenge valuers at a very detailed level to obtain the best quality valuations.  

·         Yield during recession is very different to yield in normal times. How can we balance that? The Director GT confirmed that this was about market evidence and assessing the latest market information that is available at the time.

Somerset County Council Auditors Annual Report 21/22

Dan Povey, Public Sector Audit Manager at Grant Thornton UK LLP introduced the report and talked members through some of the key points including,

·         This is a positive report, but there are some recommendations to consider.

·         This year we have carried out a significant amount of work on LGR which was identified in the external audit plan as a potential significant risk.

·         Page 320 Executive summary highlights the key areas for improvement recommendations

·         Page 323 refers to financial sustainability and the key message is that there are robust arrangements in place which have allowed the level or reserves to increase in recent years.

·         Page 324 SCC is facing significant in-year budget pressures. This focus should continue, and the council should continue to develop and implement mitigating measures. 

·         Page 326/327 Financial Risk around minimum revenue provision and capital financing. This has also been highlighted in the Annual Audit findings report 21/22.

·         Page 329 is about looking at arrangements for new council consideration of financial sustainability. We have found that there are robust processes in place.

The Head of Finance and S151 Officer welcomed the report and agreed that it is helpful in giving members assurances, but also highlights the significant challenges the council faces. He reminded members that a budget position update report has been to the executive in November which set out the Councils current financial position.

The following questions and comments were received from members -

·         Regarding Minimum Revenue Provision, why was this increased to 2%? The Head of Audit Grant Thornton LLP advised that the council changed its MRP policy in 2018 and explained that as auditors they usually focus on the material items within the accounts and that MRP was previously considered immaterial. Auditors are now looking at MRP in much more detail. The S151 Officer also advised that a new MRP Statement would be adopted in early ‘23.

Informing the Audit Risk Assessment for Somerset Pension Fund 21/22 &Informing the Audit Risk Assessment for Somerset County Council 21/22

The Senior Auditor from Grant Thornton LLP advised that the two ITARA documents had been sent via email but had brought to members attention on this agenda for completeness.