Issue - meetings

The Committee heard from the External Auditor, Debra Chamberlain, who introduced the report. The Committee was directed to the introduction which outlined the audit strategy in terms of materiality, significant risks, and other key elements. It was noted that the methodology for the value-for-money conclusion followed the approach detailed in the report, with a risk assessment scheduled for completion in the coming months. Confirmation of audit independence was provided, with reaffirmation of independence continuing throughout the audit process.

Badar Abbas, External Auditor, continued the presentation explaining that the materiality threshold was set at £1.2 million, with an audit misstatement threshold of £60,000. It was explained that any adjustments exceeding this amount would be reported in the year-end audit report. Four significant risks were highlighted; firstly, the valuation of land and buildings, valued at £30 million, was identified as a risk due to the complexity of the valuation process conducted by external valuers. Secondly, the valuation of investment properties, valued at £23 million remained a focus area, although no substantial changes in underlying risk factors were reported compared to the previous year. Thirdly, the valuation of the local government pension scheme was highlighted due to the complexity of actuarial assumptions, requiring the engagement of a specialist pension team and in-house actuaries to assess the reasonableness of estimates. Lastly, the Auditor stated that management override of controls was acknowledged as an inherent risk in any audit, and specific procedures were designed to detect potential material instances of fraud, though no fraud risk factors had been identified for the Council to date.

Another risk was highlighted by the Auditor, namely the adoption of International Financial Reporting Standards (IFRS 16) for the financial year 2024-25. This had been flagged as an additional audit risk, given the challenges of first-time adoption for councils. The assessment remained ongoing, with any changes to be communicated in the final audit report. Questions were invited from Members of the Committee.

Responding to a question from the Committee, the Auditor emphasised that the risk assessment had been based on the previous year’s financial statements, which recorded the value of land and building assets at £30 million. Due to the significant valuation and the complex process involved, it was confirmed that the risk would remain significant. The final audit report was expected to include a review of the valuations for the 2024-25 period, detailing the results of the audit procedures undertaken in response to this risk.

Questions were raised by a Committee Member regarding materiality, noting a considerable increase in the level set since the previous year. In response to the Committee’s concerns the Auditor explained that the previous year had marked the first audit of the Council which had required extensive planning and risk assessment. It was stated that no significant misstatements or concerning control recommendations had been identified, prompting a review and adjustment of materiality levels. The Committee was reassured that the threshold had not been raised to the maximum permissible level of three percent of expenditure, as a  ...  view the full minutes text for item 5