This item presents the annual audit letter and audit fee variation letter from Grant Thornton, the Council’s external auditors.
Andrew Smith and Keyasha Pillay from Grant Thornton presented the Annual Audit Letter. The letter was a public document that provided a summary of the results of the auditor’s work that was presented to the Committee at its previous meeting. Andrew Smith noted that the papers also included a letter on fee variations for additional audit work carried out. The areas of additional work were:
· Implementation of the new ledger system (SAP)
· Assessing the impact of the McCloud ruling
· Pensions (IAS 19)
· PPE valuation
Andrew Smith commented that, even with these additional fees the Council, the total cost was still 15 percent below what the previous auditor was charging.
Councillor PJ Murphy asked how the fees were calculated. Andrew Smith said they were based on time sheets and the hours were multiplied by the company’s standard rates for audit work. He added that there were different rates that related to the staff grades but estimated the blended rate at around £500 to £600 per day.
Councillor Murphy noted that he felt the additional fees for Pensions (IAS 19) and the PPE Valuation were questionable. He said it seemed as though Grant Thornton were charging again for work that should have been done better the first time around. Andrew Smith clarified that the Financial Reporting Council had requested auditors carried out further steps and it wasn’t a comment on the quality of the work they had done.
Councillor Murphy said he didn’t think the Council should pay the third and fourth fees. He added that the fee for additional work in light of the McCloud ruling was troubling because it suggested the Council could be charged for any external changes. Andrew Smith said auditors were empowered to charge additional fees for any additional work carried out – whether due to internal or external circumstances.
Councillor Alex Karmel said surely Grant Thornton tendered for a full audit to the satisfaction of the Financial Reporting Council. Assumptions around additional work should have been built into the tender. Andrew Smith said the framework allowed the auditor to come back to the Council for additional fees where necessary.
Councillor Karmel said it was not the fault of the client and in his own business experience the original tender should be honoured. Andrew Smith agreed that it was not the authority’s fault - but said the tender was not fixed fee and the framework allowed additional fees.
Councillor PJ Murphy asked Grant Thornton to reconsider the additional fees. Andrew Smith said they had agreed a standardised approach and would be submitting the additional fee request to Public Sector Audit Appointments Ltd.
Councillor Matt Thorley suggested the auditor could provide discounted fees next year.
Councillor Rebecca Harvey asked for clarification that the auditor was not seeking approval for these fees but was telling the Committee that is what the Council would be charged. Andrew Smith agreed.
The Chair asked if the auditor was aware of these changes ahead of the audit. Andrew Smith said they were only aware of the new ledger implementation. The Chair said surely the McCloud ruling was on their radar? Andrew Smith said it was on their radar but at that time they didn't know the outcome of the Supreme Court’s ruling.
Councillor PJ Murphy expressed disappointment that the Council was being charged an additional 8 percent with no recourse. He felt it wasn’t conducive to strong partnership working. He requested that Grant Thornton reconsidered the additional fees and return with an updated proposal.
Hitesh Jolapara (Strategic Director of Finance and Governance) noted that the Council’s accounts were signed off on time when many others weren’t. There were questions about the capacity of the audit sector to complete so many public sector audits by July. There was also a spotlight on the audit sector due to high-profile cases like Carillion etc. It was likely there would be changes coming and officers would keep the Committee informed.
That the Committee noted the contents of the auditor’s letters.