Agenda item

Paul Dossett (Engagement Lead at Grant Thornton) presented Grant Thornton's audit progress report and sector update.

He highlighted the following key points from the report:

·       Grant Thornton issued their opinion on the Council's 2018/19 Statement of Accounts on 31 July 2019.

·       The only outstanding element was the certification of claims and returns. Certification of the Council's annual Housing Benefit Subsidy claim was delayed by systems issues so the final position would be presented to the Committee in the new year.

·       Grant Thornton had prepared a response to the Redmond Review, which was looking into the future of local public audit and financial reporting. The review was driven by concerns over the length and complexity of local government accounts. The review was due to report in Summer 2020.

Committee members, in reference to the slides on recruitment and retention (pages 24 and 25 of the agenda), asked how the public sector team's turnover figures related to the firm's general staff turnover rate. Paul Dossett said it was harder to retain staff in the public sector team than the corporate sector teams.

Councillor Jonathan Caleb-Landy noted that the report said austerity had reduced local authorities’ ability to produce high-quality accounts and working papers - and asked if that was an issue in Hammersmith and Fulham. Paul Dossett said austerity had meant finance departments were more constrained - and as accounts became more technical there were fewer people with the specialist skills necessary. He added that the position in Hammersmith and Fulham was stronger than average - by some margin. That had meant Grant Thornton were able to sign off the account earlier. Many councils in London had still not had their accounts signed off.

Councillor Alex Karmel asked if Grant Thornton's response to the Redmond Review was a national response or if it was specific to H&F. Paul Dossett said it was a national response.

Paul Dossett explained that since the abolition of the audit commission there was no single body that supervised the whole system. Now there were a number of different organisations with different interests. Grant Thornton's view was that whole system oversight was needed.

Councillor PJ Murphy, in reference to page 29 of the agenda, asked why accounts were more complex now. Paul Dossett said it was mainly due to the introduction of IFRS, a very complex set of accounting standards. Councillor Murphy asked for an explanation to be included in the report.

Paul Dossett added that reductions in Government funding had led to an increase in local authorities setting up joint ventures, companies, making more complex investments etc. which all had to be accounted for. Councillor Murphy asked that this point be made under the austerity section - to show the cause and effect of central government funding reductions.

Councillor PJ Murphy asked that Grant Thornton explain in the response how the proposed rebasing of the audit fees would be funded - i.e. local authorities should receive additional money from central government. Paul Dossett said he didn't feel it was the remit of the auditor to say where the money should come from.

Councillor Alex Karmel, referencing the historical comparison on page 22 of the agenda, noted that the 2008/09 figure for Birmingham City Council's scale fee and audit fee totalled £1m. He suggested if the figure was adjusted for inflation it would be around £1.2m. He also noted that some of this fee would have funded central functions that the audit required. Councillor Rebecca Harvey asked what the like-for-like figure would be. Paul Dossett said it would be around £500,000 to £550,000.

Councillor PJ Murphy asked why firms kept bidding on public sector business if the fees were unsustainable, as the report suggested. Paul Dossett said Grant Thornton bid two years ago and the regulatory environment had changed radically in the last 18 months. He added that the 2017/18 fee was set at a sustainable level given the environment at the time.

Paul Dossett informed the Committee that, in the corporate sector, fees had increased by 25 to 30 percent. NHS bodies had seen increases of around 15 percent on last year's fees. A number of NHS trusts are only receiving one or two bids, even at higher prices, because the regulatory environment has changed so much.

Councillor PJ Murphy said he felt the response should include something about what Grant Thornton have had to do to streamline processes as the Council has. Paul Dossett said the full, detailed response covers some of those things around the use of technology and efficiency improvements. He said he would share the full response with the Committee.

ACTION: Paul Dossett