Agenda item

Michael Green, Engagement Lead and Key Audit Partner (Grant Thornton) presented the 2024/25 External Audit Plan.  Local authorities faced many challenges; the pandemic along with the cost of living crisis had left local governments with economic, social and health challenges to address, and, despite the best efforts of local authorities, financial pressures were affecting the scale, range and quality of council services provided to local residents. 

The report covered the key issues both for the national and local contexts.

The areas of significant risk were the same as in previous years, centring around management over-ride of controls, closing valuation of land and buildings including Council dwellings and valuation of defined benefit pension fund net asset/liability balance.  A further risk had been identified this year, “other risk”, relating to the implementation of the new accounting standard IFRS16 which came into force on 1^st April, 2024. 

Materiality was calculated on a similar principle as previous years but if items went above those thresholds they would be considered separately within the audit. 

No risks of significant weakness had been identified.

On receipt of the Council’s financial statements, Grant Thornton had commenced their external audit procedures and would continue through the summer.  It was expected to submit the audit findings (ISA260) report and value for money report to the November meeting of the Audit Committee.

Audit fees were set by PSAA as part of their national procurement exercise.  Grant Thornton had been awarded the contract with effect from 2023-24.  The scale fee set out in the PSAA contract for the 2024-25 audit was £417,703.  However, it was noted that there may be an additional fee charged based on the increased audit requirements relating to the review of the Council’s implementation of the newly applicable IFRS16 leases accounting standard which was not included within the PSAA scale fee for 2024-25.

It was noted that the Minister of State for Local Government and English Devolution, on 18^th December, 2024, had announced the launch of a strategy to overhaul the local audit system in England.  The proposals were also laid in Parliament via a Written Ministerial Statement.

The Government’s intention was to streamline and simplify the local audit system, bringing as many audit functions as possible into one place and also offering insights drawn from audits.  A new Local Audit Office would be established.  Building on the recommendations of Redmond, Kingman and others, the Government would ensure the core underpinnings of the local audit system were fit for purpose.

Grant Thornton welcomed the proposals which were much needed and essential to restore trust and credibility to the sector.  They were keen to work with the MHCLG, existing sector leaders and the Local Audit Office as it was established to support a smooth transition to the new arrangements.

Rotherham was in a really good position having already produced its financial statement well ahead of the majority of other local authorities enabling the external auditor to commence their work.  Grant Thornton aimed to report the ISA260 and auditor’s annual report on value for money arrangements to the November Audit Committee meeting and confident of concluding the audit and issuing the audit opinion by the end of the 2025 calendar year ahead of the February 2026 backstop date.

Although it was a “new” external audit team, Greg Charnley, Audit Senior Manager, in the past had worked with Rotherham’s Finance team.  All had trained within the company’s public sector contracts section.

It was difficult to predict what the additional fee would be at the present time as it would depend upon the extra work required.  Some local authorities would be straight forward and others have complex arrangements in place.

Resolved:-  That the update and the audit plan be noted.