Agenda item

The Audit Findings for the Devon & Somerset Fire & Rescue Authority is a document prepared by Grant Thornton, the Authority’s External Auditor. The document sets out the external audit findings and opinion and would normally be accompanied by the Authority’s Financial Statements for the year ended 31 March 2020. Whilst Grant Thornton has submitted its Audit Findings (as attached for information), the Value for Money work has not been completed due to delays associated with the Covd-19 pandemic and therefore, it has not issued the Auditor’s Annual Report.  Grant Thornton expects to publish its report no later than 30 September 2021 (a paper elsewhere on the agenda for this meeting refers).  Appendix D of the Audit Findings document constitutes the required audit letter explaining the reason for the delay for the purposes of compliance with the 2020 Code of Audit Protection.

The Committee considered a document prepared by the Authority’s external auditor (Grant Thornton) setting out the initial audit findings on the Authority’s financial statements for the year ended 31 March 2021.

The Treasurer advised the Committee that there would be a suite of financial statements for consideration at the next meeting centred on the Authority’s Statement of Accounts for 2020-21.  He referred to the delay in finalising the accounts but advised the Committee that there had been a good outcome on the financial statements for 2020-21 and that he was pleased with how this placed the Authority going into the next financial year.  There were some issues to be resolved and the Treasurer provided an explanation on this, specifically in relation to how the process on journal entries was being resolved.

Mr Morriss, representing the External Auditors - Grant Thornton, presented the initial audit findings to the Committee.  Mr Morriss referred to the issues caused by the Covid-19 pandemic in terms of preparation of the Authority’s financial statements.  He acknowledged the assistance provided by the Treasurer and finance team in undertaking this audit work remotely in such difficult circumstances and stated that the anticipation was that, subject to resolution of the points raised on page 3 of the audit findings, an unqualified audit opinion would be issued.

During his presentation to the Committee, Mr Morriss referred to the following points:

·         The materiality level was now likely to be £1.750million;

·         There were a number of issues identified including (amongst others) journal entries.  Following testing, some weaknesses had been identified in financial systems but it was acknowledged this was being addressed.  The audit work had not identified that any weaknesses in the system had been exploited, however, which was important;

·         The valuation of land and buildings and pensions was in line with the expectations of auditors and actuaries. 

·         The audit findings had identified an anomaly on the salary growth range which had resulted in the Service seeming to be out of line but on investigation, the PWC growth rate appeared to be out of line so auditors were looking at this nationally;

·         Attention was drawn to matters that would be included in the updated financial statements (not before the Committee as yet), including:

-       Note 25 – Red One was disclosed as a related party but the balance was not disclosed.  The auditor did not feel this was complete and an amendment would be included in the final audit findings paper;

-       No death lump sums were identified but it had been identified that £0.116m should be included;

·         There were no significant audit adjustments required on the statement of accounts;

·         The Value for Money (VFM) judgement had changed as a result of new practice introduced by the National Audit Office under the Code of Audit Practice 2020. Auditors would no longer issue a single conclusion on VFM arrangements as part of their opinion on the financial statements.  Instead, significant weaknesses in arrangements would be reported when identified together with recommendations for improvement.  VFM arrangements would only be reported as part of the audit opinion by exception, where significant weaknesses were found. The main output on VFM would be a commentary contained in a new document, the Auditor’s Annual Report, covering arrangements for:

-       Financial sustainability

-       Governance

-       Improving value for money

In conclusion, Mr Morriss indicated that the Authority was amongst the earliest of local authorities to complete its financial statements and progress the audit and he congratulated both the finance and audit teams on this achievement.

The Chair referred to an additional amount of funding that would be required now to bridge the gap as a result of the pay award agreed by the National Employers’ in 2021 which would create an issue for all local authorities.  The Treasurer added that he would be looking carefully at the budget deficit over the next 3 years which was about £7m.

It was noted that the Committee would receive the financial statements for approval at its meeting scheduled for either 29 or 30 September 2021.

 (SEE ALSO ITEM *APRC/21/2 ABOVE)