Audit Committee - Thursday 30 January 2025, 7:30pm - Welwyn Hatfield Borough Council Webcasting

Audit Committee
Thursday, 30th January 2025 at 7:30pm 

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  1. Cllr Darrell Panter
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  1. Internal Audit
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  1. External Audit
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  1. External Audit
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Cllr Darrell Panter - 0:00:00
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Good evening, everybody.
Welcome to the Welland Hatfield Borough Council's Audit Committee.
I now need to make a number of statutory announcements.
Those present at this meeting should be aware that by law it can be recorded by anyone attending.
Therefore, the meeting can be filmed, audio recorded, photographed or reported electronically
by the use of social media.
Anyone recording must cease as soon as the meeting is declared closed.
To confirm, this Council meeting is being live streamed, therefore anyone present should
be aware that they are being recorded and broadcast live via the Internet.
Please remember to use your microphones while speaking in order for everyone in the room
and anyone watching the webcast can hear you clearly. Please turn the microphone towards
you when you speak. Before I start, I would just like to welcome our new external panel.
audit person Mr. Ian Winter who's just taken his seat this evening so thank you
agenda item one apologies and substitutions we have received no

1 APOLOGIES & SUBSTITUTIONS

2 MINUTES

apologies of substitutions gender item two commends please confirm as a
correct record the minutes of the meeting held on the 5th of September
2024 as a correct record can I have a show of hands, please?
That's okay, thank you
Gender item free

3 NOTIFICATION OF URGENT BUSINESS TO BE CONSIDERED UNDER ITEM 9

Notification of urgent business to be considered under item 9
Any items withdrawn from the agenda?
Can I invite members to raise any urgent business to be considered under agenda item 9?
Any?
No?
Okay.
Thank you.

4 DECLARATIONS OF INTERESTS BY MEMBERS

Agenda item 4, declarations of interest by members.
I invite members to make any declarations of interest in relation to the items on the
agenda.
Nope.
Gender item five internal audit process

5 INTERNAL AUDIT PROGRESS REPORT

progress report. Excuse me.
Pages three to 18.
Can I invite Katie filler to present her report please?
Thank you chair. Uh,
this report details progress made by the shared internal audit service in
Internal Audit - 0:06:02
delivering the Council's Annual Internal Audit Plan for 24 -25, the implementation status
of previously agreed audit recommendations and an update on performance indicators.
In summary, on page 5 of the pack at paragraph 2 .2, the table details all final reports issued
since the last committee in September. Six completed projects are reported, four with
substantial assurance opinion and two with a reasonable assurance opinion.
On page 6, paragraph 2 .4, we note that no new high priority recommendations have been
raised as a result of the work completed and there are currently no outstanding high -priority
recommendations from previous reports. Paragraph 2 .5 highlights that there were six medium -priority
recommendations due for follow -up during this cycle, two of which have been implemented.
An update has been provided in respect of the outstanding recommendations in Appendix
C. I would just like to apologise the incorrect appendix was referenced in the report. On
page 7, paragraph 2 .8 provides an update of performance indicators as at the 16th of January.
Billable days were 65%, and there have been 15 projects to draft report stage.
There have also been nine satisfaction questionnaires returned from 16 issued, all at a satisfactory
level.
To provide some context, this position is broadly in line with the progress made at
the January Committee last year, and we currently report no risk to the delivery of a robust
annual assurance opinion.
I am cautiously optimistic that we will be able to meet our performance indicators, as
we have achieved in the past.
However, there is always a risk at this time of year that any issues from either side could
impact on our ability to meet these targets. However, CISE have allocated staff to all
remaining portable projects in the internal audit plan and start dates have already been
scheduled or in the process of being agreed with the relevant service areas.
On page 9, appendix A provides a detailed summary of all audits and their current delivery
status and on page 12, appendix B, sorry, details all audits and their start dates and
status across the year. This concludes the update. I'll hand back to the chair for any
questions. Thank you.
Thank you, Katie.
Cllr Darrell Panter - 0:07:58
Can I ask members to note the internal audit progress report for the period to 16th January
2025 and note the implementation status of internal audit recommendations and management
update.
Kuchika.
Thank you, Chair.
Thank you, Katie.
Cllr Russ Platt - 0:08:26
I just had a question.
It was regarding Appendix A. And it was just if you could just
give an explanation.
If we took, say, for example, the fourth or fifth one down,
housing benefits, where it said the audit plan days are at 10,
but the billable days completed are only at three,
and there's a few others down there that have similar ratios,
is that a good sign that we haven't done them because things
are going well or what is the explanation for them being less than the plan days?
Internal Audit - 0:09:01
Yes, certainly. So this is a snapshot of where we are at the date of the 16th of January,
but that is sort of detailing how many days of the 10. So we've allocated 10 days to that
project and that's how many days we've actually worked on it and built. But I can say for
Cllr Russ Platt - 0:09:16
that one in particular we are actually nearly there.
I thought that was the case.
So in theory, the audit plan days is the year -end total,
and the other one is where we are towards that.
Thank you.
Cllr Darrell Panter - 0:09:29
Any other questions?
Can we note the report, please?
Noted.
Okay
Gender item six
KPMG external year -end audit report pages 19 to 54

6 KPMG EXTERNAL YEAR END AUDIT REPORT

Can I ask Chris Paisley?
to present please
External Audit - 0:09:58
Thank you chair, thank you
So we've got two reports on the agenda this evening. This is the first one
It's our year -end report and it's prepared under International Auditing Standards, ISA
260.
It is traditionally a private report for the Audit Committee, the attention of the Audit
Committee or those charge of governance, whichever committee fulfills that relevant responsibility.
Clearly in local government context, there is no such thing as a private report, but
But the purpose of it is very much to go through it in quite granular detail the outcome of
the audit, the risks we identified, the work we've done in relation to those risks, and
the outcome of that and our findings, our overall opinion, and also to there's a host
of other mandatory disclosures within that report that we would provide.
So that's the first one of these reports which I'll speak to.
So I think the first bit of context for this report,
I suppose, if you look to page 4 of our report, which
is 22 of your PAC, which articulates the background
to the backlog of delays and delays in the audit
market in local government.
I think we've spoken about that at this committee in the past,
and the reasons for those are many and varied.
The important thing to note is that as of last September,
I think it was late September last year,
the government introduced new measures
to deal with that backlog.
So I think at that point, well, in Hatfield,
Borough Council had one audit year,
or it would have been two audit years, one audit year
outstanding at that point.
So by no means the worst affected,
but nevertheless affected.
And there are some authorities up and down the country that
had several years, three, even four years
of unaudited accounts.
So it was a very serious situation,
and one that sort of undermined the principles
of open, transparent financial reporting within the sector.
And there had to be something done to address it.
So what's been done to address it
is introducing this new legislation
and linked to that new legislation amendments
to the accounts and audit regulations,
as well as the NAO's code of audit practice,
to effectively permit audit firms that
work in the local government sector to give
disclaimed audit opinions.
And they can range from we've done
no work on these financial statements right through to,
we've done almost as much as we possibly can,
but there are a small number of things
that are creating a pervasive issue for the accounts
in terms of our ability to give that assurance in our opinion
and everything in between.
So in that context, your 22, 23 accounts
were given a signed disclaimed opinion
by Ernst & Young, your predecessor auditors,
in December in line with the statutory backstop date set out
in the legislation.
So that fast forwards us then to the next backstop date, which
is the end of February 28th of February 2025,
which is the backstop date for the 23 -24 accounts, which
is what my team have been auditing,
and that's what I'm talking about this evening.
Excuse me.
The other thing to say is that the amendments
to those regulations did not preclude or did not
include any disclaimers around value for money.
There's still a requirement to undertake the usual procedures
in terms of value for money, which we have done.
So I won't go through every page of the report,
we're pleased to know, but in terms
of where we sit within that spectrum of doing
the bare minimum work versus a full audit,
we're actually quite close to the full audit
end of the spectrum in terms of the work we've been able to do,
thanks to the help of Richard and Helen
and the rest of the team.
Clearly, we have certain areas that we're
unable to get assurance over.
And page five of our report sets out,
which those are, particularly around, obviously,
opening balances, because you have a fully disclaimed audit
for 22, 23, effectively meaning that those accounts weren't
audited.
That gives us, then, an issue in terms of the knock -on effect
for this year, in terms of some of the balances in the 24
accounts, but also other things that Rollford
like the movements in reserves and those sorts of things.
But I'm really pleased with the level of progress
we've made this year.
And one of the appendixes talks you
through the reset and recovery principles
that are set out in that statutory guidance
and in the guidance that the NEO have issued.
And I think we're well on our way
to sort of across the next two or three year periods,
kind of getting back to that rebuilding assurance,
getting back to a clean, fully clean opinion
and a normal time scale.
But I just -just for the -just for -not to labor the point, but the legislation and the revised
guidance was very much with the aim of addressing the backstop.
And that has been the priority.
So making sure that we get back to a normal timetable.
And it's not an ideal situation, an ideal solution, but there are no perfect solutions
to the issue with the local government audit market.
And it's the best and it seems it seems so far to be working well
Obviously we have a challenge in the coming years to rebuild assurance to get back to giving a fully unqualified clean opinion
Which as I say is set out in one of one of our appendixes to this report
Page six of our report just all of our findings at a glance
Effectively we've completed pretty much all of the work in relation to our significant audit risks that set out on the left -hand side
so valuation of land and buildings
the assumed risk of management override of controls,
and also evaluation of post -retirement benefit
obligations, in other words, your local government pension
scheme obligation.
We have identified three audit differences
that have not been adjusted, as they're not material.
And each of those matters relating to the pension scheme
and are matters that were, I would say,
are slightly outside of the authorities' gift
in terms of being able to address them and relate
to the actuarial valuation or the timing of when
that was undertaken.
But there's further detail on that on page 27 of the report.
So the so what of all of that is that by the 28th of February,
we need to issue the opinion on the 24 accounts.
It will be a disclaimed opinion for the reasons
that are set out on page five of our report.
But as I say, we've been able to conduct
a good majority of the work we would undertake
in a normal, unqualified audit year.
So I'm very happy with where we've got to for this year.
And we're just, as we speak, just finalizing
last few points on the accounts and so on,
few minor matters to sort of iron out ahead of the deadline on 28th of February.
Happy to take any questions.
Cllr Darrell Panter - 0:17:45
Thank you, Chris.
Does anyone have any questions for Chris on this report?
Councillor Platt.
Cllr Russ Platt - 0:17:56
Thanks very much, Chris.
Mine's a sort of general question regarding the backstop.
I run a small business and at the end of the year, me and my accountant, we go through
and if there's something not adding up from the last year to this year, we go and we find
it and it might be a misfiled invoice or hadn't put something through, something like that.
And obviously, counselors are doing that on a humongous scale with hundreds of millions,
if not billions of pounds.
And you guys have come in KPMG to do this year's audit based on figures from a previous
year that aren't maybe – I'm trying to think of the right word – well, haven't
actually been audited, so that's probably the best way to put it.
And you rightly have a disclaimer on that.
But my question is, what risk does the fact
that there wasn't a previous one represent to your audit
and our council?
External Audit - 0:19:01
So I think the risk to our audit in the current year
is simply that it's self -evidently impacted
on the opinion that we're able to give,
because we don't have assurance over the opening balances,
the prior year columns, and also some of your opening balances
in your balance sheet actually impact most notably
around property, plant, and equipment impact on the,
we can audit some of the movements in here,
but if we don't have assurance over that opening position,
it's difficult to have assurance over the closing position.
In a longer term sense, there is obviously
the impact of that is that we're gonna have to
do additional work to rebuild assurance
and get to the place of giving an unqualified opinion.
As far as the council's concerned, what I would say,
I mean, it's to some extent not for me to say,
but in terms of the level of impact,
I think having a single year unaudited
is probably a lesser impact than those
that have had three to four years, because clearly,
you know, there could be, in theory,
there could be quite significant issues,
underlying financial issues in terms
of financial sustainability and so on within those authorities
that would go, that could go unidentified or undetected.
I think in your position where you had
a completely clean opinion for the 22 year end,
you've got a gap for the 23 year end,
and then back to a fairly complete picture for 24,
albeit not 100%, is actually, I would say,
it's not ideal, but it's by no means
that significant an impact in the context
of the, uh, some of the, some of the authorities in the country.
So, but Rich might want to comment more on the internal side.
Thank you.
Cllr Darrell Panter - 0:20:51
Yeah, I'll just, I'll just add to that.
Mr Richard Baker - 0:20:54
Um, so I think as, as, as Chris has explained, it's obviously only one year that we've had
that kind of the main, um, disclaimer applied.
Um, in terms of the key risks to the financial statements, um, and the key risks that are
outlined in the report, things like valuation of land
and buildings, valuation of pensions,
actually don't really impact us from a financial sustainability
point of view, because they are all reversed out
under statute anyway.
So actually, whilst they're important for ensuring
we meet international accounting standards,
actually for our financial position,
they don't really have much of an impact.
Things that would have an impact are things
like over and under accruals of creditors or debtors.
A large part of that was tested as part of the 23, 24,
and anything that would have flushed out through the 24, 25 in year monitoring anyway.
So we would have picked up on those risks
and those risks coming through anyway.
So hopefully that adds to what Chris has explained.
Thank you, Chris, and thank you, Richard. That's a good explanation.
Cllr Russ Platt - 0:22:00
Thanks.
Cllr Darrell Panter - 0:22:03
Any further questions?
So, I think that's a good point.
Can I ask you all to note the report, please?
Thank you.

7 KPMG ANNUAL AUDITOR'S REPORT

And leading on to agenda item 7, we go back to Chris for his
External Audit - 0:22:26
Annual order as report pages 55 to 76
Thank you
Should be a shorter update on this one
so this is the second report and it's something that was it was a report that was introduced a few years ago by and
through the audit code of practice issued by the nao
And it was it brought brought in at the same time that a new framework for conducting our value for money work was brought in and
Previously we'd had a very binary
value for money opinion of either you
are delivering value for money or you're not,
which is not really any use to anyone.
And the idea was to give a bit of a richer picture
of the arrangements in place at local bodies.
This new guidance was brought in, and alongside that,
a public -facing commentary.
So this is very much designed to be more of a public -facing
document that members of the public could understand.
Now, we could debate how understandable some of it is,
but that's certainly the idea behind it.
And so it is very much more of a summarised report
in terms of the outcome of the audit that we've undertaken.
But you'll notice that it does focus heavily
on the value for money work in line with that NAO guidance.
So what it does is it steps you through our risk assessment
work that we've undertaken under that guidance in relation
to financial sustainability, governance, and delivering economy efficiency and effectiveness
in the council's use of resources.
And it's important to say as well that it's very much arrangements -driven, we say, rather
than outcomes -driven.
So in other words, you know, a negative financial outcome for the year and an out -term for the
year does not necessarily mean you have a significant value for money weakness.
It's very much aimed at articulating what the arrangements are in place, what your systems
and processes and whether they are well designed.
And it has regard to the fact that there are factors that are out with a body's control
that could impact on financial out turn.
So that's very much the focus of the report.
I wasn't proposing to go through every page of the report.
Hopefully it's consistent with your experience of the Council during the year and it is a,
a true read, a true reflection of that and it's recognisable in these pages. I wasn't
going to say any more than that really. Suffice to say we haven't identified any significant
value for money weaknesses that I need to bring to your attention. Happy to take any
questions.
Cllr Darrell Panter - 0:25:07
Thank you, Chris. Any questions from any members? Jonathan.
Not really a question, more just a general comment. It is nice to know
Cllr Jonathan Boulton - 0:25:16
and I think residents
can take some reassurance from the fact that there were no identified significant risks
or actual risks, which is broadly, as we all know, that Welland Hatfield is a very well -run
council on behalf of residents, which is a really a good thing, albeit, you know, an
audit is only as good as the year. So we'll be looking for the next year scrutinizing
that in due course as well.
Cllr Darrell Panter - 0:25:42
Thank you, Jonathan.
Councillor Platt.
Yeah, I was going to say something similar to Councillor Bolton, actually, that it is
Cllr Russ Platt - 0:25:53
nice to see there weren't any significant ones.
I'm going to ask a question that probably shows my naivety when it comes to this audit
process.
Just about the term value for money, is that an accepted and normal phrase in this scenario?
only that value for money traditionally in any other scenario
would be very subjective.
What you see as value for money, I might not.
You buy a Porsche for 80 grand and think it's the best thing,
and I think it's a waste of money.
So I just wonder if that is a phrase that is used just here,
or is it the accepted phrase terminology?
Sure.
External Audit - 0:26:34
Yeah, that's fine.
Yeah, no, it is very much the accepted phrase.
It is the, and it has been for as long as I've
been doing this job, it's been the term used
for this type of work.
The terms of that work has changed,
as I mentioned earlier, but it has always
been the value for money.
And the NAO guidance is the value for money guidance.
Now, I agree, it's a slightly clumsy label, to be honest.
But yeah, like I say, you're right, it is subjective.
And that is why we do have through the NAO guidance some quite objective criteria to apply and that guidance by the way is publicly available
It's AGN. It's if you if you google a NAO AGN 03 I think
For either one of them you'll see the value for money
Guidance and it does sort of step you through what are the typical arrangements that each type of body would have
So what kind of range would a would a district council have what kind of range would a unitary council have?
and what kind of arrangements would an NHS body have.
There's the supplementary guidance that sets that out.
So we do have a benchmark to look at,
but it's very much focused on what
would we expect to be in place for an authority of this size
versus what do we see through our risk assessment.
So although, yeah, the term value for money
is very subjective, there are some, underneath it,
there are some objective things that we can compare with.
Yep, lovely.
Thank you.
Cllr Russ Platt - 0:28:04
And I agree.
the meat of the report shows the objective thing.
And just one thing, I really apologize
if you go out and get in a Porsche now,
because I'm going to feel really bad.
Chance would be a fine thing.
External Audit - 0:28:16
Cllr Darrell Panter - 0:28:21
Thank you.
Any further questions?
Can we please note the report, please?
OK, noted.
Okay.
Agenda Item 8.

8 2023/24 STATEMENT OF ACCOUNTS

2023 -24, Statement of Accounts, pages 77 to 80.
This is Richard Baker.
Thank you very much.
So, just very briefly, really, this is followed on from the auditor's draft report.
Mr Richard Baker - 0:28:55
It's presented to remind the committee about the delegations that have already been put
in place for the approval of the 2023 -24 accounts.
and to confirm that subject to the finalisation of that report and the work that Chris has just talked about,
we'll be seeking to approve the accounts using that delegated authority by the backstop date of the 28th of February.
Thank you.
Cllr Darrell Panter - 0:29:18
Thank you Richard. Do we have any questions for Richard?
Okay. Can I ask members to note the statement of accounts for 2023 24 previously reviewed
by the committee on the 25th of June, 2024 to note that the delegated approval has already
been granted for the finalisation of the accounts and in issuance of the letter of representation.
Also to note that any final changes to the accounts on issuance of the auditor's final
report will be undertaken as required and the accounts will be approved by the statutory

9 SUCH OTHER BUSINESS AS, IN THE OPINION OF THE CHAIR, IS OF SUFFICIENT URGENCY TO WARRANT IMMEDIATE CONSIDERATION

backstop date. Noted. Noted. Okay. Gender item nine, we don't have any other urgent
business. So I shall close the meeting. Thank you.