Delays in info mean audit fees could rise by over £70,000
FEES paid to an audit firm by West Lancashire Borough Council look set to rise by at least £70,000 because of council delays in providing information, according to a report for councillors.
Grant Thornton, which carries out auditing work for local councils, has predicted a £70,000 increase for one project and ‘substantial increases’ in other work for West Lancashire in an update to the borough’s latest Audit & Governance Committee meeting.
An Audit Progress Report by Grant Thornton gives updates on its work which includes auditing the council’s financial statements and valuations of buildings and land.
The report also refers to the council’s new property and land development company. Grant Thornton said it had expected financial statements to be prepared on a group basis due to the formation of the company. But financial statements submitted for audit were not prepared on this basis, it states.
A section of the report, called Progress at May 2022, mentions delays and resulting higher fees.
It states: “The audit opinion for the 2019/20 financial statements was issued on June 14, 2021.
“The deadline for the opinion was November 30, 2020. There were substantial delays in undertaking the audit and delays in responses and receiving working papers. This required significant extra audit work and audit resources, and increased the audit fee from the scale fee of £33,684 to £102,500.
“We discussed the final fee in a meeting with the Head of Finance, Procurement and Commercial Services in September 2021, however no agreement was reached. Our fee proposal has been submitted to Public Sector Audit Appointments (PSAA) in March 2022 and they will liaise with the council to seek a way forward on this issues.”
Public Sector Audit Appointments is linked to the Local Government Association. It sets auditors for local councils and scales of fees charged.
In a subsequent piece of work for a financial statements audit for 2020/21, the Grant Thornton report states: “We undertook our initial planning for this audit work in June and July 2021. We presented our audit plan at the Audit & Governance Committee meeting in July 2021,
“We did not receive the 2020/21 financial statements until November 2021, due to delays in the council completing them. We started our audit work as soon as we received the financial statements. We note there are improvements required to the quality review process in place prior to the submission of the accounts for audit, as the financial statements we received have some areas requiring update, and consistency issues.”
On the new development company, the report adds: “We were expecting the financial statements for 2020/21 to be prepared on a group basis, due to the formation of the council’s development company. The financial statements submitted for audit were not prepared on a group basis. Amendments will be made to incorporate group accounts and associated disclosures in the final audited version, as the company has material transactions. “
The Grant Thornton report says auditing work on West Lancashire Council’s property, plant and equipment is substantial. It reports that one of the queries the council is working on is whether valuations of its buildings and land are correct because the property market has seen significant changes in recent times.
Grant Thornton says the balance for the council’s other land and buildings (outside the development company) was £25.4million in March 2021. Grant Thornton says the council does a full valuation every five years and carries out assessments on values and depreciation at other times.
The audit firm adds: “We were progressing the financial statements audit but were unable to secure improvements in the timeliness of responses to both audit queries and requests for working papers. We therefore paused the audit in March 2022.
“We issued the council with an up-todate list of outstanding requests and continue to have monthly meetings to discuss progress. We expect to resume the audit in July 2022.”
Looking ahead to forthcoming fees, it states: “The delays in producing the financial statements on time, and the other issues noted in this update report, will impact the audit fee for the 2020/21 year. There will again be substantial increase. This will be discussed as we progress the audit further.”
Other interim audit work by Grant Thornton has not found any weaknesses in the council’s audit or financial statements work, the report adds. It also has a summary of emerging national issues that may be relevant to the council and questions for councillors on the committee, designed to help their work.
Over the past year, the council has highlighted challenges to its work including staff shortages and the impact of the covid pandemic. It has been looking at recruitment and new ways of working. Boroughs elsewhere have experienced similar problems and delays, some councillors have said.
Councillors were due to consider the report at the latest Audit & Governance Committee meeting on May 31.