Agenda item

The Chairman read out a short statement from Councillor Carnell in relation to the report received from the external auditor in March 2022. The statement updated members on a meeting that the Chair and Vice Chair had attended with Grant Thornton to understand the matters raised in the March meeting. During the meeting an apology from the Key Audit Partner of Grant Thornton was received for not being made aware that Grant Thornton had concerns over the conduct of officers in relation to the audit and that this was only brought to the Chair and Vice Chairs attention during the March committee meeting. After this meeting the Chair and Vice Chair then met with the CEO, CFO and Monitoring Officer to discuss the outcomes of that meeting and agree any actions. He asked that the Monitoring Officer look at any points raised from the meeting that day regarding the concerns the member of public raised in the Scrutiny Committee meeting on the 10^th May and report back to the Audit Committee with any recommendations.

The Chairman informed members that the Chairman of the Scrutiny Committee was in attendance for Audit members to understand Scrutiny’s concerns and also how Audit and Scrutiny could best work together.

The Key Audit Partner of Grant Thornton introduced the brief statement in the report and explained that the current position had changed as further information identified had been received.

He gave a brief reminder of the timescales and schedule of the audit, and highlighted specifically the delivery date of the working papers for the group accounts. The most significant area was the valuation of the Opium Battery Storage assets within the group entity. Sufficient evidence had not been received to be able to support the valuation.  Management were looking to engage further support to be able to provide this information.

The Manager, Grant Thornton updated members on outstanding information that had been received since the agenda was published, including:

·         Updated version of the going-concern assessment now received which factored in the group company.

·         Evidence relating to additional sample of grants.

·         Initial responses in relation to two recharges had been received and further discussions were scheduled later that week with management.

The Key Audit Partner explained that work on the audit was now being completed alongside other ongoing NHS audits but they were working with management to resolve the remaining issues. A number of unadjusted errors that had been identified would need discussions with management to see that appropriate amendments were made to reflect them in the accounts.

The Chairman gave some further explanation to members on the details of the battery asset valuation and why it had held up the audit of the accounts.

One member expressed his disappointment with the details of the report showing ongoing delays with the audit. He questioned what additional audit fees there may be for the council.

The Chairman highlighted to members that approximately 45% of local authority accounts were outstanding, and this was not just an SSDC issue. The PSAA (public sector audit appointments) guidance was more rigorous and auditors were being asked to justify their opinions more robustly than in the past.

In response to a query about Opium loans and repayments, the CFO confirmed that loan repayments had been received from the Taunton site, and they were about to receive repayments from the Fareham site in the current financial year. She explained that she and the Monitoring Officer both attended the board meetings for observation and received information required.

The Lead Specialist, Finance gave further details of the loan repayments. To date, loan repayments from the Taunton site were in the region of £2 million and repayments from the Fareham site were due to start in the financial year as per the loan agreement. Based on information from the company there was no reason to believe the loan payments would not be repaid and there were no concerns with regards to viability or the company as a going concern. In the future it may be possible that the directors of the company attend an Audit Committee to provide further information to members.

In response to a query, the Key Audit Partner Grant Thornton explained that the valuation of the battery assets was based on the future cash flows that those assets generated. The income from the selling of electricity would be offset by the costs, operation and administration of those assets. The process was complex due to the demand and future price of electricity.

In response to a question related to over or undervaluing, he confirmed that the accounts must present a true and fair view of what the financial position is of the authority. Undervaluing would carry an equal risk as overvaluing.

The CFO explained that the expert optimisers and the expert valuer based their valuation on the optimers value of future income flows. The value was a significant sum against the overall assets.  A meeting had been arranged with valuers, the company and the optimiser to ensure the last element outstanding was resolved.

In response to questions from Members regarding Opium Power, the CEO agreed that a specific report on SSDC Opium power would be helpful to address Members concerns.  The date of the report would be agreed in consultation with the Chairman.  She also confirmed that there were no direct accusations of wrongdoing by SSDC Opium Power.

At the conclusion of discussion the Chairman thanked the auditors for their contributions.