Agenda item


To receive a report from BDO ( External Auditors) presenting the external audit progress and fees update. This report is not attached to this agenda and will be circulated ‘to follow’.

                                                                                                            To follow


David Eagles from BDO (external auditors) introduced the report on the external audit progress and fees update.




1.    The main purpose of the report is to provide an update of where BDO are with the current external audit of the main council and the pension fund; and to update on the fees position for the last couple of years.


2.    The main audit progress is at an early stage with the main part starting early August. The national context is that the MHCLG have put the accounts preparation deadline back to the end of August and the publications deadline back to the end of November. The council is ahead of the revised deadlines and is aiming for September publication.

3.    Extensive work has been undertaken on valuations particularly on HRA beacons which was an issue on last year’s audit. BDO have started early on this to provide lead time for valuers to respond and resolve queries that will be raised.

4.    On the valuations that have come through BDO are not only looking the valuations as end of year was March 2020 but also revisiting the position as at the end of March 2019. This is to provide more information to further improve the robustness of positions. This is ongoing at present

5.    The Pension fund audit commenced slightly earlier. This is ongoing and a fair bit of progress has been made. This year this has included additional work on what the actuary does in terms of membership data cleansing. Every three years the actuary undertakes an extensive exercise to strip out potential anomalies in the data sets they have for different types of members. So that the calculation of estimated liabilities is as accurate as possible. BDO as part of their work this year are looking at this data cleansing exercise undertaken by the actuary and this work is progressing well.

6.    Overall the external audit is on track at present with the caveat being what comes out of the valuations work that is currently being looked at. Regular updates with officers are taking place to keep on track with the audit.

7.    There was an additional £55,900 added to the costs of the 2018/19 Audit. There was a detailed analysis undertaken and a summary with the key elements are included in the agenda paper. The majority of this amount relates to additional work on valuations.

8.    The 2019/20 fee position reflects in their work programme differences of approach. This is based upon quality reviews that have been feedback in terms of different ways of looking at valuations and pensions. This also includes a significant raising of the bar by FRC meaning the grades which BDO are required to achieve have been increased. This creates movement in terms of what needs to be done so the work programme and resource supply have changed.

9.    To provide transparency these have been broken down in the report to areas where a change in approach is a recurring change and those areas considered to be a one off.

10.The report highlights the substantial increase in HRA beacon valuations. This was previously 24 and now is in the region of 400 for this particular year.

11.This is subject to discussions with PSAA who are required to approve any fee variations. The proposals are consistent with proposals elsewhere within BDO and with other firms.

12.For 2020/21 audit there is a new code of practice introduced from 1 April 2020. This changes significantly the way BDO undertake their use of resources work. Previously undertaken work was solely on what was considered to be significant risk. The new approach is on wider matters and this creates flexibility to look at emerging issues as they arise to provide more timely feedback and more constructive recommendations for improvement.

13.In addition to the widening of the scope there is a need to report back at the end not only the conclusion but a narrative report in a refashioned annual audit letter.

14.These elements are expected to increase both the volume of resources but the grade mixes necessary to undertake the work with increased work at a more senior level.

15.It is expected that this will result in an increase in fees, however the mandatory guidance for auditors on application of the code is still subject to consultation. At the end of autumn, when the guidance notes have been finalised BDO will come back to officers and then to the committee to explain the consequences and fee implications.


The following questions, statement and queries raised in response:

·         There have previously been issues where staff were unavailable to assist the council due to illness or lack of staff. Will there be staff available to assist the council if there is an issue and is this reflected in the increased fees. BDO acknowledged that there have been occasional delays in the past due to staff availability and illness. Whilst there is a commitment to provide as much staffing as they can do should there be unforeseeable events that prevent this then nothing more can be done about this. However, the fee reflects the additional resource necessary to do the work. BDO are working to an agreed timetable and will deliver as necessary. The fundamental driver for the increased fees is not timing, it is the issues that were arising from the work undertaken as part of the audit and the audit trail they had to work with. As the paper states officers are working on addressing issues such as audit working papers and supporting ledges to enable those accounts to be prepared on a more robust basis.

·         What are the auditor’s views on losses due to Covid 19 and how this straddling 2 years? BDO advise for the audit 2019/20 in terms of the accounts must look at how Covid 19 exposure will potentially affect some of the figures in the accounts. It is expected to have implications on certain valuations, and cashflows from activities that had to be suspended e.g. car parking, bad debt issues with fees and charges not being able to be paid, rent issues. This includes looking at the accuracy of the numbers ensuring that there is consideration of those key estimates. In terms of use of resources what has been agreed nationally is because lockdown came very late in terms of the 2019/20 position there is little impact for 19/20 on use of resources considerations. Although it is expected that there will be disclosures in the governance statement that will reflect any significant changes, that have had to be put in place as part of that process. The sign off for the accounts covers up to and including the end of September when the audit opinion is given. For 20/21 it is more difficult to say what needs to be looked at in terms of use of resources, partly because the guidance is changing. There will be a full year’s impact of arrangements. At present BDO have not determined the risk assessment or the work programme. There is no national guidance at present on what needs to be considered. This is an evolving position.


AGREED to note the External Audit Progress and Fees Update report.



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