Agenda item

The Committee considered the report of the Head of Internal Audit which provided the Combined Authority Audit Strategy Memorandum (ASM) from Mazars which detailed their proposed approach to the audit of the Combined Authority’s financial statements for the financial year 2021/22 for consideration and comment.

Mark Dalton, Engagement Lead for Mazars, stated that this report had been discussed and agreed with management prior to its presentation to this Committee. The ASM set out the responsibilities as external auditors in auditing the financial statements and informing a view on the authority’s arrangements in securing value for money in the use of resources. It described the audit approach, the timeline and it highlighted the proposed testing strategy to address the risks that had been identified both in relation to their own financial statements and value for money work.

Mark Dalton highlighted the following key points:

·            Section 5 of the report on page 246 of the pack highlighted the approach to its value for money work. The Committee should note that at this stage the external auditors had not identified any risks or significant weakness in the local authority arrangements which was a positive. It should also be noted that the National Audit Office had extended the deadline for reporting the value for money work and that was three months from the date on which an opinion had been provided on the financial statements. As a result it would likely be early 2023 before the outcome of our value for money work for 2021/22 was reported;

·            Section 6 of the report on page 249 of the pack highlighted the planned fees for the audit. This section highlighted the recurring additional fees associated with the additional work required to be undertaken by our regulators on the pensions liability, property, plant and equipment, and also the additional fees associated with changes in auditing and accounting standards and the new code of audit practice and the new value for money approach that had come into effect in 2021. The planned fee was very much in line with that which had been charged for the prior year. The Committee could be further assured that the Government had confirmed that the additional £15m of funding that was announced last year to help meet these increased external audit costs had been extended for a further two years with the CA’s share of this £15m being £18,730. So comfortably covering the additional fees that was being proposed for the CA; and

·            In Section 7 of the report it was confirmed that the audit team was appropriately independent and objective.

Dawn Watson, Engagement Manager for Mazars, highlighted the following key points:

·            Section 4 on pages 239-243 of the pack detailed the significant risks and the audit procedures proposed in relation to those risks. They were fairly consistent with the prior year. The first of those was the management override of controls and there were no concerns in respect of the Combined Authority but the external auditors were required to look at this area. The second two were in respect of the defined benefit liability valuation for the pension and the property and equipment valuation. These were the largest estimates within the accounts and were both inherently complex areas which did rely on experts to inform these values;

·                Page 244 of the pack also detailed an enhanced risk which was on the group consolidation process. Again along with the planned response at this stage there was nothing of concern to bring to the authority’s attention. A report would be brought back to the Committee on these risks via the audit completion report in September following the financial statements audit that was due to commence next week; and

·                Section 8 page 254 of the pack contained details of the initial materiality thresholds which were consistent with prior years. They were based on 2% of gross expenditure as this Combined Authority was considered low risk so the higher end of the range had been applied when calculating materiality.

RESOLVED That:-

(i)         the external audit plan as detailed in the Audit Strategy Memorandum appended to this report be noted;

(ii)    the approach detailed be noted; and

(iii)   the approval of the Audit Strategy Memorandum be approved.