Agenda item

External Audit: Audit Wales Programme and Timetable - Quarter 1 2022/23 Update

To present the report of Audit Wales.


The report of Audit Wales on its Work Programme and Timetable as of 30 June, 2022 was presented for the Committee’s information. The report provided an update on the progress and status of Audit Wales’ financial and performance audit work comprising of both planned and published studies and included the work of Estyn and Care Inspectorate Wales.


In response to a question regarding the audit of the financial statements and whether there might be any issues which might delay the completion of the audit by the end of November deadline, Ms Yvonne Thomas Financial Audit Lead, Audit Wales confirmed that the audit is ongoing and that a significant part of the work has been completed. While no issues have been identified to date some amendments have been highlighted; once the amended accounts are received by Audit Wales together with valuation information that the Council is providing which it is understood is imminent there should not be a delay in completing the audit. However, a potential issue has arisen in relation to the treatment of infrastructure assets and how these are audited – further guidance and confirmation of the final position on this matter are awaited.


The Director of Function (Resources)/Section 151 Officer advised that having agreed with Audit Wales that those areas of the accounts that can be audited be prioritised, there are two issues that are affecting all councils in Wales and most in England which relate to –


·                     The valuation of property, plant and equipment. Due to increasing property prices and because not all property is valued annually, concerns have been raised that the value of property may therefore be materially understated on local authority balance sheets. The Council is having to undertake further work to show that the value of its property is not understated or if it is, by how much. While discussions between Audit Wales and CIPFA regarding how councils can demonstrate this have caused some delay, Anglesey has decided to carry out a desktop valuation which is in the process of being completed following which the information will be submitted to the auditors.

·                     The treatment of infrastructure assets which includes roads and bridges. These have historically been valued on the balance sheet according to the expenditure on them and are depreciated over time. An issue has been raised in relation to how councils show that when part of an infrastructure asset is replaced the value of the original asset has been depreciated to zero in the accounts. Although that is the assumption, councils are being asked to provide supporting evidence which is information many councils do not hold as they do not record expenditure/value of assets in this way.


Discussions between the relevant accounting bodies to find a way forward with regard to the 2021/22 accounts (and in the case of some local authorities in England with regard to the 2020/21 accounts where this remains the outstanding issue preventing sign off) are ongoing and may delay the conclusion of the audit of accounts process. Welsh Government is considering the possibility of issuing a statutory override to the requirements of the Code of Practice in this area. However, until that is done or if the override is not issued in time the Council’s 2021/22 accounts could be subject to a qualified audit opinion on the basis that they do not comply with the Code in the treatment of infrastructure assets as it stands, or while it awaits a solution to the issue, the statutory deadline for the publication of the audited accounts is missed. The Director of Function (Resources)/Section 151 Officer confirmed that the Chief Finance Officers  of the 22 local authorities in Wales have as a Society of Welsh Treasurers escalated the matter to Audit Wales and CIPFA Wales and that Welsh Government  is aware of their concerns having civil service representation at those meetings.


Recognising the need for a speedy resolution to the matter, the Committee expressed concern about the lack of progress in coming to a determination on how to proceed and the potential consequent impact on the audit of accounts process if a decision is not made in time for the Council to be able to meet the statutory deadline. It was emphasised that all avenues should be considered and suggestions were made about the Committee lending its voice to the representations already made or the Council via the Leader and/or Chief Executive acting in tandem with other Welsh councils to make representation directly to Welsh Ministers about the need to issue a statutory override. To further expedite the matter, the Director of Function (Resources)/ Section 151 Officer said that he would raise the Committee’s concerns at the next meeting of the Society of Welsh Treasurers Executive Group on Wednesday, 5 October, 2022.


The Audit Wales Programme and Timetable Update was noted.


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