The report of the Engagement Lead is attached.

Contact: Richard Percival (0121) 232 5434

124.1  The Committee received the report of the External Auditor (copy attached to the signed minutes) which updated the Committee in relation to the Redmond Review.    The Engagement Lead introduced this item and explained that the Redmond Review, which had been published in early September, was likely to have a fundamental impact on both the accounts process in the future and on the Audit and how the audit worked.

124.2  The Engagement Lead explained the reasons for the review and drew Members’ attention to two key issues that had come out of the review, one was that the accounts were too complex and the other was around the Audit process and the audit fees and the need to ensure that the audit market was sustainable and that audit suppliers could deliver the level of audit that the public would expect of them at a fee that would enable them to do that on a sustainable basis. 

124.3  He then took the Committee through some of the key findings of the review (set out on pages 7 to 12 of the report) along with the recommendations which included the setting up of the Office of Local Audit and Regulation and a removal of PSAA and the FRC from the field, a revised fee structure to ensure that adequate resources could be deployed to all audits in future, and reverting back to the September deadline.   Redmond was recommending not only the simplification of the accounts but also the production of an audited accounting summary, that would be more of a public document that would enable a lay person to easily understand the key financial dynamics of the local authority. 

124.4  The Engagement Lead explained that Grant Thornton’s view as a firm very much supported the outcome of the review and very much wanted to help with its implementation.  They wanted sustainable arrangements to be put in place so that they could continue with their presence in the public audit market.

124.5  In response to a query, the Engagement Lead explained that the first point on page 11 of the report referred to the ability of Audit Committees to effectively consider audit reports. The Director of Finance, Governance and Assurance (Section 151 Officer) was then asked to comment on the last paragraph on page 11 of the report about the need for a greater role for Full Council who had delegated the Audit function to the Audit Committee.

124.6  In response, the Director of Finance, Governance and Assurance (Section 151 Officer) felt that the Council as a meeting had a reasonable level of information provided from Audit Committee, which itself had the ability to review the accounts and did go into quite a bit of detail to ensure that the various issues were considered as necessary.  He therefore did not agree with the suggestion that there needed to be a greater role, and he deferred to the Engagement Lead to see if there was anything, in relation to his experience in other Local authorities, that would suggest a way forward in terms of either improving that interface or confirming that Shropshire Council was doing what it needed to do already.

124.7  In response, the Engagement Lead stated that the Redmond Review looked across the whole of local government.  He explained that the responses to the call for views came from a lot of key stakeholders including local authority members and officers and obviously audit suppliers.  He confirmed that he agreed that for Shropshire there was a good balance and once the Redmond Review was being implemented and moved forward, new standards would emerge, and it would be for the Council to reflect whether it was meeting those new standards.  He explained that some of the feedback received was that the audit process was not always as transparent as it could be to members of the public.  However, in the immediate term there was nothing that he would point to for Shropshire that he thought the Council needed to change.

124.8  Turning to the findings about Audit Committees lacking independent, technically qualified members, it was felt that that was not the case in Shropshire.  In response, the Engagement Lead reminded the meeting that members of the Audit Committee did not necessarily have to be Members of the Local Authority and that the appointment of Independent member(s) to an Audit Committee could be a useful way to involve other stakeholders and pull in the expertise of a qualified accountant, for example.

124.9  Members hoped that the appointment of an independent Committee Member would not be a mandatory requirement but that the option would be there if it was felt that it would add value to the process as, it had to be remembered, the responsibility lay with elected Members.  It was felt that in Shropshire that independence was visible because as a Committee, they had been prepared to challenge when they’ve had concerns and the Committee would not hesitate, if they felt it appropriate, to refer any serious issues to Cabinet or Full Council for discussion, indeed, there had been instances in the past where reports from the Audit Committee had gone to Cabinet because the Committee felt there was sufficient concern.

124.10The Engagement Lead confirmed that the principles of the Redmond Review had been accepted by Government however it would take time for changes to be made as some would require primary legislation so the timescale was unclear at the moment.  However, the importance of putting the audit market in a sustainable position had to be a priority as the market could not afford to lose any more suppliers.

124.11In response to a query, the Engagement Lead reminded the meeting that there were only about 94/96 key audit partners in the country who were able to sign off Accounts, a third of which worked for suppliers that had withdrawn from the market leaving around 65 key audit partners, whose average age was above 50.

124.12RESOLVED:  That the contents of the report be noted.