This report summarises EY’s preliminary audit conclusion in relation to the audit of Reading Borough Council for 2017/18.

Maria Grindley and Adrian Balmer, EY, presented their draft Audit Results report, which summarised the preliminary conclusion in relation to the audit of Reading Borough Council for 2017/18.

The Committee was advised that the previous audit year, 2016/17, was challenging for the Council, with EY’s audit opinion being qualified in four areas, Debtors, Creditors, I&E and Pensions.  The value for money conclusion had been an adverse report and statutory recommendations had been issued to the Council highlighting areas for improvement.  The Council had implemented changes to address EY’s recommendations in relation to processes, documentation and controls.  However, the 2017/18 year was well underway as these changes were being implemented. Therefore, EY’s report highlighted those matters where improvements were being made but were not yet embedded by 31 March 2018. It was anticipated that these improvements would be reflected in the 2018/19 financial statements.  The Committee was also advised that EY had been unable to obtain assurance from the auditors of the Royal Berkshire Pension Fund for 2017/18 due to a timing issue between the closure of the Council’s 2016/17 audit and the change in auditors at the Pension Fund.  EY had made it clear in the report that the circumstances for lack of assurance were beyond the control of the Council in this instance.

It was the responsibility of the Authority to develop and implement systems of internal financial control and to put in place proper arrangements to monitor their adequacy and effectiveness in practice. EY had not identified any significant deficiencies in the design or operation of an internal control that might result in a material mis-statement in the financial statements of which the Council was not aware.  However, the audit did reveal some control ‘risks’ to be addressed in relation to: Payroll; MOSAIC; Exit Packages; Employee Recharging; NNDR Appeals Provision; Council Tax Bad Debt Provision; and NNDR Impairment of Debt, which had been drawn to the Council’s attention.

During the general debate, the Committee discussed the position of Reading Transport Limited and the impact of the COVID-19 pandemic on the financial position of the Company, due to the likely reduction in passenger numbers that would have been experienced over recent months.  The Committee requested a report to the next meeting on the financial implications of COVID 19 on Reading Buses.

It was reported that EY had substantially completed the audit of Reading Borough Council for the year ended 31 March 2018 and subject to concluding the outstanding matters listed in the report, EY confirmed that it expected to issue a qualified audit opinion on the financial statements.

Resolved:

(1)           That the draft Audit Results report, which provided a summary of the preliminary audit conclusion, be noted;

(2)           That the control ‘risks’ identified in relation to: Payroll; MOSAIC; Exit Packages; Employee Recharging; NNDR Appeals Provision; Council Tax Bad Debt Provision; and NNDR Impairment of Debt be noted and action taken to mitigate the risks be reported to the Committee to provide assurance that these areas of concern were being adequately addressed;

(3)           That a report be submitted to the next meeting on 28 January 2021 on the financial implications of COVID 19 on Reading Buses to be considered in Part 2 of the agenda (closed session).