Chichester District Council
Agenda item

Agenda item

Audit Planning Report Update Year Ended 31 March 2020 - EY

The Committee is requested to consider and note Ernst & Young LLP’s Audit Planning Report update for the year ending 31 March 2020.

Minutes:

Mr Suter of Ernst & Young LLP presented this report, which was an update to the report prepared for the cancelled March meeting before the Covid 19 pandemic.

 

He advised that with regard to the Financial Impact of Covid 19 report considered by the Committee earlier in the meeting, EY did not have any concerns with the Council continuing to look over the medium term in respect of its finances.  He drew members’ attention to page 27 of the report.   EY considered that Covid 19 would impact its audit concerning the fair value of Property, Plant and Equipment.  In particular the Council’s land and buildings, and investment properties.  This had resulted in a greater of uncertainty and therefore a need to increase the audit risk to significant and for EY to instruct their expert valuers, as the valuation could be materially wrong.  The current position was that EY was waiting for the Council’s valuers to complete a review of the valuations to enable EY to determine whether or not there is an impact.  With regard to the concept of going concern in relation to disclosure, EY would have to ascertain whether or not the Council had looked at the assessment of its going concern arrangements, in particular around the level of reserves and cash flow liquidity.  Cipfa had delayed the introduction of new accounting standards for IRS16 relating to leases due to Covid 19, identified as a risk in the original report.

 

In response Mr Gillett reported that the provision of a valuation by 31 March 2020 had been difficult due to the Covid 19 outbreak.  The Council’s position was to report the valuations as they were with material valuation uncertainty, in keeping with the Royal Chartered Institute of Surveyors (RCIS) guidance.  The Council was comfortable that this position should still remain.  Applying evidence not available at the valuation date went against valuation principles and at 31 March 2020 there was no new evidence available to suggest what impact the pandemic would have on the valuations. The RCIS was still updating its recommendations up to mid-June.  His recommendation was that the council should undertake a further valuation exercise later in the year when more evidence is known and could better understand the impact of not only the Council’s own portfolio but generally the impact on property values.  He had addressed further questions from EY on the matter in a supplemental report, with evidence to support the Council’s position, which had not yet been seen by Mr Suter.

 

Mrs Belenger confirmed that any adjustments would impact the declaration on the balance sheet, but the accounting treatment applied would negate it into an unusable reserve.  Any changes to the asset values would go into the capital adjustment account with no impact to the Council Tax payer.

 

Mr Suter confirmed that he had no issue with the Councils concept, but his position was that he was required to give an opinion as at 31 March 2020.

 

RESOLVED

 

That Ernst & Young LLP’s Audit Planning Report update for the year ending 31 March 2020 be noted.

Supporting documents:

 

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