Council audit fee for last year increases by 71%

Reading Borough Council Civic Offices

The final item on the agenda at the audit and governance committee on Thursday 26 January was an update from the external auditors Ernst & Young, who had issued a certificate now that their 2015/16 audit into Reading Borough Council had been completed . It also set out a final fee of £220,735 for their work; a substantial increase on the anticipated cost.

The difficulties in completing the audit which resulted in a delay of the audit were set out by the auditors at the November 2016 audit and governance committee. The causes of the prolonged audit had been largely attributed to the change in auditors.

At the November meeting councillor Liz Terry had said “it has been a difficult transition from the old auditors to Ernst & Young; we’d had years of reassurance, but it’s been quite a shock to everybody.”

Councillor Steele questioned the auditors about why the fee had increased so much, asking “were we so ill prepared?”

The breakdown of the fees are set out in the table below.

Scale fee
[ref 3]
Additional fee
[ref 4]
Total
[ref 5]
Increase
£ £ £ %
Opinion audit and value
for money (VFM) conclusion
108,938 77,206 186,144 71
Certification of housing
benefit subsidy claim
 20,187 14,404 34,591 71
Total 129,125 91,610 220,735 71

The additional fee is subject to agreement by Public Sector Audit Appointments Ltd, (PSAA), the body responsible for agreeing the scales of fees. The PSAA website states:

Scale fees are based on the expectation that audited bodies are able to provide the auditor with complete and materially accurate financial statements, with supporting working papers, within agreed timeframes.

The auditors explained that “the fee increase covered the work that we had to do in order to get to the completion of the audit”, concluding that “documentation and evidence was not as forthcoming as we would have expected.”

In response, the Interim Director of Finance stated,

There was a list of requirements that had been shared prior to the audit starting… the interpretation of some of those by the team was different to Ernst & Young based on having had experience for quite some years with different auditors and that caused some confusion.

As a consequence of that painful learning process with the team and with Ernst & Young I think we are going to be much better prepared in terms of the audit going ahead into next year and we are strengthening the processes now to ensure that is much smoother than it was this year.

Councillor Stevens, chair of the committee, referred to discussions at the full Council meeting on 24 January where the appointment of auditors for future years had been on the agenda, saying:

I really don’t like the idea of changing auditors again after three years unless we really have to.

The 2016/17 audit plan included the scale fee for 2016/17. This is  £108,938 for the ‘opinion audit and value for money conclusion’, the same as originally set for 2015/16. The scale fee for the certification of housing benefit subsidy claim is £12,458, a reduction on the fee set for 2015/16.

The fees are based on assumptions below set out by auditors Ernst & Young:

  • officers meeting the agreed timetable of deliverables;
  • the operating effectiveness of the internal controls for the key processes outlined in section 4.2 of the audit plan;
  • we can rely on the work of internal audit as planned;
  • our accounts opinion and value for money conclusion being unqualified;
  • appropriate quality of documentation is provided by the Council; and
  • the Council has an effective control environment.

In addition the plan states:

If any of the above assumptions prove to be unfounded, we will seek a variation to the agreed fee. This will be discussed with the Council in advance.

Fees for the auditor’s consideration of correspondence from the public and formal objections will be charged in addition to the scale fee.

These assumptions, and whether they can ever be realistic, will be tested during the 2016/17 audit as they were during 2015/16. Additional audit fees are never welcome and at this time represent a significant additional pressure on Reading Borough Council’s budget.


Links and References

  1. Audit and Governance Committee 26 January 2017 – all papers
  2. Audit and Governance Committee 26 January 2017 – webcast
  3. Audit and Governance Committee 26 January 2017, External Auditor Update, Annual Audit Letter, Appendix A, p EY23. Note there is an inconsistency between this part of the report and para 4.5 of the audit plan (EY 8 of ref 4 below) which states that the scale fee is £109,938.
  4. Audit and Governance Committee 26 January 2017, External Auditor Update, Audit Plan, Appendix A, p EY12.
  5. ibid.
  6. Council meeting 24 January 2017 – all papers
  7. Council meeting 24 January 2017 – webcast. Agenda item 8 [at 00:51:50]
  8. Auditors finally deliver report on council finances
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One thought on “Council audit fee for last year increases by 71%

  1. Pingback: Woe, woe and thrice woe! | The Whitley Pump

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