Agenda item

Audit Findings Report 2018/19

To consider the Annual Audit Letter produced by the Authority’s External Auditors – Grant Thornton, concerning the key findings arising from the work carried out at Merseyside Fire & Rescue Authority for the year ended 31st March 2019.


This report will be presented by a representative of the Authority’s External Auditors – Grant Thornton.



Michael Green was in attendance, representing the Authority’s external auditors – Grant Thornton; and presenting their Audit Findings Report for 2018/19.


Michael introduced himself and informed Members that he was a Director with Grant Thornton; and had recently been appointed as the Engagement Lead for MFRA.


Members were informed that the process was now substantially complete, with only some minor administrative work required; and that Grant Thornton are pleased to report that an unqualified audit statement has been issued.


Members were advised that the presentation of the report is much later than usual this year, due to a number of reasons. They were advised that there have been a number of additional areas of work required, for example around Pensions as a result of the McCloud case; and an issue around the valuation of land and buildings, which has led to a full re-evaluation completed in September 2019, which resulted in a material adjustment to the statement.


Members were also advised that there have been a number of other amendments made, however none which impact on the general fund, with the majority being balance sheet movements.


Members were taken through the report, with the key areas highlighted.


The areas of significant risk were highlighted to Members, which include improper revenue recognition; and management override of controls. No issues were found with either of these risks.


With regards to the risk around the valuation of land and buildings, Members were advised that there has been increasing scrutiny from regulators. They were informed that it was identified at an early stage that not all of the Authority’s asset base had been valued since 2015, which could result in a material misstatement. As such, Members were advised that Officers commissioned a full re-valuation, which resulted in valuation adjustments of £17m within the financial statements; and that no further issues were identified.


In relation to the audit risk around valuation of pension fund liability, Members were informed that this is the largest figure on the balance sheet; and represents a significant estimate. Members were informed that as a result of the impact of the McCloud transitional protection pensions ruling and the current legal position, the Authority’s gross pension liability has increased by £46m.


A further significant audit risk highlighted to Members, was around accounting for PFI. Members were advised that the draft financial statements did not include the required disclosure of the fair value of the PFI liability, however this has subsequently been calculated and disclosed within the revised financial statements. Members were advised that no other issues were identified.


With regards to other matters identified, Members were informed that there had been 3 adjustments. One was identified by officers during the preparation of the financial statements, regarding an error in the IAS 19 pension valuation provided to the Authority by the Local Government Pension Fund actuary.

Members were informed that the other two relate to pensions, with one being in relation to a reclassification issue around the Firefighters Pension Fund account; and the other being around how the Authority accounted for Top-Up Grant received in respect of the Firefighter Pension Scheme.


In relation to the use of the Going Concern assumption, Members were advised that auditors have not identified any issues.


The other mandatory communication requirements were highlighted to Members; and apart from written representations regarding the floor area of land and buildings and the assumptions and estimates underlying the valuation, Members were informed that there is nothing else to point out.


With regards to the auditors other responsibilities under the Code, Members were advised that there are no issues.


In relation to the Value for Money Conclusion, Members were informed that there was one significant risk identified around financial sustainability, including delivery of the reserves and estates strategies. With regards to reserves, it was highlighted to Members that the Authority have robust arrangements and healthy reserves, however these will need to be monitored as the majority of reserves are committed.


Members were advised that the report confirms the independence of Grant Thornton. It also provides further detail regarding the audit adjustments made; and information regarding the audit fee. Members were advised that the final audit fee has yet to be confirmed, but will be higher than the original proposed amount, due to additional work required.


Members Resolved that:


The content of the report, be noted.


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