External auditors will take a close look at the transition from Arch to its successor company this year, as it represents a new risk for Northumberland County Council.
Last November, the official change-over took place as the local authority replaced its previous wholly-owned development company with another, Advance Northumberland.
In Ernst & Young’s audit planning report for the current financial year, which was presented to the council’s audit committee last Wednesday, it is explained that the transfer of trade and activities from the Arch Group to Advance Northumberland is a new ‘inherent’ risk and ‘the most significant transaction undertaken by the council’ in the year from April 1, 2018.
The overview of its 2018-19 audit strategy explains that ‘there will be some complex accounting in the subsidiary entities to account for the transaction which will be significant for the council’s group financial statements’.
The auditors also plan to look at the potential value for money risk in relation to the decision to replace Arch.
‘We will consider the governance processes and procedures put in place by the council to address this matter to determine whether appropriate arrangements are in place to take informed decisions,’ the report states.
Another area of risk in which there will be an increase in focus compared to 2017-18 is the valuation of land and buildings.
The overview explains: ‘As there has been a change in valuer, and there are challenging economic conditions surrounding retail property, we have escalated this to a significant risk for 2018-19.’
The report adds later: ‘We also note that Advance Northumberland holds material values of investment property, including commercial properties, which are consolidated into the Group accounts.
‘For this reason, we extend this risk to cover the land, buildings and investment property held by Advance Northumberland.’
The external audit is set to be completed and presented to the council’s audit committee by July.
Ben O'Connell, Local Democracy Reporting Service