Agenda item

The Council’s External Auditor will submit a report summarising the key issues identified during the audit of the Financial Statements for the year ended 31^st March, 2017 for the Authority and on the assessment of the Authority’s arrangements to secure Value for Money.

The Committee considered a report of the External Auditor (KPMG) which had been submitted in accordance with International Standard on Auditing 260, the External Audit Governance Report 2016/17.  Mrs C Partridge representing KPMG attended the meeting to present the report.

The report incorporated, amongst other things, the following:

·         The Financial Statements, including the significant audit risks, area of audit focus and judgements

·         The proposed opinion and audit differences

·         The Accounts Production and audit process

·         The current position with regard to the completion of the audit of the financial statements

·         The Value for Money Conclusion which indicated that there were no identified VFM risks

Appendices to the report provided the following:

·         Key issues and recommendations

·         The follow up of prior year recommendations – all of which had been implemented

·         The audit differences

·         Materiality and the reporting of audit differences

·         The Declaration of independence and objectivity

·         The audit fees

In relation to the Financial Statements, the report summarised the key findings in relation to the 2016/17 external audit.  The report focussed on the work which had been completed in August 2017 on the Authority’s significant risk areas as well as other areas of the financial statements together with additional findings in respect of KPMG’s control work.  She stated that subject to all outstanding queries being resolved satisfactorily, it was anticipated that an unqualified audit opinion on the Authority’s financial statements would be issued before the deadline of 30^th September, 2017 following consideration by the Council on the 28^th September, 2017.

A number of audit adjustments had been identified, notably the need to prepare consolidated accounts, with the remainder of the adjustments being largely presentational with no impact upon the primary statements and the reserves balances.

Based on the work undertake, four recommendations had been made and these were detailed within Appendix 1.  These related largely to IT controls, the retention of documentation and evidencing of reconciliation preparation and review.  These had been discussed and agreed with management and the response to those recommendations was detailed.  It was also recommended that the Authority should closely monitor progress in addressing risks, including the implementation of the recommendations, and these issues would be formally followed up next year.

In relation to the Use of Resources, it was reported that the risk based work to consider whether in all significant respects the Authority had proper arrangements to ensure it had taken properly informed decision and deployed resources to achieve planned sustainable outcomes for tax payers and local people had been completed.  It had been concluded that the Authority had made proper arrangements to secure economy, efficiency and effectiveness in its use of resources. It was anticipated, therefore, that an unqualified Value for Money opinion would be issued.

Finally, Mrs Partridge asked to place on record her thanks to officers and members for their continuing help and co-operation throughout the audit work.

The presentation engendered a full and frank discussion during which matters of a detailed and general nature were raised and answers were given to Members questions where appropriate.

The following issued were referred to:

·         The External Auditor had not identified any material misstatements.  They had, however identified that a set of group accounts needed to be prepared due to the material nature of the pension liability held by the Subsidiary company Berneslai Homes Ltd. 

·         For the year ending 31^st March 2017 the Authority had reported total surplus on provision of services of £55.2m which includes £86.3 m reversal of previous impairment loss on Council Dwellings.  Net outturn was, therefore of the order of approximately £31.1m deficit.  The impact on the General Fund had been an increase of £5.9m.  Mrs Partridge apologised for the typographical error within this section and stated that this section would be re-issued

·         There was some concern expressed in relation to the recommendations in relation to IT controls.  In response the Chief Executive and Service Director Finance commented that all recommendations had been accepted and remedial action taken to address the issues.  Where required, additional compliance controls were to be introduced and reminders given to Service Directors and managers of the arrangements to be followed particularly in relation to ‘leavers’, the notification of such events to appropriate sections and to ensure their removal from access to IT systems.  In addition there were to be periodic reviews to ensure compliance with the system requirements

·         Arising out of the above, the Chief Executive commented on the reduction in staffing within the Council and of the increased pressure faced by remaining staff and also in relation to the increased risk appetite which the Authority was now required to accept

·         There was a discussion of the significant audit risks, of why they were classified as risks and of the action taken to address the issues identified

RESOLVED:-

(i)            That the External Auditor’s Report 2016/17 be received and referred for consideration by the Council to be held on the 28^th September, 2017;

(ii)          That the Auditor’s findings on the effectiveness of the Council’s internal controls and the conclusion on the Council’s arrangements for securing Value for Money be noted; and

(iii)         That the Committee place on record their thanks and appreciation for the hard work of the External Auditor and the Service Director Finance and his Team in this process.

RECOMMENDED TO FULL COUNCIL ON THE 28^th SEPTEMBER, 2017:-

(i)            That the External Auditor’s Annual Governance Report 2016/17 be approved;

(ii)          That the findings on the effectiveness of the Council’s internal controls and the conclusions on the Council’s arrangements for securing Value for Money be noted; and

(iii)         That the findings from the audit work in relation to the 2016/17 financial statements be noted and accordingly, the final accounts 2016/17 be approved.