Agenda item

Report to those charged with Governance (ISA 260) 2015/16

 

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 31st March, 2016 for the Authority and on the assessment of the Authority’s arrangements to secure Value for Money.

Minutes:

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 2015/16.  Ms C Partridge and Ms L Wild representing KPMG presented the report which incorporated, amongst other things, the following:

 

·         The Headline findings

·         The proposed opinion and audit adjustments

·         The key significant financial audit risks, area of audit focus and judgements

·         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 including the specific Value for Money Risks

 

Appendices to the report provided the following:

 

·         Key issues and recommendations

·         The audit differences

·         Materiality and the reporting of audit differences

·         The Declaration of independence and objectivity

 

It was reported that it was anticipated that an unqualified audit opinion on the Authority’s Financial Statements would be issued by 30th September, 2016 following consideration by Council on the 29th September.  It was also reported that the Annual Governance Statement complied with the guidance issued and was in line with the auditor’s understanding of the Authority.

 

The audit had identified one material audit adjustment with a total value of £13.3m, however, whilst there was an impact on the net worth in year, there was no overall impact on the Authority’s medium term financial plan as this was simply a reallocation of costs over a longer period.  In addition, there was no impact on the Council Tax requirements for the Council.  The appropriate adjustments had been made to the financial statements.

 

During the year KPMG had continued to review the risks to the financial statements on an ongoing basis.  In January 2016 they had identified risks in relation to the Consolidation of subsidiary companies and the Minimum Revenue Position (MRP).  Work had continued on these two issues throughout the year and the findings on these were outlined within Appendix 3.  There were no matters of any significance arising as a result of audit work in the Consolidation of Subsidiary Companies and the changes to the policy on the MRP.

 

The Authority had continued to have good processes in place for the production of the accounts and good quality supporting working papers.  Officers dealt with queries efficiently and the audit process had been completed within the prescribed timescales.  The Finance Team, Mr N Copley, Service Director Finance, and Miss F Foster, Director of Finance, Assets and IT and their staff were thanked for their assistance and support.

 

No specific Value for Money risks had been identified within the Audit Plan for 2015/16.  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 that an unqualified VFM conclusion would be issued by 30th September 2016.

 

All work on the financial statements was substantially complete subject to the completion of work in relation to Creditors, Journal Entries, Whole of Government Accounts and Completion of Final Review.

 

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:

 

·         Reference was made to the two recommendations and to the rationale for them:

o   The need for the Authority to review its written procedure notes for the posting and authorisation of journal entries and ensure that they reflected the procedures what were both required and were currently in practice.  This was due for completion by the 31st October, 2016

o   The need for the latest valuation of the waste PFI asset to be reflected in the 2016/17 statement of accounts and for all new assets to be valued when they came into use in line with the requirements of the Code.  Work was ongoing in this respect and it was anticipated that this would be complete by 31st March, 2017.  In response to questioning, it was noted that there was no additional staff training needs identified in this area

·         Specific reference was made to the reasons for the audit adjustment given that this was a value of £13.3 m.  The Authority had accepted that adjustments due to the repayment for the PFI contracts made by the Council had been put into a prepayment account to match the revised MRP policy over a longer period.  This was not in accordance with accounting standards.  It was reported that the Authority had accounted for the actual payment over 60 years, per the revised MRP policy instead of over the 25 years in line with the life of the lease.  Several adjustments had been required to the draft statement of accounts to rectify this and the impact of these adjustments was outlined.  It was stressed, however, that there was no overall impact on the Authority’s medium term financial plan as this was simply a reallocation of costs over a shorter period.  It was further stressed that the necessary adjustments had been accepted and made by the Council and there were no additional financial implications for the Authority

·         There was a discussion of materiality, how this was calculated and whether or not this was appropriate.  It was noted that this had been set at £11m which equated to around 1.7% of the gross expenditure of the Authority.  It was considered that the reassessment undertaken due to the significant fall in Gross Expenditure (compared to 2014/15) was correct and appropriate in the circumstances

·         Reference was made to Significant Risk 1 and to the consolidation of subsidiary companies.  It was noted that, following review, KPMG had agreed with the Authority that for 2015/16 group accounts were not required

·         In relation to Journal authorisation:

o   It was noted that the creditors and journal entries had now been completed.  The Service was looking to undertake a review of Journal entries/authorisation including an interim audit of processes and controls

o   It was noted that the authorisation procedures were being updated.  There was no evidence of inappropriate entries.  The Service Director Finance would submit a further report on this once the procedures had been updated and were in place

·         It was noted that the final Director review was now complete, pending receipt of the final signed financial statements

·         All Members of the Council had the opportunity to comment on the Annual Governance Statement, it had been published and was to be the subject of a presentation and report to the Council meeting to be held on the 29th September, 2016

·         As previously stated, and in response to further questioning, the KPMG representatives stated that it was anticipated that, following consideration by Council, an unqualified opinion would be issued by 30th September, 2016

 

RESOLVED:-

 

(i)            That the External Auditor’s Reprt 2015/16 be received and referred for consideration by the Council to be held on the 29th September, 2016;

 

(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 Director of Finance, Assets and Information Services and their respective Teams in this process.

 

RECOMMENDED TO FULL COUNCIL ON THE 29th SEPTEMBER, 2016:-

 

(i)            That the External Auditor’s Annual Governance Report 2015/16 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 2015/16 financial statements be noted and accordingly, the final accounts 2015/16 be approved.

Supporting documents:

 

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