Agenda item

This report considers the issues raised in the Council’s External Auditor’s Annual Governance Report, which incorporates the findings following the 2014/2015 audit of the Statement of Accounts.

The Chairman is asked to accept this report as urgent because the next meeting of this Committee will not take place until 12 January 2016 and the issues raised in the Council’s External Auditor’s Annual Governance Report must be considered by this Committee prior to publication of the Statement of Accounts by 30 September 2015. The report could not be despatched with the agenda as officers needed sufficient time to prepare the report following discussions with the External Auditor.

Discussion:

Members considered a report detailing the issues raised in the Council’s External Auditor’s Annual Governance Report (AGR), which incorporated the findings following the 2014/15 audit of the Statement of Accounts.

The Accounts and Audit Regulations 2011 (as amended) required that the Audit Committee consider these issues prior to publication by 30 September 2015.

Tabled at the meeting were proposed amendments to the Accounts from the Council’s External Auditors (Supplementary Agenda No 2).

Representatives from BDO emphasised that in order to meet the earlier deadlines which would be imposed on the preparation of the financial statements in two years’ time (i.e. Statement of Accounts to be published by 31 July rather than 30 September)  the Council should be working towards good quality financial statements and supporting working papers at an earlier stage. The Council therefore needed to give serious consideration as to what resources would be required to meet the new upcoming deadlines as it would not be met with existing resources. Members acknowledged the Council’s difficult financial situation but still felt that adequate resources should be made available as it was in the best interests of Medway residents for an unqualified opinion to be issued on the accounts. It was recognised that changes in key personnel in the Council and BDO had impacted on the ability to prepare and audit the accounts this year but this would not be an issue for the following year.

A Member referred to the large number of non trivial errors in the primary statement and supporting disclosure notes and asked if BDO felt this was something the Council should be concerned about. BDO representatives replied that these were all issues which the Council needed to address but felt the Council should be primarily concerned about them in the context of the accelerated deadline for the preparation of accounts.

A Member also queried whether the Committee should actively monitor progress in implementing the recommendations made by BDO. There was general support for this view. 

A Member expressed surprise that the Council had implemented additional controls around the annual declaration process regarding related party transactions including carrying out Companies House searches on Members and senior officers. He felt that this appeared to be disproportionate and that, provided the guidance issued to Members on this was clear, then these further checks should not be necessary.

Decision:

The Committee agreed:

a)        to note the issues raised and judgements made by the Auditor as presented in Appendix 1 to the report, and agreed the proposed response as set out at Appendix IV to the External Auditor’s Annual Governance Report (AGR).

b)        the revised Statement of Accounts as set out in Appendix 2 to the report (including the amendments set out in Supplementary Agenda 2)

c)         the Management Representations Letter, attached at Appendix VI of the AGR.

d)        to ask for regular updates on progress with implementing the recommendations in the AGR

e)        to ask Cabinet to consider the issue raised in the AGR about the need for the Council to consider what resources are needed to meet the new upcoming deadlines regarding the preparation of the financial statements