This report presents BDO’s plan for the audit of the accounts for the financial year 2016/17.
Members considered a report which presented the Council’s External Auditor’s (BDO) plan for the audit of the accounts for the financial year 2016/17.
The Chief Finance Officer highlighted two issues. Firstly, in relation to the timetable for the production and approval of the 2016/17 accounts, that the final audit fieldwork would commence in early June 2017. This was a month earlier than last year and was part of the preparations for the statutory deadlines being brought forward next year. Secondly, he was pleased to note that BDO no longer considered the preparation of the financial statements to be a key risk, which was testimony to the hard work of the team.
A Member referred to the fact that planning materiality for the Council was based on 2% of average gross expenditure for the current and two preceding years (£11.7m) and queried whether it would be more appropriate if this was based on net expenditure and also whether there should be a different level for expenditure which was not directly controlled by the Council, such as schools funding. £11.7m was a high figure in respect of expenditure directly controlled by the Council and could have a potentially very significant impact on the authority. BDO advised that £11.7m was a high level figure and testing took place at lower levels (around £7-8m). Anything above 3% of the materiality level would be reported to the Committee. School funding was still part of the Council’s accounts. In response a Member noted that £7-8m still represented a significant sum and risk, particularly in the light of the increasing difficulties in setting a balanced budget.
A Member referred to the requirement to value property, plant and equipment and queried how the Council’s roads were valued. Another Member highlighted the risk of not having a true commercial valuation of the Council’s property and assets, particularly in light of the Council’s programme of rationalising its estate. The Chief Finance Officer undertook to provide a briefing note on the basis by which the Council valued its assets.
The approach to deciding risk in relation to non domestic rates appeal provision was queried. The Chief Finance Officer advised that in 2010 and 2015 appeals were backdated but as future appeals could only be made against the 2017 listings, the risks in the short term were not as great as the previous year. Appropriate provision for appeals would be made.
A Member asked what plans were in place to mitigate the risks around sustainable finances given concerns about the Council’s resilience in the face of ongoing financial pressures, reductions in funding and demographic pressures. The Chief Finance Officer replied that there were non-earmarked general reserves of £8m. The Council’s finances were the highest rated strategic risk and would be managed through the Medium Term Financial Plan process. The Council had a four year financial settlement so the level of revenue support grant funding for the next three years was known. BDO would be reviewing the Council’s medium term financial strategy to assess the reasonableness of its assumptions and this would form part of its value for money opinion on the accounts. The majority of Council’s that BDO audited also recognised risks around sustainable finance.
a) noted and accepted the proposed annual Audit Plan for 2016/17, and;
b) requested a briefing note on the basis by which the Council valued its assets.