Agenda item

Annual External Audit Plan

This report presents Grant Thornton’s plan for the audit of the accounts for the

financial year 2018/19. 




Members considered a report regarding Grant Thornton’s plan for the audit of the accounts for the financial year 2018/19. The purpose of the Audit Plan was to provide an overview of the planned scope and timings of the statutory audit of Medway Council for those charged with governance.


The following issues were discussed:


Materiality levels – in response to a question whether the approach of Grant Thornton would differ to that of BDO, Grant Thornton advised that they had determined planning materiality to be 1.9% of the Council’s gross expenditure, with the industry norm being 1-2%. This threshold, together with the other areas of the audit, was fairly consistent with the approach taken by BDO.


Brexit – reference was made to Grant Thornton’s plans, in the light of the UK leaving the European Union, to review the Council’s workforce plans, analyse the supply chains and model potential impacts on finances, including investment and borrowing as well as any potential impact on the valuation of Council assets. A Member asked if Grant Thornton had seen any evidence that the Council had considered these issues, making the point that this was a key and imminent risk the Council should have already addressed. Grant Thornton replied that this review had been included due to the financial reporting risks and the potential disruption to Medway and Kent. Grant Thornton were aware of the work to prepare for Brexit carried out by the Kent Resilience Forum.


The Chief Finance Officer added that managers had been preparing at a service level. Although some councils in Kent had produced impact assessments, the Council had decided not to draw up plans for the numerous possible scenarios it was facing, given the high levels of uncertainty about what would happen. Grant Thornton stated that they were not advocating which approach the Council should take but wanted to understand what the Council’s plans were for Brexit. A Member commented that the Council’s approach was to manage its finances prudently and the controls and systems in place were robust. Finances were very tight and spending money preparing for as yet unknown difficulties was not seen as sensible. The Chief Finance Officer commented that he was working to stabilise the Council’s borrowings through a series of longer term loans to prepare for any negative impact of Brexit. The Council’s investments in property and property funds were relatively modest and he did not consider the risk to be significant.


Management Override of Controls – responding to a query, Grant Thornton advised that, due to the risk of manipulation by journal transfers, they would be looking at the Council’s control environment and testing samples.


Significant Value for Money (VFM) risks – a Member asked if Grant Thornton had any concerns relating to Medway that they did not have for other councils. Grant Thornton advised that examining VFM arrangements was part of the work External Auditors had to do to look at the risks of a council reaching the wrong VFM conclusions. Looking at financial sustainability was part of that work as Grant Thornton did not yet know enough about the Council’s plans on this matter, although they did not have any concerns at present.


Business Rates Retention Pilot – in response to a question, Members were advised that although the bid in 2018/19 had been successful the 2019/20 bid had not been approved. However, the growth in business rates that would have resulted had not been built into the Medium Term Financial Strategy. 




The Committee agreed to note the proposed annual Audit Plan for 2018/19.



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