Agenda item

This report sets out important areas of the auditor risk assessment where Grant Thornton is required to make inquiries of the Audit Committee under auditing standards.

Discussion:

The Head of Corporate Accounts introduced the report which set out the areas where auditors would be required to obtain understanding of management process when undertaking the audit of Medway Council.

The following issues were discussed:

Lothbury Fund – in response to a question whether the Lothbury Fund had been closed, the Head of Corporate Accounts confirmed that the fund had been closed and there would be a loss incurred by the Council as a result. Provision had been made in the budget to cover any loss.

Borrowing – it was commented that the Council had borrowed £20m to repair Gun Wharf following the discovery of RAAC, however, only £12m would be used to replace RAAC. A Member asked for further detail on the purpose of the other borrowing. The Chief Operating Officer stated he did not have the full details available and undertook to provide the information to Members outside of the meeting.

Monthly Revenue Budget Monitoring – A Member commented that the report indicated the Council had moved to monthly budget monitoring by Corporate Management Team (CMT) and this information was provided to Portfolio Holders. The Member asked if this could be shared more widely with Members. The Chief Operating Officer explained that additional resource had been provided to enable monthly budget monitoring by the CMT following a recommendation from CIPFA and this information was shared with Portfolio Holders. He added this monitoring was not formally reported to Cabinet meetings or Overview and Scrutiny meetings which was still reported quarterly; however, he would consider options for sharing the monthly monitoring data more widely.

It was questioned whether the audit would consider whether Members had access to the relevant financial information at an early enough stage to enable Committee’s to effectively scrutinise progress. The Director, Grant Thornton stated the timeliness of the information provided to Committee would be included in the value for money analysis under governance.

Earmarked reserves – it was queried why £2.5m was drawn from ear marked reserves to supplement the housing budget yet that budget outturn was underspent by £1.5m, but Public Health drew from reserves exactly the amount required to avoid an overspend. The Chief Operating Officer explained that a combination of funds was used to support the Housing budget and an underspend was realised in the general fund to support budget pressures elsewhere. However, Public Health was funded through grants, so all monies had to spent on public health projects and the budget could not be underspent to ease budget pressures elsewhere.

Group Accounts – in response to a question when group accounts would be published, the Chief Operating Officer stated the accounts from Kyndi and Norse had been completed. The Council had received assurances that Medway Development Company (MDC) accounts would be completed by August.

Fees – further information was requested in respect of audit fees which had risen significantly. The Director, Grant Thornton explained that fee scales were set by the Public Sector Audit Appointments (PSAA) and it was hoped this would minimise the variation of fees. The Head of Corporate Accounts added that the rise in fees reflected the current market rate.

A Member commented that in the past Council officers had robust discussions with auditors in relation to fees and had undertaken significant work in submitting views to the PSAA for this fee cycle during the negotiation phase. The Director, Grant Thornton noted that the last two years of audits had not been completed so a substantial refund on those fees would be expected.

Fraud – it was questioned whether auditors would assess the Council’s fraud prevention measures. The Director, Grant Thornton explained it would be considered with the anti-fraud workplan which was part of the governance, timeliness and quality of information, however, fraud may not be material from an accounts perspective rather than the taxpayer perspective.

Valuation of assets – it was questioned how often assets were valued, the Head of Corporate Accounts explained that CIPFA practice was to reevaluate the value of all assets every five years, the Council therefore assessed at least 20% of assts each year but valued some items, such as Council housing stock every year. He added that the Council would consider any changes which may affect the value of the asset, for example, last year there had been a change in the value of Council car parks, so the Council valued all car parks as a result.

Decision:

a)     The Committee approved the management responses provided are consistent with its understanding and made further comments at the meeting.

b)     The Committee requested The Chief Operating Officer to give consideration to how monthly CMT budget monitoring reports might be shared with a wider group of Members than Portfolio Holders.