Agenda item

This report considers the issues raised by the Council’s external auditors following the 2010/2011 audit.

Discussion:

This report considered the issues raised by PKF, the Council’s external auditors, during the 2010/2011 audit of the Statement of Accounts.

The Chief Finance Officer advised Members that after the presentation of the draft Statement of Accounts for 2010/2011 to the Audit Committee in July 2011 PKF had begun their audit. It had then become apparent that the accounts were not of a robust standard and that International Financial Reporting Standards (IFRS) adjustments had not been properly made. Despite further work it had not been possible to achieve the publication date of 30 September, as required by the Accounts and Audit Regulations 2003. 

The report gave details of the main issues arising from the audit and a revised set of the Statement of Accounts was tabled at the meeting, reflecting the ongoing work with the External Auditor. Members were informed that none of the work had necessitated any material change to either the outturn position or the general reserve balance previously reported. It was noted that a number of typographical errors would still need to be addressed but that an unqualified audit opinion would be issued on the financial statements.

Robert Grant from PKF provided an overview of the external auditor's report, which was attached at Appendix 1 to the report. This included details of the errors and inconsistencies, such as those with the fixed asset register, which had been corrected within the financial statements and that this had resulted in an estimated increase of £50,000 in fees due to the additional work undertaken. It was noted that the auditor was satisfied with the Annual Governance Statement and they would be issuing an unqualified value for money conclusion.

The Council’s response to the issues identified was included as an annex to the auditor’s report. Members were advised that a final review of the accounts would be undertaken by the External Auditor and the Audit Committee would be notified in writing of any issues arising.

Members discussed and expressed concern as to the changes that had to be made to the accounts, along with the additional work undertaken by the auditor and subsequent increase in their fee. Further concerns as to the delay in the audit process attributable to officers providing payroll and Care Director information were discussed. The Committee and Chief Finance Officer also considered the need to review the training requirements for Audit Committee Members in order to enable appropriate challenge on the accounts.

Responding to Members’ concern as to the preparation of the accounts and the assurances provided by this process, the Chief Finance Officer explained a review would be undertaken but that through the process of correcting the accounts the expertise within the finance team, especially in accounting for IFRS, had been enhanced.

Members considered their ability to read, understand and approve the revised Statement of Accounts that had been tabled at the meeting. The Chief Finance Officer and External Auditor gave assurances that the necessary adjustments had now been made.

A briefing note was requested on the delay in providing payroll information and the process whereby these delays were escalated within the council. Further information would also be provided as to the claim, and its treatment within the balance sheet, arising from a legal proceeding by one of the council’s contractors and also the treatment of the overpayment of housing benefit, as set out in paragraph 3.97 of the auditor’s report and within the ‘Debtors’ notes to the accounts, and the housing benefit subsidy regime.

Decisions:

a)     The Audit Committee noted 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 A to the Annual Governance report.

b)     The Audit Committee noted the assurance of the Chief Finance Officer and External Auditor that the amendments suggested by the External Auditor in paragraph 1.27 of the External Auditor’s report had been made and therefore agreed the revised Statement of Accounts as tabled at the meeting, including the amended Accounting Policies set out within that document.

c)      The Audit Committee agreed the Management Representations Letter, attached at Appendix C of the Annual Governance report.

d)     The Audit Committee agreed the need for additional training to enable Committee Members required to fully undertake the Committees functions including the assessment of the Statement of Accounts in future

e)     The Audit Committee requested a briefing note providing clarification on:

1.            the delay in providing payroll information and the process whereby these delays are escalated within the council

2.            the claim, and its treatment within the balance sheet, arising from the legal proceeding by one of the council’s contractors

3.            the treatment of the overpayment of housing benefit, as set out in paragraph 3.97 of the auditor’s report and within the ‘Debtors’ notes to the accounts, and the housing benefit subsidy regime.