Agenda item

This report sets out the annual audit plan for 2011/2012. The Council’s external auditors (PKF) have produced the plan and it is reported to this committee to comply with governance requirements.

Discussion:

Robert Grant from PKF, the Council’s external auditor, provided an overview of the Annual Audit Plan 2011/2012 which was attached at Appendix 1 to the report. This included details of the significant risks identified in planning the audit of the Financial Statements, the Council’s value for money approach over the last three years and the auditor’s fees which had increased by £30,000 since the Audit Fee Letter was issued in April 2011. The increase was due to an update that had been taken on the assessment of risks and the additional work necessary in addressing significant matters from the 2010/2011 audit.

Members asked if the external auditor was aware of the un-anticipated overspends in the capital programme, in particular with regard to Chatham bus station and road works at The Brook, as the projects were not mentioned in the Audit Plan 2011/2012. The external auditor responded that they did have regard to the capital programme but were not aware of the particular overspends mentioned but the significance of these would be included in the conclusion of the report.

Responding to Members’ concern on the capital projects overspends, the Chief Finance Officer advised that the current £3.4 million overspend should be looked at in terms of the totality of the budget and that up until 31 March 2011, the Council was advised that everything was on time and budget for these projects. Members were assured that there would be a full statement with regard to the financing of these schemes when the current budget had been finalised. They were also assured that in regard to the high value Academy schemes, there were much better systems in place and the financial risks were passed onto the contractor.

Members questioned the significant risk raised by the external auditor in the Council’s weakness in controls over the Fixed Asset Register, asking why there was not a standardised system throughout the Council for recording assets. The Chief Finance Office advised that assets were recorded using the Logotech system. Last year, the system had not been up-to-date resulting in assets being recorded on a spreadsheet system. However, Logotech had now been updated and all the Council’s assets were on that system in one place. Training had taken place for officers involved with the updated Logotech system and that had also involved the PKF audit team.

Responding to why Logotech was not used throughout the Council, officers explained that service-led systems used within various departments, for example ‘Confirm’ within Highways and ‘Atrium’ within education, did not have the quality of information required by the external auditors for the completion of the statutory accounts. These stand-alone systems also carried out other functions specific to the service users.

Members asked for clarification about the external auditor’s fee and how this compared to similar sized Local Authorities and whether other services were incorporated into these fees. Robert Grant from PKF advised that the Audit Commission published a scale of fees to determine the fee set. This had been adjusted with an increase of £30,000 to cover the work of the areas highlighted within the Significant Risks section of the annual report (page 15 of the agenda). Other services were commissioned on an adhoc basis and reports of any additional work were published at this committee, together with the fees for that work. There had been no other services commissioned for 2011/2012.

In response to further questions as to the transparency of additional fees charged by the external auditor, Robert Grant advised that the Council’s accounts were subject to public inspection and the public had a right to question the accounts and then object to them, if they wished to do so. Although this had not yet happened, the external auditors did receive contact from the public and the auditors resolved these matters in discussion with the Chief Finance Officer or the Monitoring Officer. If it became a significant issue, the Council would be billed for the time spent on that matter but to date, this had not happened.

Members also asked whether there were any major risks that had been insufficiently addressed by the council over the past 12 months. Robert Grant responded that the main area addressed over the past nine months was the closure of auditable accounts for 2010/2011. There had been a huge effort from the finance team to complete this, with weekly and monthly meetings with various officers. One remaining internal control risk that had not yet been updated was the ‘Care Director’ recording the financial transactions in and out of the social services. 

Decision:

The Committee accepted the proposed annual Audit Plan for 2011/2012.