Agenda item

This report considers the issues raised in the Council’s external auditor’s Annual Governance Report, which incorporates the findings following the 2012/2013 audit of the Statement of Accounts. 

Discussion on 25 September 2013:

Robert Grant from BDO, the Council’s external auditor, provided an overview of the external auditor's report. This included the key findings from the audit of the accounts and use of resources, together with the external auditor’s opinion on the Annual Governance Statement. This item was considered in open session on 25 September 2013 (and on 27 September 2013).

A revised version of the Statement of Accounts, from that considered by the Committee in July 2013, was tabled at the meeting.

Members were advised that whilst the audit had not identified any material misstatements in the financial statements, a number of non-material misstatements had been identified and details of these were given. This included a number of errors that affected fixed asset disclosures, the treatment of Housing Revenue Account Income and Expenditure and the need to adjust the amount payable to the national non-domestic rates (NDR) pool. The Committee was updated as to progress of a number of outstanding matters and advised that having largely completed their audit work, in respect of the financial statements, it was anticipated that an ‘unqualified’ opinion would be issued. The Chief Finance Officer advised that, as a consequence of the adjustments made to the financial statements, further work was needed to correct the Cash Flow Statement. 

Robert Grant (BDO) reported that the auditor had identified areas with significant deficiencies in internal control. These related to payroll and Care Director - the Council’s adult social care information system. In relation to ‘use of resources’ a number of issues were noted by the external auditor, such as the Council’s effective arrangements for financial governance, financial planning and financial control and the Council’s arrangements for managing its budgets. It was noted that the auditor was satisfied with the Annual Governance Statement and would be issuing an ‘unqualified’ value for money conclusion.

Members were informed that a local elector had objected to the financial statements and it was noted that the external auditor had completed his work and would be notifying the elector of his conclusions.

The Committee considered the external auditor’s report noting a number of issues identified, such as the value for money conclusion and the comments relating to the corporate procurement arrangements and savings from the Category Management programme. It was also clarified that the £34million resource gap reported for 2015/16 within the auditor’s report was a cumulative figure, as opposed to a specific gap for that financial year.

The Committee acknowledged that this audit represented a significant improvement compared to previous years and congratulated officers on their work in preparing the Statement of Accounts.

Members were mindful of the need to review the revised documents tabled at the meeting and also for the external auditor to review the final adjustments made, before being able to approve the Statement of Accounts.

Decision on 25 September 2013:

The Audit Committee agreed to adjourn the meeting of 25 September 2013 to 27 September 2013 at 4 pm in the Civic Room, Gun Wharf. This was to provide Members the opportunity to consider the Statement of Accounts that were tabled at the meeting and enable the external auditor to review the final adjustments that had been made to the accounts.

Discussion on 27 September 2013:

The Audit Committee was reconvened where it considered the Statement of Accounts, that had been tabled on 25 September 2013, and a revised section F ‘Principal Financial Statements’ and changes to section G ‘Notes to the Principal Financial Statements’ which had been tabled at the reconvened meeting. These documents highlighted where changes had been made to the accounts.

Robert Grant (BDO) and officers advised the Committee of the adjustments made to the accounts since they had been tabled at the meeting on 25 September 2013. It was noted that the majority were attributable to the treatment of schools within the accounts. Other issues highlighted related to the removal of £1.3million from the balance sheet, following a further review of leases, and a balancing item in the cash flow statement.

The Chief Finance Officer advised Members of a subsequent amendment made to the Management Representations Letter, Appendix VII of the Annual Governance Review, to reflect the position with the Cash Flow Statement. Members were also informed that a disclosure note relating to the Housing Revenue Account (HRA) would need to be added to the accounts. This would refer to a decision taken earlier on 27 September 2013, under urgency provisions, to move £2million from the HRA Reserve to the Council’s General Fund.

The external auditor and officers responded to Members’ questions on the accounts, as amended. This included clarification on the reporting of termination benefits and the depreciation of the Council’s property portfolio. In response to questions as to the value for money conclusion the external auditor advised that the governance structure within the Children and Adults directorate was a matter for the Council and would be reviewed by Ofsted.

The Audit Committee was advised that the external auditor anticipated that an ‘unqualified’ opinion would be issued on the Statement of Accounts. He would write to the Audit Committee confirming the position on 30 September 2013.

Decisions on 27 September 2013:

(a)               The Audit Committee noted the issues raised and judgements made by the external auditor, as presented in Appendix 1 of the report, and agreed the proposed response as set out at Appendix IV to the Annual Governance Review.

(b)               The Audit Committee agreed the revised Statement of Accounts tabled on 25 September 2013 and amended on 27 September 2013, subject to the inclusion of a further disclosure note relating to the transfer of £2million from the Housing Revenue Account Reserve to the Council’s General Fund.

(c)               The Audit Committee agreed the Management Representations Letter, attached at Appendix VII of the Annual Governance Review, as amended to include the following:

“Uncorrected balancing item – cash flow statement

We have considered the balancing item in the cash flow statement as highlighted in your report, together with the explanations provided by the Chief Finance Officer for not correcting the item, and we consider the matter to be immaterial to the view given by the financial statements.”