Agenda item

To present Members with Grant Thornton’s Audit Findings Report in relation to the final accounts for 2015/16.

(Report attached – appendices to follow)

Members were presented with Grant Thornton’s Audit Findings Report in relation to the final accounts for 2015/16.  Report appendices 1 and 2 – Audit Findings Report and management’s Letter of Representation – had been circulated under cover of Additional Papers in advance of the meeting. 

Mr Percival provided a general overview of the report.  As the Council’s external auditors Grant Thornton were required to report whether, in their opinion, the financial statements gave a true and fair view of the financial position of the Council and its income and expenditure for the year, and whether they had been properly prepared in accordance with the Code of Practice on Local Authority Accounting.  Grant Thornton also needed to satisfy themselves as to whether the Council had made proper arrangements to secure economy, efficiency and effectiveness in its use of resources; the ‘value for money’ conclusion. 

Whilst the audit was almost complete some procedures were currently in the process of being finalised, including clearance of audit queries and final review of audit work relating to consideration of investment properties and PPA (purchase price allocation) disclosure of Threadneedle House.  Work was currently being undertaken on certification of the Council’s Housing Benefit subsidy claim on behalf of the Department for Work and Pensions.  This was due to be finalised at the end of November and the outcome of this would therefore be reported via a later report to Committee.

Mr Percival stated that the Council was a long way ahead of where it had been this time last year with the 2014/15 accounts.  However, whilst there had been improvements in the quality of the financial statements and supporting working papers, further improvements were still needed in this area, specifically:

·       working papers to support entries in the accounts to be available at the start of the audit, which should clearly link to items in the financial statements; and

·       audit queries needed to be resolved in an efficient and timely way to support delivery of the audit.

Significant governance issues relating to Grant Thornton’s statutory recommendations had not been adequately explained in the draft version of the Council’s Annual Governance Statement, and it had been agreed with Officers that amendments would be made to give more information regarding the responses to the recommendations.  Control issues had also been identified as part of the testing process in relation to:

·       complexity of the ledger coding structure;

·       inaccuracies in payroll payments; and

·       supporting evidence for charges.

No new issues had been identified which required Grant Thornton to apply their statutory powers and duties for 2015/16.  At the end of the 2014/15 audit four recommendations had been issued under section 11 of the Audit Commission Act 1998.  Whilst it was Grant Thornton’s overall view that improvements had been made since they had issued their recommendations, further progress on these was needed.  The key actions they expected the Council to take were to:

·       improve the quality and timeliness of financial statements production and the supporting working papers and resolution of audit queries, to ensure the deadline for both accounts production and audit completion is achieved;

·       improve the reporting of the annual budget and Medium Term Financial Strategy to Members, specifically to include the impact of future spending plans on reserves and balances; and

·       improve the clarity and consistency of in-year reporting of budget variances and forecasts of year-end outturn, including the actions to address adverse budget variances.

Whilst Grant Thornton would be giving an unmodified opinion on the financial statements, a qualified ‘except for’ value for money conclusion was being issued due to the need to implement improvements in budget monitoring and financial planning.  It had been concluded that there were weaknesses in the Council’s arrangements for:

·       reliable and timely financial reporting that supported the delivery of the strategic purposes;

·       planning finances effectively to support the sustainable delivery of strategic purposes and maintain statutory functions; and

·       governance arrangements.

Mr Percival made clear that they were not saying that Officers did not have a grasp on the Council’s financial position as it was felt the Council had good arrangements at an Officer level to manage the budgets, however the in-year reporting to Members was inconsistent and difficult to follow.  Grant Thornton had therefore concluded that there were weaknesses in the Council’s arrangements to demonstrate that it could produce reliable and timely financial reporting which supported the delivery of the strategic purposes.

Ms Joberns spoke on the audit findings against significant and other risks sections of the report, and on issues surrounding long term debtors and legal charges on properties, the testing of journals, recharges for income and expenditure and employee remuneration.  Officers confirmed that actions were currently being undertaken to address some of the issues highlighted, which included a full review of long term debtors with legal charges on properties to ascertain the legal status of all such charges.  In response to a Member’s question as to whether the Member who had received the duplicate mileage payment had been asked to pay back the additional payment, Officers stated that they would speak with the Democratic Services Manager in this regard. 

Ms Joberns spoke on the outstanding valuation of investment properties element of the report and the required amendment which had been agreed with Officers to the previous year’s accounts in this regard.  Members approved management’s course of action in relation to the unadjusted misstatements relating to long term debtors and valuations disclosure.

Grant Thornton’s Action Plan at Appendix A to the report was noted.  Mr Percival stated that the external auditors would work with Officers on the recommendations to ensure that a plan to address these was put in place.  Officers advised that they would be working through implementation dates shortly, details of which it was anticipated would be made known to Members via the Budget Scrutiny Working Group by the end of October.

Mr Percival highlighted the reduced fees for the 2015/16 accounts and brought to Members’ attention the representation letter appended to the report, which the Committee was asked to approve.

Members requested that their thanks to the Council’s Finance Team for their work on the 2015/16 accounts be formally recorded.  Whilst it was noted that there were still improvements to be made in some of the accounting processes, Members congratulated staff on the significant improvements which had been made since the closedown of the 2014/15 accounts. 

RESOLVED that

1)          the Audit Findings Report 2015/16, as circulated under cover of Additional Papers, be noted; and

2)          the draft Letter of Representation, as circulated under cover of Additional Papers, be approved.