Members received for consideration Grant Thornton’s Audit Findings Report for the 2016/17 Statement of Accounts. Mr Neil Preece and Ms Mary Wren of Grant Thornton presented the report.
Mr Preece advised that the audit was almost complete and that, subject to completion of some minor elements, Grant Thornton had given an unqualified opinion on the accounts and a qualified Value for Money opinion. The accounts had been submitted to Grant Thornton on 27th June; within the current statutory deadline.
Mr Preece reminded Members that with effect from the 2017/18 financial year draft accounts would have to be submitted to the external auditors by the end of May; a month earlier than at present. The external auditors would then have to complete their audits by the end of July, rather than the end of September. Grant Thornton had been working with Officers in preparation for the new statutory deadlines. The audit team had some concerns as to whether the Council would be able to produce the accounts to the required standard within the new timeframe, particularly as Officers would be doing this for two authorities. Other authorities had produced accounts within the new timescale but not to the same quality as previously. Concern was also expressed in relation to two key members of staff who had been involved in the production of the 2016/17 accounts, but who would not be at the Council during preparation of the 2017/18 accounts.
In order to address Grant Thornton’s concerns Officers advised that they were currently in talks with the Chartered Institute of Public Finance and Accountancy (‘CIFPA’) regarding a supported software system which could close down accounts at the touch of a button – known as the ‘Big Red Button’ (‘BRB’). Officers were working with CIPFA on a model for this, for procurement in 2018. Members were advised that the BRB had already been piloted in some authorities. Mr Jones queried whether the Council needed to factor in any risk for this, in the event it didn’t work. Officers explained the testing process and the support the Council would receive from CIPFA. Paul Field, who had worked on the Council’s 2016/17 accounts, and who would shortly be leaving the authority to work at CIPFA, was thanked for his work. Officers added that the Council’s new Financial Services Manager, Chris Forrester, was due to start in mid-November. It was also anticipated that there would be a secondment opportunity from Solihull Council for the second member of staff who would be taking maternity leave during the preparation of the 2017/18 accounts.
Mr Preece went on to highlight other key messages from the report, including materiality and the audit findings against significant risks. Officers responded to Members’ questions, including the reason for the Council’s failure to complete its pension PCF1 returns to the County Council, and Officers’ actions in this regard. The invoice issues highlighted under Internal Controls and the Management Response to this was also discussed. Members queried whether sending out a return envelope might assist in the processing issue. Officers responded that there would be a cost involved with this but that they could look into the position. Further clarification was also sought by Members in relation the Journal authorisations’ issues.
It was noted that two of the IT control issues identified in the previous year – in relation to absence of proactive reviews of logical access within Civica IBS and E-Financial and the lack of documentation batch administration policies and procedures – had not met the anticipated completion date of the end of August, and were due to be completed at the end of October. Whilst a number of adjustments to the draft accounts had been identified during the audit process, Grant Thornton had not identified any adjustments which had not been made within the final set of financial statements, which was positive news.
Mr Preece closed by explaining Grant Thornton’s Value for Money findings and agreed recommendations for improvement, and Management’s responses to these in the Action Plan appended to the report. Grant Thornton were working with Officers on a number of issues, including the development of RAG rating/narrative within budget monitoring reports to improve in-year financial reporting to Members. Financial sustainability and robustness of the Medium Term Financial Plan, which were seen as weaknesses, were also discussed. Further work was required to show how proposed savings plans of £1m would be met. Officers stated that if there was not a robust business case for the savings these should be identified as ‘gaps’ in order to avoid giving any false reassurances. Grant Thornton were working with Officers to provide stronger business cases, with business cases to be approved by Officers and then Members.
Members agreed that there needed to be a clear picture of where proposed savings would come from. Officers advised that the Senior Management Team would be undertaking an additional piece of challenge work with all Heads of Service to go through savings, to ensure that the £1m identified was realised. The Quarter 2 savings report would be based on the Solihull Council model and would make clear the background to any savings, including RAG rating details. There would also be a solid business case for all savings and a consistent approach for all business cases from 2018/19 onwards.
Officers referred to the Action Plan for the Financial Statements and accompanying recommendations, and advised that further details of actions would be brought to the next meeting, with progress updates to be given at all subsequent meetings. Members queried what would happen in relation to the Value for Money recommendations and Officer actions for these, which it was agreed would also be monitored at all future meetings. Members further requested that they be provided with a copy of the timetable for production of the 2017/18 financial statements (which they had been given for the 2016/2017 accounts), which Officers agreed to forward on.
1) the Audit Findings Report 2016/17, as attached at Appendix 1 to the report, be noted; and
2) the draft Letter of Representation, as attached at Appendix 2 to the report, be approved.