Agenda item

Mr Neil Preece, from the external auditors Grant Thornton, presented the Audit Opinion Plan 2017/18.  In presenting this report a number of matters were emphasised for the Committee’s consideration:

·                The main consideration when working on the Audit Opinion Plan was materiality. A benchmark was utilised to enable the external auditors to focus on the bigger items and the same methodology had been used for this as in the previous year.

·                There were a number of key challenges and risks that had been identified for the Council.

·                There were four key risks that had been identified for the authority including; valuation of Council House properties, pension fund liabilities (a common risk for most Councils), employee remuneration and operating expenses.

·                The external auditors would pick up on some of the issues raised in the VfM conclusion for 2016/17.

After the report had been presented Members requested clarification on a number of areas:

·                The potential for the Council to improve in year financial reporting and the robustness of the authority’s Medium Term Financial Plan, in line with the external auditor’s VfM recommendations.

·                The significant proportion of operational costs for the Council and the reasons why these were higher than employee remuneration.  Members were advised that operational costs included expenditure on the Housing Revenue Account (HRA) and housing benefits.

·                The authority’s ability to meet the early close timeframe for publication of the audited local government accounts.  Officers advised that the Council had a timetable in place and was aiming to meet the new deadline.

·                The pension fund for Council staff and the extent to which the Council’s contribution could be calculated given that the authority participated in the Worcestershire pension fund alongside other Councils in the county.  Members were advised that the actuary calculated contributions based on the number of employees and other key variables.

·                The use of FRS 19 to calculate pension contributions.

·                The need to take into account not just existing employees but previous employees who had paid into the pension fund when calculating the Council’s pension liabilities.

·                The risks that had been identified for the Council in the VfM audit.  Members were advised that two of these risks followed recommendations that had been made the previous year and a further risk related to recent developments in the Housing Department.

·                The VfM audit was conducted by the external auditors in accordance with guidance from the National Audit Office (NAO).

·                The potential for assurance to be provided to Members at this stage in the year.  Members were advised that it would not be possible for the external auditors to provide assurance until the end of the process when a VfM conclusion would be issued.

·                The reason why any misstatements were considered trivial when valued at under £66,000 and how this figure had been identified.  Members were advised that the figure was selected based on a calculation of 1 per cent of the Council’s gross overall expenditure.

·                The extent to which errors involving figures valued at £500 or £1,000 would be identified by the external auditors.  The Committee was informed that testing was undertaken based on random sampling.  As such, if errors were not identified in one year it was likely they would be identified in a subsequent year.

·                The review of the installation of IT software for the Payroll system.  Officers explained that currently staff had to undertake work manually, though Officers were working with the software provider in an attempt to streamline this.

·                The length of time that it was taking to review this IT software, which had been scheduled for completion by September 2017.  Members were advised that this was a problem with the system which was also impacting on other local authorities.

·                The £66 million gross expenditure on revenue for the Council.  Officers clarified that this did not include capital costs and were figures for Redditch Borough Council only, rather than shared costs.

·                The size of the HRA account.  Officers clarified that this was £26 million.

RESOLVED that

the 2017/18 Audit Opinion Plan be noted and agreed.