Issue - meetings

(External Auditor) International Standard on Auditing 260 requires the External Auditor to report to those charged with governance certain matters before they give an opinion on the Statutory Statement of Accounts. The External Auditor has indicated that their audit of the Council’s Statutory Statement of Accounts for 2014/15 is nearly complete and that they wish to present their ISA260 report to this meeting. (AGC-008-2015/16).

The External Auditor presented the Annual Governance Report for 2014/15, the purpose of which was to advise the Committee of the significant findings arising from the audit of the Council’s financial statements and arrangements to secure economy, efficiency and effectiveness in the use of resources.

The External Auditor advised the Committee that one material misstatement had been identified, which related to incorrect data input into the Asset Management System. As a result of this misstatement, which concerned a historical cost depreciation adjustment, the balance on the Revaluation Reserve had been overstated by £6.554million with a corresponding understatement on the Capital Adjustment Account. It had been agreed to adjust for the error to ensure that both Statements were correctly stated. There had been one unadjusted audit difference identified, relating to the provision made by the Council for Non-Domestic Rates appeals, which would increase the draft surplus on the provision of services in the Comprehensive Income and Expenditure Statement by £88,000 to £15.863million. There was also a further misstatement of £877,000 in respect of Affordable Housing on the Balance Sheet, which should have been reported in the Comprehensive Income and Expenditure Statement.

The External Auditor highlighted the addendum report on the supplementary agenda, in respect of the valuation of the four Leisure Centres owned by the Council. As the figures for the original valuation of the Centres could not be verified, the Council had instructed an external Valuer to carry out a new valuation. The original valuation for the four Centres was £27.162million as at 31 March 2015; however, it was found that the useful remaining lives of three of the centres had been overstated, and the revised valuation had been calculated at £12.335million. This represented a reduction of £14.827million, which had also resulted in a corresponding reduction in the value of the Council’s Balance Sheet. Accounting requirements also necessitated that £12.690million of this reduction be charged to the Revaluation Reserve, with the remaining £2.137million charged to the Comprehensive Income and Expenditure Statement.

Subject to the adjustments outlined above, the External Auditors expected to issue an unqualified true and fair opinion on the Financial Statements for the year ended 31 March 2015. The External Auditor thanked staff from the Council for their co-operation and assistance during the audit.

The External Auditor reported that the Council’s key financial systems were considered generally adequate as a basis for preparing the financial statements, with no significant deficiencies identified in the Council’s internal controls during the course of the audit. The Annual Governance Statement was not considered misleading and complied with the necessary guidance issued by the Chartered Institute of Public Finance and Accountancy (CIPFA). It was also intended to issue an unqualified value for money conclusion as it was felt that the Council had proper arrangements in place to secure economy, efficiency and effectiveness in its use of resources for the year.

The Committee expressed grave concern over the adjustment for the valuation of the Council’s Leisure Centres. It was explained that this situation had  ...  view the full minutes text for item 20

(Director of Resources) To consider the attached report (FPM-014-2015/16).

The Director of Resources presented a report regarding the key issues arising from the annual Governance Report for 2014/15. The International Standard on Auditing 260 required the External Auditor to report to those charged with governance on certain matters before giving an opinion on the Statutory Statement of Accounts.  The External Auditor had indicated that their audit of the Council’s Statutory Statement of Accounts for 2014/15 would be presented to the Audit and Governance Committee on 21 September 2015.

The report highlighted the significant findings of the audit of the financial statements of the Council for the year ending 31 March 2015, and the Director of Resources advised the Cabinet Committee of the following key findings arising from the audit:

(a)          A material misstatement relating to incorrect data input into the Asset Management System, which the balance on the Revaluation Reserve was overstated by £6,554,747 and the balance on the Capital Adjustment Account understated by the same account;

(b)          There was one unadjusted audit difference which increased the draft surplus on the provision of services in the comprehensive income and expenditure account by £88,000 to £15.863 million (from£15.775);

(c)          Subject to satisfactory completion of the outstanding work, it was anticipated that an unqualified true and fair opinion would be issued on the financial statement for the year;

(d)          No significant deficiencies in internal controls had been identified;

(e)          The Annual Governance statement was not misleading or inconsistent with other information and complied  with the ‘Delivering Good Governance in Local Government criteria;

(f)           The Whole of Government Accounts (WGA) element was below the threshold for a full assurance review and no further work was required other than to submit the section on the WGA Assurance Statement to the WGA audit team with the total values for assets, liabilities, income and expenditure; and

(g)          The auditors were satisfied in all significant respects that the Council had put in place proper arrangements to secure economy, efficiency and effectiveness in the Council’s use of resources, and proposed to issue an unqualified value for money conclusion.

The Director of Resources advised that valuations of the Council’s leisure centres, which had been performed by the Council’s internal valuer, had been significantly higher than expected and the working papers that supported the valuation had not been located. Therefore the auditors had requested that the Council revisited the valuations and include supported working papers. The Council’s Estates and Valuation team had provided an indicative opinion on the value of the assets but were unable to provide a formal valuation because of a lack of experience valuing this type of asset. The valuation had been received and reduced from approximately £27 million to £12.5 million, although this would not effect the level of Council Tax or make any changes to the Medium Term Finance Strategy and accounts should be signed off shortly.

Resolved:

(1)          That the External Auditor’s Annual Governance Report be noted.

Reasons for Proposed Decisions:

To ensure that Members were informed of any significant issues  ...  view the full minutes text for item 25