Agenda item

Reports from the External Auditor

(External Auditor) To consider the attached reports (AGC-021-2014/15):

(a) Audit Plan 2014/15;

(b) Planning Letter 2015/16; and

Minutes:

The External Auditor presented three reports to the Committee, the first being the Audit Plan for 2014/15 which summarised the significant risks with an impact on the audit and the key outputs from the Audit, the second was the Planning Letter for 2015/16 which detailed the proposed fee and audit arrangements, and finally the Grant Claims & Returns Certification which had been previously circulated to the Members of the Committee.

In respect of the Audit Plan for the 2014/15 financial year, the External Auditor reported that the Audit Plan summarised the proposed work to be undertaken for the audit of the 2014/15 financial year. It would be designed to respond to significant risks and indicated where the focus of resources would be in providing an opinion on the financial statements and value for money conclusion. There were four significant risks which would impact upon the Audit, these being: Management Override; Revenue Recognition; Valuation of Land & Buildings; and Financial Resilience. The Plan set out the proposed fee for the Audit as £86,229 plus VAT, which was an increase of £900 in comparison to the fee previously reported in the Planning Letter. There was a further fee of £24,710 plus VAT for the certification of claims and returns, which was a reduction of £2,090 from the figure previously quoted in the Planning Letter as the Audit Commission had removed the certification of Pooled Capital Receipts Return from the scope of the work.

The External Auditor informed the Committee of the expected key outputs from the audit:

· a report on any significant deficiencies in internal controls arising from the interim audit in May 2015;

· a final report to those charged with governance in September 2015;

· the opinion on the financial statements, a value for money conclusion, and certificate by 30 September 2015;

· an assurance statement on the Whole of Government Accounts by 7 October 2015;

· a summary of findings from the audit in the Annual Audit Letter in October 2015; and

· the results of the Grant Claims and Returns certification work in January 2016.

In response to a question from one of the Members, the External Auditor stated that the Council could reclaim Value Added Tax (VAT) from Her Majesty’s Revenue & Customs (HMRC), however it was incumbent upon Finance Officers to ensure that the Council did not exceed the 5% De Minimis rule otherwise the Council would lose this ability. The rules regarding the claiming back of VAT was complicated, and as a local authority the Council could claim back some categories of VAT but not others.

With regard to the Planning Letter for 2015/16, the External Auditor reported on the proposed fees and programme of work for the 2015/16 financial year. The proposed core audit fee would reduce to £64,672 from £85,329 in 2014/15, whilst the proposed Certification Fee would also reduce from the £24,884 in 2014/15 to £18,533. The total fee of £83,205 represented a 25% reduction in comparison to 2014/15 as a result of the further audit procurement exercise undertaken in April 2014. The focus of the planned work would again be on the audit of the financial statements, the value for money conclusion and the Whole of Government Accounts return.

The planned outputs for 2015/16 were as follows:

· a detailed Audit Plan in March 2016;

· a report on any significant deficiencies in internal controls arising form the interim audit in May 2016;

· the final report to those charged with governance in September 2016;

· the opinion on the financial statements, the value for money conclusion, and certificate in September 2016;

· the Assurance Statement on the Whole of Government accounts and report to the National Audit Office in October 2016;

· the Annual Audit Letter in October 2016; and

· the Grant Claims and Returns Certification report in January 2017.

In relation to the Grants Claims and Certification report for 2013/14, the External Auditor highlighted the key issues arising from the work, along with recommendations for the future and an action plan. An adjustment was required for the Housing Benefit Subsidy, which had led it to being qualified. The impact of this amendment was an increase of £6,644 in the amount payable to the Department of Works & Pensions, although the External Auditor acknowledged that this amendment was very small when compared against a claim worth nearly £38.5million. For the Pooled Housing Capital Receipts Return, an issue was identified relating to the omission of new build expenditure incurred during 2012/13. This omission was corrected but it had no impact on the value of the Return.

There were four recommendations for future action, all of which had been accepted by Officers. For the second recommendation in the 2013/14 Action Plan, the External Auditor stated that they would expect refresher training to be undertaken by Staff to cover those areas where differences had been found in the treatment of rent liability, eligible rent and tax credits. The management response stated that refresher training would be taking place in March 2015, and the Director of Governance undertook to report back to the committee whether the training had been undertaken.

Resolved:

(1) That the following reports from the External Auditor be noted:

(a) the Audit Plan for the audit of the 2014/15 financial year;

(b) the Planning Letter outlining the proposed fees and programme of work for the 2015/16 financial year; and

Supporting documents: