Agenda item

(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 2015/16 is nearly complete and that they wish to present their ISA260 report to this meeting. (AGC-007-2016/17).

The External Auditor presented the Annual Governance Report for 2015/16, 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 of the key matters that had arisen during the course of the audit. Following a review of infrastructure and community assets, a number of assets had been identified for which the Council was no longer responsible, and these had been written out of the accounts. The initial treatment of these assets was found to be incorrect, but no working paper had been prepared by Officers to support the initial treatment. The financial statements had been amended to reflect the correct treatment. A third Balance Sheet for the 2014/15 financial year had been prepared to show the restated opening balances and an audit recommendation had been raised regarding the preparation of working papers. The related parties identified in the draft financial statements had not met the definition for such transactions in the accounting standards. No formal assessment of the relationships disclosed had taken place, and the incorrect disclosures had been removed. An audit recommendation had been raised regarding related parties. Finally, the Council had been unable to confirm the location of some works relating to off-street parking associated with Council dwellings, due to the time elapsed since the expenditure was incurred. The total value was such that the issue identified was not indicative of a material overstatement of the value of Council dwellings, but an audit recommendation had been raised regarding the existence of assets.

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. 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 added that the progress made with the Transformation Programme, introduced to combat the threat to the Council’s finances from the continuing reductions in funding from the Government, was understood and any issues identified would be raised during the External Auditor’s regular reviews. However, the role of the External Auditor was to identify threats and not to monitor the progress of the Programme itself. The Chairman suggested that the Committee should receive regular reports from the Chief Executive regarding the progress of the Transformation Programme and any threats identified, as well as the implications for the Programme to provide financial savings. This was agreed by the Committee.

The Chairman stated that he was satisfied to sign the draft Representation Letter if the Committee was in agreement. The Vice-Chairman suggested that the sentence confirming the financial statements were free of material misstatements, should end “…as far as we are aware.” The External Auditor stated that the Council’s accounts had been signed off and were free of material misstatements. The Director of Resources reassured the Committee that the threshold for material misstatements had been set at £1.9million, and he was fairly certain that the Council’s accounts were free of such misstatements. The External Auditor suggested that the sentence should be amended to read “…material misstatements, including material omissions.” And this was agreed by the Committee.

Resolved:

(1)        That the Annual Governance Report for 2015/16 presented by the External Auditor be noted;

(2)        That the Chief Executive be requested to submit regular reports to the Committee concerning the Transformation Programme, the progress made, the threats to the Council identified by the Programme and the implications for providing financial savings to the Council; and

(3)        That the draft Representation Letter be signed by the Chairman of the Committee and the Director of Resources, subject to the following amendment:

            (a)        “We confirm that the financial statements are free of material            misstatements, including material omissions.”