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 2017/18 is nearly complete and that they wish to present their ISA260 report to this meeting. (AGC-007-2018/19).

The External Auditor introduced the audit report for the year ended 31 March 2018, highlighting the key findings of the financial statement of the Council. They had substantially completed their audit procedures in accordance with the planned scope and their objectives had been achieved, subject to the matters set out in the report.

The key findings were;

(a)          That no additional significant audit risks had been identified during the course of the external audit procedures subsequent to the Audit Plan on 19 January 2018;

(b)          That the final materiality was £2,000,000, which had not required reassessment;

(c)          That there were no significant changes to the planned audit approach nor were any restrictions placed on the audit;

(d)          That the audit identified the following material misstatements:

• Upon transfer of the Langston Road Retail Park from Assets Under Construction to Investment Properties, the Revaluation Reserve balance was not removed via the Capital Adjustment Account. The revaluation reserve was therefore overstated by £6.503 million and this had been adjusted in the revised financial statements;

• The St John’s Road site was classified as an asset held for sale within current assets at £6.139 million in the draft financial statements. However, planning permission had not yet been granted on the site and therefore the site should have been classified as a surplus asset within non-current assets. Surplus assets were consequently understated by £6.139m and this had been adjusted in the revised financial statements; and

• The Essex Pension Fund actuary reissued its IAS19 actuarial valuation report in June 2018 following publication of the Council’s draft financial statements as there had been a significant movement in the estimate used in the actuarial calculation and the actual fund value at the year end of £111 million. The impact for the Council was that the pension scheme liability had increased by £2.859 million to £74.860 million and this had been adjusted in the revised financial statements.

(e)          That there had been no unadjusted audit differences;

(f)           That the audit identified no significant deficiencies in internal controls;

(g)          That following the receipt of the draft accounts, the Pension Actuary had  issued an updated IAS19 report and the audit was in progress;

(h)          That a number of presentational changes had been made to the draft financial statements as a result of the audit;

(i)            That management reported at the end of the year a General Fund balance of £6.7 million, which was an improved position compared to the opening balance of £0.5 million predominantly due to a change in accounting treatment. Management were planning for reserves to be 37% of the Council’s net funding requirement by 2021/22 with the minimum requirement being set by Members at 25%;

(j)            That the Council had healthy levels of reserves when compared to the minimum requirement and a strong asset base. The impact of the Transformation Programmeand the commercial strategy the Council had adopted on its finances were appropriate to continue to deliver the strategies;

(k)          That subject to the successful resolution of outstanding matters, it had been anticipated that a  unmodified opinion on the financial statements for the year ended 31 March 2018 would be issued;

(l)            That there were no exceptions to report in relation to the consistency of the Annual Governance Statement with the financial statements; and

(m)         The Council was below the audit threshold for a full assurance review of the Whole Government Accounts return and no other powers or duties under the Local Audit and Accountability Act 2014 had been exercised.

The work of the External Auditors was still ongoing and would continue right up until the deadline of 31 July 2018.

The Committee raised concerns about the process and time given, to give a fair judgement on the External Auditor’s Annual Governance Report.

Resolved:

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