Agenda item - Grant Thornton - Audit Findings Report 2015/16 (Appendix to follow)

Agenda item

Grant Thornton - Audit Findings Report 2015/16 (Appendix to follow)

Minutes:

Representatives from Grant Thornton presented the Audit Findings Report in relation to the final accounts 2015/16.  For this item the draft letter of representation, detailing the Financial Statement for the year ended 31st March 2016, was tabled for Members’ consideration (attached at Appendix 1 to these minutes).  During the presentation of this report the following matters were highlighted:

 

·                Grant Thornton had made no adjustments to the accounts, though had identified one area in respect of assets that could impact on the accounts if an adjustment was made.

·                The external auditors were anticipating that they would be issuing an unqualified opinion on the accounts.

·                The process followed by the Council to issue the accounts had improved significantly when compared to the previous year, in line with the Section 11 recommendations.

·                Further improvements could be made to the process to ensure that in future the Council could submit the accounts in line with new earlier deadlines from 2018.

·                Grant Thornton had identified weaknesses in the Council’s arrangements, particularly in respect of financial reporting, and were issuing a qualified ‘except for’ value for money conclusion. 

·                For the risk in terms of management over-ride of controls the testing of journals work undertaken by the auditors had required significant time due to the complexity of the Council’s ledger and cost coding arrangements. 

·                The risk in terms of the valuation of Parkside had identified no issues for the Council, which shared this asset with Worcestershire County Council.

·                Since the publication of the report more information had been received regarding the valuation of the former Council House site and the external auditors were satisfied with this detail.

·                Grant Thornton had reviewed the assumptions, qualifications and controls used by the actuaries for staff pensions. 

·                When considering operating expenses no problems had been identified for 2015/16 but an issue had been identified for the previous year in relation to an invoice for £4,000.  Following further investigation Grant Thornton had discovered no further mistakes and this was not considered to be a systemic problem. However, this investigation had highlighted challenges in respect of invoices being recharged and included on the general ledger.

·                External auditors had noted that the volume of invoices to Redditch Borough Council for shared services was such that improvements could be made to streamline the process.

·                Three assets had been identified for which the Council received charges though the ownership status was unclear. 

·                These three assets comprised low cost housing that had been transferred to BDHT in the early 2000s.

·                Legal Services had undertaken some initial investigations and determined that additional time was required to provide further clarification regarding legal ownership arrangements.

·                These were separate to five other assets detailed in the statement of accounts which had been reclassified by the Council as operational assets, having previously been listed as investment assets, following consultation with Grant Thornton.

·                The external auditor’s approach to undertaking the Value for Money (vfm) assessment had changed in 2016/17 in line with national requirements.

·                For the Financial Outturn and Medium Term Financial Strategy the external auditors had discovered that the Council had good arrangements at the officer level for managing budgets.

·                However, improvements could be made to the ways in which Members were engaged in the budget setting process and supported to make informed decisions about the budget.

·                Consideration had been given to the progress made by the Council in respect of Section 11 recommendations and a decision had been taken not to issue further recommendations at this time.

·                The final auditing fees charged by Grant Thornton to the Council were £57,830.

 

Additional points were also raised for the Committee’s consideration about the report by the Executive Director of Finance and Corporate Resources:

 

·                Officers were working to improve the financial monitoring reports presented for the consideration of Members.

·                Work was also being undertaken to provide further clarity in respect of the Council’s chart of accounts.

·                An Efficiency Statement had been produced for the Council which provided a strategic overview of the local authority’s financial position.

·                Officers were aiming to present a balanced and robust four year programme for the authority.

·                Budget reports would be presented for the consideration of the Finance and Budget Working Group, Overview and Scrutiny Board, Cabinet and Council as part of an enhanced approach to involving Members in the budget setting process.

 

Following presentation of the report the following points were considered by Members in detail:

 

·                The potential for the external auditor’s final auditing fee for the Council to be recorded on the front page of the report.

·                The length of delays in terms of the Council paying external organisations when invoiced.

·                The arrangements in place to advertise the statement of accounts the previous year, the extent to which this complied with statutory requirements and the information provided about this in the report.  An apology was provided for the lack of a reference to this in the report and it was agreed that Officers should discuss this further with the external auditors and report back at a later date.

·                The improvements that could be made to the ways in which budgetary monitoring information was reported for Members’ consideration.

·                The need for action to be taken and difficult decisions to be made to balance the Council’s budget in future years.

·                The extent to which funding had been transferred from reserves to balance the budget in recent years.

·                The use of virement and the number of cases in which this had occurred at a level close to that requiring approval from full Council.  Officers agreed to obtain further information on this subject for Members’ consideration.

·                The impact of achieving budget savings on the services received by the Council’s customers.

·                The legislation requiring advertising of the accounts, the Audit Commission Act 1998, and the extent to which this should be updated to reflect the growth in the internet and electronic forms of communication.

·                The promotion of the Council’s work on the statement of accounts on the Council’s website.

·                The impact of using page numbering for the report alongside page numbering for the agenda pack on the clarity of proceedings.  Members were advised that the focus should always be on referring to the page numbers in the agenda pack.

·                The potential for many of the points considered during Members’ discussions to be raised at future meetings of the Overview and Scrutiny Board.

 

At the end of these discussions Members briefly considered the potential content of the Council’s Medium Term Financial Plan.  In challenging economic circumstances for local authorities Members suggested that the deficit position for the Council across the full 4 year period that would be covered by the plan should be reflected in that report.  The Committee accepted that if this was to occur the first year of the period would still need to achieve a balanced budget.  However, Members commented that this would provide further clarity about the financial position of the Council and would help when making decisions about the budget.

 

The Committee also discussed in some detail the level of funding allocated by the Council each year to address the pension fund liability and the extent to which this had been set at an appropriate level to meet actuarial funding requirements.  Members were advised that the external auditors checked whether the estimate was a fair reflection of the Council’s liability as had been set by Mercers, the Worcestershire Actuary.  However, the external auditors were not required to assess the proportion of staff who were due to receive particular pension settlements.  Given the complexity of these arrangements and the significant level of the pension fund liability Members agreed that it would be useful to receive a presentation on the subject of the Council’s pension arrangements at a future meeting.

 

Following these discussions the Committee

 

RECOMMENDED to Council

 

(1)       The approval of the draft letter of representation as included in the attached appendix; and

(2)       That the Council’s Medium Term Financial Plan should always be produced displaying the total deficit for the authority.

 

RESOLVED that the Audit Findings Report 2015/16 be noted.

 

Supporting documents: