Agenda item
Audit Commission documents
This report includes the following documents, produced by the Audit Commission in their role as the Council’s external auditors:
(i) Appendix 1 - Progress Report March 2010
This briefs the Audit Committee on work currently being planned or undertaken by the Audit Commission. It includes a commentary on International Financial Reporting Standards (IFRS) and a mandatory letter to the Audit Committee regarding its response to fraud and other matters.
(ii) Appendix 2 - Certification of Claims and Returns – Annual Report February 2010
This report summarises the significant issues from the Audit Commission certification of grant claims for 2008.09.
(iii) Appendix 3 - Annual Audit Letter December 2009
This report summarises the findings from the 2008/09 audit. It includes issues arising from the audit of the financial statements and assesses the arrangements to secure value for money in Brent’s use of resources.
(iv) Appendix 4 - Audit Opinion Plan February 2010
The plan sets out the proposed audit work to undertake for the audit of financial statements 2009/10. The plan is based on the Audit Commission’s risk based approach to audit planning and reflects:
· audit work specified by the Audit Commission for 2009/10;
· current national risks relevant to local circumstances; and
· local risks
(v) Appendix 5 - Pension Fund Opinion Plan February 2010
The plan sets out the proposed audit work to undertake in relation to the audit of financial statements 2009/10 for Brent Council’s Pension Fund accounts. The plan is based on the Audit Commission’s risk-based approach to audit planning which assesses:
· current national risks relevant to local circumstances; and
· local risks and improvement priorities.
(vi) Appendix 6 - Human Resources Follow Up January 2010
This plan sets out progress made since previous reviews carried out in 2005 and 2008.
Minutes:
Duncan McLeod (Director of Finance and Corporate Resources) referred to the six documents produced by the Audit Commission in their role as the Council’s external auditors. He drew members’ attention to the fact that the progress report on the work currently being planned or undertaken by the Audit Commission included a commentary on International Financial Reporting Standards (IFRS). He also pointed out that the Audit Commission’s letter to the Committee on compliance with International Auditing Standards was not part of the progress report, as it was felt that it was difficult to do justice to it at the meeting. A separate meeting with the Chair and the Committee would be organised to discuss it. Duncan McLeod also drew members’ attention to the fact that the Annual Audit Letter summarising the findings of the 2008/09 audit had been presented to the Council’s Executive in January 2010.
(i) Progress Report, March 2010
Paul Viljoen (Audit Commission) introduced the report, which briefed the Committee on work currently being planned or undertaken by the Audit Commission. He reported that the 2008/09 audit programme had been completed, and that two supplementary opinion plans and a report on grants were on the Committee’s agenda. Paul Viljoen highlighted the fact that local government financial statements needed to comply with IFRS from 2010/11 onwards and that Brent had made progress towards this. Responding to a question about the Audit Commission’s supplementary fee, Duncan McLeod informed the Committee that the single financial accounting system would be implemented from 1 April 2010. He hoped that this would lead to a reduction in fees in future years.
(ii) Certification of Claims and Returns – Annual Report, February 2010
Paul Viljoen (Audit Commission) informed the Committee that this report showed an improvement on the previous year, and this had been reflected in the Audit Commission’s reduced fee. However, there were still issues relating to the certification of grants and amendments and qualification letters. Paul Viljoen drew members’ attention to the fact that the general auditing concepts of reasonableness and materiality did not apply to grants, as a result of which matters that were sometimes very minor needed to be reported.
(iii)Annual Audit Letter, December 2009
Andrea White (Audit Commission) introduced the Annual Letter, which summarised work on the 2008/09 audit. She reported that everything reported on in the letter had already been put before the Committee. The main issues were that an unqualified opinion had been issued on the main accounts and the Pension Fund, as well as a conclusion on value for money. The recommendations in the Annual Governance Report had been agreed with officers and were being taken forward. Responding to members’ disappointment at the scored judgement on governance, Duncan McLeod informed the Committee that the Audit Commission’s commentary and action plan on areas for improvement was helpful, and that the Council had worked hard on this. The assessment of the current year was already being undertaken, with improvements expected. The governance judgement was affected by issues around audits of foundation schools, for example, which the Council would now undertake in addition to the audits carried out by the schools’ own auditors. Duncan McLeod added that the Council would not be responsible for auditing the academies, as they lay outside the Council’s financial framework. Simon Lane (Head of Audit and Investigations) informed members that the Council was now imposing itself as auditor on the foundation schools because it had found that some audits were inadequate. He agreed to inform members if the Council met with obstruction in this process. In response to questions from members, Simon Lane reported that it could be difficult to get schools’ auditors to release audit working papers, and that the contract was between the individual school and its auditors. While the Council could write terms of engagement with auditors and get schools to do the same, the test would be whether auditors would release working papers. Andrea White added that this was a complex arrangement, but that the Audit Commission was interested in the Council’s own arrangements. She added that it was the responsibility of the Director of Finance to set up arrangements to sign off the Dedicated Schools Grant, incorporating checks and balances, and that the Audit Commission would comment on the overall arrangements. Duncan McLeod informed members that the Council’s concern was that appropriate arrangements were in place. He added that, as soon as some of the audits of foundation schools had been carried out, the programme would be reviewed and amended if not adequate.
(iv)Audit Opinion Plan, February 2010
Paul Viljoen (Audit Commission) introduced the Audit Opinion Plan, which followed from the audit plan issued the previous year, setting out the work to be carried out and specific risks identified to date. The Audit Commission’s fee had increased by £10,000 in response to specific risks identified. These included the accounting treatment of Private Finance Initiative (PFI) projects. This was part of the wider scope of IFRS, but was being introduced a year early. Other risks concerned the results of internal audit work, as well as irregularities at an individual school and subsequent arrangements. Responding to members’ questions, Paul Viljoen explained that the PFI issue related to accounting for PFI projects as assets and liabilities in the Council’s accounts. This was a complex chain of events, involving the need to make accounting decisions with a higher chance of errors.
(v) Pension Fund Opinion Plan, February 2010
Paul Viljoen (Audit Commission) briefed the Committee on the Pension Opinion Plan, which followed from the plan issued the previous year, setting out the work to be carried out and specific risks identified to date. The report had already been presented to the Pension Fund Sub-Committee. The risks identified related to unquoted investments, the valuation of which was challenging, the completeness of investment commitment disclosures and full compliance with the relevant Statement of Recommended Practice (SoRP).
While recognising the difference in the roles of the two committees, members discussed the apparent duplication of work in that this document had also been considered by the Pension Fund Sub-Committee. Duncan McLeod acknowledged that there was a level of duplication, and agreed that some anomalies needed to be resolved. He had referred the matter to the Interim Borough Solicitor, together with the proposal that the Audit Committee have an independent chair.
(vi)Human Resources Follow-Up Report, January 2010
Andrea White (Audit Commission) informed the Committee that the Audit Commission had reviewed Human Resources (HR) three times since 2003. Improvements had been made, but the 2005 review reported that the pace of improvement was slow. The 2008 review commented on progress in all areas, with work still to do. Since then the management structure had changed, and HR was now at the centre of the Council’s business. However, improvements needed included a system of early warnings and good performance information. The role of the strategic HR group also needed to be looked at. The report was positive in the main, and arrangements were now good, despite the slow start.
RESOLVED:
that the report and Audit Commission documents be noted.
Supporting documents:
- Audit Commission Documents - cover report, item 5. PDF 61 KB
- Appendix 1 - 2009-10 Progress Report Brent LBC March 2010 final, item 5. PDF 212 KB
- Appendix 2 - 2008-2009 - Certification of Grant Claims and Returns - London Borough of Brent v1 0, item 5. PDF 265 KB
- Appendix 3 - 2008-2009 - Annual Audit Letter - Brent LBC v1 0, item 5. PDF 240 KB
- Appendix 4 - 2009-2010 - Audit Opinion Plan - London Borough of Brent v1 0, item 5. PDF 272 KB
- Appendix 5 - 2009-2010 - Opinion Plan - Brent Pension Fund v1 0, item 5. PDF 228 KB
- Appendix 6 - 2009-2010 - Human Resources - Follow-up - Brent LBC v1 0, item 5. PDF 216 KB