Agenda item
Statement of Accounts 2015/16 and External Auditor's Report
The Audit Committee has responsibility for considering issues raised by the external auditors as part of the process of approving the annual statement of accounts. The basis for this consideration is the “report to those charged with governance” also referred to as the ISA260 report. The Council’s external auditors, KPMG, produce the report following completion of the audit of accounts. The report is intended to identify any changes to the accounts, unadjusted mis-statements or material weaknesses in controls identified during the audit work. It also provides the findings from the value for money conclusion for the year.
Minutes:
Ben Ainsworth (Head of Finance) introduced the report into the work being completed by the Council’s external auditors, KPMG, in assessing the 2015-2016 financial accounts. The Committee heard that KPMG had identified seven audit adjustments and three significant risks during the course of its work, details of which were set out in the report.
Ben Ainsworth firstly drew the Committee’s attention to the £117.3 million increase in Property, Plant and Equipment assets. He mentioned that this large readjustment figure had arisen due to the Council being able to establish a more accurate valuation on Council dwellings. Conrad Hall (Chief Finance Officer) added that Council was required to put a valuation of Council dwellings but, without a full revaluation, accuracy for this could be difficult and valuations could be different to what they actually turned out to be. He noted that the Council had its five-yearly revaluation of Council dwellings between April and September this year which allowed for greater accuracy and had resulted in this readjustment.
Ben Ainsworth continued by advising the Committee that the full revaluation of Council dwellings also had a net impact in reducing the usable reserves by £24.8 million. He outlined that this was connected with the adjustment policy on Minimum Revenue Provision. The Committee was advised that there had been a change in policy relating to this, as previously much of this payment had been front loaded but this was no longer viewed to be an affordable method. Ben Ainsworth also mentioned that some of the additional changes to current assets and liabilities were connected to a change in output VAT.
Phil Johnstone (Director, KPMG External Audit) introduced KPMG’s role in this process in providing an unqualified opinion on the Local Authority’s financial accounts and Pensions Fund and ensuring that the Council complied with CIPFA/SOLACE guidance. He emphasised the quality of the support that had been provided by the Council’s finance team. He also drew the Committee’s attention to the headline audit adjustments, including the £24.8 movement between useable and unusable reserves as mentioned by Ben Ainsworth and the overall adjustment of the Council’s dwellings. He went on to discuss the three key risks which had been identified in the audit process, with more detail included in Section 3 of the KPMG report. These were specifically identified as: Oracle General Ledger and Purchase Ledger; the fair value of Property, Plant and Equipment assets and pension assets and liabilities. It was also noted that there was little to report on the other two risks which were identified as part of External Audit Plan 2015/2016 and mentioned to the Committee at the 23 March meeting.
In addition, Phil Johnstone mentioned the conclusions reached on whether the Authority had conducted its business in order to secure Value for Money (VFM). He reported that the Authority had made proper arrangements to secure VFM but that two specific risks had been identified. These were with regards to financial resilience caused by reduced central government funding and the development of governance and accounting arrangements for the Better Care Fund.
It was noted that in terms of completion, this was the final stage of the audit process but that KPMG was still waiting on the final version of the report for any amendments that needed to be made. Phil Johnstone also mentioned that KPMG were not yet in a position to issue the Audit Certificates, because they were still investigating six objections to the accounts from the public. He explained that five of these objections were with regard to the exit package which was issued to the Council’s former HR director and the final objection related to LOBOs (Lender Option Borrower Options) Loans.
A discussion ensued in response to a question from a Member of the Committee about the language of the report identifying decreasing central government funding as being a significant risk. The argument was made that the Council’s financial planning had been informed by a knowledge of the Revenue Support Grant decreasing, and thus the risk was lower than was implied in the report. Phil Johnstone stated that although central government funding was only one component of the Council’s funding it remained a significant risk at least for the next year because there remained a degree of uncertainty into how Local Authorities would fully adjust.
It was requested that it be put on record that the Committee expressed its thanks to both the Finance team and KPMG for their balanced approach and thoroughly detailed report.
RESOLVED that:
(i) The key issues and recommendations in the report, be noted;
(ii) The corrected audit adjustments, also be noted;
(iii) The statement of accounts, be approved;
(iv) The letter of representation to KPMG, also be approved,and
(v) The Chair be authorised to sign these on the Committee’s behalf.
Supporting documents:
- statement_of_accounts, item 8. PDF 85 KB
- appendix_1, item 8. PDF 105 KB
- appendix_2, item 8. PDF 433 KB