Agenda item

This Annual Audit Letter summarises the outcome from KPMG’s audit work at the London Borough of Brent in relation to the 2015/16 audit year. The report also communicates key messages to key external stakeholders, including members of the public.

Phil Johnstone (Director at KPMG) introduced the Annual Audit Letter which summarised the outcome of the KPMG’s audit work at the London Borough of Brent in relation to the 2015/16 audit year. He noted that some of the contents of the report had been reported to the previous meeting of the Audit Committee on 22 September 2016 and the amendments made had been reflected in the document.

The annual audit letter set out that the audit of the council's accounts had resulted in an unqualified audit opinion, although some significant amendments had been required to the draft accounts.  An unqualified value for money conclusion had also been issued, meaning that the council had reasonable arrangements in place to secure value for money.

Phil Johnstone informed the Committee that KPMG had received six objections to the accounts from local electors and it would not be possible to issue the audit certificate prior to the completion of all responsibilities related to the financial year.  Although there are six legally separate Objections five of them are very similar and relate to the same subject: the exit payment to the Council's former HR Director.  Phil Johnstone informed the Committee that ongoing updates in terms of progress would be brought to the next meeting of the Committee.

A Member asked a question about the cost incurred by the Council in relation to the additional work undertaken on the six objections received. Phil Johnstone clarified that any additional fees would be agreed with the Chief Finance Officer and Public Sector Audit Appointments Limited (PSAA) and these would be reported to the Committee. This led to a discussion about the cost of objections in the previous financial year and to the extent to which electors could challenge the Council. Phil Johnstone explained that although there was not a formal threshold for objections, the criteria for accepting objections had changed. He gave an example of the introduction of a prescribed period for accounts being available for inspection (30 working days), i.e. when it would be possible to bring objections up. Moreover, Phil Johnstone listed some of the reasons why an objection could be rejected –if it had been previously considered, if the cost incurred would be disproportionate or due to its nature. He advised that the external auditor was not obliged to explain the reason for the rejection and that the person brining the objection had the right to appeal. 

In relation to the six objections received, Phil Johnstones informed the Committee that although the initial stage of investigation would not usually incur a cost, it had not been clear yet if any of the objections would be rejected. Conrad Hall (Chief Finance Officer) added that the Council sometimes received questions from people who were interested in the accounts, and that the Council takes an open and transparent approach to these in order to assist residents.

Mr Sullivan requested more information about the adjustments to the accounts and the causes for these. It was agreed that he would work on this with the Chief Finance Officer outside the meeting. The external auditor, KPMG, offered to assist him in case he had any questions.

A Member asked a question which related to the fee incurred by the audit of the Pension Fund (£21,000). Phil Johnstone responded that the fee was in line with the planned fee. He clarified that under KPMG’s terms of engagement with PSAA, the external auditor undertook prescribed work in order to certify the Council’s housing benefit grant claim (the fee would be confirmed), while audit-related services for the certification of the Teachers’ Pension Return and Pooling of Housing Capital Receipts Return fell outside of the PSAA certification regime. The discussion continued by a Member’s question which related to the reasons why internal auditors could not provide these audit-related services to which the Chair responded that the current arrangements ensured the conduct of an independent audit process. 

RESOLVED that the contents of the Annual Audit Letter 2015/16 be noted.