Agenda item

This report from KPMG, the Council’s external auditors, sets out the Audit Plan 2016-17.

Andrew Sayers (Partner at KPMG) presented the External Audit Plan 2016-17. He drew the Committee’s attention to key points, presented in the Plan, such as materiality (which had been set at £12 million for the Council and £6 million for the Pension Fund), management override of controls, pension valuation (data had been much more extensive than in previous years), plants and equipment (valuation adjustments were to be made), fraud and revenue recognition (related to spending Section 106 funds). He also noted that there was a new format of the Comprehensive Income and Expenditure Account and Movement in Reserves Statement with a new Expenditure and Funding Analysis statement which would require prior years’ comparatives to be restated. He added that despite the fact that value for money was not an area of significant risk, KPMG would focus on financial resilience and if any other areas had to be examined, the Committee would be informed. Mr Sayers confirmed that KPMG remained independent and encouraged Committee Members to bring to KPMG’s attention any issues, which may be related to fraud and ones which the Committee may have concerns about.

Members asked questions that related to rotation of external auditors and the current best practice for re-tendering for external auditors. Mr Sayers explained that there were two elements – individual rotation of the person in the company who was responsible and general rotation which meant that after an external auditor had been in place for five years, an approval was required to allow the company to work with the Local Authority for another two years. Conrad Hall (the Council’s Chief Finance Officer) added that the Council had signed up for the sector-led process (through procurement by Public Sector Audit Appointments (PSAA)) and the particular reason for this had been to create a buffer between the Council and the auditor as appointment of the auditor would not be made directly. It was clarified that KPMG had started its fifth year as an external auditor of Brent Council.

Members enquired how the benefit of value for money fitted into the wider context. In response, Mr Sayers said that there had been three aspects of value for money – informed decisions, financial resilience and working in partnership. He informed the Committee that KPMG would look at projects and examine how these had been conducted and may comment on what had been completed, what had not been achieved and what KPMG had observed in other organisations. Questions that related to the significance of the Brent Housing Partnership (BHP) were raised in the context of BHP’s potential transfer back to the Council. Carolyn Downs (the Council’s Chief Executive) explained that a decision about the potential transfer might have been taken by the time of the next meeting of the Audit Committee. She highlighted that the Council should have taken a stronger position and pushed for more internal audits of BHP. She emphasised that in the event of potential transfer of BHP back in-house, business as usual would not continue as senior staff would be changed, as most are temporary appointments, and a specific scrutiny panel (with residents co-opted on the panel) would be set up to oversee the transition. However, Ms Downs reminded the Committee that the Audit Plan discussed related to the 2016-2017 financial year so the potential transfer of BHP would not have an effect on the Plan.   

The Chair thanked KPMG for its work on the External Audit Plan.

RESOLVED thatthe contents of the External Audit Plan 2016-2017 be noted and approved.