Agenda item

The report summarises the auditing activities undertaken by KPMG in the period March 2017 to June 2017 and provides an overview of actions to be completed by the next meeting of the Audit Committee.

Andrew Sayers (Partner at KPMG) presented the report which summarised the audit activities undertaken by KPMG in the period March 2017 to June 2017. He said that there were no particular issues that had to be reported at this stage and that any outstanding items would be included in the annual audit letter. Mr Sayers drew the Committee’s attention to key work undertaken by KPMG which could be found on page 16 to the Agenda Pack. He highlighted that KPMG had commenced work on the Pension Fund annual accounts on 12 June 2017 and that work on the main financial statements had started on 19 June 2017, with an expectation to be completed by the end of July 2017. The Committee heard that work on the objections to the accounts continued and KPMG’s provisional view on the objections made relating to the payment to the former Human Resources Director and associated matters would be shared with the Council and the objectors in July 2017, along with material documents KPMG had relied upon. Mr Sayers said that KPMG had requested additional information from the Council on the Lender Option Borrower Option (LOBO) objection which the Council was currently compiling.

The Chair invited Mr Grant to address the Committee. Mr Grant stated that the objectors were disappointed with the lack of progress and expressed concern that the investigation process may have changed without any notice given to the objectors. Mr Grant explained that the objectors expected to receive all documents which Mr Phillip Johnstone considered material to his decision, so they could have the opportunity to make further comments, before Mr Johnstone made additional enquiries and that KPMG’s provisional findings would be shared with them. Mr Grant said that the objectors still had not received any documents (due by the end of June) as per Mr Sayers’ email from 3 May. He requested the Committee to invite Mr Sayers to clarify the process the investigation was following and to encourage him to provide a timetable for the steps in the process he intended to take in order to resolve the objections. In response, Mr Sayers said that the actual process had not changed and that there was a slight amendment on timing as he had decided to share the provisional views with the material documents so objectors could consider both together.  This in his view was likely to be more helpful.  As far as the timetable was concerned, Ms Sayers explained that KPMG had been considering information received at the end of March which accounted for some delay to the process. He said that he expected both the Council and the objectors to respond to the provisional views and then he estimated it would take six weeks for a final decision to be issued unless a new strand of investigation was required.

Mr Grant addressed the Committee in relation to material documents to the payment the electors had objected to. He asked why the objectors had not been provided with the documents that had been given to KPMG in December 2016 by Conrad Hall. He explained that if he had seen the documents, he might have withdrawn his objection (if the documents meant he was satisfied) or he could have made specific comments, clarifying the points he disagreed with. This led to a short discussion about the meanings of ‘legal privilege’, ‘constructive dismissal’ and ‘unfair dismissal’ which Debra Norman (the Council’s Chief Legal Officer) explained. Mr Grant asked the Audit Advisory Committee to recommend that officers of the Council notify Mr Sayers that the Council consented to him sharing any documents, including “legally privileged” documents, with the five objectors, subject to strict confidentiality conditions; and to reassure the Chief Executive, and any of her staff, that giving such consent would not be considered to be a breach of their duties to the Council. Mr Sayers responded he would not comment on the legal position, and KPMG would take its own legal advice if required, but he reassured the Committee that he had not been restricted in any way and he had all the information he needed to complete his work on the objections.

A Member of the Committee asked if KPMG would have taken a different approach if the legal privilege did not exist. Mr Sayers said KPMG would have shared documents that were material to their decision and if there was a potential data protection issue, would if necessary have sought its own legal advice. Conrad Hall (the Council’s Chief Finance Officer) reminded Members that a meeting had been held between Carolyn Downs (the Council’s Chief Executive), himself and the objectors in early December 2016 when a number of documents were discussed. Mr Hall emphasised that information had been shared and that the Council had not been trying to limit information sharing. In response to a question that related to the nature of the objection, Mr Sayers said that he would not discuss details of the objections received at the meeting.  He explained the actions available to the auditors, which are to apply to court for a declaration that the item was unlawful or to prepare a public interest report. Mr Sayers explained that it was a judgement of the auditor to decide whether or not to raise a public interest report.     

Mr Hall updated the committee on the work undertaken on the other objection to the accounts (related to the LOBO treasury transactions). He said that all of these transactions were undertaken more than seven years ago and that, at the time of the meeting, officers were seeking to locate relevant documents, some of which would date back to the 1990s, and that it would therefore be some time before a more substantive update was possible.

RESOLVED  

(i)        The contents of the External Audit Progress Report be noted; and 

(ii)       A report detailing the timetable of the investigation into the objections made relating to the payment to the former Human Resources Director, the costs incurred and an update on progress (or the final findings) be presented at the Audit Advisory Committee meeting in September 2017.