Agenda item

To consider the external auditor’s Audit Plan 2017/18. 

47.1           Attention was drawn to Grant Thornton’s Audit Plan 2017/18, circulated at Pages No. 35-48, which set out the Audit Plan for the year ended 31 March 2018.  Members were asked to consider the information provided.

47.2           The Engagement Lead from Grant Thornton explained that the Audit Plan was one of the key outputs to start off the planning process for the 2017/18 audit.  Interim work had already been undertaken along with a risk assessment to determine the areas of focus for the accounts; the Audit Plan was a summary of those findings and Page No. 37 of the report set out the headlines.  She explained that Grant Thornton was required to follow the National Audit Office Code of Practice and the scope of the audit work was to provide opinions on the Council’s financial statements and its value for money arrangements.  Grant Thornton was required to identify areas of the accounts which were subject to significant risk; these areas tended to be subjective e.g. those requiring management judgement or estimation.  The key risk present in any audit was the management override of controls and Grant Thornton had focused its time on areas where figures could be manipulated, such as journals. The valuation of Property, Plant and Equipment was another significant risk as this was also subject to a lot of assumptions as well as requiring expert input from actuaries etc.  There were other areas of risk and Page No. 41 of the report set out ‘reasonably possible risks’; these were areas which were important to the Council e.g. employee remuneration and operating expenses.  The materiality level had provisionally been set at £739,000 which was 2% of gross expenditure based on the previous years’ audit.  This would be revisited when the final year outturns were available and the Committee would be updated if there was significant change.  Grant Thornton was also required to make the Council aware of any issues below that value other than those that were ‘clearly trivial’ which had been set at £37,000. 

47.3           Grant Thornton would review the Council’s arrangements in relation to value for money to establish how it was identifying, managing and monitoring these financial risks.  The focus for this year would be the Medium Term Financial Strategy in the context of reduced government funding and the need to look at alternative sources of income generation and reducing costs.  Time would be spent visiting the Head of Finance and Asset Management and his team to establish what plans were in place to bridge that gap and the assumptions underpinning them.  The year-end audit would take place in May/June, when Grant Thornton wold carry out its final visit, and the audit findings would be presented to the Audit Committee in July in accordance with the statutory deadline to complete and publish by the end of that month - two months earlier than previous years.  The planned audit fee was £44,921 which was the same as the current year, although it was noted that this could reduce by 23% in future years following a procurement exercise.

47.4           In terms of the identified significant risks, a Member questioned whether borrowing and property investment would be included in the evaluation of Property, Plant and Equipment.  The Engagement Lead from Grant Thornton advised that they would normally write to borrowing organisations to seek third party confirmation of outstanding borrowing; this would be a separate element from what was contained within the plan.  If the Council purchased additional properties these would absolutely be considered as part of the work; however, given that it was 28 March, it was unlikely any such purchases would be completed before year-end i.e. 31 March.  In terms of the existing portfolio, the Council had acquired a large investment property at the end of 2017 and Grant Thornton would challenge the assumptions around that valuation and understand the basis on which they were made.

47.5           Having considered the information provided, it was

RESOLVED          That Grant Thornton’s Audit Plan 2017/18 be NOTED.