To consider Grant Thornton's report on progress against planned outputs.

41.1           Attention was drawn to Grant Thornton’s progress report, circulated at Pages No. 6-18, which set out the progress which had been made in relation to the audit plan together with any emerging national issues and developments that might be relevant to the Borough Council.  Members were asked to consider the report.

41.2           With regard to the progress against the audit plan, Members were advised that Grant Thornton was required to issue a detailed accounts audit plan for 2013/14 giving an opinion on the Council’s financial statements and the value for money conclusion.  The audit plan would be informed by interim work which included updating the review of the Council’s control environment and understanding of the Council’s financial systems.  Whilst the report set out that this work would be completed in early March, unfortunately this had been delayed.  Grant Thornton had completed its initial visit and would now be coming back to complete the work at the end of the month in order to bring the draft audit plan to the Audit Committee meeting in June.  This interim work comprised approximately 20% of Grant Thornton’s work during the year with the majority of information being obtained post year end when the Council produced its final accounts.  Grant Thornton would embark on a series of tests to update its work on the Council’s arrangements for value for money which would be informed by the year end outturns and medium term financial planning arrangements.  In terms of the certification of claims and returns, the next report on the Agenda provided the outcomes of the work for 2012/13 which had involved two claims; this represented a significant reduction compared to previous years.  In terms of work for 2013/14, a National Non-Domestic Rates claim was not expected which was surprising given the changes to the National Non-Domestic Rates system and the localisation of Business Rates.  The assumption was that the only area of work for 2013/14 would be the Housing and Council Tax Benefits claim and the work on the Council Tax benefit element would be reduced following changes to the Council Tax system. 

41.3           A Member queried what impact the additional interim work and the reduced work in respect of the National Non-Domestic Rates claim would have upon the audit fee.  The Engagement Lead explained that the work between now and the end of March would be encompassed within the overall fee; there would be no additional charge for Grant Thornton being slightly behind.  If work was no longer required e.g. National Non-Domestic Rates claim, then the Council would not be billed for it.  The Member went on to question how assurance would be provided that the National Non-Domestic Rates systems were operating as they should be.  The Policy and Performance Group Manager advised that internal control assurance would be required and a number of additional days had been included within the Internal Audit Plan 2014/15 for National Non-Domestic Rates to ensure that the key controls were in place.  The Engagement Lead from Grant Thornton indicated that transactions would still appear within the end of year accounts and collection funds which would provide some assurance that they were materially stated.  He indicated that, if Internal Audit intended to carry out more work to provide additional assurance, he would be happy to provide the criteria used by Grant Thornton which could be adapted to take account of the new arrangements.

41.4           In terms of emerging issues, Members were advised that the Audit Commission’s latest research ‘Tough Times 2013’ talked about the financial challenges in local government and the need for effective and robust medium term financial planning; the research included a number of examples of best practice which may be of interest.  Members were also informed that the Local Audit and Accountability Act had received Royal Assent on 30 January 2014.  The Act made provisions for local authorities to appoint their own external auditors once the current contract ended in 2016/17.  Local authorities would be required to establish an auditor panel, either individually or in a consortium with other authorities, which would advise on the maintenance of an independent relationship with the local auditor appointed to audit the accounts.  The panel would need to be in post no later than December 2016 in order to inform the appointment of auditors for 2017/18.

41.5           Pages No. 14-15 of the report provided details of two reports from Grant Thornton, the first of which had been shared with Chief Officers and related to alternative service delivery models across the public sector to deliver savings, recognising that it was not possible to continue to incrementally reduce budgets year on year without fundamental service redesign e.g. shared Chief Executives, joint management teams, outsourcing work, setting up companies etc.  ‘Reaping the Benefits’, a more recent report published in February 2014, focused on welfare reform and the impact on communities and the Council’s role going forward, for instance, increased rent arrears and use of food banks and the wider ramifications of universal credit.  Page No. 16-17 of the report set out two areas to which Grant Thornton would be paying particular attention during the following year in relation to the Council’s financial statements.  Property, plant and equipment was the largest entry on the Council’s balance sheet after pension liabilities and the 2013/14 Code specified that revaluations must be ‘sufficiently regular to ensure that the carrying amount does not differ materially from that which would be determined using the fair value at the end of the reporting period’.  This meant that a local authority had to satisfy itself that the value of assets in its balance sheet was not materially different from the amount that would be given by a full valuation.  The second issue related to the recognition that local authorities were liable for successful appeals against business rates and should therefore make additional provisions within their financial statements.  The Engagement Lead from Grant Thornton gave the example of a large supermarket making a challenge which was upheld and other supermarkets across the country subsequently being encouraged to make similar challenges.  In addition to financial provisions, local authorities would have to make provisions for the additional work involved in assessing how reasonable and realistic these claims were.

41.6           With regard to the Audit Commission research into financial resilience, a Member queried whether the new ways of delivering services which relied less on Government funding were suggestions or directives and he indicated that Tewkesbury Borough Council had previously shared a Chief Executive with another local authority which had not worked for a number of reasons.  He understood that the Local Government Association (LGA) was responsible for disseminating best practice.  The Engagement Lead from Grant Thornton explained that there was no requirement to implement the measures which were suggested in the report and each local authority was different; notwithstanding this, there were some similarities and there was always scope to learn from others.  Whilst the LGA certainly had a role to play in offering examples of best practice, other organisations were striving to provide alternative service delivery models which were more financially resilient and may have other ideas which had not previously been considered.  The Deputy Chief Executive indicated that the report was adding to the narrative in relation to reshaping public services and the Audit Commission had made a number of suggestions based on previous experience.  There was no ‘one size fits all’ solution; however, the unprecedented cuts to finances meant that local authorities would need to make radical changes.  This was something which Tewkesbury Borough Council was addressing through its Business Transformation work.  The Chairman went on to explain that consideration was being given to merging the Business Transformation Working Group with the Budget Working Group as there was a considerable amount of overlap between the two Groups.  He indicated that he had been fortunate enough to attend the Leadership Academy which provided an opportunity to learn from other Councils, for instance, Breckland Council had outsourced their planning department to Capita Symonds.  A Member raised concern that this approach might lead to a loss of local knowledge and she referred to the problems within the ambulance service as a result of outsourcing as drivers were unfamiliar with the area.  The Chairman provided assurance that the decision-making aspects of planning were retained by the local authority but outsourcing meant that there was a greater pool of people to do the work which could address capacity problems.  He understood that this arrangement was working well for Breckland.  The Engagement Lead from Grant Thornton indicated that the peer challenge process was another way of learning from other authorities and the Deputy Chief Executive confirmed that Tewkesbury Borough Council had a peer challenge scheduled for autumn 2014.

41.7           Having considered the information and views expressed it was

                  RESOLVED          That the Grant Thornton progress report be NOTED.