To consider Grant Thornton’s audit findings 2013/14.

17.1           Attention was drawn to Grant Thornton’s report, circulated at Pages No. 11-45, which set out the audit findings for the Council for 2013/14. Members were asked to consider the report.

17.2           Alex Walling, Engagement Lead, explained that the report highlighted the key matters which had arisen from Grant Thornton’s audit of the Council’s financial statements for the year ended 31 March 2014. It was also used to report the audit findings to management and to those charged with governance in accordance with the requirements of the International Standard on Auditing 260 (ISA). Under the Audit Commission’s Code of Practice, Grant Thornton was required to report whether, in its opinion, the Council’s financial statements represented a true and fair view of the financial position, its expenditure and income for the year and whether they had been properly prepared in accordance with the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Local Authority Accounting. In addition to this work, Grant Thornton was also required to reach a formal conclusion on whether the Council had put into place proper arrangements in terms of the Value for Money (VFM) conclusion.

17.3           Members were advised that, overall, the findings of the audit had been very positive; particularly from her perspective, given the major changes that had gone on within the finance team staffing. It had been clear to her that the Council had obviously been aware of the bigger picture and was thinking about how to do things differently and better. This had resulted in very few internal control weaknesses which was good to see. The audit was substantially complete now, as things had moved on since the Committee report had been published, and the only outstanding piece of work was the testing of housing benefit expenditure and Council Tax support. The key messages from the audit of the financial statements were that the accounts contained only a small number of errors, the majority of which had been adjusted by management; the working papers continued to be of a high quality; and finance staff had responded promptly to all audit queries. An unqualified opinion had been provided on both the financial statements and the VFM conclusion. In terms of controls, attention was drawn to two minor control issues which had been identified in relation to the posting of journals and the authorisation of timesheets.  The recommendations made were that the Chief Financial Officer should have the ability to post journals and, to strengthen control, the timesheets should be individually signed as authorised.

17.4           In drawing attention to Page No. 19 of the report, the Engagement Lead explained that there were two presumed significant risks which were applicable to all audits under auditing standards: improper revenue recognition; and management override of controls. The audit work undertaken had not identified any issues in respect of revenue recognition or in terms of management override of controls. In terms of audit findings against other risks, no significant issues had been identified in respect of operating expenses or employee remuneration. At this stage the audit of welfare expenditure was ongoing but to date no significant issues had been identified. In respect of Property, Plant and Equipment (PPE), one issue had been identified which was set out at Page No. 25. The Paragraph of the Code permitted a class of assets to be revalued on a rolling basis provided the revaluation of the class of assets was completed within a ‘short period’ and the revaluations were kept up to date. In the view of Grant Thornton the ‘short period’ would usually be within a single financial year as the purpose of simultaneous valuations was to avoid reporting a mixture of costs and values at different dates. For assets not valued in the year, insufficient assurance had initially been provided by Officers that PPE valuations held in the accounts remained materially correct hence, whilst the Council’s accounting policy was considered appropriate, it needed to ensure arrangements were in place in future to confirm that the carrying amount of PPE did not differ materially from the fair value at the balance sheet date. Grant Thornton would work with Officers next year to ensure compliance with the Code in this respect.

17.5           There were a small number of misclassification and disclosure changes which were identified at Page No. 27. None of them had any effect on the overall financial position but all had to be noted within the findings report. However, there was one unadjusted misstatement which Grant Thornton had requested be processed but which had not been made within the final set of financial statements. The issue related to information received from the Valuation Office regarding the reduction in the rateable value for a large property for which the Council collected business rates. The Council had included this as an additional note entitled ‘events after the balance sheet date’ which meant that it had been classed by Officers as a non-adjusting event. In Grant Thornton’s view this was an adjusting event, however, it had been accepted that the overall impact on the Council’s financial statement each year was not material.

17.6           Referring to the Value for Money work undertaken, the Engagement Lead advised that the Auditors were required to provide a Value for Money conclusion based on two criteria: that the Council had proper arrangements in place for securing financial resilience; and that the Council had proper arrangements for challenging how it secured economy, efficiency and effectiveness. Overall the work had highlighted that, in a period of austerity, the Council had, to date, managed its finances effectively and, despite not delivering all of its savings plans, the 2013/14 accounts had reported an underspend of £537,000 against budget, mainly due to increased planning and land charges income and business rate retained income. The Council would continue to face significant financial risks and challenges during 2014/15 and beyond, but its current arrangements for achieving financial resilience remained satisfactory. It was the view of the Engagement Lead that, for a fairly small District Council, the outlook was positive given the work which was ongoing in terms of the projects that were coming forward and the Business Transformation Programme. Page No. 35 identified two small residual risks to the Value for Money conclusion which were performance against capital budgets; and performance against savings targets. It was recommended that the Council should continue to monitor its capital spend during the year so that the level of slippage could be easily identified and addressed where possible. In addition, it was recommended that the Council should continue to monitor progress against its savings plan in 2014/15 to ensure delivery and financial stability. In terms of the audit fees, these had been largely set by the Audit Commission. However, there was one additional fee of £900 in respect of work on material business rates balances in the accounts. Certification work was still ongoing and the final fee would be reported to the Audit Committee later in the year as part of the annual certification report. There were no fees for other services. In terms of independence and ethics, there were no matters to draw to Members’ attention. The action plan, which contained only five actions, was set out at Pages No. 41-42 and all were low priority with a risk of inconsequential misstatement. The Engagement Lead offered her thanks and congratulations to the finance team for the work put in to ensure this was a positive report.

17.7           A Member questioned what the corporate fraud in relation to electoral registration had been. In response, the Borough Solicitor advised that she had raised this at the last meeting. The issue had been identified by the electoral registration team during the annual canvass. This had been reported to the Police for investigation and, although this had not resulted in prosecution, a restorative justice solution had been found. The situation had been remedied as soon as it had been found and no one had been disadvantaged as a result of the issue.

17.8           Members offered their congratulations to the finance team and accordingly it was

                  RESOLVED          That Grant Thornton’s audit findings 2013/14 be NOTED.