To consider Grant Thornton’s Audit Letter 2014/15. 

29.1           Attention was drawn to Grant Thornton’s Annual Audit Letter 2014/15, circulated at Pages No. 12-18, which summarised the key findings from the work that had been carried out at Tewkesbury Borough Council for the year ended 31 March 2015.  Members were asked to consider the Annual Audit Letter 2014/15.

29.2           The Audit Manager explained that Grant Thornton had reported the findings arising from the audit of the Council’s financial statements to the Audit Committee meeting on 30 September 2015 and had issued an unqualified opinion.  One of the key matters that had been highlighted was that bad debt provision for housing benefit required further consideration in light of proposed changes to benefit regulations.  An unqualified value for money conclusion for 2014/15 was also issued on 30 September 2015.  The conclusion had drawn attention to the reliance on New Homes Bonus money; this was now even more pertinent given the Government’s Comprehensive Spending Review which had been published in November.  Work on the certification of the housing benefit grant claim was complete and the claim was qualified and referred to the Department for Work and Pensions (DWP) in line with its deadline of 30 November 2015.  The key recommendations identified during 2014/15 were set out at Appendix A, Page No. 16 of the report, and related to bad debt provision and the gaps which had been identified within the Medium Term Financial Plan which was an ongoing process that needed to be reviewed and updated in light of future government finance.  Appendix B, set out at Page No. 17 of the report, confirmed the audit fee, which included the housing benefit grant certification fee.

29.3           In terms of the Council’s reliance on New Homes Bonus, a Member queried whether that would affect Grant Thornton’s considerations in respect of the future financial stability of the authority.  The Audit Manager explained that he would continue to raise over-reliance on New Homes Bonus as a potential issue in discussions with the Finance and Asset Management Group Manager and his team, however, it would not change Grant Thornton’s position.  In response to a further query, the Audit Manager went on to advise that part of the value for money process was to look at the Council’s long term financial strategy and assess whether it was reasonable in light of assumptions and known facts about Tewkesbury Borough Council and central government funding.  The Medium Term Financial Plan had shown a gap towards the end which was something an auditor would never be comfortable with.  In Grant Thornton’s view, reliance on such a large source of income which was centrally controlled was a risk to the Council achieving a balanced budget in future years and ideally a ‘plan b’ was needed in the event that the government withdrew or diverted that funding.  A Member raised concern that this was beyond the scope of the external auditors and the Borough Solicitor provided assurance that reliance upon New Homes Bonus was a common factor for every local authority in the country; it had greater relevance for some than others but it was certainly a financial risk to Tewkesbury Borough Council as it was outside of the Council’s control and was being used to fund 65% of its budget.  Whilst it was an identifiable risk which was legitimate for Grant Thornton to raise, Officers were well aware of its precarious nature and it was necessary to have a strategy for addressing the fact that it was likely to be withdrawn in the longer term; something which was being considered by the Transform Working Group. 

29.4           Having considered the information provided, it was

RESOLVED          That the Annual Audit Letter 2014/15 be NOTED.