Agenda item

To consider Grant Thornton’s audit findings 2015/16. 

20.1           Attention was drawn to Grant Thornton’s report, circulated at Pages No. 18-54, which set out the audit findings for the Council for 2015/16.  Members were asked to consider the report.

20.2           The Engagement Lead from Grant Thornton explained that the report highlighted the key findings from its audit of the Council’s financial statements for the year ended 31 March 2016.  Under the National Audit Office Code of Audit 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, and its income and expenditure 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 conclusion.

20.3           Members were reminded that Grant Thornton had set out its plans for how it would approach the audit in March 2016 and no changes had been made.  Work on the financial statements was substantially complete but it would be necessary to carrying out some finalisation procedures before they were signed off.  This included consideration of the post-balance sheet which accounted for anything which had happened since the end of the financial year which had significant bearing on the accounts.  It was anticipated that an unqualified audit opinion would be issued in respect of the financial statements; there had been a small disclosure amendment but, overall, the reported position remained unchanged and the Engagement Lead praised the quality of the accounts which had been put together by the Finance Team.  In terms of wider responsibility, Grant Thornton looked at the Annual Governance Statement which was consistent with the financial statements and contained no exemptions.  The action plan attached at Appendix A to the report included two matters which had previously been reported to the Committee in March 2016.  In terms of value for money, Grant Thornton was satisfied that the Council had proper arrangements in place to secure economy, efficiency and effectiveness in its use of resources and proposed to give an unqualified conclusion.  The audit fees were in line with those proposed in the Audit Plan at the start of the year and there were no issues which impacted on Grant Thornton’s independence as auditors.

20.4           The Grant Thornton Audit Manager drew attention to Page No. 26 which set out the level of materiality which was worked to; any errors were reported to the Council with the exception of three items which had a lower materiality level due to their sensitive nature.  Significant risks were set out at Page No. 27 and two risks had been identified which were applicable to all audits – fraudulent transactions in the revenue cycle and management override of controls.  Two “other” risks of material misstatement had been identified in the Audit Plan in relation to employee remuneration and operating expenses but the audit work had not identified any significant issues in relation to the risks.  Regular meetings had been held with management throughout the year to discuss accounting issues and Members noted that two significant matters had been discussed in 2015/16; Ubico and Virgin Media.  With regard to Ubico, it was noted that the reduction in the Council’s shareholding, following the appointment of Stroud District Council as a partner in Ubico, no longer constituted Tewkesbury Borough Council as having significant influence over the company and no group accounts were required as a result.  Confirmation was provided that the Council had reviewed the bad debt provision for the outstanding housing benefit debt that had been identified the previous year and this was being addressed.  Pages No. 34-35 set out matters which had been identified during consideration of internal controls; these had all been reported to previous Audit Committees and no further work was required. 

20.5           It was accepted that there would be some mistakes, as there would with any accounts, and Page No. 20 included details of two disclosure changes identified during the audit which had been made in the final set of financial statements.  Following the outcome of a European Court judgement, a VAT tribunal ruled that local government off-street parking was non-business and therefore not subject to VAT.  This decision had been reversed following an appeal by Customs and Excise and the outstanding claim by the Council had been dismissed therefore the contingent asset was no longer relevant to the Council’s financial statements.  The date of notification, 16 December 2015, was prior to the balance sheet date and it had been removed from the post balance sheet disclosure.  Value for money was more contentious as it was a subjective area and Grant Thornton’s assessment was based on the information which was available.  The ongoing challenge of meeting the savings outlined by the Chancellor as part of the Autumn Statement continued to put pressure on local government finances and this had been highlighted to the Committee in March 2016.  Page No. 23 of the report set out the main considerations which included the Medium Term Financial Strategy, savings and sources of funding e.g. New Homes Bonus.  Grant Thornton had concluded that the Council had proper arrangements in all significant respects to ensure that it delivered value for money in its use of resources.  The Council’s savings plans for the next couple of years appeared reasonable and achievable; however, plans for 2018/19 and beyond would need further consideration given the amount of unknowns going forward.  With regard to fees, the Grant Thornton Audit Manager drew attention to Page No. 23 of the report and pointed out that work on the grant certification was ongoing and may be subject to change, however, there was no indication that would be necessary from the work done to date.  He reiterated that there was a robust process in place to review the accounts and no further issues had been identified; this was a credit to the Finance Team and he thanked Officers for responding quickly to queries and working with Grant Thornton to reach this conclusion.

20.6           A Member noted that the representatives from Grant Thornton were happy with the Council’s model for use of New Homes Bonus, however, Page No. 42 of the report set out that it was not considered core funding and, as such, could be phased out on any subsequent funding review, therefore, the continued reliance on a single funding stream was still an area of concern.  The Grant Thornton Audit Manager indicated that there was always a risk associated with reliance on a single source of income, particularly given the potential for further government reorganisation or a change in leadership.  It was a risk which needed to be flagged and the Council should have a contingency in place should the situation change but there was currently no suggestion that would happen.  The Finance and Asset Management Group Manager explained that the New Homes Bonus was a six year rolling programme which was currently in its final year.  The Council used 65% of its New Homes Bonus money to support core services with the remaining 35% set aside for one-off use which acted as a buffer in the event of changes to the scheme.  The government consultation at the start of the year had suggested that it was looking to reduce the scheme by up to two-thirds, however, there was no indication as to whether this would actually come to fruition given that feedback had been expected in June.  Whilst the Council was reliant upon New Homes Bonus money, it was in a better position than many authorities which used 100% to support their base budgets.

20.7           A Member drew attention to the first recommendation included on the Action Plan, attached at Appendix A to the report, and noted that it had an implementation date of April 2016.  The Finance Manager confirmed that this had been raised in March and an estimate included so the action had been completed.  In response to a query regarding the accounts for Ubico, clarification was provided that Ubico would provide its own limited company accounts.  As Tewkesbury Borough Council was one of six partners in the company it did not have control; its stake in Ubico was as an investment only and there was no requirement to produce group accounts.

20.8           The Chair offered her congratulations to the Finance Team on a very positive report and thanked Officers for their hard work on behalf of the Audit Committee.  Accordingly it was

RESOLVED          That Grant Thornton’s audit findings 2015/16 be NOTED.