Agenda item

To receive the attached External Audit Findings Report from Grant Thornton and for Members to raise any relevant questions and observations they may have.

(PLEASE NOTE: With reference to the outstanding items listed on page 5 of the External Audit Findings Report from Grant Thornton, Members will receive a written update on any further progress made prior to the meeting).

Recommendation

It is recommended that the Audit Committee endorses the External Audit Findings Report.

Iain Murray and Matthew Dean from Grant Thornton presented their External Audit Findings Report for the year ending 31 March 2015 as set out on pages 11 to 42 of the Agenda.

Section 1: Executive Summary

It was affirmed that the draft Group and Council financial statements had been produced to a very high standard and that this had resulted in a minimal level of issues arising from Grant Thornton’s work. These statements had been supported by an excellent set of working papers and the input of Members and Officers had been gratefully received.

They anticipated that an unqualified opinion in respect of the financial statements could be provided and that no adjustments affecting the Group and Council’s reported financial position were required. It was also stated that the Council’s strong financial reporting process meant that it was likely the accounts and audit process would be delivered earlier then deadlines planned for 2018.

Section 2: Audit Findings

Supplementary to the report, the key findings of the audit were highlighted including the following:

·        No issues identified in respect of revenue recognition with accounting policy in line with the requirements of the CIPFA Code.

·        No evidence of management override of controls and no significant issues in respect of journal controls and entries.

·        No significant issues identified in terms of operating expenses and employee remuneration.

·        Stated critical judgements and estimation uncertainties were in line with the CIPFA Code. The Councils approach regarding Business rate appeals provision and the calculation of depreciation of Council Housing stock was appropriate and satisfactory.

·        The management’s assessment of the Council and its services as a going concern were assessed as satisfactory and appropriate.

·        A review of accounting policies had not identified any issues.

·        Regarding Property, Plant & Equipment (PPE) estimates and judgements; it was stated that Grant Thornton were happy with the Council’s approach. They did however highlight the importance of revisiting this at the end of each year where a full revaluation of PPE does not take place.

·        Internal controls were found to have been operating effectively with no matters to report to the Committee.

Section 3: Value for Money

It was explained that Grant Thornton’s work had highlighted that the Council had robust financial management arrangements in place and that the Medium Term Financial Plan was updated on an annual basis.

However, the audit had identified the need for the Council to find an additional £900,000 of savings between 2016-17 and 2017-18. It was acknowledged that the Council had a proven track record of delivery cost savings, £10m since 2007-08. But, steps to achieve the needed savings had to be identified if the risk presented to medium term financial health was to be removed.

It was found that the Council’s arrangements to challenge economy, efficiency and effectiveness by prioritising resources, improving efficiency & productivity were sound. However, two key areas of residual risk had been identified that would need to be managed closely to ensure that they did not have any adverse impact on the organisation. These were the development of the Local Plan, and the progress of the Brightwells Development in Farnham.

In their assessment, Grant Thornton believed that the decisions that had to be taken on both issues within the forward 6 month period would have a significant effect on the Council’s financial position. Due to the size, scale and resource requirement of both, it was key that a successful outcome in both could be achieved.

In summary, it was restated that in all significant respects, the Council had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2015. As a result, Grant Thornton confirmed its ability to propose an unqualified Value for Money conclusion.

Resulting Members Questions

During the presentation, the Committee expressed concern that only material Group accounts were included in the Grant Thornton report.

Iain Murray and Matthew Dean explained that this was normal and that the Trust appointed their own external auditors to consider the full Group accounts. Officers explained that the role of the Audit Committee was to consider only the Council accounts, and any material Group accounts, but not all of them. This Committee did note approve the Trustees’ accounts. Those were taken to Council (acting as Trustees) for approval.

Members also raised the issue of the number and size of short term debts as reported in the Annual Financial Report 2014-2015 (Agenda Item 7, Annexe 1) asking for the external auditors opinion on the situation.

Iain Murray and Matthew Dean explained that this had been reviewed as part of the external audit process and that they were satisfied with the level and size of short term debts as well as with the Impairment Allowance provision. Members were informed that the Council’s situation was not unique and that many other District and Borough Councils held similar levels of short term debt.

Officers described some of the causes for the debt such as overpayment of benefits due to slow central Government processes and notification from the Department for Work & Pensions. Also recipients not advising of changes in their personal circumstances and some debts being repaid by nominal weekly amounts as a result of Court Orders were also cited.

P31 Certificate

In concluding the presentation, Iain Murray explained that he would be required to keep the P31 Certificate open as a question from a member of the public regarding the Brightwells Development had been received. Time needed to be given to allow him to reply and to give the questioner a chance to respond before he would be able to close the Certificate. It was anticipated that this would not take longer than a few weeks. Iain Murray confirmed that this letter did not include any matters relating to the 14/15 Accounts and therefore there was no reason why it should prevent the Committee from approving the Accounts.