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.

Recommendation

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

Iain Murray of Grant Thornton introduced the External Audit Findings Report to the Committee. He was very happy to see the good work done by the Council in embracing the early close agenda and expected to have a full dry run in 2017/18 prior the mandatory earlier reporting regime coming into effect for 2018/19.

He explained that the Report highlighted the key issues affecting the results of Waverley Borough Council’s Group and Council financial statements for the year ended 31 March 2016.

He praised the Council for the very high standard of the financial statements; for providing them in advance of the statutory deadline; and for supporting them with an excellent set of working papers. Some non-material issues had been identified but none of the adjustments had impacted the Council’s reported position.

Three issues of deficiency had been identified in the Council’s financial report. This included:

1. Housing Revenue Account (HRA) asset register;

The HRA asset register included five assets with a total value £297k, which had been demolished, converted or where ownership had transferred during the year. There was a risk that the HRA asset register had not correctly reflected the HRA asset base.

2. Pension Fund Liability;

The actuary (Surrey County Council Pension Fund) had provided Waverley with an incorrect estimation of 2015/16 benefits paid. The risk was that incorrect values provided by the actuary lead to a material misstatement of the Council’s pension fund assets and liabilities.

3. Short term debtors and HRA rent arrears;

The total HRA tenant rents and cost debtor disclosed in the financial statements as £540k agreed to the trial balance from the general ledger but was not supported in full by the corresponding report form the Orchard internal I.T. system. This showed a balance of £455k. Officers were unable to provide a reconciliation for the £85k balance during the audit. The risk was that the housing rent arrears debtor in trial balance had been misstated.

It was noted that management had agreed to take the action proposed by Grant Thornton to rectify these issues as follows:

1. Housing Revenue Account (HRA) asset register;

Regular reconciliation of the properties on the HRA asset register to the Orchard housing system.

2. Pension Fund Liability;

Review information provided by Actuary to ensure it is was reasonable, in line with expectations and comparable with the prior year if appropriate.

3. Short term debtors and HRA rent arrears;

Carry out a reconciliation between the HRA tenants rent arrears control account and the Orchard rent system. Consider whether there were items on the general ledger control account which should be cleared and/or written off.

In response, Members asked that the management response to pension fund liability issue be strengthened in order that all third party data is comprehensively checked for accuracy.

Graeme Clark would strengthen the management response to the pension fund liability issue recorded in the Report.

Councillors also expressed concern at the cumulative general fund budget shortfall of £3m identified as a significant risk on page 24 of the Report (page 32 of the agenda pack). Officers explained that the shortfall was mainly due to the changes to funding under consideration by central government. It was noted that the Audit and Corporate Overview & Scrutiny Committees would need to work closely together on keeping a track on the issue.

The Chairman agreed and informed the Committee that he had already been in contact with the Leader of the Council to ensure the work of each committee was co-ordinated.

Closing with their `value for money` conclusion, Iain Murray explained that Grant Thornton were satisfied that, in all significant respects, Waverley had the proper arrangements in place to secure economy, efficiency and effectiveness in its use of resources.

The Audit Committee RESOLVED to endorse the External Audit Findings Report.