To consider a report by the Head of Resources detailing the draft Auditors ISA 260 report and seeking endorsement for the Annual Governance Statement, the Letter of Representation and the Annual Financial Report.
Contact:C Mason 388157
Minutes:
Consideration was given to a report by the Head of Resources (a copy of which is appended in the Minute Book) which sought approval in principal for the publication of the Council’s Annual Governance Statement, Annual Financial Report and Letter of Representation.
The Annual Governance Statement (AGS) and Annual Financial Report (AFR) were documents required by statute and had to be approved and published by the 30th September.
In the absence of the Head of Resources, the Panel were apprised by the Accountancy Manager of the process required to be undertaken prior to the approval and publication of the 2014/15 final accounts.
As a consequence of the Corporate Governance Panel meeting being held a week earlier than in previous years, the final validation checks by the External Auditors of both the AGS and the AFR were incomplete. Therefore the Panel were requested to approve in principal both the AGS and the AFR, as well as the Letter of Representation, and following confirmation by the External Auditor that both documents were unqualified, delegate authority to the:
• Executive Leader and the Managing Director to sign the AGS;
• Head of Resources to sign the Letter of Representation; and
• Corporate Governance Panel Chairman to sign the AFR.
Mr Clive Everest and Mr Chris Wlaznik, the Council’s External Auditors from PricewaterhouseCoopers LLP (PwC) were in attendance at the meeting and presented their draft ISA 260 report to the Panel. In was noted that the areas where matters remained outstanding were highlighted throughout the report in yellow. However, the Panel were specifically referred to the following areas:
• Page 9 - Pension’s liability – the figure contained within the Statement of Accounts was a significant estimate and the External Auditors had requested evidence for assurance that this figure was appropriate;
• Page 9 - Valuation of property, plant and equipment - the Authority operated a 3 year cycle of revaluation and Leisure Centres represented the largest element of the Council’s estate. As the Leisure Centres had not been valued during 2014/15 (as they were revalued in 2013/14) and given their significant value the External Auditors had requested that the Authority obtained assurances from the expert valuers that there were no material revaluation during the course of the year. It was explained that since the publication of the Agenda the External Auditors had received the valuation report from the Council’s expert valuers, Barker Storey Matthews, and were satisfied with the response;
• Page 10 - Non-Domestic Rates safety net calculation - in August the Department for Communities and Local Government released a revised calculation template for the non-domestic rates safety net calculation. The External Auditors considered that the revised calculation was appropriate. However, it was yet to be agreed with the Council whether it should be recorded as an adjustment to the 2014/15 accounts, increasing the reported income, or reported as a non-adjusting event in the 2015/16 accounts;
• Page 10 - Provision against Non Domestic Rate (NDR) Appeals – the External Auditors were of the opinion that the estimate regarding appeals made against NDR assessments might be overly prudent and therefore the Authority was required to provide an additional explanation to support the appropriateness of the level of provision; and
• Pages 14 - 15 – Internal Controls – The External Auditors had identified four areas where the Council’s internal financial controls required improvement relating to:
o No formal authorisation process for journals;
o Bank reconciliations;
o No formal authorisation process for fixed asset disposals; and
o Depreciation Policy.
It was explained to the Panel that where an Accountant below Principal Accountant level generated a journal of more than £850,000, this was reviewed by either a Principal Accountant or the Accountancy Manager. For journals below £850,000 produced by an Accountant below Principal Accountant, a new process was to be introduced whereby a random 10% sample of journals would be reviewed by either a Principal Accountant or the Accountancy Manager.
Currently fixed assets were not depreciated in the first year of purchase so depreciation on newly purchased assets was understated. As a result the Council had agreed that the Depreciation Policy would be updated for the 2015/16 Annual Financial Report.
The External Auditors referred the Panel to page 16 of their report regarding the risk of fraud. At the Panel’s meeting in March the Panel had been asked whether they were aware or had any concerns regarding fraud. In presenting the draft ISA 260 report to the Panel the External Auditors asked the same question and received confirmation from the Panel that there had been no changes to its view of fraud risk and that no additional matters had arisen that should be brought to the attention of External Audit.
Appendix 1, page 20 of the draft report, referred to a summary of uncorrected misstatements. In response to a question the Panel were informed by the External Auditors that there were no uncorrected financial misstatements or disclosure misstatements to report and it was not envisaged there would be once the final ISA 260 report was issued.
The Annual Governance Statement had been prepared in consultation with the Panel and their comments had been incorporated. The Internal Audit and Risk Manager noted that there was one amendment required to the document regarding the Lead Officer listed on the last page of the report (page 18). The Lead Officer responsible for Improve project management practices, including Officer compliance with the project management toolkit, was the Corporate Team Manager, not the Corporate Director (Services).
External Audit commended the Annual Governance Statement and confirmed to the Panel that it incorporated all requirements as per the Chartered Institute of Public Finance and Accountancy guidance and also accorded with their audit.
The Letter of Representation from the External Auditors was required to support all audits in order to confirm that the audit has been completed to the best of their knowledge and belief. It was noted to the Panel that a new addition to the letter was the requirement to provide a complete list of the Authority’s related party transactions as attached as Appendix 2 of the letter.
Referring to page 34 of the AFR it was noted by a Panel Member that as the Council did not possess ‘Mayoral Regalia’ the wording should be replaced with ‘Civic Insignia’.
Having expressed appreciation to the Officers involved in producing the AGS and AFS and also to the External Auditors for their work over the years and hoping that the new Auditors would be able to replicate their high standards, the Panel
RESOLVED
i. to receive the External Auditor’s Draft ISA 260 report (attached as Appendix A to the Officer’s Report).
ii. in principal, approves the Annual Governance Statement (attached as Appendix B to the Officer’s Report) and authorises the Executive Leader and Managing Director to sign the Statement on behalf of the Council, once the External Auditors confirm that the Annual Governance Statement will not be qualified.
iii. in principal, approves the Letter of Representation (attached as Appendix C to the Officer’s Report) and authorises the Head of Resources to sign it on behalf of the Council, once the External Auditors confirm that both the Annual Governance Statement and the Annual Financial Report will not be qualified.
iv. in principal, approves the Annual Financial Report (attached as Appendix D of the Officer’s Report) and authorises the Chairman of the Panel to sign the accounts on behalf of the Council once the External Auditors confirm that the Annual Financial Report will not be qualified.
Supporting documents: