Agenda item

(External Auditor) International Standard on Auditing 260 required the External Auditor to report to those charged with governance certain matters before they gave an opinion on the Statutory Statement of Accounts. The External Auditor had indicated that their audit of the Council’s Statutory Statement of Accounts for 2013/14 was nearly complete and that they wished to present their ISA260 report to this meeting (AGC-009-2014/15).

The External Auditor presented the Annual Governance Report for 2013/14, the purpose of which was to advise the Committee of the significant findings arising from the audit of the Council’s financial statements and arrangements to secure economy, efficiency and effectiveness in the use of resources.

The External Auditor advised the Committee of the significant audit findings. No material misstatements had been identified from the audit of the Council’s Financial Statements and it was anticipated that an unqualified “true and fair” opinion would be issued. One unadjusted audit difference had been identified, which would result in a reduction of the draft surplus for the year by £115,000 in the Consolidated Income and Expenditure Statement, but no significant internal control deficiencies had been identified. The Annual Governance Statement was not considered misleading and complied with the guidance issued by the Chartered Institute of Public Finance & Accountancy (CIPFA). It was also intended to issue an unqualified value for money conclusion as the Council had proper arrangements in place to secure economy, efficiency and effectiveness in its use of resources for the year.

The Council’s key financial systems were considered generally adequate as a basis for preparing the financial statements, with no significant deficiencies in the Council’s internal controls identified. It had been identified that monthly reconciliations between the Housing Rents system and the General Ledger had not happened during the year. The Director of Communities had stated that a year-end reconciliation had taken place and that monthly reconciliations were now happening. It was also noted that there was no direct engagement letter between the Council and the Actuary for the Pension Fund. The Director of Resources stated that the Council could not insist on such a letter as the contractual relationship was between the County Council and the Actuary, however the Council would liaise with both parties to devise a solution.

The Committee were advised that the External Auditor anticipated issuing an unqualified “true and fair” opinion on the Council’s accounts. It was expected to complete the work on the Whole of Government Accounts by 3 October 2014. The draft Letters of Representation had been attached to the report, and these were due to be signed by the Director of Resources, and the Chairman of the Audit & Governance Committee accordingly.

In response to queries from members of the Committee, the External Auditor stated that the identified audit difference of £115,000 had been discussed with Officers. As it was not a material difference, the External Auditor could request the change be made but the Council could refuse and the Accounts would not be qualified. It was confirmed that the sum of £115,000 was extrapolated from a sample figure and considered to be the worst possible case. The Committee considered the comments of the External Auditor very carefully, but decided to leave the Accounts as presented. The External Auditor reported that the guidance and tools provided by the Audit Commission were used to perform the Audit. With the imminent demise of the Audit Commission, the new National Audit Code did not appear to be fundamentally different from the guidance previously issued by the Audit Commission. It was highlighted that the Committee had a Chairman, not a Chair, and the External Auditor agreed to amend the draft Representation Letter accordingly.

Resolved:

(1)        That the Annual Governance Report for 2012/13 presented by the External Auditor be noted;

(2)        That the requested amendment in the sum of £115,000 to the Consolidated Income and Expenditure Statement not be made; and

(3)        That the draft Representation Letter be amended to read “Chairman of…” the Committee, not “Chair of…”.