Agenda item

The External Auditor submits a report which provides and overview on progress in delivering responsibilities as external auditors. The report also highlights the main technical issues which are currently having an impact in local government. The Committee are asked to note the report.

The External Auditor submitted a report providing an overview on progress in delivering the responsibilities of external auditors.  The report also highlighted the main technical issues that currently were having an impact in local government.

John Cornett, from KPMG, introduced the report.  Members noted that planning for the 2015/16 audit was underway, which needed to take account of work required following the report issued in March 2015 by the Office for Standards in Education that concluded that children’s services were inadequate.

Mr Cornett explained that two criteria, one relating to financial resilience and one to economy, efficiency and effectiveness had been merged in to one criterion and several sub-criteria.  Consideration was being given to the implications of this change, but it was felt that the total amount of work required would not change. 

The external auditors would continue to work with Council officers to identify changes and would report these to the Committee through the Audit Plan.  As audit fees were set until the end of the external auditors’ contract, the changes would not affect these.

The Committee noted that the date for publishing final accounts was changing from the end of August to the end of July.  Work therefore needed to be programmed to take account of this.

2015/16 was the fourth year of a five year contract originally let by the Audit Commission.  The Department for Communities and Local Government (DCLG) had extended this contract for one year, but had advised that it could not be extended beyond this.  The Council therefore would need to undertake a procurement exercise to appoint its own external auditors to start 1 April 2018. 

It was possible that the DCLG would ask someone to run a procurement exercise for all local authorities, but no details were known yet, including whether local authorities would have to pay to participate.  Mr Cornett confirmed that there was interest amongst local authorities in undertaking joint procurement on a county or regional basis.

Members noted that the government had announced that a two pence increase in Council Tax could be levied as a ring-fenced contribution to Adult Social Care.  Some concern was expressed that this was unfair on people who did not use the services, but the Committee was reminded that all Council Tax payers already paid for the service irrespective of whether they used it.

In respect of the project on highways network asset accounting, the Head of Internal Audit and Risk Management reported, on behalf of the Director of Finance, that the following developments had occurred in recent days:-

a)     The Chartered Institute of Public Finance and Accountancy (CIPFA) had revised its implementation plan, so the first applicable date now was 1 April 2016, (not 1 April 2015 as stated in the report).  This was beneficial, in that it reduced the work required whilst achieving the same outcome and allowed the Council to prepare more thoroughly;

b)     CIPFA was working with the audit profession on some key aspects of this change, including materiality, which added uncertainty.  However, a KPMG technical expert had stated that he thought there was a compelling case for auditors to take a wider and qualitative view of materiality in respect of infrastructure assets than they did for the rest of the Statement of Accounts.  This was because the figures involved were very large, but even quite large variances would not have the same impact on users of the accounts as they would in other contexts.  This interpretation would be pragmatic and helpful for this Council if it prevailed;

c)     Officers from Finance and Highways were working together on getting ready for this project and already had started testing and analysing the data held in the Council’s systems.  Initial reviews generally were encouraging in terms of the Council’s ability to meet the data requirements easily; and

d)     Discussions had been held with KPMG on providing assurance on this work prior to the 2016/17 accounts, but further updates would be scheduled in the light of the changes outlined above.

RESOLVED:

1)    That the report be noted; and

2)    That the external auditors be asked to present a report to the next meeting of this Committee on proposals for the mass procurement exercise for the appointment of local authority external auditors, if the information is available in time.