Agenda item

The External Auditor submits the ISA 260 Report to Those Charged with Governance a report which summarises the 2015/16 audit of Leicester City Council, and the requirement for Members to authorise the Director of Finance to sign the letter of representation to KPMG from the Council.

The Audit and Risk Committee are asked to note the report and approve the letter of representation.

Details of the Annual Governance Report will be circulated to Members of the Committee as soon as they are available.

John Cornett, Director (External Auditor, KPMG) presented a report to Those Charged with Governance (ISA 260). The report summarised the key findings arising from the audit of Leicester City Council’s financial statements for the year ended 31^st March 2016, the Auditor’s assessment of the Council’s arrangements to secure value for money (VFM) in its use of resources, and the requirement for Members to authorise the Director of Finance to sign the letter of representation to KPMG from the Council in connection with the audit of the Council’s financial statements. Members were asked to note the report and authorise the letter of representation. As noted on the agenda, supporting information had been distributed to members, published on the Council’s website and was available at the meeting.

Members’ attention was drawn to the following:

·         KPMG anticipated issuing an unqualified audit opinion on the authority’s financial statements on 30^th September 2016 as a true and fair view of the authority’s accounts, and asked for it to be noted the accounts had been produced to a high standard with a timely production of evidence, and asked that their thanks to the Finance Team be recorded.

·         It was anticipated that a qualified Value for Money (VFM) conclusion would be issued on 30^th September 2016. Two risks were identified earlier in the year, and reported to the Audit & Risk Committee in March 2016:

o   Implementation of OFSTED’s recommendations following their review of children’s services and subsequent report in March 2015 – last year a qualification was issued. The Chair noted that if there were concerns regarding the speed of improvements, scrutiny should look into the issue.

o   Financial resilience – it was noted the authority faced a challenge to make savings over the coming years, and that plans were adequate to deal with the issue, though it would become harder to make savings moving forward.

·         Members’ attention was drawn to the previous year’s outstanding recommendations. The first recommendation on notes to the financial statements had been partially implemented, with plans to further review the relevance of the recommendation going forward. The remaining two outstanding recommendations were:

o   Related party disclosure – it was confirmed there was one declaration outstanding from an elected member. The Chair expressed support for a recommendation from members of the Committee to publish the names of members who failed to return their related party declarations;

o   Journal controls – management response stated a workflow-based system of authorisation for journals would be incorporated into the development of the new finance system.

The Head of Finance informed the meeting that 2017/18 accounts would need to be prepared for the end of May 2018, with the auditors opinion by end of July 2018. He added that the first year at least would be challenging and would require significant change, and the support of all departments, directors and services to work with the finance team. KPMG would also hold a closure workshop at the end of December for all authorities. The Chair asked that an update in six months on progress be brought to the Audit & Risk Committee.

The External Auditor concluded there were four areas that required completion as listed on page 8 of the report, and all that remained was for the external auditors to receive a signed management representation letter.

The Chair thanked the External Auditor for the report.

RESOLVED:

that:

1.    The report to Those Charged with Governance (ISA 260) be noted;

2.    The qualified ‘except for’ Value for Money conclusion following the OFSTED report in March 2015 with regards to arrangements for children’s services be noted;

3.    The recommendation to publish the names of members who failed to return their related party declarations was supported;

4.    An update report on progress regarding the implementation of earlier closure of accounts be brought to a meeting of the Audit & Risk Committee in six months.