Meeting documents

To consider the attached report.

Contact Officer:  Simon Wasteney (01296) 585164

The Committee had received a report on the current position with the draft Statement of Accounts for 2016-17 to the July meeting, prior to the accounts being submitted to the external auditors.

The Audit Commission’s Code of Audit Practice required the external auditors to report to ‘those charges with governance’ on the work carried out to discharge the external auditors statutory and audit responsibilities, together with any governance issues identified.

The Committee received a report summarising the auditors findings from the 2016-17 audit which had been substantially completed.  Subject to the satisfactory completion of the outstanding matters listed in the auditors’ report, it was expected to issue an unqualified audit opinion on the financial statements before the 30 September 2017 deadline.  The auditors had not identified any matters on the arrangements to secure economy, efficiency and effectiveness in the use of resources that needed to be reported to the Committee.  The report highlighted the following key findings:-

(i)            Financial Statements – it was expected to issue an unqualified opinion, subject to the satisfactory clearance of any outstanding work. The audit results demonstrated that the Council had adequately prepared the financial statements.

One difference had been identified in the draft financial statements which management had chosen not to adjust.  The auditors requested that it be corrected or a rationale be given as to why it had not been corrected and included in the Letter of Representation.  The aggravated impact of the unadjusted audit differences was £650,000, although it had been assessed that the impact was not material.

(ii)           Value for Money – it was expected to conclude that the Council had put in place appropriate arrangements to secure economy, efficiency and effectiveness in the use of resources.

(iii)          Whole of Government accounts – it was expected to issue an unqualified confirmation to the National Audit Office regarding the Whole of Government accounts submission.  It had been found that AVDC was under the threshold for detailed testing.

(iv)         Control Observations – no significant deficiencies had been identified in the design or operation of an internal control that might result in a material misstatement in the financial statements.  A fully substantive approach had been taken to make these observations, which had not involved detailed testing on the operation of controls.

Members were informed that an issue had been identified where the advertisement in respect of the public inspection period had covered 30 working days but had not fully included the mandatory period of 3-14 as per National Audit Office guidelines.

The areas that had been focussed on during the audit work included:-

·                    Revenue and Expenditure Recognition – testing had not identified any material misstatements, issues or unusual transactions that might indicate any misreporting of the Authority’s financial position.

·                    Management Override – audit work had not identified any material weaknesses in controls or evidence of material management override.  No other transactions had been identified which might appear to be unusual or outside the Authority’s normal course of business.

·                    Reliance on Experts (Pensions Valuation and Property Valuation) – the auditors had relied on the advice of experts in these two major areas in their Audit Plan.  No issues had been identified in either area that needed to be reported to the Audit Committee.

Audit Differences – as part of their work the auditors identified misstatements between amounts that they believed should be recorded in the financial statements and disclosures and amounts actually recorded.  These differences were classified as ‘known’ or ‘judgemental’ and generally involved estimation and related to facts or circumstances there were uncertain or open to interpretation.  All known amounts greater than £1.433m relating to AVDC had been included in the summary of misstatement table, which included:-

·                    the revised revaluation figures had been incorrectly input into the Fixed Asset Register.  The values should have been input split in line with their asset category, i.e. land or building.  Instead they had been input as either land or building.  All revaluations, total value of approximately £37.5m, had been removed and corrected re-input.

·                    a number of assets which should have been revalued were identified.  These had subsequently revalued after the balance sheet date and revalued at an increased value.  The total value of assets revalued had been £9.729 m.  The asset classification of these assets had also changed from Surplus Assets to Other Land and Buildings.

·                    an overstatement of car parking assets post valuation because of an incorrect entry on revaluations.  The value of the error (£650,000) had involved the land element of a number of car parks being overstated post revaluation.  In line with statutory requirements, the Council’s management and the Audit Committee had been asked to specify the reason(s) for non-adjustment in the Letter of Representation.

The audit findings also included a number of appendices which Members considered as part of their deliberations:-

·                    Appendix B – Required communications with the Audit Committee.

·                    Appendix C – Outstanding matters.

·                    Appendix D – Accounting and regulatory update.

·                    Appendix E – Management representation letter.

Members sought and were provided with additional information as follows:-

(a)          that the unadjusted audit difference of £650,000 mentioned in the Executive Summary (agenda page 19) was the same matter as the Audit Differences (overstatement of car parking assets post revaluation) that was explained at agenda page 33.

(b)          it was explained that there were two measures of the Council’s pension liabilities.  One was an actuarial valuation that took a long term view and was used to calculate the Council’s contributions to the pension fund.  This measure showed that the Council’s position had improved in the last year.  The second measure was a current valuation (£105.9m as at 31 March 2017), and based on international accounting standards, which showed that the Council’s pension deficit administered by Bucks County Council had increased from £82.9m, as at 31 March 2016.  However, this second measure was influenced by market factors and could vary in value from day-to-day.

(c)          that following the re-structuring in the Finance team, Officers were confident that the accuracy of PPE / asset valuations and in reclassifying existing financial instruments assets would be improved in the future.  A thorough review of assets and the treatment of PPE would be done when the accounts closed for the current year.

RESOLVED –

(1)          That the matters raised in the external auditors’ report and raised by the auditors at the meeting be noted.

(2)          That the Letter of Representation be agreed, and the Chairman of the Audit Committee be approved to sign it off on the Committee’s behalf.