Meeting documents

To consider the attached report.

Contact Officer:  Nuala Donnelly (01296) 585164

The Committee received a report and External Audit Plan which summarised the proposed approach and scope of work to be undertaken by the external auditors for the 2018/19 audit in accordance with statutory requirements and to ensure it was aligned with the Committee’s service expectations.

The Audit Plan had been prepared having regard to several key inputs including:-

·                    Strategic, operational and financial risks relevant to the financial statements.

·                    Developments in financial reporting and auditing standards.

·                    The quality of systems and processes.

·                    Changes in the business and regulatory environment.

·                    Management’s views on all the above mentioned issues.

As well as the financial statement risks and value for money risks, the auditors had to perform other procedures as required by auditing, ethical and independence standards, the Code and other regulations.

The auditors had assessed the key risks which would drive the development of an effective audit and the planned audit strategy in response to those risks and had identified four significant risks to the opinion of the financial statements. These were misstatements due to fraud or error, the risk of fraud in revenue and expenditure recognition (incorrect classification of capital), property valuations (land and buildings), pension asset valuation and the impact of new accounting standards (IFRS 9: Financial Instruments and IFRS 15: Revenue from contracts with customers) and whether they had been appropriately implemented by the Council.

The Audit Plan restated, as in previous years, that management had the primary responsibility to prevent and detect fraud.  The Plan detailed how the auditors planned to obtain reasonable assurance about whether the financial statements as a whole were free of material misstatements whether caused by error or fraud.  Work would also be undertaken to consider whether the Council had in place ‘proper arrangements’ for securing financial resilience at the Council, and to secure economy, efficiency and effectiveness on its use of resources, which would include an assessment against the requirements of the CIPFA/SOLACE framework for local government.  In due course this would be reported to the Committee through documents such as the Annual Governance Statement.

The risk assessment had also identified one potential significant risk as a result of the 1 November 2018 announcement by CLG that a unitary authority for Buckinghamshire will be instituted from 1 April 2020.  It was possible that there might be an impact on the Council’s capacity to manage its operations as well as planning a smooth transition; also on managing strategic risks and medium-term financial planning.

An update on the results of the audit work in these areas would be reported back to the Committee in October 2019.

As in previous years, the Internal Audit plans and resulting work would be reviewed.  The findings of audit reports, together with any other work completed in the year, would help to inform detailed external audit work, including on issues raised that had an impact on the year-end financial statements.

The indicative fee scale for the audit work was £43,724, although it was possible that this fee could increase in due course if additional testing or work was required in addition to that already identified within the Audit Plan.  The external auditors would be making use of specialists for the work on valuation of land and buildings, pensions disclosure and the Management’s specialists, as detailed in the Committee report.

The fee for other non-audit services not covered by the audit work was £15,610 and related to the certification of Housing Benefits claims and returns annual report for 2018-19.

For the purposes of determining whether the financial statements were free from material error (i.e. the magnitude of an omission or mis-statement that, individually or in aggregate, could reasonably be expected to influence the users of the financial statements), the external auditors had determined that planning materiality (the amount over which it was anticipated that misstatements would influence the economic decisions of a user of the financial statements) at £2.29m based on 2% of gross expenditure.

Performance materiality, the amount the auditors used to determine the extent of their audit procedures had been set at £1.7m, and represented 75% of planning materiality.  Finally, Members were informed that any uncorrected audit mis-statements greater than £114,500 would be reported to the Audit Committee.

Members requested further information and were informed:-

(i)            that Aylesbury Vale Estates was a private company, although it’s accounts were incorporated with AVDC’s accounts.  As part of their work the external auditors could rely on the work by other auditors done on the AVE accounts, and could ask them to look at certain elements.

(ii)           that the risk of misstatements due to fraud or error and the risk of fraud in revenue and expenditure recognition were key risks and were looked at as a part of all Audit Plans.

(iii)          that, in particular, the impact of the unitary decision would be looked at as part of the value for money conclusion, looking at the Council’s arrangements for taking informed decisions, deploying resources in a sustainable manner and working with partners and other third parties.

(iv)         that Appendix A to the auditor’s report included information on the indicative fees for the work looking at 2018/19 financial statements and for the certification work on Housing Benefits.

RESOLVED –

That the contents of the external auditors’ Audit Plan for 2019 be noted.