Agenda item

In presenting the ISA 260 report, the External Auditors advised that the audit of the Borough Council had been substantially completed for the year ended 31 March 2017 and that subject to concluding the outstanding matters listed in their report, Ernst and Young confirmed that they expect to issue an unqualified audit opinion on the financial statements in the form at Section 3.

The Committee was reminded that the statutory deadline for 2016/2017 was 30 September 2017.  However, the Council was aiming to approve the financial statements on 31 July 2017 in preparation for the earlier statutory deadline of 31 July which was relevant for financial years ending on or after 31 March 2018.  Ernst and Young therefore confirmed that they would also expect their audit opinion by the end of July 2017.

Ernst and Young advised that the report was intended solely for the use of the Audit Committee, other members of the Authority and senior management; it should not be used for any other purpose or given to any other party without obtaining the External Auditor’s consent.

The Committee’s attention was drawn to the following sections of the report

·         Page 37:  Assessment of Materiality – this was reassessed using the actual results for the financial year, which was reduced to £1.6 million.

·         Page 38:  There were no unadjusted audit differences arising from the audit.  Any outstanding issued had been addressed in the Letter of Representation which would be signed by the Chairman of the Audit Committee, together with the Statement of Accounts.

·         Page 42:  Audit Risks.  The auditor’s testing had not identified any material misstatements from revenue and expenditure recognition.  The audit work did not identify any material issues or unusual transactions to indicate any misreporting of the Authority’s financial position.

·         Page 63:  The responsibility of the Council’s auditor was to consider whether the Authority had put adequate arrangements in place to satisfy that the systems of internal financial control were both adequate and effective in practice.  The auditor confirmed that no weaknesses were identified.

·         Appendix D:  Request for a Letter of Representation.  The Committee was advised that this was a generic standard request and did refer to any specific points.

·         Page 57:  Value for Money – The Auditor advised that the Council had a comfortable level of reserves and a strategic plan in place to address the three year budget gap.

Ernst & Young and the Executive Director responded to questions on the Statement of Accounts and the ISA260 relating to:

·         Reclassification between long-term and short-term investments.

·         Statutory deadline of 31 July 2018.

·         Identified budget gap – the Borough Council had a plan and a level of reserves in place to address the budget deficit.

·         Pension Valuation and Disclosure.  It was explained that accounting for this scheme involved significant estimation and judgement and that the actuarial expertise was used by the Council.  Comparisons had also been made with other local authorities.  The Council’s arrangement to pay a three year upfront payment was explained.  It was highlighted that the actuary worked out the required payment on a yearly basis.  The Executive Director explained that that Pension Scheme was a longer term scheme and had changed from final salary to career average.

·         Procedure in place for repayment of NWES loan.

·         Non-Domestic Rates Provision.  The auditor confirmed that the Council’s provision for business rate appeals was adequate.  An example of the Power Station appeal was outlined to the Committee.

·         Freebridge Community Housing Ltd – the Committee was referred to page 64 of the SOA and it was noted that there was a VAT sharing agreement between FCH and the Council.

·         Property, Plant and Equipment – it was explained that the accounting policy was to review individual items on a 5 year rolling programme.

·         Group Accounts – it was explained that an additional fee of £3,000 had been incurred for the additional work required to meet the group consolidation requirements of the Code of Practice ad International Accounting Standards.

·         The Borough Council’s investment portfolio.

·         Heritage Assets.

The Chairman, Councillor Pope thanked Ernst and Young for attending and answering questions from the Committee.

RESOLVED:  The Committee considered and noted the comments of the Auditor in the ISA260.