Agenda item

Grant Thornton

Jackson Murray, of Grant Thornton, introduced the Audit Findings report, as circulated with the agenda.  The report highlighted key findings arising from the audit.  Members were referred to the Executive Summary, which referenced outstanding work and informed the committee that final assurances from Cheltenham Borough Homes’ auditors had now been received and whilst this had raised some issues, it was nothing material.  The final version of the final statements and the management letter of representations had been received today and signing of the opinion would take place later in the meeting, once the committee had reviewed the Statement of Accounts.  Grant Thornton were on target for the September deadline.  In relation to Value for Money (VfM), there were three areas that were assessed: decision making, sustainability and partnership working and Grant Thornton had concluded that the Council had proper arrangements in all significant respects to ensure it delivered value for money in its use of resources.  

Jackson talked through some key points:

·         Historically, the Council had produced group accounts which had included Ubico Ltd, but with the Council’s shareholdings having decreased to one-sixth with the addition of more partners, it was agreed that group accounts were no longer required.  The Council’s interest would instead be classified as an investment in Ubico Ltd on the Balance Sheet. 

·         No material adjustments were identified within the financial statements and the recorded net expenditure had remained the same.

·         There had been an increase to the balance sheets of £3.568 million as a result of the increased value of assets.  This was matched by an equal increase in the Revaluation Reserve. 

·         Recognising the size of the accounts, recommendations on a number of adjustments to improve the presentation of the financial statements had been made. 

·         No issues with the Annual Governance Statement were identified.

·         Weaknesses in relation to IT controls were identified, but these weaknesses did not alter the proposed audit strategy; instead offering scope to refine controls.

·         Under significant risks there were two presumed significant risks which were applicable to all audits under auditing standards and none of the risk that were identified related to either of the presumed risks. 

·         The Agresso upgrade had been effective and a number of potential improvements had been identified in relation to the Council’s IT Systems. 

·         Information from the valuers suggested that there was a material difference between the carrying value and fair value of some assets which were last valued in 2014.  Grant Thornton had raised a recommendation that the council consider their valuation programme to ensure that values remained material stated. 

·         The valuation of pension fund net liability represented significant estimates in the financial statements, but the audit work had not identified any issues. 

·         No issues were identified in relation to payroll and expenditure. 

·         During testing of grant income a balance totalling £0.083m was disclosed as receipts in advance and was subsequently identified as monies relating to Section 106 bond deposits. The monies were repayable to the contractor upon completion of the works per the signed agreement.  This was a classification issue not to do with the figures themselves.

·         Having assessed the issues raised in the previous year, both had been addressed.

·         £0.095m should have been shown as de-recognition rather than a disposal and this did not have any impact on the Council’s Comprehensive Income and Expenditure Statement or the Balance Sheet.

·         In terms of the VfM findings, two interlinked risks were identified: the MTFS and 2020 Vision.  Gaps still existed in the MTFS and potential changes to the Council’s involvement in the 2020 Vision Programme would result in alternative savings having to be identified to cover any shortfalls.  Grant Thornton concluded that the risks were sufficiently mitigated and the Council had proper arrangements in place.

·         The actual fees charged for the Council audit work were as budgeted.

·         The action plan included Management responses.

The following responses were given to member questions:

·         CIPFA guidance states that depreciation begins when an asset is available for use and that all assets must depreciate.

·         The council spends circa £80million a year and therefore £82k represented 0.1% of gross revenue expenditure.  Grant Thornton would not expect the Finance Team to adjust the accounts for anything below that figure and members were assured that suspected fraud, of any sum, would be immediately reported. 

·         Grant Thornton’s audit was not designed to test all internal controls.  It focussed on areas of greatest risk and was retrospective. 

·         Journals posed an area of high risk for External Auditors as they allowed money to be moved from one place to another.  The Section 151 Officer had not posted any journals in 2015-16 but his ability to do so was removed as they would not be subject to authorisation by a more senior officer. 

·         Finance Officers worked across all partners and as such had access to all journals of all partners.  Outside of the Finance Team, access permissions were set at a level that was appropriate to the role (i.e. a budget holder would have access to their budget information only).

·         Grant Thornton did not assess decisions themselves, as this was ultimately for members to make the decision.  What Grant Thornton assessed was whether members were given all of the appropriate information to allow them to make an informed decision.

·         In reviewing the financial strategy, Grant Thornton needed to be satisfied that the assumptions that were being made were reasonable.  They recognised that there were some gaps but have seen that historically, this council has shown ability to address these gaps.

·         The implementation date of 31 March 2017 had been set for the review of the rolling valuation programme as, had this been done now, it would only have had to be repeated at the 31 March 2017.

There were no recommendations arising from this report.