- Meeting of Audit, Compliance and Governance Committee, Wednesday, 18th April, 2018 6.00 pm (Item 8.)
Sophie Morgan-Bower, of Grant Thornton, introduced the External Audit Plan which set out the planned scope and timing of the statutory audit by Grant Thornton. Members were referred to pages 89 to 91 which detailed the significant risks that had been identified. She highlighted that the risk of fraudulent transactions being included in the revenue cycle had been rebutted. The risk of management override of controls was a presumed risk that was present in all entities and therefore a non-rebuttable risk. Property, plant and equipment and investment property represented the largest of the council’s assets and the valuation of these assets was therefore identified as a risk requiring special audit consideration and was an area of particular focus for Grant Thornton. The valuation of pension fund net liability represented the largest liability to the council and therefore Grant Thornton would be looking closely at any assumptions being made. Page 92 outlined other risks which had been identified which were not significant but were slightly elevated and she highlighted the LGPS up-front payment, though this related to the disclosure associated with the payment, rather than the payment itself.
Barrie Morris of Grant Thornton referred members to Page 99 which detailed a disclosure made by GT about a potential breach of the ethical standards in connection with a contractor who was engaged with the firm (GT) and who was also the Chair of Publica Group (Support) Limited. The Ethical Standards does not allow a member of staff to take a role as an officer or member of board of directors in an entity where an audit client holds more than 20% of the voting rights. As soon as the breach was identified, GT notified the Public Sector Audit Appointments Ltd (PSAA) as well as the Director of Finance for each of the Councils and the contractor concerned. The contractor’s engagement with GT was terminated, with immediate effect, as soon as the breach was identified and no members of the audit team had any involvement with the contractor concerned and were unaware of his relationship with GT. Barrie explained that this was highly unusual and suggested that the reason the issue had arisen was that the definition of people had changed earlier in the year. He gave assurances that arrangements had been strengthened and reassured members that responsibility for this lay with Grant Thornton and not the Council. A member commented that the individual should have, themselves, declared a conflict of interest.
Finally, Barrie highlighted the non-audit services, which were of such low value, they did not undermine their independence.
In response to member question Barrie explained that work relating to Publica Group Support Ltd would be twofold. Firstly GT would review the Council’s treatment of Publica in the accounts of the council and given that CBC had limited involvement this would be less than partners, but discussions were ongoing with the Section 151 Officer and Deputy Section 151 Officer. Secondly and in terms of VfM, GT would check that governance arrangements to monitor service standards and savings, which formed part of the business case on which the decision to form Publica was based, are sufficient and appropriate.
A member was aware that another member of the council was paid twice in one month and that this had come to light as a result of that member having reported it and his questions was: what if it wasn’t report by an officer or member, if and how would this be picked up? GT explained that their work did not include substantive checks of all payroll transactions, instead undertaking a walkthrough of payroll and the controls in place. The Assistant Director for SWAP confirmed that the Internal Audit role did include transactional testing and any such issue would be reported, with the Deputy Section 151 Officer confirming that the finance team did pull off the payroll ledger, which would identify any issues.
There were no further comments or questions.
No decision was required.