Agenda item

Grant Thornton (Final Report to Follow)

Barrie Morris of Grant Thornton (GT), introduced the report as circulated with the agenda. He firstly wished to commend the officers for the good standard of responses GT had received to any queries.

He explained that when performing their audit work, GT applied the concept of materiality and overall materiality had been determined to be £1,606,000 (2% of gross expenditure), though the materiality was lower for more sensitive transactions, balances or disclosures. He advised that they had reviewed the Section 151 Officer’s assessment and were satisfied that the Going Concern Basis was appropriate for the 2017/18 financial statements. They had  also identified the valuation of the pensions fund net liability as a risk requiring special audit consideration, however, following a  review of this and the accounting treatment of the early repayment of 7.1m paid across to the pension fund they had identified no issues.

He informed the committee that a number of IT deficiencies had been identified  as part of their 2017/2018 IT review.  These were outlined on page 11 -16 of the report where a breakdown of the associated risks for each deficiency were also outlined.  He reported that 3 new risks had also been  identified during the course of the audit that had not been communicated in the Audit plan, these included the consolidation of Publica,  Lender Option Borrowing Options (LOBOs) and Ubico Vehicle lease. Mr Morris proceeded to give an update on each new identified risk.  He reported that the Council had decided not to consolidate Publica into the Group’s accounts for 2017/18, however, the council would monitor this position on an annual basis to see if the position changes. Whilst the LOBO’s had been subjected to increased scrutiny, GT had identified no significant issues with the accounting treatment of them. He explained that GT were satisfied with the Council treatment surrounding the Ubico Vehicle Lease, however,  they  had observed that a formal agreement regarding the use of these vehicles had not been put in place and recommended that the agreement be formalised.

The committee were advised that all the accounting policies were showing green which indicated that the policies were appropriate and disclosures sufficient. GT had also sent out confirmation request to the bodies with which the Council held investment, cash and debt balances and positive confirmation had now been received from all but two of the third parties. They did however stress that they were confident through alternative testing that the arrangements were in place and the lack of responses had not impacted upon the overall conclusion. 

In relation to Value for Money (VFM), GT had to satisfy themselves that the council had put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. In conducting this assessment GT had identified two potential risk areas; the Council’s Medium Term Financial Strategy and the Council’s arrangements for the establishment of Publica Group. Mr Morris noted that this was not an assessment of Publica itself just the governance arrangements.

In mitigating the risks of the medium term financial strategy GT had made two recommendations to monitor the high risks saving within the balanced budget and monitor the use of reserves when budget setting. With regards to the Council’s arrangements for the establishment of Publica Group, GT recommended that the liaison and communication arrangements between Members and Publica be formalised to ensure members have the opportunity to challenge and scrutinise Publica’s performance.

Mr Morris also wanted to make the committee aware  of a potential breach of the ethical standards following a discovery that a person engaged with the firm was also the Chair of Publica.  He advised that the persons contract had subsequently been terminated with the company and there had been no impact on the audit of the council.

Sophie Morgan, also of GT, proceeded to summarise the  recommendations as a result of the issues identified during the course of the audit work. These included:

·           Continuing to monitor the red-rated savings within the balanced budget; 

·           Continuing to monitor the use of reserves when budget setting;

·           Formalising liaison and communication arrangements between members and Publica;

·           Implementing the recommendations arising from the IT review; and

·           Formalising the lease between Ubico and CBC.

She reported that of those issues identified during the audit for the previous year (2016/17) two of the risk still remained valid, these were in relation to the balanced budget and the budget strategy reserve. She advised that there were also 2 minor disclosures outlined on page 36 of the report which were worth noting.

The following responses were given to Members questions:

·           GT would confirm who the organisations were who had not provided responses to there confirmation requests.

·           The Deputy Section 151 Officer confirmed that red rated savings referred to target savings in the medium term strategy  such as becoming more commercial and further investment in the Council’s portfolio. She advised that these were highlighted in the budget papers and could issue a copy if necessary. 

No decision was required.