Agenda item

Mr Henderson presented the report. He said this plan was focused on the Council’s 2015/2016 accounts, which are likely to be published at the end of June or July. Agenda pages 63-64 set out some of the issues taken into account in the plan. He drew attention to the need to value the Council’s highway assets this year and for them to be entered on the opening balance sheet next year. This was a difficult area and a good deal of estimation would be involved in assessing the value of individual roads.

A Member asked what criteria there would be for assessing the relative value of different roads. Would the state of repair be taken into account? Mr Henderson replied that valuing roads did appear to be a strange thing to do, but the information was needed to fill a gap in the whole-of-government accounts. Roads obviously had some value, so the issue was the valuation methodology. He expected that guidance would be issued and would be based on standard figures, e.g. an A road should be valued at so much per metre, and that the software the Council would use for road valuations would have these standard rates built in. The difficulty would be that the valuations would be based on a lot of estimates, yet could add billions of pounds to the Council’s assets while the materiality figure would remain £8m. The Head of Audit West said that the Council valued all its other assets and was able to compare the costs of maintenance with the value of the assets. In future it would be possible to see for the first time what percentage the Highways Budget was of the value of the assets, which would give a new perspective. A workshop about this was planned for June. In response a question from another Member, Mr Henderson said that he thought that roads valuation would be based essentially on replacement cost and that that depreciation would be applied.

A Member referred to the risk identified on page 67 “the revenue cycle includes fraudulent transactions”, and asked how fraud could be quantified. Mr Henderson said that the external auditors were only concerned with misstatements and fraud that appeared in the accounts and not with possible revenue that had never been entered into the accounts.

A Member asked to what extent the external auditors relied on work done by Internal Audit. Mr Henderson said that the external auditors were no longer allowed to rely on work done by Internal Audit, but they did take it into account and used it to inform their own work.

A Member asked how the audit fees were determined. Mr Henderson explained that rates for fees, which were previously determined by the Audit Commission, were now set by Public Sector Audit Appointments Ltd. Fees had been progressively reduced since the decision to abolish the Audit Commission. The Member asked whether the level of fee restricted the work that the external auditors could do. Mr Henderson explained that this was not an issue in Bath and North East Somerset, but fees were lower for small authorities, and in their case it was sometimes a challenge to do the necessary work within the fee set. The external auditors did not receive the full fee, as they had to pay a certain percentage to Public Sector Audit Appointments. Fees might change again when the market for public sector external auditors was deregulated.

RESOLVED to recommend the plan for approval by the S151 Officer.