Agenda item

Mr Henderson presented the Annual Audit Letter for the year ending 31 March 2016 and the external auditors’ progress report and update.

The Chair asked about the valuation of long-term (non-current) assets (agenda page 22). Mr Henderson said that this had been a problem for the last couple of years. One of the issues was the much higher materiality used by the valuer than used by the external auditors. It had now been agreed with the Council’s valuation team that they would carry out their valuation mid-year, rather than at the beginning of the year, and would, if there had been significant changes in value, revalue high-value items at 31^st March.

A Member asked about the impact of materiality. Mr Henderson replied that if there was an error or combination of errors above the materiality threshold, the auditors would expect the Council’s accounts to be amended. If the error was below the threshold, the auditor would simply report it. The Member noted that the materiality threshold for the Avon Pension Fund accounts was £38m.

Mr Henderson drew Members’ attention to the progress update (agenda pages 36-37). He said that, as always, there had been issues relating to claims. DWP had written to the Council seeking information, which might result in additional work being requested from Grant Thornton. The issue concerned evidence relating to occupational and retirement pensions. Grant Thornton had no evidence supporting long-standing benefit claims, and had to report that fact. The Council would have to go through a separate process to obtain this evidence. If it could be obtained now, Grant Thornton would be able to amend the qualification letter. The Council may possibly have to pay a large amount to DWP.

He reminded Members that the new statutory deadline for the publication of Council accounts will apply from 2017/18. Both the Council and the auditors would treat this year as a dry run to prepare for this new deadline, with the accounts being published by 31^st May 2017 and the audit commencing on 1^st June 2017.

He drew attention to the information about the procurement options for engaging external auditors (agenda pages 44-47) and reminded the Committee that they had agreed at the previous meeting that their preferred option was to join a sector-led procurement exercise from Public Sector Audit Appointments Ltd. The Head of Audit West said that it had been for full Council to decide how to proceed and they had approved the use of PSAA in November. A Member said that he understood that a cap would be set on the amount of work that any single audit company would be able to undertake for a Council. Mr Henderson replied that audit companies would not be able to combine the role of external auditor with any other kind of work for a Council, so they would be faced with choices about what kind of Council work to accept.

Mr Henderson drew attention to two changes to the CIPFA/LASAAC Local Authority Accounting Code for 2016/17 (agenda page 49). CIPFA/LASAAC had now announced that the provision relating to measuring the costs of the Highway Networks Asset would be deferred and that a decision about its implementation would be made in March 2017. The external auditor would therefore not do further detailed work on this until the final decision on implementation had been taken. The other change related to the Comprehensive Income and Expenditure Statement. Because of this requirement the 2015/16 figures would have to be restated. The Head of Audit West said that this change would make it easier for Members to read the accounts, since the revenue budget report and the mid-year budget position reports would be in exactly the same format as that used in the annual accounts.

Mr Henderson drew attention to training events and workshops open to Members (agenda page 54). The Head of Audit West suggested that a regional training event for members of corporate audit committees might be helpful. This would probably be hosted by North Somerset Council. Members indicated interest.

RESOLVED to note the report and updates provided by the external auditor.