A report of the Chief Finance Officer was presented for Members of the Corporate Affairs and Audit Committee to note the final version of the Auditors ISA 260 report and review the Council's response to the recommendations made in Appendix 4 of the report.
Deloitte presented their draft ISA 260 report on the audit of the Councils 2014/2015 Statement of Accounts to the Corporate Affairs and Audit Committee on 24 September 2015. The ISA 260 included thirteen recommendations arising from the audit; and an action plan listing the recommendations made by Deloitte together with the management response was attached at Appendix A to the submitted report.
It was emphasised that none of the issues raised in the ISA 260 Report had any impact on the level of resources available to the Council.
The Accounting Services Manager highlighted some of the key recommendations and outlined the management response as follows:
The Audit had identified a weakness in the operation of the control around journals being posted to the financial ledger. Although there was a protocol in place, in some instances this was not being adhered to. No inappropriate mis-adjustments had been identified as a consequence of this. The protocol for processing journals had been recirculated to all staff and spot checks would be carried out three times a year to ensure it was being followed.
The Council needed to ensure that Related Party Transactions forms were completed annually to support the production of the accounts. Future returns would be pre-populated with data supplied in the previous years returns with information obtained from the Register of Members Interests. In future, Members would be requested to confirm that the information contained on the form was correct or advise of any changes.
Testing of grant income had identified a number of errors in the application of the recognition criteria. Whilst the number of errors had reduced from the previous year, it was recommended that the level of management review was increased to ensure the appropriate recognition criteria were adopted. The Council was satisfied that the current control procedures were sufficient. However, in future if there were any queries in relation to grant income, the Accounting Service Team would check with EY for clarification before recognising it in the Accounts.
The implementation of the new finance system, Agresso, presented a number of challenges to the Council including financial reporting. Deloitte had recommended a dry run of the closure of accounts to ensure that all information required as part of the production of the financial statements could be readily and easily obtained. Unfortunately, the Council did not have the resources to carry out a full test closure as recommended and Members voiced concern that this recommendation had not been implemented.
However, Finance and Investment Officers had met with colleagues in a neighbouring Authority who had recently implemented Agresso and identified the key processes and possible risk areas relating to year end closure. Additional support had been identified from Unit 4 if required and a test system was also available. The External Auditor commented that they would also be carrying out some testing in advance of the year end closure and would provide an update at the next meeting.
From 31 March 2017, the Code of Practice on Local Authority Accounting would adopt a change in the valuation approach for infrastructure assets on the Balance Sheet. The Council would be required to provide valuations as at 31 March 2017 and comparators as at 31 March 2016 on a Depreciated Replacement Cost (DRC) basis. Finance Officers would be liaising with Officers from the Transportation and Infrastructure Department to develop a database to capture details of all the Councils infrastructure assets and agree the basis of valuations. An Action Plan would be developed to identify the key actions and milestone dates leading up to the implementation of the new Code requirements.
AGREED that the ISA 260 report and the management response were received and noted.