SUSPENSION OF COUNCIL PROCEDURE RULE NO 5 - ORDER OF BUSINESS
ORDERED that, in accordance with Council Procedure Rule No 5, the Committee agreed to vary the order of business as follows: Agenda Item 5, Agenda Item 4, Agenda Item 6, Agenda Item 7, Agenda Item 8, Agenda Item 11, Agenda Item 9, Agenda Item 10 and Agenda Item 12.
The External Auditor presented a report to provide the Corporate Affairs and Audit Committee with an update on the progress of the external audit for the year ended 31 March 2016. The report included a summary of the work undertaken to date, changes to the risk assessment in the Audit Planning Report presented to the Corporate Affairs and Audit Committee on 24 March 2016 and an indication of initial materiality estimates. There were no significant findings arising from the Auditor's interim audit work to report to the Committee.
In the original Audit Plan, the Auditor identified valuation of land and buildings as an 'other financial statement risk'. Following completion of interim work this risk had been reassessed as being significant. The reason for this reassessment was that the fixed asset balance was one of the most significant assets on the Council's balance sheet and the valuation of these assets could be complex. A small movement in the assumptions behind the valuation could have a material impact on the Balance Sheet.
Following the original assessment, the External Auditor noted that a variety of valuation methods were used by the Council's valuers, as the land and buildings owned by the Council were diverse in nature, which required expert knowledge and were inherently judgemental in nature. In addition, the Auditor's review of prior year working papers at other local government bodies had highlighted some errors in valuations that had led to material adjustments in the financial statements. On this basis, the External Auditor sought to change the risk for valuation of land and buildings to a significant risk.
The External Auditor also informed the Committee that at this stage of the Audit, EY considered the most appropriate basis for assessing materiality for the Council to be 2% of the expenditure for the year. Based on 2014/2015 expenditure in the audited accounts, EY anticipated the materiality to be in the region of £7,868,900. EY would report all unadjusted misstatements over £395,500 identified during the course of the audit to the Committee.
It was highlighted that any substantive errors discovered during the audit would be adjusted. A copy of the Draft Accounts would be published on the Council website today and hard copies would be made available. Member training would be provided during the summer, prior to approval of the Accounts in September 2016.
A Member referred to a concern raised at the previous meeting in relation to the recent implementation of the Agresso financial system and its integrity. The Assistant Director Interim, Finance and Investment, assured Members that appropriate financial controls were in place and that the real issue was employees not using the Agresso system correctly, and not the system itself. It was clarified that through the Middlesbrough Manager scheme, all employees would be trained to ensure adherence to correct procedures in relation to financial control and use of Agresso. Further assurance would be provided through Internal and External audit work.
AGREED as follows:
1. The External Audit Plan was amended to change the risk for valuation of land and buildings to a significant risk.
2. Based on 2014/2015 expenditure in the audited accounts, materiality would be in the region of £7,868,900.