The External Auditor presented a report on the principal matters that had arisen to date from the audit for the year ended 31 March 2014.
There were a number of audit procedures still to complete before the Auditor would be in a position to complete the audit. An objection had been received from a member of the public in respect of an item of account, which the Auditor would consider. It was noted that the objection might impact on the Auditor's ability to certify the completion of the audit by the 30 September 2014 deadline if the matter was not satisfactorily resolved by then. In addition, there was one item in the Letter of Representation which required further discussion.
Reference was made to two queries that had been raised on the accounts by an elector and the External Auditor confirmed that he had arranged to meet with the member of public following this meeting.
The audit was conducted using the concept of materiality. Materiality was set at a level of £4.0 million and all uncorrected errors over a threshold of £0.2 million were reported within Appendix 2 to the submitted report.
No significant deficiencies in internal control had been identified although there were some areas where improvements could be made which would be detailed in a separate management letter following the conclusion of the audit and submitted to the next meeting of the Corporate Affairs and Audit Committee.
The following significant risks had been identified and the External Auditor provided a detailed explanation and update as to the current position for each of the items:
Recognition of Grant Income.
Valuation of Property, Plant and Equipment.
Adequacy of Related Party Disclosures.
Management override of key controls, as presumed by auditing standards.
In relation to the adequacy of disclosures of related party transactions, it was highlighted that a number of annual declarations were not returned by elected members and the process to follow-up those Members who had not responded needed to be improved. Members suggested that it would be helpful to have a single form to cover all declarations of interests.
Completion of a risk assessment regarding Value for Money arrangements in place at the Council had identified two significant risks to address which were: the Section 151 Officer did not sit on the Council's Management Team (CMT) and the Council's future financial planning and resilience. The External Auditor highlighted the observations on both these two significant risks that were detailed in the submitted report.
The External Auditor confirmed that in terms of financial resilience the Council, like other public bodies, faced a significant challenge to reform to ensure it continued to operate effectively with reduced resources. The Council's Medium Term Financial Plan (MFTP) had been reviewed and provided a high level summary of the resources, expenditure and funding gap of the Council. The Change Programme and the MFTP were broadly aligned in terms of the spending profile, however significant spending gaps still existed. The current year savings plans were approved and the 2015/2016 savings plans were progressing and further work was ongoing to identify the full extent of the savings required for 2016/2017.
The External Auditor confirmed that Deloitte expected to provide an unmodified audit opinion by 30 September 2014, pending resolution of outstanding matters.
The External Auditor also intended to issue an unmodified opinion on the Council's arrangements for securing Value for Money in its use of resources.
Work was not yet complete on the Council's submission as part of the Whole of Government Accounts (WGA) process. However, it was anticipated that this opinion would be issued by the deadline of 3 October 2014.
The External Auditor confirmed that the ISO 260 Progress Report would be updated to reflect the changes agreed since the initial Report was issued.
AGREED as follows that:
1. the Middlesbrough Council Statement of Accounts 2013/2014 be approved.
2. following the issue of the final ISO 260 Progress Report and clarification of the outstanding matters, the Chair of the Corporate Affairs and Audit Committee was authorised to sign the Letter of Representation on behalf of the Committee.
3. the current process for Members' Declaration of Interests would be reviewed.