The External Auditor presented the Audit Planning Report to provide the Corporate Affairs and Audit Committee with a basis to review the proposed audit approach and scope for the 2017/2018 audit in accordance with the requirements of the Local Audit and Accountability Act 2014, the National Audit Office's 2015 Code of Audit Practice, the Statement of Responsibilities issued by Public Sector Audit Appointments Ltd (PSAA), auditing standards and other professional requirements.
The Plan summarised EY's initial assessment of the key risks driving the development of an effective audit for the Council, and outlined the planned audit strategy in response to those risks. The significant risks were identified as:
Risk of fraud in revenue and expenditure recognition.
Misstatements due to fraud or error.
Valuation of land and buildings and investment properties.
Pension liability valuation.
Property disposal governance arrangements.
The External Auditor explained that the first two risks were mandatory and required to be included in all audits.
A Member voiced concern regarding value for money in relation to assets since this was the third year it had been included as a significant risk. The External Auditor stated that there was an extensive planned programme of work focussed on property governance. It was clarified that the Audit Planning Report covered the procedures and process in the financial year 2017/2018 and the work on value for money was not yet concluded, since it was not yet the year end. The results of the audit would be reported to the Committee in July 2018.
The Strategic Director of Finance, Governance and Support reminded the Committee that the previous qualification was in respect of the governance arrangements for property disposals rather than value for money. Whilst the Council had made good progress, the External Auditor had felt that the new policy agreed in December 2016 was not sufficiently embedded by March 2017 to remove that qualification last year. The Director added that the focus on strengthening governance arrangements was an absolute priority.
With regard to a query in relation to tendering and value for money, the External Auditor confirmed that the audit was in relation to the governance arrangements for value for money.
For planning purposes, materiality for 2017/2018 had been set at £10.4 million. This represented 2% of the Councils prior year gross expenditure on provision of services. The figure would be reassessed throughout the audit process. Any uncorrected misstatements over £0.52 million would be reported to the Committee.
The timetable for reporting the Audit had been amended this year and the External Audit would report back to the Committee by the end of July rather than the end of September.
Confirmation of EYs independence and the Audit Fees were also included in the submitted report. It was noted that a scale fee variation of £50,000 had been requested by the External Auditor for the additional work undertaken in respect of the value for money risks in 2016/2017. The fee had been agreed with Officers and the PSAA had been informed. Given the significant risk to the value for money opinion identified in 2017/2018, it was expected that there would also be a scale fee variation for this work which would be quantified following EYs initial scoping of the work.
The External Auditor explained that the scope of work had been extended following queries received in relation to some specific transactions. Additional time had been built in and some specialists engaged to deal with specific queries. This additional work had been agreed in advance with Officers.
AGREED that the information provided was received and noted.