Agenda item

Purpose: To provide Members with a copy of the external audit plan from KPMG for 2015/16.

Ian Pennington introduced the report which set out the external audit plan from KPMG for 2015/16. Mr Pennington noted the document set out the timelines and procedures associated with the summer audit of the Council’s accounts which would be reported to the Committee in the autumn of 2016.

The report asked Members to note the attached plan and the two key objectives within the plan to audit/review and report on:

(1)       The Financial Statements including the Annual Governance Statement, providing an opinion on the accounts.

(2)       The use of resources, concluding on the arrangements in place for securing economy, efficiency and effectiveness in the Council’s use of resources.

Mr Pennington explained that the materiality, or financial amount the auditors were willing to risk, had been set at £6m for the Council. This sum was based on the Council’s budget of £350m and the estimated value of assets being circa £400m. The auditors would undertake sampling in order to test the validity of the accounts. They were obliged to report uncorrected omissions or misstatements, other than those that were clearly trivial, to the Governance and Ethics Committee. During the previous year Officers had accepted all the changes and therefore nothing needed to be reported to the Committee.

The auditors had not identified any significant risks other than that required by auditing standards namely management override of controls. This would involve looking at areas that could be exploited by management including journals, estimates and any significant transactions. Historically there had not been issues at this Council.

The other areas the audit would focus on were:

·         Valuation of property, plant and equipment;

·         Pension assets and liabilities.

The second area of work that the auditors would undertake centred on the Council’s value for money arrangements. The risk assessment undertaken by the auditors had identified two value for money significant risks:

·         Financial resilience

·         Better Care Fund/ Care Act eligibility.

Mr Pennington noted that this was the third audit of West Berkshire Council that he had been involved in. He would be heading up a new audit team and he hoped that this might provide a fresh perspective. The fee for 2015/16 was around £25k lower than the previous year.

Councillor Rick Jones noted that the internal audit report would also be looking into the Better Care Fund and Care Act eligibility and he wondered how the two audits would relate to each other. Mr Pennington noted that KPMG would look at the internal audit report to ensure that all the questions they needed to cover had been addressed.

Councillor Jones also noted that Children’s Services had been subjected to an Ofsted Inspection and a lot of internal scrutiny and wanted to ensure that KPMG would not be duplicating work that had already been done. Mr Pennington noted that they were aware that there was an existing action plan to address deficiencies. The external auditors would be checking to see if the problems had been identified and that work was being undertaken to rectify the issues.

Councillor Lee Dillon noted that journal entries and estimates were potentially areas that could be exploited by managers overriding the controls and he wondered if contract values would be considered alongside this work. Mr Pennington noted that deliberately over paying a contract would constitute fraud. The auditors would look at the processes underpinning this area of work and would seek reassurance, for example the use of external valuers. During the previous audit an extra piece of work on Procurement had been undertaken. One issue had been identified and had been reported to the Committee in September 2015.

Councillor Anthony Pick asked if the audit would be used to identify areas where savings could be made by the Council. Mr Pennington noted that the role of external audit was not to identify areas where savings could be made although clearly if they came across any savings that could be made they would point them out. The value for money aspect of the audit was designed to look at the processes employed by the Council and was not designed to deliver value for money.

Councillor Quentin Webb asked how many transactions would be tested. Mr Pennington stated that it was difficult to say but reiterated that they would be focussing on processes and that various testing methods would be employed.

Councillor Webb noted that the Better Care Fund involved partner organisations and he therefore queried how much auditing could be undertaken. Mr Pennington explained that they would focus on the Council’s arrangements but that they could speak to the Clinical Commissioning Groups to establish if the Council was a good partner from their perspective.

Mr Pennington explained that it was anticipated that the Council’s accounts would be completed by the end of May 2016, the audit would take place during June and July and a report would be brought back to the 22 August 2016 Governance and Ethics meeting.

RESOLVED that the plan and the two key objectives within the plan to audit/ review and report on be noted.