Agenda item

To receive and approve the External Audit Plan

PricewaterhouseCoopers introduced a report on the External Audit Plan for 2012/13.

The following key points within the report included:

• Risk assessments for the year management controls;
• Key Risks - Financial Statement Specific Risks identified, which included:

-        Management override of Controls;

-        Revenue and expenditure recognition;

-        Property, plant and equipment valuation;

-        Property, plant and equipment – new fixed asset system;

-        Adult Social Care – new social care records system; and

-        Savings targets.

• The de minimis threshold of £250,000;
• Invest to Save governance arrangements;
• Risk of fraud;
• External audit fees; and
• The budget allocation for external audit fees which was to be agreed with the Audit Committee.

PricewaterhouseCoopers responded to comments, questions and concerns raised by Members.  In summary, responses included:

• The fees charged by PwC were based on a scale fee that had been set by the Audit Commission’s guidance and was lower for 2012/13, due to the recent national procurement exercise undertaken by the Audit Commission and changes in  the recharge mechanism;
• The high risk identified for management override of control was raised across all audits and was necessary, for example, in order to closely monitor the appropriateness of accruals and deference of expenditure processes.  The process was overseen by Peterborough City Council’s (PCC’s) Finance Team, where managers were regularly challenged to justify any amounts identified;
• The Council had changed the accounting policy in line with the guidance on capitalisation of the financial costs.  On adoption of the policy change, PCC had decided not to capitalise on any finance costs incurred;
• The audit approach on savings targets was intended to consider new and unusual proposals, which enabled PwC to consider the impact of income and expenditure against the PCC efficiency challenge.  PCC would also engage with PwC if an initiative was likely to have complex accounting arrangements. Recent examples highlighted, where the audit approach was utilised were for the Local Authority Mortgage (LAM) scheme and the transfer of Adult Social Care; 
• The solar panel and wind farm income generation proposals would not be included within the 2012/13 external audit plan, as the process referred to projects that were underway;
• The de minimus value was set at a percentage of the total Council’s gross budget. The £250,000 value was within that threshold; and
• The capitalisation costs on building properties could include architect, surveying  and borrowing costs;

7.51pm - At this point Councillor Sandford arrived at the meeting.

• Valuations were conducted by PCC external experts and in conjunction with the Accounts team.  PwC auditors checked the valuations with their internal Valuation Team in order to compare the figures and to assess the balances;
• PwC would also pay particular attention to the current market fluctuations and high value assets within the property valuation audit exercise;
• The Audit Committee was charged with governance and would be in a position to raise any issues it believed would be of a fraudulent nature;
• The Council also operated a whistle blowing policy.  Senior Officers such as the Chief Executive, Chief Internal Auditor and the Head of Governance would be approached in order for any member of staff or Councillor to raise any suspicion of fraudulent activities that they believed may be occurring in the Council;
• The current Whistle Blowing policy was under review and would be presented to Audit Committee for comment in June 2013;
• A report was presented on an annual basis to the Audit Committee by the Head of Governance in order to highlight investigations, which had taken place, such as blue badges, benefit and corporate fraud; and
• PwC were commissioned by the Audit Commission to provide external audit services to PCC until 2015/16.  The Council would be in a position to appoint their own external auditors once the Draft Local Audit Bill had been approved by Government.

8.04pm - At this point Councillor Maqbool arrived at the meeting.

During debate, Members raised a number of concerns including:

• Answers provided by PCC Officers to Members questions did not appear to be detailed or transparent enough; and
• Some financial information in relation to Cabinet decisions had proved to be difficult to obtain.

AGREED ACTION:

The Committee:

i)     Considered the External Audit Plan for 2012/13 and considered the points raised by PwC;

ii)    Agreed to the proposed scope, comfortable with the audit risks, and           approach;

iii)     Considered and responded to matters relating to fraud;

iv)    Approved the PwC audit fees for the year;

v)      Provided comment on any amendments necessary; and

vi)    Approved the Audit Plan.

The Committee Further Agreed:

• That the Head of Corporate Services would provide an update on progress of the PwC’s audit of the Invest to Save Scheme to all Members of the Audit Committee; and
• That the Audit Committee’s comments regarding their concerns over the availability of transparent information, was to be communicated to Cabinet.