Agenda item

To receive the Audit Plan from Ernst & Young, to review their proposed approach and scope for the 2015/16 audit in accordance with requirements, and to ensure that the EY audit is aligned with the Committee’s service expectations.

Audit Manager Ernst and Young LLP introduced the report to the Committee, which outlined the external audit plan for 2015/16.

They key points highlighted included:

·         Financial Statement Risks;

·         Paying particular attention to Schools accounting processes as highlighted by the PwC last year;

·         Minimum Revenue Provision;

·         Group Boundaries and Partnerships;

·         New Financial System (November 2015 the Local Authority had changed its accounting system from Oracle to Agresso);

·         The Better Care Fund (BCF);

·         Value for Money Risks;

·         Materiality and Trivial Level normally based on 5% reportable audit misstatements £250,000;

·         Scale Fee;

·         Timetable of  the key stages of the audit;

·         Appendix A -  Fees;

·         Appendix B -  Communications; and

·         Appendix C – Detailed Scopes.

The Audit Manager Ernst and Young LLP responded to comments and questions raised. A summary of the responses included:

·         The Audit fees would be £108,533 as set by the Public Sector Audit Appointments (PSAA), however, there would be additional fees to cover any in depth review by the technical department on the finances, which was anticipated to be no more than 10% of the overall total fee;

·         The Better Care Funding would present a complex relationship with LA partners such as NHS, which could lead to more areas of risk, however some of these risks were known to external auditors through working with other authorities.  This knowledge had provided external auditors with insight to the possible pitfalls. The issues surrounding Private Finance Initiative (PFI) in regards to the hospital were different and require an alternative approach;

·         In order to protect the LA against financial loss it was encouraged to develop good partner arrangements in order to implement robust legal agreements and strong contractual safeguards.  The Adult Social Care partnered service provided experience in robust contracts, which had been bought in house;

·         The risks and liabilities of PFIs had been reviewed on a yearly basis and currently the arrangement was being analysed, which would be published as part of the ISA260 report;

·         The LA had an obligation to maintain other schools, which included the duty to ensure that PFIs contracts were meeting their regulatory standards.

·         The future ownership of PFI funded schools was discussed and it had been confirmed that ownerships would return to the LA after 30 years with the possible exception of one Academy.  There would not be the same risks applicable to PFI schools as with the NHS due to the affordability arrangement. 

·         Facility functions for PFI funded schools such as care taking and cleaning had been monitored by the People and Communities Department in the same way as with LA maintained schools.

An outline of risks and changes would be included in the ISA 260 report due to be reported to Committee on 22 September 2016.

ACTION AGREED

The Committee:

1.    Considered the External Audit Plan for 2015/16 and points raised by Ernst and Young  LLP in the document including:

·         Proposed scope, comfortable with the audit risks, and approach;

·         Considered and responded to matters relating to fraud;

·         Considered and responded to the Ernst and Young view on the value of misstatements; and

·         Noted the audit fees for the year.

2. Provided comment on any amendments necessary.