Agenda item

·        To present the Statement of Accounts for 2015/16.

·        To present the External Audit report on the audit of the Financial Statements.

·      The report of the Head of Function (Resources) and Section 151 Officer incorporating the Statement of Accounts for 2015/16 and Annual Governance Statement 2015/16 was presented to the Committee.

The Head of Function (Resources) and Section 151 Officer reported that the draft accounts for 2015/16 were presented to the Audit Committee at its meeting held on 27 June, 2016 and were subsequently submitted for external audit which process has taken place over the summer months and is now substantially complete . A number of amendments to the draft have been incorporated into the accounts details of which are set out in the Auditor’s ISA 2560 report; a summary of the more significant amendments to the draft statement is provided at paragraph 3.2 of the report. The Officer said that the Audit and Governance Committee is required to recommend the financial statements for approval by the County Council but that there remains an outstanding issue which needs to be resolved before that can take place.

The Head of Function (Resources) and Section 151 explained that as part of the audit of the financial statements the auditors undertake substantive testing of certain areas of the accounts. During that sampling process, the auditors have identified three infrastructure assets totalling £5.336m for which they require evidence to corroborate their existence and ownership. The Officer confirmed that the value of one of the assets in need of supporting evidence is shown as £4m on the accounts, and because of the historical nature of the asset, the Finance Service to date has not been able to provide the evidence required partly because systems have changed over the course of time and partly because of difficulty in accessing paper records the retention of which is time limited. Although efforts to resolve the issue are ongoing and it is anticipated that a resolution can be achieved shortly, the Service at this point has not been able to provide the auditors with the required level of assurance with regard to this item to enable them to certify the accounts without qualification meaning that the Audit Committee is not in a position at today’s meeting to recommend the accounts for approval to the Council at its meeting on 27 September. This is due to the fact that the accounts could change depending on how the outstanding issue is resolved and the outcome in terms of what is shown on the accounts. In the circumstances the Authority could delay approving the accounts until such time as the auditors have obtained the necessary assurance but that could then require convening an extraordinary meeting of the Council or alternatively, the auditors could issue a qualified report. Following discussion with the Chair and the auditors, the Engagement Lead for the financial audit has confirmed that he is satisfied with the work currently being undertaken to resolve the issue and to provide the auditors with the level of assurance they require, and it is therefore recommended that the Committee delegates to the Chair and Vice-Chair the authority to recommend the accounts to the Council once the outstanding issue has been resolved and the auditors are satisfied with the assurance received regarding the matter and are able to issue an unqualified opinion.

The Committee noted the position and having sought further clarification of the issue in question, the extent of the assurance required by the auditors and the implications, was minded to accept the recommendation put forward and to authorise the Chair and Vice-Chair to liaise with the Finance Service and the auditors regarding confirmation of the accounts and to subsequently recommend them to the Council.

The Head of Function (Resources) and Section 151 Officer said that at present the Code of Practice under which the Statement of Accounts is prepared requires that the value of  infrastructure assets is shown on the balance sheet which because they are infrastructure assets means reflecting the capital expenditure on them during the year. As the expenditure continues from year to year, the value of the assets increases. A change in the regulations means that next year the Authority will have to revalue its infrastructure assets and the revaluation figure will be shown in the accounts and the supporting details will be readily available meaning that the specific issue that has arisen in the course of the 2015/16 audit is not likely to recur.

Ms Clare Edge, Financial Audit Manager confirmed that the issue arose through sample testing and that the auditors had sought to establish what were the items of infrastructure in the sample,   their existence and ownership and, given that the balance of one of the items was £4m, they would have expected to see audit evidence confirming they were true assets.

It was resolved –

•           To accept and to note the Statement of Accounts for 2015/16 subject to the resolution of the outstanding issue as reported by the Head of Function (Resources) and Section 151 Officer.

•           To delegate to the Chair and Vice-Chair the authority to recommend the Statement of Accounts 2015/16 for approval by the Council on receipt of confirmation by the auditors that the issue outstanding on the accounts has been resolved to their satisfaction and they are able to issue an unqualified opinion.

•           To approve the Annual Governance Statement for 2015/16 and refer the document to the Leader of the Council and the Chief Executive.

•           The report of the External Auditors on the audit of the Financial Statements for 201516 (ISA 260 report) was presented for the Committee’s consideration.

·                    The report of the External Auditors on the audit of the Financial Statements for 201516 (ISA 260 report) was presented for the Committee’s consideration.

Ms Clare Edge, Financial Audit Manager confirmed that subject to the satisfactory completion of  outstanding work including that referred to above, it is the Auditor General’s intention to issue an unqualified audit report on the financial statements. The Officer also confirmed the following:

·                     That there are no misstatements identified in the financial statements which remain uncorrected.

·                     There are misstatements which have been corrected by Management which are drawn to the Audit Committee’s attention in line with the Committee’s responsibilities over the financial reporting process (Appendix 3 of the report)

·                     There are no issues arising from the audit risks as identified in the Financial Audit Plan other than one adjustment in relation to grant income (Appendix 3) and one control observation (Appendix 4)

·                     There are no concerns regarding the qualitative aspects of the Authority’s accounting practices and financial reporting. However a recommendation has been made with regard to improving the quality and timeliness of some supporting audit evidence (Appendix 4)

·                     No significant difficulties were encountered during the audit.

·                     There were no significant matters discussed and corresponded upon which Management need to report to the Committee.

·                     There are no other matters significant to the oversight of the financial reporting process that need to be reported.

·                     No material weaknesses in internal control were identified although several areas in which it would be possible to improve control were identified.

·                     There are no other matters specifically required by auditing standards to be communicated to those charged with governance.

It was resolved to accept the report and to note its contents.