Agenda item

To present the report of External Audit.

The External Audit report incorporating the proposed Audit Plan for the 2017/2018 financial year was presented for the Committee’s consideration. The Plan set out the audit approach, the key financial audit risks, a summary of performance audit and grant certification work along with the estimated fees.

Mr Wil Bevan, Manager, Deloitte reported specifically on the key financial audit risks identified at the planning stage of the audit, i.e. areas where the risk of material misstatement  are  considered to be significant and therefore requiring of special audit consideration. These are outlined in Exhibit 2 of the report which also sets out the proposed audit response in addressing the risks so highlighted. The Officer said that the financial audit is scheduled to be completed in June/July and to be signed off definitively in September.

The Committee noted the information. The Committee sought clarification of the position with regard to finalising the 2016/17 Housing Benefit Claim in relation to which additional work was stated as being required. 

Mr Wil Bevan said that a significant qualification was issued in relation to the 2015/16 Housing Benefit Claim; consequently there is additional sample testing work that has to be completed under the Grant Audit Framework as required by the DWP in relation to the 2016/17 claim. This work is ongoing due mainly to the volume of work falling to the Council in looking at specific claims and also to the Auditor in reviewing them. The claim itself has been completed but there is substantive underlying work that needs to be done on testing the claim. The Head of Function (Resources) and Section 151 Officer said that the 2016/17 Housing Benefit Claim could not be finalised until the 2015/16 claim had been finalised – a delay ensued because of issues arising with the latter claim. There is also a capacity issue in that the Finance Service has one officer who has the detailed knowledge to assist the Auditors with this aspect of their work. The particular Officer is also involved in end of year financial management work which means that a skilled resource is removed from the process for a period at the end of the year and is unavailable to support the auditors. A timetable has to be agreed with the auditors to complete this work. The Housing Benefit grant claim is a very complex claim and although the Finance Service’s team that is engaged on completing the work to the DWP and auditors’ satisfaction is small, the requirements are the same as for larger local authorities with far greater staff resources at their disposal. Any additional fee for the extra work undertaken will be agreed in discussions between the Section 151 Officer, the Wales Audit Office and Deloitte’s Engagement Lead for Financial Audit.

The Committee noted that property valuations have been identified as a financial audit risk. The Committee sought clarification of whether the focus of the auditors’ work with regard to property valuations is on the accuracy of the valuation in terms of the Council’s assets or whether it is on value for money obtained in disposing of assets. Mr Wil Bevan said that the auditors’ focus is on the valuation and on the inputs used in arriving thereat; given that property valuations include judgements and estimates and that the figure for land and building valuations as at March, 2018 was £288m, any changes in the judgements and estimates  can have a material impact on the carrying value. The Head of Function (Resources) and Section 151 Officer said that the value of the Council’s assets as provided for in the accounts is not equivalent to their market value e.g. if the Council’s own housing stock was to be sold as untenanted properties their value would likely be greater than the carrying value on the Balance Sheet which reflects the fact that they are tenanted and cannot be sold as such. It is an accounting treatment of property that does not give the true value of the Council’s assets.

The Committee noted with regard to Performance Audit that reference is made to changes in the statutory basis of the External Auditor’s work for which it sought clarification. Mr Gwilym Bury confirmed that there are plans to introduce new legislation to replace the Local Government (Wales) Measure but until that happens the WAO as well as the council have to comply with the requirements of the Measure. In addition, the Well-being of Future Generations (Wales) Act 2015 has placed new responsibilities both on councils in requiring them to have regard to sustainability and to future generations in making strategic changes, and on the WAO in terms of assessing councils’ compliance therewith. 

It was resolved to accept the Audit Plan 2018 and to note its contents.

NO ADDITIONAL ACTION WAS PROPOSED.