Agenda item

·        To present the Statement of Accounts 2013/14.

·        To present the External Audit report on the Audit of the Financial Statements (ISA 260 Report)

REPORTS TO FOLLOW

3.1  The report of the Interim Head of Function (Resources) and Section 151 Officer incorporating the final accounts for the 2013/14 financial year was presented for the Committee’s consideration.

The Head of Function (Resources) & Section 151 Officer confirmed that the detailed audit of the accounts is now substantially complete and the Auditor’s report has been issued. A number of amendments to the draft accounts for 2013/14 which were presented to the Committee’s July meeting have been incorporated into the final version. The Officer said that issues arising from the audit have been, and will be implemented, and that it is considered good practice for the Audit Committee to be assured that any subsequent adjustments to practice and procedure are taken forwards successfully. As such he would report back to the Committee’s December meeting outlining any improvements made to processes and systems to ensure that the closure of accounts process for 2014/15 proceeds even more fluently.

3.2  The report of the External Auditor on the outcome of the audit of the Financial Statements (Report under International Standard on Auditing 260) was presented for the Committee’s consideration.

Mrs Lynn Pamment, Financial Audit Engagement Lead confirmed that it is the Appointed Auditor’s intention to issue an unqualified audit report (as per Appendix 2) in the financial statements on receipt of the Letter of representation (based on that set out in Appendix 1) and that in the Auditor’s opinion, the accounting statements and related notes give a fair and true view of the financial position of the Isle of Anglesey County Council as at 31 March, 2014 and of its income and expenditure for the year than ended. She proceeded to expand on the main considerations arising from the audit as set out in paragraphs 10 to 41 of the report and drew the Committee’s attention to the following issues:

•  Whilst there were no concerns about the qualitative aspects of the Authority’s accounting practices and financial reporting, the Auditor does draw attention to the continued reliance on temporary staff for a number of key positions within the Council’s Finance Service thus producing pressure on the finance team to produce a CIPFA Code compliant final draft of the Statement of Accounts in time for the Audit Committee. It is essential that arrangements are put in place as soon as possible to ensure that the finance team has adequate and appropriately skilled resources going forwards.

•  Certain material weaknesses in internal controls were identified in the year in relation to the implementation of the Civica Ledger system and in relation to payments where external audit fieldwork noted that a fraudulent request to change bank details for one of the Council’s suppliers was received and actioned during the year. 

The Committee raised the following matters on the information presented –

•  The volume and complexity of the material presented in respect of the Statement of Accounts. Given the importance of the Committee’s being assured regarding the accuracy and robustness of the financial statements, it was suggested that a prior briefing session be arranged to enable Members to familiarise themselves with the details behind the Statement, and to focus on any areas of concern. The Interim Section 151 Officer said that the closure of accounts process in lengthy but that Officers could endeavour to incorporate a familiarisation session for Members within that process.

•  The arrangements for reporting back to the Committee on the performance of the Gwynedd Pension Fund which it was noted in a previous meeting would occur on an annual basis. The Committee deemed it an area of sufficient significance for Members to be monitoring. The Portfolio Member for Finance informed the Committee that the Gwynedd Pension Fund Annual Meeting had been held the previous month and the 2013/14 Annual Report had been published.

•  Reference was made to the issue highlighted by the External Auditor as significant to the oversight of the financial reporting process in relation to the reliance on temporary staff and the   risk this poses to the accounts preparation and closure process as a key area of activity. It was suggested that a more collaborative approach to filling key positions within the Finance Service might be more productive in terms of identifying and attracting suitably skilled staff and that the discussion should be extended beyond Anglesey to institutions and bodies regionally who may also be experiencing similar problems. The Interim Section 151 Officer acknowledged the point and said that a process is in place to develop the skills of permanent staff so that they undertake more of the accounts preparation work in respect of the 2014/15 accounts. There will still be a need for temporary staff during that process but increasingly in an advisory capacity. It is envisaged that for 2015/16, the accounts preparation process should be undertaken without input by temporary staff. Additionally a process has been put in place to develop accountancy professionals within the Council’s own Finance Service and an advertisement placed for trainee accountants. The response locally to that advertisement has been very positive.

•  Concern was expressed regarding the failure of internal controls in relation to the attempted fraud on the Council described in paragraph 42 of the Auditor’s report which was identified by a source outside the Council. The Committee noted that no monies had been lost to the fraud  but sought assurance  that remedial action had been taken and measures implemented to prevent a reoccurrence. The Interim Section 151 Officer said that the situation had been reviewed and controls tightened accordingly. He said that he was as satisfied as he could be that such an incident would not be repeated. The Authority however was not targeted in isolation and the attempted deception was part of a wider fraud aimed at a number of local authorities some of which did lose monies to the scam which is now the subject of a police investigation.

It was resolved –

•  To recommend to the County Council that it accepts and approves the 2013/14 Statement of Accounts.

•  To accept the Audit of Financial Statement Report and to note its contents.

ACTIONS ARISING:

•  Interim Head of Function (Resources) and Section 151 Officer to report back to the Committee’s December meeting on any improvements made to practice and process as a result of the audit of the Statement of Accounts 2013/14.

•  Interim Head of Function (Resources) and Section 151 Officer to look at the feasibility of incorporating within the accounts preparation and completion schedule, a  familiarisation   session for the Committee’s Members to assist them in identifying key issues arising from the Statement of Accounts.

•  Interim Head of Function (Resources) and Section 151 Officer to arrange for the Gwynedd Pension Fund Annual Report 2013/14 to be made available to the Audit Committee’s members.

•  Internal Audit Manager to report back to the Audit Committee on the conclusion of the internal audit investigation into the incident of attempted fraud on the Council and its implications in terms of the control environment.