Agenda item

The External Auditor, to present a report summarising the results of the 2016/17 audit of the financial statements.

Vishal Savjani, External Auditor

 

(a)       presented a report (copies of which had previously been circulated to Members) summarising the results of the 2016/17 audit of the financial statements;

 

(b)       advised there were eight sections within the report, highlighting

 

•      Executive Summary - the audit was substantially complete and subject to satisfactory completion of several outstanding items, it was anticipated that an unqualified opinion on this Council’s financial statements would be issued

•      Areas of Audit Focus – The Audit Plan presented to this Committee on 7 February 2017, identified key areas of focus for the audit of this Council’s financial statements.  This Council was asked to review External Audit’s observations and conclusions to ensure:-

i.     there were no other considerations or matters that could have an impact on these issues

  ii.    this Council agreed with the resolution of the issue

  iii.   there were no other significant issues to be considered

 

There were no matters apart from those reported by this Council or disclosed within the report, which should be brought to the attention of this Committee

 

•      Audit Differences – Four unadjusted audit differences were identified in the draft financial statements, which this Council had chosen not to adjust:-

i.     ‘The Auditors of the Leicestershire Pension Fund identified an error over the valuation of the investments held within the pension fund.  The impact of the error is to increase the asset values used for the valuation of Melton Borough Council pension liability as at 31 March 2017 by £51k.  The impact on the accounts is to reduce the overall pension liability and amount charged to the pension reserve by the same amount’

ii.    ‘The pension cost for the year disclosed was understated by £34k.  The impact on the accounts is to increase the overall pension liability and amount charged to the pension reserve by the same amount’

iii.   ‘The method used to calculate the provision for business Rates appeal by the Council is not consistent with our expectation.  The estimate is overstated by £321k.  The effect on the Council’s accounts is to overstate provisions by £129k (40% share) and understate the business rates income by the same amount’

iv.   ‘As part of our testing of creditors, the Council were unable to evidence the inclusion of two creditors, one of £95 for water liability and another of £1000 for electricity liability.  As a result, we have extrapolated the error identified over the creditor balance and the projected error is £51k’

 

It was requested that they be corrected or a rationale as to why they would not be corrected be approved by this Committee and included in the Letter of Representation.

 

The Corporate Director referred Members to a copy of this Council’s rationale/response to the External Auditor’s findings, which had been circulated for Members’ attention, prior to the start of this meeting:-

i.     ‘This was an error identified by the auditors of the Leicestershire Pension Fund on an amount entirely outside of this Council’s control.  Due to the lateness of this identification and the impact affecting both sides of the balance sheet only and so not the cost of services, no adjustment was made’

ii.    ‘This was an error caused by the difference in estimate of early retirements to actuals.  Due to the impact affecting both sides of the balance sheet only and so not the cost of services, no adjustment was made’

iii.   This Council have agreed to review this opinion on the provision for next year as more information becomes available.  This Council is comfortable that the estimates used this year are adequate for the purpose’

iv.   ‘The £51k is as noted a projected amount rather than a fully quantified figure.  Therefore an adjustment would be inappropriate’.

 

The effects of the unadjusted audit differences were immaterial, both individually and in the aggregate to the financial statements taken as a whole and therefore had not been corrected.  The External Auditor agreed that these differences were not material.

 

The External Auditor stated that a small number of presentational and reclassification adjustments had been identified and adjusted by this Council.  There was no impact on the reported financial performance of this Council.

 

•      Audit Report – External Audit’s opinion on the financial statements was they:-

i.     gave a true and fair view of this Council’s financial position as at 31 March 2017 and of its expenditure and income for the year then ended

ii.    had been prepared properly, in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting 2016/17.

 

External Audit’s opinion on other matters was that the information given in the Annual Statement of Accounts for 2016/17, for the financial year for which financial statements had been prepared was consistent with the financial statements.

 

External Audit was satisfied that this Council had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2017.

 

•      Value for Money – External Audit had considered this Council’s arrangements to take informed decisions, deploy resources in a sustainable manner and work with partners and other third parties.  No significant risks had been identified.

•      Assessment of Control Environment – No significant deficiencies in internal control had been identified.  However, improvement recommendations for financial processes had been identified and agreed by this Council

 

Members confirmed that they were satisfied with this Council’s rationale relating to the four unadjusted audit differences which had been identified in the draft financial statements, which this Council had chosen not to adjust.

 

A Member queried if External Audit had identified any misstatements less than £30k during their audit.  The External Auditor advised that there had been two identified.  These related to creditors and amounted to an estimated £95 approximately.

 

There being no further comments or questions from Members it was

 

RESOLVED that the report be noted.