Agenda item

Report of the Interim Corporate Director Resources.

The Committee received a report of the Corporate Director Resources on the Accounts Audit Opinion Plan 2011/12 and the Pension Fund Annual Report Audit Plan 2011/12.  The purpose of the report was to keep Members informed of current issues in relation to the Audit of the Council’s accounts.

The Chairman welcomed Anna Parker, Audit Senior Manager; Matthew Hall, Audit Director; and David Hobson, Pension Senior Manager, from Deloitte LLP to the meeting.

David Hobson, Deloittes, referred to the Audit Plan for the 2011/12 Pension Fund Annual Report Audit and outlined the key areas of the audit scope, including the key audit risks, as follows: calculation and payment of contributions, benefits payable and investments made, details of which were set out in the report.  He responded to questions relating to the formulae applied in estimating Planning Materiality, which was calculated on the basis of the net assets of the Fund and clarified that the guidance issued by the Audit Commission required auditors to treat the Local Government Pension Fund (LGPS) as a stand-alone body, but the Pension Fund Accounts remained part of the accounts of the Authority as a whole.

In relation to the Financial Instruments, Members were informed that the Pension Fund made some use of investments in private equity and derivative financial instruments.  In terms of the risks associated, both types of investments were considered to be complex and would be examined in detail.

Anna Parker from Deloittes identified the key audit risks, as follows:

·                     valuation of properties, which was judgemental – a review of the arrangements in place for updating market values, including an assessment of their compliance with the new Code of Practice, would be carried out;

·                     pension liability -  consideration of the qualifications, relevant expertise and independence of the actuary engaged by the Council and the instructions and sources of information provided to the actuary would be conducted;

·                     management override of controls – work on testing of journals, significant accounting estimates and any unusual transactions, including those with related parties would be examined;

·                     capital miscoding – testing around the design and implementation of the new controls to confirm that previous control weaknesses had been addressed would be performed.  It was essential that previous year’s mistakes were not repeated and evidence would be sought that standards agreed had been implemented and were operating effectively;

·                     revenue recognition – recognition that income properly reflected the grant scheme rules would be tested.

A discussion ensued around the mis-statement of £695k.  The Corporate Director Resources reminded the Committee that the Auditor had reported that the bad debt had been overstated in last year’s accounts. The Corporate Director stated that it was a matter of judgement rather than a perceived error and she was satisfied with the provision and no adjustment was made. The bad debt policy would be reviewed prior to finalising the 2011/12 Financial Statements.  A Member was of the view that he could not support the opinion that this was a misstatement and agreed that prudence was desirable.

The Committee was briefed on the report of the Audit Committee on the year ending 31 March 2011 Certification Work, including the qualification letters issued.

RESOLVED:  That

(1)               the 2011/12 Accounts Audit Opinion Plan and Pension Fund Annual Report Audit Plan be noted;

(2)               the Grants Certification Report for 2010/11 be noted.