Agenda item

This report from PwC was to provide a review of the External Auditor’s annual plan arrangements for 2014-15. The update on this report was provided by Charlie Martin; apologies were given for Katy Elstrup. The Committee were informed that Janet Dawson had left the organisation.

Mr Martin reminded the Committee that this was the last year that PwC would act as the External Auditors for LBB, but that they were committed to providing a high quality service to the end.

Mr Martin outlined the Audit approach taken by PwC that focussed on six areas:

·  Client acceptance and Independence

·  Deep business understanding

·  Relevant risks

·  Intelligent scoping

·  Robust testing

·  Meaningful conclusions

Mr Martin updated the Committee concerning the 2012/13 accounts—informing that they could still not be signed off due to objections concerning the parking contract and the related issuing of PCN’s. It was noted that a meeting had been convened with the objector in December 2014, where supporting points had been raised. A meeting was due to take place with the objector in February, but this failed to take place, and so another one was planned for mid-April 2015.

A Member commented that it was good that the public raised objections, and that fault finding and scrutiny was good.

Mr Martin mentioned the three categories of relevant risks, and they were classified as Significant, Elevated and Normal. A Member made the observation that no value had been attached to risks, and that it would be helpful if risks could be quantified. Mr Martin stated that PwC were required by the International Standards on Auditing to consider possible management override of controls and the rebuttable risk of fraud in revenue recognition as significant risks to the integrity of the Authority’s financial reporting. It was further stated that PwC would specifically review manual intervention in those areas, in addition to applying a level of unpredictability into the testing.

A Member asked how LBB could change criminal behaviour or error, and Mr Martin responded that PwC would assess controls and errors and report back to LBB with recommendations. 

A Member commented that LBB maintained fraud registers, and that fraud is flagged at the front end. The Committee expressed concern as to how this could be maintained with current reductions in staffing.  A Member wondered if PwC could use their experience to aid LBB with fraud control. Members considered that the Audit Committee arrangements for monitoring of fraud were adequate and this was conveyed to Mr Martin.

The Chairman referred to the fact that LBB was a commissioning authority, and asked if that would change the Audit approach. Mr Martin responded that one of the key issues was to be happy with the contract terms and conditions, and the associated accounting implications; it was important to look at contracts in depth. It was also important to consider value for money implications, and long term financial plans. Plans needed to be identified to close budget gaps.

The Chairman enquired why the Crystal Palace Project had been classed as a risk. It was noted that this was because of the value of the estate, and the possibility that the exclusivity deal could have resulted in a devaluation of the property. 

A Member commented that LBB were going through a period of change, and would therefore appreciate any relevant advice that it could gain with respect to possible mistakes that other councils had made, or regarding other pertinent court decisions. The Member enquired therefore, if PwC could advise on such matters, and provide early warnings regarding judicial issues and risk warnings. Mr Martin answered that they could provide LBB with advice concerning potential legal costs and that PwC did try and develop a wider awareness of the industry and take advice from other audit firms if appropriate.

Members noted the Total Audit Code Work Indicative Fee which was £201,948.

A Member expressed concern about the off-shoring of data, and expressed the view that this may be an issue that would worry local residents; the Member enquired what LBB policy was regarding this, and what information was going to service centres in India and Poland. Mr Martin assured the Committee that PwC would comply at all times with the seventh principle in Part 1 of the Schedule 1 to the 1998 Data Protection Act. Mr Martin stated that no personal information was going abroad, and that the data was redacted; he assured the Committee that Electoral Roll data was not being off-shored.

The Committee agreed that LBB policy should be checked to avoid possible penalties.

The Chairman thanked Mr Martin for his update and for answering the questions of the Committee. 

RESOLVED that:

(1) the External Audit Plan 2014-15 be noted

(2) LBB policy concerning the off-shoring of data be checked

(3) the proposed audit fees for 2014/15 were noted and agreed   

(4) LBB fraud arrangements were noted.