Agenda item

This report is also due to be considered by the Executive on 8^th December 2010. The accompanying documents, the 2009/10 report to those charged with governance and the 2009/10 Annual Audit Letter, are being circulated under separate cover.   

Report DR10108

The Sub-Committee considered a report summarising the results of the external audit work undertaken by PriceWaterhouseCoopers for the 2009/10 audit.  The report set out:

- Matters arising from their audit of the financial statements, including the pension fund accounts, which they are required to report to Members under the Audit Commission’s Code of Audit Practice and International Standard on Auditing (UK & Ireland) 260 - “Communication of audit matters with those charged with governance”
- The results of their work under the Code of Audit Practice, to support the Value for Money conclusion
- Any changes to the audit plan(s) presented to Members in November 2009
- An audit fee update.

The auditors had also prepared the Annual Audit Letter to provide a high level summary accessible for members and other interested stakeholders. The matters reported in their Annual Audit Letter were those that they considered were the most significant for the Authority and a summary of the key recommendations that they had made could be found in Appendix A of the letter attached to the report.

Representatives from PriceWaterhouseCoopers attended the meeting and answered Members questions.  During questioning the Sub-Committee was told that during the external audit process internal audit processes and controls had been reviewed.  External auditors worked closely with the Council’s internal audit department and information gathered through this process had been used to develop testing for the financial statement audit.

The Chairman asked the External Auditors for their observations on International Financial Reporting Standards (IFRS).  The Auditors explained that IFRS was a significant exercise and LBB had been making good progress on the standards for having work completed in time for the publication of the 2010/11 accounts.

The Sub-Committee considered the importance of Value for Money (VFM) and the External Auditors stated that it was good that the Council’s Internal Audit had a role in monitoring VFM.  In terms of reviewing use of resources, the Auditors reported that they would be undertaking targeted VFM work and as part of this they had to assure themselves that the Council had processes in place to monitor the use of resources.  A Member of the Sub-Committee asked the Auditors to comment on use of resources work as, despite a reduction in the work that was required, the fee for the work had remained the same and had not reduced.  The Auditors explained that the work reported in the financial statement was work that had been undertaken in 2009, prior to the requirements being reduced.  For 2009/10 the Auditors had undertaken all the work required for the use of resources report, however the requirement to publish the report had been withdrawn.  The Director of Resources had been provided with the indicative scores for the Council. The fee for this year’s work on use of resources would be reported in the 2010/2011 financial statement.

Referring to the Key Lines of Enquiry and the issue of financial reporting, a Member of the Sub-Committee asked who the stakeholders were and how the Auditors could assess whether the reporting met the needs of local people.  The Auditors reported that they had worked with the Director of Resources and reviewed the budget process undertaken by the Council and the consultations that had been undertaken throughout the budget process.  Another Member noted that the requirements for the effective use of natural resources had been met in 2008/09 but appeared not to have been met in 2009/10.  The Auditors explained that the first year for this reporting was 2008/09 however, in 2009/10 there was not a requirement to report on this specific issue.

In response to a question surrounding whether as part of the external audit the Council’s returns and balances had been considered to see if they represented VFM.  The Auditors responded that the processes around treasury management would have been analysed as part of the audit.  It was considered that the Council had tight management of treasury returns and the reserves currently held by the Local Authority were appropriate.

The Sub-Committee considered the levels of reserves that would be prudent and responsible.  The Director of Resources reported that LBB was a heavily outsourced organisation and there were significant spending pressures within Adult and Community Services.  As a result of these factors the Council needed a higher level of reserves than an authority that had more in-house services with greater financial flexibility.

In response to a question from the Chairman regarding the process for external audit once the Audit Commission had disbanded.  The Auditors reported that there were still a number of unanswered questions and there were as yet no definitive answers.  However, it was likely that local authority Sub-Committees would have a significant role to play in appointing auditors.

The Chairman thanked the representatives from PriceWaterhouseCoopers for attending the meeting and sharing their views with Members.

In response to a question from a Member regarding the presentation of accounts, the Director of Resources explained that the accounts for 2010/11 would be prepared under the new IRFS system.  The main area of change would be around the valuation of property.  Another Member requested that the Committee be sent Microsoft Excel versions of financial data to enable Members to analyse the accounts.  The Director of resources agreed that files could be made available on One Bromley once appropriate requirements of Members were clarified.

RESOLVED that the reports be noted.