To update the committee on the improved audit findings for 2013/14.

 Grant Thornton UK LLP (the Council’s external auditors) presented members with the Review of the Council’s Audit Findings Report for 2013/2014.

It was confirmed that this year the audit process went well; and was aided by having draft accounts and working papers of an improved quality compared with previous years. This has improved the transparency of the accounts. However, there is still room for improvement. Officers have been made aware of this and accept the points made.

Audit Findings

Grant Thornton UK LLP expect to provide an unqualified opinion on the financial statements.

It was explained to members that the report shows the main financial risks the auditors had identified as a result of the 2012/13 audit and the conclusions they had reached. They show improvements in all of the areas previously rated as amber or red. All of these areas now have a green rating.

A member asked about the assessment rating of the council’s reserves, which had been red in 2012/13 and was now green. In response, the Section 151 Officer confirmed that the forecast 12 months ago was for a large overspend. This would have taken the council into its minimum working balance, which is 3% of turnover. At that time there was no clear financial plan to replenish the reserve. This led to the previous red rating.

Today there is a clear financial plan in place and an increase in the reserves held.

Grant Thornton UK LLP confirmed that, when deciding their rating, they look at the plans a Local Authority has in place and the reserves held. The rating levels are set each year. They confirmed that budgetary control systems are much improved this year and all of the areas of risks they would expect to be identified have been. It was also confirmed they make comparisons with other Local Authorities and, this year, there was a more positive comparison with Herefordshire Council being at a medium point when compared to other councils.

The Section 151 Officer confirmed to members that there are also contingency monies within the budget, held for unforeseen issues such as Colwall School, which mean the reserves do not have to be used in these circumstances. If there is a severe winter, further reserves could be accessed.

With regard to the 3% minimum working balance, it was confirmed it is Herefordshire Council’s own policy to set the limit at this amount. Grant Thornton LLP UK confirmed this is a typical position for Local Authorities.

Value for Money

Grant Thornton UK LLP confirmed the Value for Money conclusion is unmodified. They confirmed there is now a stronger financial plan in place which has been a positive step.

There is still scope to improve how savings schemes are project managed.

It was confirmed to members there had been five specific risks identified when they made their Value for Money conclusion. They had been the Public Information Disclosure Act: CRM review (PIDA), the Better Care Fund, the Energy from Waste project (EfW), Adult Social Care and safeguarding of children.

With regard to EfW, Grant Thornton UK LLP confirmed they had received an objection to this matter from a member of the public and when presenting this item needed to ensure their objectivity. The summary of the findings of this matter were read directly from the published report.

In reply to a member’s query, Grant Thornton UK LLP confirmed that the unqualified opinion had been reached having considered all matters, including the EfW, and they considered the appropriate arrangements were now in place.

Grant Thornton UK LLP felt it was a positive step that this committee is setting up a Working Group following the PIDA report as the scrutiny of the Audit and Governance Committee is needed to provide assurance of the council’s response to the auditors’ work. They confirmed that, as auditors, they cannot be advisors but can give constructive feedback.

The Committee were reminded by the Chairman that there were currently four members of the Working Group and a fifth is needed.

Further clarification was sought from members concerning the Better Care Fund. Grant Thornton UK LLP confirmed that it is still early days for what is a, national agenda led, major project. Adult Social Care and the NHS cannot operate without integrated services and a community infrastructure needs to be created. The progress made so far was commended, but there is still a long way to go. This was confirmed as the same position as most other Local Authorities.

Grant Thornton UK LLP confirmed the reason they have not been able to formally conclude the audit and issue an audit certificate is due to the objection they have received from a member of the public concerning the EfW part of the report.

Resolved:

That the report be noted.