To consider a report from the council’s external auditor on the audit findings for the year ending 31 March 2017.

The external auditor introduced the audit findings report and highlighted the following issues.

It was explained that the external auditor was not yet able to issue a final opinion as there were outstanding issues in relation to Hoople pensions liabilities and the valuation of the Energy from Waste plant which was to be provided by Worcestershire County Council. These were technical accounting issues and it was hoped that these would be resolved within a week of the meeting. A third issue, around property plant and equipment valuation, had now been resolved.

The audit had been more challenging this year and there had been more errors than in previous years, partly because of changes and absences in senior staff. Lessons identified included a need for a better quality review of the accounts when first produced to correct obvious errors and omissions. Responses to audit questions had not been as forthcoming or rigorous as expected. Issues had to be escalated to be resolved. With tighter deadlines for completion of the audit of the 2017/18 accounts, these issues would need to be addressed.

Adjustments to the accounts were listed at the back of the report. One significant change was the adjustment in the recorded net expenditure.

The external auditors were satisfied that the council had proper arrangements to secure value for money in its use of resources and no issues had been identified in that area.

In the opinion of the external auditor the council needed to be more challenging of its own accounts and provide more of an overview to users of the accounts.

The chairman noted that the audit findings report acknowledged the ‘fantastic achievement’ in incorporating planned savings of around £10m while still remaining financial sustainable for the foreseeable future.

The committee expressed their concern at the issues highlighted in the report and questioned whether the council would be able to meet the tighter deadlines for audit of the 2017/18 accounts. The committee queried whether the council had adequate procedures in place and sufficient staffing capacity.

Under questioning from the committee it was stated that:

·         an unqualified accounting opinion was expected to be issued within the following two weeks

·         in making the value for money conclusion the external auditors had considered whether the volume of errors and queries warranted issuing a qualified opinion but as these issues were able to be corrected they decided not to do so on this occasion

·         after discussion between officers and the auditors it had been agreed to use the valuation of the smallholdings based on their position at year end 16/17 when the disposal had not yet begun, the notes to the accounts set out the sale position of those assets

·         the valuation of assets recorded in the accounts did not impact the return achieved at disposal

·         the valuation of land assets at the enterprise zone was produced by external valuers, the chief finance officer undertook to examine the assumptions made in the valuation process and report back on this

·         terms of reference had been agreed for the internal control improvement board which had been established. The board would ensure actions already in progress as part of the annual governance statement action plan approved by the committee in May were sufficient to address concerns raised by the external auditor regarding the robustness and employee awareness of council policies and procedures.

The chief finance officer (S151 officer) accepted the comments from the external audit about the close down process and recognised the need to make significant changes for the following year. He confirmed that the council would be working with the external auditor in planning the account close down for 2017/18 and that he would be happy to report back to the committee on progress.

The chief finance officer also confirmed that he had received written questions from a member of the committee and would make a response in due course, liaising with the external auditor as necessary.

It was agreed that the chief finance officer would bring a report to a future meeting of the committee to cover:

·         the final audited accounts for 2016/17;

·         a clear statement of management actions to address the weaknesses identified, progress on those actions and planning for 2017/18 close down;

·         the approach to the valuation of assets and cycle of revaluation.

A councillor who was not a member of the committee asked to speak. The chairman chose not to use his discretion to allow participation by non-members and declined the request.

RESOLVED

That:

(a)  the report of the external auditor attached at appendix A be considered; and

(b)  the report requested by the committee on the issues identified for further consideration be added to the committee’s future workplan.