Audit Findings Report - To Follow
David Bray (Grant Thornton) and Geri Daly (Grant Thornton) attended to present this item and highlighted the following points:
a) the report summarised the key findings and other matters arising from the statutory audit of Plymouth City Council and the preparation of the Council's financial statements for the year ended 31 March 2019 for those charged with governance.
b) auditors have to produce an audit findings report and will produce a final report once the audit is complete;
c) the risk assessment and key matters in progress as at 16 July (the time of writing of the audit);
d) a focus of testing has been on the Council’s loans and LOBOs given national publicity on LOBOs last year; this is required per IFRS 9 (financial instruments);
e) that those charged with governance should satisfy themselves that unadjusted items don’t cause any concern re being materiality;
f) the Value for Money (VfM) conclusion is something that all public sector auditors have to report on;
g) the Council has appropriately made available the draft accounts to the public and no objections had been forthcoming;
h) with regards the definition of materiality, auditors determine £9.775m (1.75% of the prior year gross expenditure) to be an acceptable threshold with regards any errors; auditors are required to report on any error over £489k;
i) income recognition, particularly in relation to grant income, was a focus for the audit given an error last year;
j) in relation to land and buildings, the auditors had concentrated on those items that had not been valued in-year, alongside the Tamar Bridge and waste plant given their value, to ensure accuracy of the figures
k) with regards the pensions liability, the auditors were continue to seek advice from their own legal advisors on the legality of the proposed borrowing; that work had not yet been concluded and therefore advace provided so far could not be shared.
l) The McCloud issue referred to within the report had impacted every local authority and has meant that all councils have had to go back to their actuaries as all pension liabilities would be increased. The actuary had estimated an increase in pension liability of £7.931m which the Council had decided not to reflect as the value was under the materiality threshold and it was a balance sheet issue; this was consistent with the approach taken by most other local authorities.
Members discussed the following:
a) the key risks that the auditors considered faced the council. The auditors outlined three key risk areas in the audit plan and accounts: 1. Pension liability estimation technique, 2. McCloud problem, 3. decision-making regarding the potential pension transaction (the committee noted that any detailed discussion required on the potential pension transaction was commercial in confidence and would require moving into a Part II discussion)
b) concern about the state of the Council’s finances in general including savings targets and potential further impact on the working balances. The auditors confirmed that the Council’s reserves are lower than ideal.
c) That the figures in the auditors report were slightly out of date due to the timing of the meeting and when the report was written and that officers would be working with the auditors to ensure the most up-to-date figures are reflected in the final report
The Committee noted the draft audit report, including the auditor’s statement of independent, and the verbal update provided by the auditors.