The Audit Plan – template user guide
Contents
1. Grant Thornton Audit Committee Update for Torbay Council Year ended 31 March 2015 18 March 2015 Alex Walling Engagement Lead T 0117 305 7804 E alex j walling uk gt com Mark Bartlett Manager T 0117 305 7896 E mark bartlett uk gt com Lesley Whitworth Executive T 0117 305 7854 E lesley a whitworth uk gt com The contents of this report relate only to the matters which have come to our attention which we believe need to be reported to you as part of our audit process It is not a comprehensive record of all the relevant matters which may be subject to change and in particular we cannot be held responsible to you for reporting all of the risks which may affect your business or any weaknesses in your internal controls This report has been prepared solely for your benefit and should not be quoted in whole or in part without our prior written consent We do not accept any responsibility for any loss occasioned to any third party acting or refraining from acting on the basis of the content of this report as this report was not prepared for nor intended for any other purpose Contents Section Introduction Progress at 5 March 2015 Emerging issues and developments Grant Thornton Local government issues Accounting and audit issues 2015 Grant Thornton UK LLP Page 11 16 Introduction This paper provides the Audit Committee with a report on progress in delivering our responsibilities as you2. Work Planned date Complete Comments 2014 15 Audit Fee 28 February 2015 Yes In 2013 14 the Audit Commission increased the External Audit fees are determined by the Audit audit fee for all Unitary Councils by 1 070 to reflect Commission after a period of consultation with the the fact additional audit work was required on audited bodies material business rates balances This additional work was necessary as auditors were no longer required to carry out work to certify NNDR3 returns The additional fee was 50 of the average fee previously charged for NNDR3 certifications for Unitary Councils The Audit Commission has included this additional amount in all audit fees for 2014 15 The audit fee is now 136 070 for Torbay Council The indicative certification fee for 2014 15 has been set at 12 840 Interim accounts audit 31 March 2015 No We undertook our initial planning work in January Our interim fieldwork visit includes 2015 and will complete our work in March 2015 in e updating our review of the Council s control line with the timetable agreed with the Council environment We will aim to complete as much testing as possible e updating our understanding of financial systems to reduce the peak over the summer months e review of Internal Audit reports on core financial We have reported the findings to date in the Audit systems Plan which is on the agenda of this meeting Any further findings will be reported to the July audit e
3. 2003 We expect authorities that are spreading the impact of pension deficit contributions to obtain legal advice either internally or externally to determine the amounts that are chargeable to the general fund The accounting judgements and treatment should reflect the advice received and should be documented accordingly Where an authority has received legal advice that the up front payment can be recognised in the general fund over three years based on our understanding of the arrangement we would expect the total amount to be reflected in the pension fund liability This means that the pension reserve will not equal the pension liability We expect the background to the transactions and the reason for the difference to be disclosed in a note to the accounts This issue has been discussed with Finance staff who have confirmed that the Council did not pay a three year contribution 2015 Grant Thornton UK LLP 19 Inclusion of overtime in the calculation of holiday pay Accounting and audit issues The Employment Appeal Tribunal EAT has delivered its judgement on the extent to which overtime pay should be included in the calculation of holiday pay This case stems from an apparent conflict between UK law and European Law The EAT found that non guaranteed overtime i e overtime which is not guaranteed by the employer but which the worker is obliged to work if it is offered should be included in the calculation of holiday pay Bac
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5. proposition is the devolution of powers funding and taxes to sub national entities over a 10 year period They estimate that this could lead to over 200 billion in public expenditure being controlled at a sub national level The expectation is that councils and their partners would work collaboratively to manage differences in capacity and resources They see local areas becoming self sufficient The Commission advocates a variable speed approach to reform with Pioneers able to and wishing to reform at a faster pace Reforms advocated for all authorities include An independent review of the functions and sustainability of local government in advance of the next spending review Freedom to set council tax and council tax discounts and full retention of business rates and business rates growth Multi year financial settlements The ability to raise additional revenue through the relaxation of the rules on fees and charges Pioneer authorities would also implement Single placed based budgets for all public services Management of funding equalisation across a sub national area Further council tax reforms including the ability to vary council tax bands and undertake revaluations Newly assigned and new taxes such as stamp duty airport taxes and tourism taxes The establishment of Local Public Accounts Committees to oversee value for money across the placed base budget 2015 Grant Thornton UK LLP 11 Inspec
6. authorities need to ensure that their core objectives and values are fulfilled through many other agencies This implies a greater role for scrutiny and a need to make sure local public sector bodies arrangements are a transparent as possible for stakeholders Hard copies of our report have been provided to officers and will be available for members at the meeting 2015 Grant Thornton UK LLP Stronger futures development of the LGPS Grant Thornton Our second review on governance in LGPS funds in England and Wales is based on comprehensive research with pension fund senior officers supported by insights from pension fund auditors and is available at http www grant thornton co uk Publications 2015 Stronger futures development of the LGPS With the local government pensions scheme LGPS continuing to face significant change and challenge there is a clear commitment to ensuring its survival and the provision of affordable pension benefits for the future Following the implementation of a career average pension scheme in 2014 administering authorities are preparing for significant changes in governance arrangements effective from April 2015 Some of the key messages from the report are Garetnomeon Stronger futures there are increasing strong examples of innovation and increased collaborative working across the LGPS to achieve reduced costs and improved use of specialist skills and knowledge implementation of the career av
7. e backlog and improve the nation s health Issue to consider Have members received adequate assurances that locally the Authority has a robust and adequately funded schools programme in place to ensure that school places are created on time and in the right places 2015 Grant Thornton UK LLP Care services for people with learning disabilities and challenging behaviour Local government issues The National Audit Office NAO published its report Care services for people with learning disabilities and challenging behaviour on 4 February 2015 It concludes that the Government has not met its central goal of moving people with learning disabilities and challenging behaviour out of hospital by 1 June 2014 because it underestimated the complexity and level of challenge in meeting the commitments in its action plan Following the exposure in May 2011 of abuse of patients at the Winterbourne View Hospital the Department of Health set out its action plan in the Winterbourne View Concordat for moving people with learning disabilities and challenging behaviour out of hospital and into community care At September 2014 however there were still 2 600 inpatients with learning disabilities in mental health hospitals although NHS England s stated ambition is to discharge 50 of these into more appropriate care settings by 31 March 2015 As the NAO also report that there is no financial incentive for local commissioners to bring such patients
8. early work on emerging accounting issues his m committee meeting in the Audit Findings Report e early substantive testing proposed Value for Money conclusion 2015 Grant Thornton UK LLP Progress at 5 March 2015 Work 2014 15 Audit Plan We are required to issue a detailed accounts audit plan to the Council setting out our proposed approach in order to give an opinion on the Council s 2014 15 financial statements 2014 15 final accounts audit Including e audit of the 2014 15 financial statements proposed opinion on the Council s accounts proposed Value for Money conclusion Value for Money VfM conclusion The scope of our work to inform the 2013 14 VfM conclusion comprises securing financial resilience and e challenging how it secures economy efficiency and effectiveness 2014 15 Annual Audit Letter 2015 Grant Thornton UK LLP Planned date March 2015 30 September 2015 Statutory deadline 30 September 2015 Statutory deadline 31 October 2015 Complete Yes No No Comments The Audit Plan is included on the agenda of this meeting The final accounts audit starts on 15 June 2015 The Audit Findings Report will be brought to your meeting on 29 July 2015 We plan to issue the opinion as soon as possible after the July Audit Committee Our Value for Money work will focus in the Council s financial resilience The findings from this work will be reported in the A
9. erage scheme from April 2014 went well and demonstrated good project management and effective communication with members and employers and there have been several other positive trends across the LGPS since our 2013 review particularly around the widening scope of reporting to Pension Committees including performance reporting risk management and internal audit reviews However we saw a wide variation in practice including a concentration of risk reporting on investment risk over half of funds have not implemented the CIPFA knowledge and skills framework as part of their member training 45 per cent of Pension Committees do not receive internal audit reports and 15 per cent do not have specific internal audit coverage and nearly half of funds have no information around the value of their liabilities in between the triennial valuations Hard copies of our report are available from your Engagement Lead or Audit Manager 2015 Grant Thornton UK LLP 10 Independent Commission into Local Government Finance Local government issues The Independent Commission on Local Government Finance was established in 2014 to examine the system of funding local government in England and bring forward recommendations on how it can be reformed to improve funding for local services and promote sustainable economic growth It published its final report Financing English Devolution on 18 February 2015 The report notes that the core of the Commission s
10. home They have to bear the additional costs of expanding local community services to meet the patients needs following discharge from hospital when NHS England had centrally funded patients care in mental health hospitals 2015 Grant Thornton UK LLP 14 DCLG Build to rent scheme Local government issues Housing Minister Lewis Brandon announced on 10 January 2015 a 55 million deal to provide nearly 800 homes for private sector rent in Manchester and Salford as part of the government s wider 1 billion Build to Rent scheme which has the objective of building 10 000 new homes for private rent The Chief Executive of the Homes and Communities Agency HCA Andy Rose said this is a major investment in the private rented sector in Manchester It demonstrates how the HCA working closely with partners is combining financial and local expertise to increase the private rented choice in areas where there is a high demand for homes As part of its strategy of creating a bigger and better private rented sector the government has also e published a How to rent guide so tenants and landlords know their rights and what to expect when renting privately e published a model tenancy agreement so tenants who want to ask for longer tenancy agreements have the opportunity to do so e introduced a new requirement for letting agents to belong to one of three redress schemes so the minority of tenants and landlords who get a raw deal have
11. http www grant thornton co uk en Publications 2015 Local Government Governance review 2015 All aboard1 We note that the challenges faced by local authorities are intensifying as austerity and funding reductions combine with demographic pressures and technological changes to create a potential threat to the long term sustainability to some organisations Maintaining effective governance is becoming ever more complex and increasingly important Against this background we have focused this year s review on three key areas o An instinct for growth Governance of the organisation the main area of concern highlighted in this year s governance survey is the level of dissatisfaction with the scrutiny process All aboard Governance in working with others there is an urgent need for scrutiny to exercise good governance over the complex array of partnerships in which local authorities are now involved Boundary issues notwithstanding by shining a light on contracted out activities and joint operations or ventures scrutiny committees can bring a new level of transparency and accountability to these areas Governance of stakeholder relations despite the work that a number of local authorities are doing with the public on co production almost a third of respondents to our survey did not think their organisation actively involves service users in designing the future scope and delivery of its services We conclude that local
12. k dated claims can only be made if it is less than three months since the last incorrect payment of holiday pay It is likely that there will be an Appeal to this decision However that does not mean that authorities should hold off assessing the impact Local authorities should be considering their own circumstances and if necessary taking their own legal advice as to the extent they might be affected by the ruling If an authority is going to be affected they need to assess whether the liability can be reliably measured For an authority likely to be affected in a material way where it is possible to reliably measure that liability then appropriate provision should be made in the 2014 15 accounts The fact that the issue might go to Appeal at some uncertain time in the future is not of itself grounds for not including a provision The chances of any success would need to be taken account of in the legal analysis but in any case there are some indications that the key issue on Appeal would be whether to remove the three month cap if this were done then the provision would increase rather than dismissing the entire decision to include overtime in the calculation of holiday pay Issue to consider e Has your Authority taken legal advice and assessed if a provision is required in the 2014 15 accounts 2015 Grant Thornton UK LLP 20 Grant Thornton 2015 Grant Thornton UK LLP All rights reserved Grant Thornton means Grant Thornton
13. n to Rotherham Issues to consider Have Members been briefed on e the headline messages from the inspection of aspects of Rotherham MBC s governance arrangements whether there are any lessons to be learned by the authority and actions that need to be taken to strengthen its overall governance arrangements in response to the risk of child sexual abuse including the robustness of member oversight challenge and scrutiny 2015 Grant Thornton UK LLP 12 Councils fear school place tipping point Local government issues Just ahead of the 15 January 2015 deadline for parents to apply for primary school places for their child for September 2015 the LGA warned that the 12 billion cost of creating places for the 900 000 extra pupils expected at England s schools over the next decade could push schools to breaking point Whilst the government has committed 7 35 billion to create extra school places the LGA claims that this still creates a backlog The LGA is calling on the Government to fully fund the cost of all school places now and in the future and to give councils the powers to open new schools without bureaucratic burdens so they can be delivered according to local need The LGA s Investing in our nation s future campaign outlines measures which it claims would save the public purse 11 billion tackle the country s housing crisis ensure every child had a place at a good school reduce long term unemployment address the pothol
14. r external auditors The paper also includes asummary of emerging national issues and developments that may be relevant to you and anumber of challenge questions in respect of these emerging issues which the Committee may wish to consider Members of the Audit Committee can find further useful material on our website www grant thornton co uk where we have a section dedicated to our work in the public sector http Avww grant thornton co uk en Services Public Sector Here you can download copies of our publications including All aboard our local government governance review 2015 Stronger futures development of the local government pension scheme e Rising to the challenge the evolution of local government summary findings from our fourth year of financial health checks of English local authorities e 2020 Vision exploring finance and policy future for English local government e Where growth happens on the nature of growth and dynamism across England If you would like further information on any items in this briefing or would like to register with Grant Thornton to receive regular email updates on issues that are of interest to you please contact either your Engagement Lead or Audit Manager Alex Walling Engagement Lead T 0117 305 7804 M 07880 456142 alex j walling uk gt com Mark Bartlett Audit Manager T 0117 305 7896 M 07880 456123 mark bartlett uk gt com 2015 Grant Thornton UK LLP Progress at 5 March 2015
15. rnton held workshops on this issue in December 2014 and January 2015 that were attended by Torbay finance staff and the audit team have continued to liaise with Council officers over the developments in this area The Council is making good progress in its judgements on the accounting treatment of schools non current assets on a case by case basis and further update meetings on this issue are planned 2015 Grant Thornton UK LLP Provision for Business Rates Appeals Accounting and audit issues Unlodged appeals The Chancellor s Autumn Statement included a change to the rules relating to business rates appeals As a result we do not expect to see any provisions for unlodged appeals in local authorities 2014 15 accounts although we will expect this to be re considered for 2015 16 accounts The change restricts the backdating of Valuation Office Agency VOA alterations to rateable values Only VOA alterations made before 1 April 2016 and ratepayers appeals made before 1 April 2015 can now be backdated to the period between 1 April 2010 and 1 April 2015 The aim is to put authorities in the position as if the revaluation had been done in 2015 as initially intended before the deadline was extended to 2017 There may be some fluctuations in provisions at 31 March 2015 as unlodged appeals provisions are released However there may also be increased numbers of appeals lodged prior to 31 March 2015 These appeals may be more speculative in nat
16. s auditors will be required to consider whether these are reasonable and supported by appropriate evidence Local authorities should discuss and agree these judgements with Those Charged With Governance Other matters The work required to identify and consider the arrangements over the use of schools may be significant and progress to date has been variable Local authorities need to consider the resources required to identify and review arrangements and to undertake any necessary valuations Good project management arrangements also need to be in place to ensure the requirements of the Code are met Treating a school as an entity means that local authorities are satisfied that for each school they have captured all the financial information relating to the school as an entity This means all income and expenditure including voluntary donations and related expenditure cash flows and all assets and liabilities 2015 Grant Thornton UK LLP 16 Accounting for schools Code update and LAAP Bulletin 101 Accounting and audit issues As part of their accounts preparations local authorities should ensure transactions between the local authority and schools are eliminated all required disclosures are made and any appropriate governance matters are disclosed in the Annual Governance Statement A more detailed summary of the issues arising from the Code Update and LAAP Bulletin 101 has been provided to the Council s finance team Grant Tho
17. somewhere to go with their complaint 2015 Grant Thornton UK LLP 15 Accounting for schools Code update and LAAP Bulletin 101 Accounting and audit issues Non current assets In December 2014 CIPFA issued an Update to Appendix E of the 2014 15 Code which states The recognition of non current assets used by schools shall be determined in accordance with the relevant standards adopted by Chapter Four Non Current Assets of this Code as appropriate to the arrangements for the assets These assets shall be recognised in a local authority s balance sheet if they meet either the appropriate recognition criteria see Chapter Four for the local authority or for a school within the local authority area CIPFA also issued in December LAAP Bulletin 101 Accounting for Non Current Assets Used by Local Authority Maintained Schools The Bulletin provides application clarification and interpretation but is secondary to the Code and accounting standards Due to the varied and sometimes complex arrangements for use of school land and buildings the accounting treatment for these non current assets will require the chief finance officer to make significant judgements in the preparation of the statement of accounts These judgements should be based on the circumstances for individual schools and will involve consideration of the rights of the school as an entity and any rights held by the local authority Judgements should be robust and well documented a
18. tion into the governance of Rotherham Council Local government issues On 4 February 2015 the Secretary of State for Communities and Local Government Eric Pickles announced the publication of Louise Casey s report Her inspection of the exercise of functions on governance children and young people and taxi and private hire licensing states Rotherham Metropolitan Borough Council is not fit for purpose It is failing in its legal obligation to secure continuous improvement in the way in which it exercises its functions In particular it is failing in its duties to protect vulnerable children and young people from harm It summarises the following serious failings acouncil in denial about serious and on going safeguarding failures an archaic culture of sexism bullying and discomfort around race e failure to address past weaknesses in particular in Children s Social Care weak and ineffective arrangements for taxi licensing which leave the public at risk ineffective leadership and management including political leadership no shared vision a partial management team and ineffective liaisons with partners culture of covering up uncomfortable truths silencing whistle blowers and e paying off staff rather than dealing with difficult issues The report has had widespread press coverage and in a statement in the House of Commons the Secretary of State confirmed that he is considering exercising his powers of intervention in relatio
19. udit Findings Report to your July meeting We plan to issue the opinion as soon as possible after the July Audit Committee Our Annual Audit Letter summarises the findings of our audit work in the year Progress at 5 March 2015 Work Planned date Certification work 30 November e Housing benefit subsidy for 2014 15 2015 e Teachers Pension Return Other activities Complete Comments No We plan to make an early start on our housing benefit certification work in 2014 15 Dates are being agreed with officers currently The Teachers Pension Return is not carried as part of the Audit Commission certification work and would be agreed with the Council Our annual financial statements workshops in conjunction with CIPFA are taking place in February and March 2015 Torbay Council was represented at the event in Exeter on 11 February The Executive Director is attending Grant Thornton s CEO Room a session held in a dedicated room in our Bristol office focused on key strategic financial and leadership issues for Torbay Council The audit team have regular discussions and meetings with key finance officers to discuss emerging issues and share information as it becomes available 2015 Grant Thornton UK LLP Emerging issues and developments 2015 Grant Thornton UK LLP All Aboard Local Government Governance Review 2015 Grant Thornton Our fourth annual review of local government governance is available at
20. ure and therefore authorities may need to consider whether prior year assumptions remain valid in estimating their provisions Utilisation of provision As part of the provisions disclosures in the accounts local authorities need to disclose additional provisions made in the year the amounts used i e incurred and charged against the provision during the year and unused amounts reversed during the year We understand that the software used for business rates may not provide values for the amounts charged against the provision during the year and that there is no simple software solution for this for 2014 15 Local authorities will need to consider available information and make an estimate of the amount for appeals settled in the year 2015 Grant Thornton UK LLP 18 Early payment of pension contributions Accounting and audit issues During 2014 15 some local authorities paid pension fund deficit contributions covering three years 2014 15 to 2016 17 By doing this the local authority benefits from a discount on the total amount payable resulting in a lower overall charge Due to the amounts involved some authorities are seeking to spread the impact of the payment over the three year period In doing so they must be satisfied that the amounts charged to the general fund in a financial year are the amounts payable for that year as defined by regulation 30 of The Local Authorities Capital Finance and Accounting England Regulations
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