The Audit Plan – template user guide
Contents
1. asummary of emerging national issues and developments that may be relevant to you and a number of challenge questions in respect of these emerging issues which the Committee may wish to consider Members of the Audit and Governance 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 2015 Grant Thornton UK LLP Progress at March 2015 Work Planned date Complete Comments 2014 15 Accounts Audit Plan l March 2015 Yes Our fee letter was sent to the Council in April 2014 We are required to issue a detailed accounts audit Our detailed audi2. Grant Thornton Gloucestershire County Council Audit and Governance Committee Update Year ended 31 March 2015 April 2015 Elizabeth Cave Director T 44 0 117 3057885 E liz a cave uk gt com Terry Tobin Senior Manager T 44 0 121 232 5276 E _ terry p tobin 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 March 2015 Emerging issues and developments Grant Thornton Local government issues Accounting and audit issues 2015 Grant Thornton UK LLP Page Introduction This paper provides the Audit and Governance Committee with a report on progress in delivering our responsibilities as your external auditors The paper also includes
3. 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 2015 Grant Thornton UK LLP 13 Earlier closure and audit of accounts Accounting and audit issues Legislation was recently passed to bring forward the deadlines for the preparation and audit of Local Government financial statements from 2017 18 onwards The timeframes for the preparation of the financial statements and their subsequent audit will be reduced by one month and two months respectively as follows Deadline for preparation of financial statements 31 May currently 30 June e Deadline for audit completion 31 July currently 30 September Although July 2018 is over 3 years away both local authorities and their auditors will have to make real changes in how they work to ensure they are match fit to achieve this deadline This will require leadership from members and senior management Local government accountants and their auditors should start working on this now Top tips for local authorities make preparation of the draft accounts and your audit a priority investing appropriate resources to make it happen make the year end as close to normal as possible b
4. has robust systems and processes to manage effectively financial risks and opportunities and to secure a stable financial position that enables it to continue to operate for the foreseeable future e The organisation has proper arrangements for challenging how it secures economy efficiency and effectiveness The focus will be on how the Council is prioritising its resources within tighter budgets for example by achieving cost reductions and by improving efficiency and productivity 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 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
5. made and any appropriate governance matters are disclosed in the Annual Governance Statement 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 Back 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
6. 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 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 are available from your Engagement Lead or Audit Manager 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 c
7. 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 as 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 As part of their accounts preparations local authorities should ensure transactions between the local authority and schools are eliminated all required disclosures are
8. in between the triennial valuations Hard copies of our report are available from your Engagement Lead or Audit Manager 2015 Grant Thornton UK LLP 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 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 M
9. ls 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 pothole backlog and improve the nation s health 2015 Grant Thornton UK LLP 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
10. ontinuing 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 average 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
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12. re 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 e 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 the Secretary of State confirmed on 26 February 2015 that he had decided to nominate five commissioners to take over all of the council s executive functions and to begin a rapid improvement programme He also confirmed that he would act to move Rotherham to all out council elections from 2016 2015 Grant Thornton UK LLP 10 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 counci
13. t plan is being presented to April plan to the Council setting out our proposed approach 2015 Audit and Governance Committee in order to give an opinion on the Council s 2014 15 financial statements Interim accounts audit January March Complete No major issues emerging from the interim to date Our interim fieldwork visit includes 2015 e updating our review of the Council s control environment e updating our understanding of financial systems e review of Internal Audit reports on core financial systems early work on emerging accounting issues e early substantive testing proposed Value for Money conclusion 2014 15 final accounts audit July August 2015 Not yet Meetings held with management to fix timescales Including started and discuss key issues for 2014 15 accounts early e audit of the 2014 15 financial statements Working paper requirements shared proposed opinion on the Council s accounts Training provided for officers proposed Value for Money conclusion 2015 Grant Thornton UK LLP Progress at March 2015 Work Planned date Complete Comments Value for Money VfM conclusion March July 2015 In progress Majority of work completed and no major issues The scope of our work to inform the 2014 15 VfM emerging conclusion comprises the two criteria specified by the Audit Commission e The organisation has proper arrangements in place for securing financial resilience The focus will be on whether the Council
14. ulti 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 Inspection 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 failu
15. y carrying out key steps each and every month e discuss potential issues openly with auditors as they arise throughout the year agree key milestones deadlines and response times with your auditor agree exactly what working papers are required Auditors are already working on bringing forward more testing to before the financial statements are prepared and will be discussing further changes with local authorities including greater use of estimates in the accounts which will enable the audits to be brought forward further Some authorities currently produce their financial statements ahead of the current deadline or have plans to do so in 2014 15 and some audits are completed before 31 July We will be assessing how this has been achieved and will share our findings in a national report expected in early 2016 2015 Grant Thornton UK LLP 14 Grant Thornton 2015 Grant Thornton UK LLP All rights reserved Grant Thornton means Grant Thornton UK LLP a limited liability partnership Grant Thornton is a member firm of Grant Thornton International Ltd Grant Thornton International References to Grant Thornton are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms as the context requires Grant Thornton International and the member firms are not a worldwide partnership Services are delivered independently by member firms which are not responsible for the services
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