The Audit Plan – template user guide
Contents
1. Grant Thornton AGENDA ITEM NO 4 Audit Committee Update for South Staffordshire Council Year ended 31 March 2015 March 2015 Mark Stocks Director T 0121 232 5437 E mark c stocks uk gt com Emily Mayne Audit Manager T 0121 232 5309 E emily j mayne uk gt com Tom Joy Associate T 0121 2325179 E tom j joy uk gt com Contents Section Introduction Progress to date Emerging issues and developments Grant Thornton Local government issues Accounting and audit issues 2015 Grant Thornton UK LLP Page 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 Introduction This paper provides the Audit Committee with a report on progress in delivering our responsibilities as your external2. auditors The paper also includes 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 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 to date Work Planned date Complete Comments 2014 15 Accounts Audit Plan February 2015 Yes We continue to assess the risks facing your Council We are required to issue a detailed accounts audit and
3. pension liability We expect the background to the transactions and the reason for the difference to be disclosed in a note to the accounts Challenge question Has your authority paid pension fund contributions covering more than one year and if so has your Chief Finance Officer obtained legal advice and documented their judgement on accounting for the early payment of pension contributions 2015 Grant Thornton UK LLP 13 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
4. prosperous places not stagnant states Freedom to deliver better services improved lives The Core Cities Group has also published its joint report with ResPublica Restoring Britiain s City States Devolution Public Service Reform and Local Economic Growth This report argues for a rebalancing of the relationship between central government and cities as the only real solution for addressing the interconnected challenges of local economic growth public service reform and better governance Challenge question Have members been briefed by your Chief Executive or Chief Finance Officer on the headline messages from the City Growth Commission report the current status of developments and the potential implications of the proposed devolution of powers to the City Council 2015 Grant Thornton UK LLP 10 Help into work programmes Local government issues In its press release of 12 January 2015 the LGA reported that more than one million unemployed people are falling through cracks in national work schemes that are failing to reach some of the most vulnerable jobseekers It warned that whilst councils are being left to pick up the pieces to prevent more vulnerable people slipping further into long term unemployment and disengagement they cannot afford to continue resolving the failings of these national schemes in their communities without the appropriate funding As aremedy the LGA calls on the next government to commit to devolving all nat
5. VfM conclusion For 2014 15 auditors of Local Government bodies are required to give their statutory conclusion on arrangements to secure value for money based on the following two criteria specified by the Audit Commission e The organisation has proper arrangements in place for securing financial resilience e The organisation has proper arrangements for challenging how it secures economy efficiency and effectiveness Grant work Audit Commission regime We plan to certify the following claim e Housing Benefits Claim 2014 15 BENO1 Other areas of work The Council has not engaged us to complete any additional work at this time However we have held seminars within the Grant Thornton Offices to which Members and Officers have been invited We also continue to share our National Publications on topics impacting on the sector 2015 Grant Thornton UK LLP Planned date February July 2015 June November 2015 N A Complete In progress Not started N A Comments The scope of our work to inform the 2014 15 VfM conclusion is detailed within the Audit Plan We have already started attending meetings with key Senior Officers to inform our overall understanding of the Council and capture evidence of how the Council is securing value for money in all areas of service delivery There will also be a strong focus on financial resilience and how the Council is preparing itself for future years Ou
6. 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 Challenge question e Has your authority taken legal advice and assessed if a provision is required in the 2014 15 accounts 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 or activit
7. ies of one another Grant Thornton International does not provide services to clients grant thornton co uk
8. ionally run education skills and employment schemes to local areas so councils can join up services to support their most vulnerable residents A report published by the National Institute of Economic and Social Research NIESR commissioned by the LGA explores in detail how a sample of councils across the country have provided a safety net for their most vulnerable and hardest to reach residents The NIESR report s lead author Dr Heather Rolfe said Local authorities have a unique position in their communities are able to bring services together forging partnerships and strengthening referral networks It is through such work that they are able to help unemployed people who are beyond the reach of national programmes Challenge question Have members been briefed by your Chief Finance Officer on the headline messages from the NIESR report and its implications for the authority s strategies around community engagement employment regeneration and economic development 2015 Grant Thornton UK LLP 11 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 al
9. med 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 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 taxe
10. meet with Senior Officers to ensure that these plan to the Council setting out our proposed approach risks are fully understood and our proposed audit in order to give an opinion on the Council s 2014 15 work is appropriate to support our final opinion and financial statements VfM conclusion If there are any revisions to the plan we will agree this with the Chief Finance Officer and report back to Audit Committee Interim accounts audit February March In progress We have commenced early discussions with finance Our interim fieldwork visit includes 2015 staff on key financial issues and the approach we updating our review of the Council s control will be taking for the 2014 15 financial audit environment We continue to work closely with Internal Audit in e updating our understanding of financial systems relation to risk work on the financial statements and e review of Internal Audit reports on core financial fraud systems Our approach for 2014 15 will be to undertake as early work on emerging accounting issues much early testing as possible to reduce pressure on early substantive testing the finance and audit team over the summer months 2014 15 final accounts audit July August Not started Including 2015 e audit of the 2014 15 financial statements proposed opinion on the Council s accounts proposed Value for Money conclusion 2015 Grant Thornton UK LLP Progress to date continued Work Value for Money
11. r Certification Plan will be prepared and submitted to the June 2015 Audit Committee N A 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 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 a
12. re 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 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 fut
13. s 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 Challenge question Have members been briefed by your Chief Finance Officer on the key findings of the Independent Commission s final report 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 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 ineffecti
14. terations 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 nature 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 Challenge questions e Has your Chief Finance Officer reassessed the methodology for making the business rates provision e Does yo
15. ur Chief Finance Officer have arrangements in place for the estimation of appeals to be charged against the provision 2015 Grant Thornton UK LLP 12 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 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
16. ures 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 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 refor
17. ve 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 relation to Rotherham Challenge question Have members been briefed by your Chief Finance Officer 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 Cities launch Magna Carta for devolution Local government issues The Modern Charter for Local Freedom was launched at the Core Cities UK Devolution Summit on 9 February 2015 Ten of the UK s largest cities set out demands for devolution that they say will drive national prosperity and boost local economies Calling for city areas to be given much greater freedom to reform and join up all public services locally with job and skills scheme and housing support among the key areas for change they cite three key freedoms Freedom to decide independence but not one size fits all Freedom to invest
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