Agenda item

Report of External Audit.                                                                      (Enclosure)

Mike Norman from KPMG presented the Annual Governance Report 2015/16. He stated that KPMG anticipated giving an unqualified opinion on the Council’s 2015/16 accounts and would report that the Annual Governance Statement was consistent with the guidance issued by CIPFA/SOLACE. Audit Standards required External Audit to report on certain categories of adjustments; Mr. Norman stated that no material mistakes had been identified and that there were no uncorrected or non-material differences that needed to be brought to members’ attention.

External Audit was required to identify potentially significant financial risks as part of the External Audit Plan 2015/16. The key risk identified for South Kesteven District Council related to the level of provisioning for business rate appeals; this was reflected nationally. This issue had been highlighted nationally as the value could be material and the provision could only be based on estimates and assumptions. No concerns were raised following the testing of the provision made by South Kesteven District Council. Examination was also undertaken of two standard risks identified as part of professional standards, regarding revenue recognition and management override of controls; there were no issues to report in relation to either.

In advising members about the accounts production process, Mr. Norman stated that the draft accounts were received well ahead of the 30 June 2016 deadline and that External Audit had no concerns about regarding accounting policies, accounting estimates and financial statement disclosures. The requested working papers were supplied at the start of the audit progress and the officer response to requests for further working papers was efficient.

The report stated that KPMG was satisfied with the progress the authority had made in relation to the recommendations in its ISA 260 Report 2014/15 relating to the financial statements and that consequently they would not be rolled over.

External Audit was required to provide a separate value for money conclusion. No significant risks were identified. The report stated that KPMG anticipated issuing an unqualified value for money conclusion by 30 September 2016.

The report also highlighted the next steps that would be taken to complete the audit. Subject to the Committee approving the Financial Statements and the letter of representation, External Audit expected to complete the remainder of procedures in time to allow the publication of the accounts on the Council’s website by 30 September 2016.

Finally, Mr. Norman confirmed that all the requirements relating to objectivity and independence had been complied with.

Following completion of the audit, a de-brief session would be held between KPMG and SKDC officers to identify any improvements that could be made to carry out the audit more effectively in future years.

Members were given the opportunity to ask questions about the report. One of the key questions related to the level of materiality, which was £1.2m. This was based on 1.5% of the organisation’s gross expenditure; a lower level of performance materiality would then be set, which would influence the bulk of testing and sample size. A number of factors were taken into account in determining materiality including an authority’s governance arrangements, internal controls and the level of risk attached to its activities.

Members were pleased with the contents of the report, adding that they felt it reflected the diligence and hard work of officers. The Committee noted the contents of the report and expressed their gratitude to the Council’s officers. Members’ thanks was also extended to External Audit for its work.