Agenda item

ISA 260 Report

Report by the Council’s External Auditors outlining the key findings arising from the statutory audit of South Kesteven District Council.

Minutes:

The ISA 260 Report was presented by the representatives from KPMG, the external auditor.

 

The external auditors noted that the findings of the report were positive with no uncorrected audit misstatements.

 

The report did note the following five significant audit risks:

 

Fraud risk – expenditure recognition

 

 

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Testing over expenditure completeness was ongoing, however, no issues were identified from the testing so far.

Management override of controls

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No instances of management override of control had been identified from testing.

Valuation of land and buildings

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The external auditors critically assessed the key underlying assumptions underpinning the valuation on which the carrying value of land and buildings was based. They concluded that the assumptions used in the valuation of land and buildings were balanced.

Valuation of investment property

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The external auditors critically assessed the key underlying assumptions underpinning the valuation on which the carrying value of investment properties was based. They concluded that the assumptions used in the valuation of investment properties were balanced.

Valuation of post-retirement benefit obligations

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No issues identified from the testing over the valuation. KPMG

actuaries have assessed the assumptions used and concluded

these were within expected range.

 

It was also confirmed that, whilst there were no significant control deficiencies, five medium control deficiencies were identified regarding the following:

 

-       Journals postings – Segregation of duties

-       Review of bank reconciliations

-       Management review of Valuations of Land and Buildings and Investment Properties

-       Management review of Actuarial Assumptions

-       Management review of Manual Accruals

 

For each of the above control deficiencies identified, the impact of the issue was outlined, alongside a recommendation. The report also encapsulated a management response, identified the relevant officer and established a due date.

 

During discussions, Members commented on the following:

 

-       Members praised the audit and noted that the positive findings paid testament to the financial systems operated by SKDC.

-       A Member noted that there had been a substantial increase in fees for the audit to be undertaken. It was noted that the level of fees were not set by the external auditors, rather by Public Sector Audit Appointments Ltd (PSAA) who set fee levels sector wide in consultation with the Local Government Association (LGA).

-       It was queried whether the targets and recommendations made within the audit report would be retrospectively reviewed following the appropriate action. The external auditors noted that, with deficiencies three and four, the auditors were happy for SKDC to continue with the existing arrangements and would not seek to raise them in subsequent years. The other deficiencies identified required a period to allow for the implementation of the new finance system of which the external auditors agreed to be available to support with the control environment.  

-       It was confirmed that the number of outstanding recommendations from the control deficiencies was zero.

-       It was noted that determinations indicated by the reasonable range scale only applied to instances where the assessments of assumptions were fundamentally financial.

 

The Committee noted the findings of the ISA 260 report.

 

Supporting documents: