Agenda item

To receive updates to the Audit Plan and VFM risk assessment from KPMG, External Auditors.

KPMG, External Auditors, presented their report to the Audit Committee. 

Since presenting the draft audit strategy for the 2023-24 audit to the Audit Committee in May 2024, KPMG had continued the risk assessment in order to further define and focus significant risks and this had resulted in changes to the planned approach.

In relation to expenditure recognition, following completion of the risk assessment this was no longer deemed as having significant risk of fraud or error.  Given the size and volume of the expenditure streams, it had now been assigned as an ‘elevated’ inherent risk to the balance and would entail taking larger samples of expenditure transactions and cash payments.

The draft audit strategy proposed a significant risk for the valuation of all council land and buildings. After completion of further risk assessment procedures and now with a detailed understanding of the balances and processes used to value Council land and buildings, it was concluded that the significant risk was with the property investment portfolio only and not the specialised buildings.  The accounting treatment of the property investment portfolio would now be classified as Other Land and Buildings.   Testing was still to be completed on the remaining ‘Other Land and Buildings’ balance, but it was not deemed to be a significant risk area.

The Value for money risk assessment had been completed using the following criteria and arrangements:

·         Financial sustainability

·         Governance

·         Improving economy, efficiency and effectiveness

It was the External Auditor’s responsibility to assess whether there were any significant weaknesses in the Council’s arrangements to secure value for money and to ensure the appropriate arrangements were put in place.  An understanding of the key processes would ensure sound financial management, risk management and partnership working arrangements.

No significant risks were identified within the three criteria and this would continue to be assessed.

In relation to the 2023/2024 accounting entries within the Statement of Accounts, there were a few areas that required completion in relation to significant risks and investment properties with the valuers looking at six specific assets in order to ensure there were no material differences between the two methods of assessment.   Management override and control in relation to journals was being progressed.  The Pension audit had been delayed, but this had been the picture nationally.  There were just a few areas that needed completion and work on the valuations was currently taking place with the actuaries.

Overall, the audit had progressed well with good communication between the External Auditors and the Finance Team who had a positive relationship.  They had examined the audit comparing it with the previous year’s external auditors and worked constructively whilst being challenging and robust.  The ISO 260 would set out the work undertaken and it was expected that there would be very few corrections to the Statement of Accounts.

The report showed the good progress that had been made and it was key to record this.

During the debate some Members felt that debrief sessions were key to making improvements to the audit ensuring that they work differently in order to improve.   It was encouraging that the first year audit as been as smooth as it could be.  Other Members asked what were the six assets that required the valuation processes and why were they chosen and if there were likely to be any changes to the audit in respect of local government pension schemes.

Interim Director: Finance, People & IDT informed Members that following the audit a debrief session was held with the wider team in order to improve processes going forward and to feedback to the Audit Committee and how the audit compared to the previous audit.

The External Auditor considered that a debrief following the audit was key to improving the audit.  In relation to assets, he confirmed that it was the six largest assets within the portfolio that were being assessed as these had been moved in the previous audit to ‘other land and buildings’ and it needed to be assessed whether this had a material impact in their valuation.  In relation to pension valuations, major changes would be coming forward which would fundamentally change how pensions would be audited.

The report was noted.