Agenda item - 2017/18 Audit Plan

Report of Ernst & Young

1)         To consider the 2017/18 Audit Plan and ask questions as necessary on our proposed audit approach, progress to date and audit scope. You should also consider whether there are any other matters which you consider may influence our audit.

41.1    Paul King introduced the report of Ernst & Young. He stated the audit plan identified two significant risks; management override and valuation of land and buildings. Overall materiality was set at 2% of the council’s gross expenditure, £16.93 million. Uncorrected differences would be   reported at £0.84 million. There was one significant risk identified for the value for money conclusion which was the challenge for the council to secure its finance over the short to medium term. A change in regulations meant that accounts would have to be audited and published by the end of July from 2018.

41.2    Councillor Cobb stated that she was disappointed that there was no change or action from last year’s plan and asked what impact the change in retirement age would have on pension costs.

41.3    Paul King responded that management override was included as standard in audit plans and was not a reflection of particular concerns in Brighton & Hove City Council. Land and building valuations was included based on concerns raised over the last two years. Local Government Pension Schemes are regularly valued and reviewed and changes are made to contribution rates. All of the factors which impact the pensions would be taken into account when the schemes were valued.

41.4    Councillor Simson asked how risks were identified and why areas such as contract management or IT support were not considered.

41.5    Mr King responded that some areas were included because of experience with past audits, and some were included on all audit plans as standard. Contract management or the performance of IT may be considered in the value for money conclusion.

41.6    In response to Councillor Sykes, Mr King stated that 5% was a standard level of materiality for audit planning purposes.

41.7    In response to Councillor Sykes, Mr King stated that the audit of Lender Option Borrower Option contracts was still under consideration.

41.8    Councillor Allen asked why pensions were being included in the audit plan.

41.9    Mr King responded that the size of the council’s liability was around £225 million and that this figure included a lot of estimation meant it represented a significant risk. This liability would not be affected by being a relatively minor contributor to the pension fund as a whole.

41.10  The Chair asked if the council was prepared for the July deadline for auditing and publishing accounts.

41.11  The Executive Director, Finance and Resources responded that the July deadline would be a challenge with diminished back office staff. Working with colleagues across Orbis should increase capacity in the future.

41.12  Resolved:

1)         The Audit & Standards Committee noted the contents of the report.