External Audit Results Report 2017/18
To consider a report from Ernst & Young LLP which sets out the outcomes from the external audit of the Council’s 2017/18 financial statements and the conclusion of work to review the Council’s arrangements for securing value for money in the use of its resources. The report also sets out Ernst and Young’s proposed audit opinion, key findings and any recommendations to consider prior to the approval of the 2017/18 accounts.
Members considered a report from Ernst & Young LLP (EY), the Council’s external auditor, which summarised the company’s preliminary audit conclusion as at 24 July 2018 in relation to the audit of Central Bedfordshire Council for 2017/18.
Points and comments included:
· The context of the preparation of the accounts, which involved an accelerated closure and the related pressures on personnel in both the Council and the external auditors.
· The EY audit had been concluded and its opinion would be issued before the statutory deadline. This reflected well on the work undertaken by both the Council’s finance team and the company’s own audit team.
· The EY audit opinion on the Council’s accounts would be an unqualified audit opinion as the accounts represented a true and fair view of the Council’s financial performance.
· EY would also be issuing an unqualified value for money conclusion to say the Council had secured adequate arrangements for value for money.
· The materiality level that was applied by EY when auditing the Council’s primary financial statements was £12m, which represented 2% of the Council’s gross revenue expenditure. Items above what EY regarded as its ‘trivial’ level of £600k were reported.
· All outstanding items listed in the report had now been completed apart from the Council’s own consideration of the management representation letter and of the accounts. Once they had been concluded EY would be able to issue its opinion.
· In the accounts prepared the Council received information from the actuary setting out a number of assumptions about the Council’s share of the Pension Fund assets and liabilities within the Bedfordshire Pension Fund. Whilst actuaries tended to prepare information based on data available at the end of December and then estimate up to the financial year end the Fund’s auditors had access to more up to date estimate. In addition there could be almost daily variations in a pension fund’s value and liabilities. EY had taken a strict interpretation of any differences in estimates between one point in time and another, had held discussions with relevant parties and made use of its own experience as a pension fund auditor. In the Audit Results report it was stated that there could be a difference of up to £2m in the Council’s share of any difference in the market valuation of the Fund’s assets. However, a new actuary report showed that the difference could actually be up to £6m. Any judgemental difference was well below EY’s level of materiality and the Fund’s auditor had said that there was no concern with the control environment operated round the Fund. The movement in the estimate was within a reasonable range and that, in effect, was just a technical difference between an estimate at one point in time and another. EY recommended that the Council updated its actuarial results and adjust its accounts but the Council did not have to do so and the amount involved would not impact on EY’s audit opinion.
· The Dunstable leisure centre was going through a significant programme of refurbishment and had been valued in the accounts on a particular basis. Further work had been carried out to ensure that the valuation was within an appropriate range and classified and disclosed appropriately in the accounts.
· On the value for money conclusion there were no matters that the Committee needed to be made aware of by EY or any matters of concern. There were no other concerns regarding the Council’s arrangements for value for money for the financial year.
· There were no other matters EY needed to report in line with its statutory responsibilities nor any concerns around the company’s independence.
· There were no plans to alter the audit fee set by the Public Sector Audit Appointments Ltd (PSAA).
· The EY Associate Partner thanked the officers of the Council for their co-operation and assistance during the audit process.
· EY was required to undertake a piece of work to inform how the Council’s accounts consolidate into the whole of government accounts. The deadline set by the government for returns was the end of August and this would be met. However, it meant it was not possible to certify closure of the audit until the work was concluded. It would not affect the signing of the letter of representation.
the External Audit Results Report from Ernst & Young LLP.