The Audit Plan – template user guide
Contents
1. Grant Thornton Audit Committee Update for Hyndburn Borough Council Year ended 31 March 2015 March 2015 Karen Murray Director Engagement Lead T 0161 234 6364 E karen l murray uk gt com Tommy Rooney Manager T 0161 214 6359 E tommy o rooney uk gt com Sophia Iqbal Executive T 0161 234 6372 E sophia s iqbal uk gt com The contents of this report relate only to the matters which have come to our attention which we believe need to be reported to you as part of our audit process It is not a comprehensive record of all the relevant matters which may be subject to change and in particular we cannot be held responsible to you for reporting all of the risks which may affect your business or any weaknesses in your internal controls This report has been prepared solely for your benefit and should not be quoted in whole or in part without our prior written consent We do not accept any responsibility for any loss occasioned to any third party acting or refraining from acting on the basis of the content of this report as this report was not prepared for nor intended for any other purpose Contents Section Page Introduction 4 Progress at March 2015 5 Emerging issues and developments Grant Thornton 7 Local government issues Accounting and audit issues 12 2015 Grant Thornton UK LLP Introduction This paper provides the Audit Committee with a report on progress in delivering our responsibilities as you2. Is the level of dissatisfaction with the scrutiny process All aboard Governance in working with others there is an urgent need for scrutiny to exercise good governance over the complex array of partnerships in which local authorities are now involved Boundary issues notwithstanding by shining a light on contracted out activities and joint operations or ventures scrutiny committees can bring a new level of transparency and accountability to these areas Governance of stakeholder relations despite the work that a number of local authorities are doing with the public on co production almost a third of respondents to our survey did not think their organisation actively involves service users in designing the future scope and delivery of its services We conclude that local authorities need to ensure that their core objectives and values are fulfilled through Many other agencies This implies a greater role for scrutiny and a need to make sure local public sector Bodies arrangements are a transparent as possible for stakeholders Hard copies of our report are available from your Engagement Lead or Audit Manager 2015 Grant Thornton UK LLP Stronger futures development of the LGPS Grant Thornton Our second review on governance in LGPS funds in England and Wales is based on comprehensive research with pension fund senior officers supported by insights from pension fund auditors and is available at http www grant
3. 2015 16 accounts The change restricts the backdating of Valuation Office Agency VOA alterations to rateable values Only VOA alterations made before 1 April 2016 and ratepayers appeals made before 1 April 2015 can now be backdated to the period between 1 April 2010 and 1 April 2015 The aim is to put authorities in the position as if the revaluation had been done in 2015 as initially intended before the deadline was extended to 2017 There may be some fluctuations in provisions at 31 March 2015 as unlodged appeals provisions are released However there may also be increased numbers of appeals lodged prior to 31 March 2015 These appeals may be more speculative in nature and therefore authorities may need to consider whether prior year assumptions remain valid in estimating their provisions Utilisation of provision As part of the provisions disclosures in the accounts local authorities need to disclose additional provisions made in the year the amounts used i e incurred and charged against the provision during the year and unused amounts reversed during the year We understand that the software used for business rates may not provide values for the amounts charged against the provision during the year and that there is no simple software solution for this for 2014 15 Local authorities will need to consider available information and make an estimate of the amount for appeals settled in the year Challenge questions e Has your Deputy
4. Chief Executive reassessed the methodology for making the business rates provision e Has your Deputy Chief Executive got arrangements in place for the estimation of appeals to be charged against the provision 2015 Grant Thornton UK LLP 12 Early payment of pension contributions Accounting and audit issues During 2014 15 some local authorities paid pension fund deficit contributions covering three years 2014 15 to 2016 17 By doing this the local authority benefits from a discount on the total amount payable resulting in a lower overall charge Due to the amounts involved some authorities are seeking to spread the impact of the payment over the three year period In doing so they must be satisfied that the amounts charged to the general fund in a financial year are the amounts payable for that year as defined by regulation 30 of The Local Authorities Capital Finance and Accounting England Regulations 2003 We expect authorities that are spreading the impact of pension deficit contributions to obtain legal advice either internally or externally to determine the amounts that are chargeable to the general fund The accounting judgements and treatment should reflect the advice received and should be documented accordingly Where an authority has received legal advice that the up front payment can be recognised in the general fund over three years based on our understanding of the arrangement we would expect the total amount to be ref
5. d date Complete Comments 2014 15 Accounts Audit Plan February 2015 Yes Audit plan to be presented to audit committee 23 We are required to issue a detailed accounts audit March 2015 plan to the Council setting out our proposed approach in order to give an opinion on the Council s 2014 15 financial statements Interim accounts audit January March On track Our interim audit is currently in progress and we Our interim fieldwork visit includes 2015 expect to complete the work by the end of March updating our review of the Council s control 2015 environment updating our understanding of financial systems e review of Internal Audit reports on core financial systems early work on emerging accounting issues e early substantive testing proposed Value for Money conclusion There are no issues arising from our work to date that we need to bring to your attention 2014 15 final accounts audit July September On track We will prepare an Audit Findings Report and Including 2015 present this to the Audit and Accounts Committee e audit of the 2014 15 financial statements prior to issuing our audit report e proposed opinion on the Council s e proposed Value for Money conclusion 2015 Grant Thornton UK LLP Progress at March 2015 Work Value for Money VfM conclusion The scope of our work to inform the 2014 15 VfM conclusion comprises considering whether the Council has appropriate arrangements in place for e Securing f
6. es and Communities Agency HCA Andy Rose said this is a major investment in the private rented sector in Manchester It demonstrates how the HCA working closely with partners is combining financial and local expertise to increase the private rented choice in areas where there is a high demand for homes As part of its strategy of creating a bigger and better private rented sector the government has also e published a How to rent guide so tenants and landlords know their rights and what to expect when renting privately e published a model tenancy agreement so tenants who want to ask for longer tenancy agreements have the opportunity to do so e introduced a new requirement for letting agents to belong to one of three redress schemes so the minority of tenants and landlords who get a raw deal have somewhere to go with their complaint Challenge question Are members aware of the Government s Build to Rent scheme and other aspects of its initiative to increase the private sector housing market and its implications for the Authority s housing strategy 2015 Grant Thornton UK LLP 11 Provision for Business Rates Appeals Accounting and audit issues Unlodged appeals The Chancellor s Autumn Statement included a change to the rules relating to business rates appeals As a result we do not expect to see any provisions for unlodged appeals in local authorities 2014 15 accounts although we will expect this to be re considered for
7. eview Freedom to set council tax and council tax discounts and full retention of business rates and business rates growth Multi year financial settlements The ability to raise additional revenue through the relaxation of the rules on fees and charges Pioneer authorities would also implement Single placed based budgets for all public services Management of funding equalisation across a sub national area Further council tax reforms including the ability to vary council tax bands and undertake revaluations Newly assigned and new taxes such as stamp duty airport taxes and tourism taxes The establishment of Local Public Accounts Committees to oversee value for money across the placed base budget Challenge question Have members been briefed by the Deputy Chief Executive on the key findings of the Independent Commission s final report 2015 Grant Thornton UK LLP Help into work programmes Local government issues In its press release of 12 January 2015 the LGA reported that more that more than one million unemployed people are falling through cracks in national work schemes that are failing to reach some of the most vulnerable jobseekers It warned that whilst councils are being left to pick up the pieces to prevent more vulnerable people slipping further into long term unemployment and disengagement they cannot afford to continue resolving the failings of these national schemes in their communities without the a
8. inancial resilience and e for challenging how it secures economy efficiency and effectiveness 2014 15 Grant claims and returns We will review and certify appropriate grant claims and returns as required for 2014 15 2015 Grant Thornton UK LLP Planned date January September 2015 To be confirmed Complete On track Not started Comments We will update our risk assessment and set out a planned programme of VFM work to inform our 2014 15 conclusion In 2013 14 our work covered the Housing Benefits Subsidy claim Arrangements for the certification of claims and returns in 2014 15 will be confirmed in due course All Aboard Local Government Governance Review 2015 Grant Thornton Our fourth annual review of local government governance is available at http www grant thornton co uk en Publications 2015 Local Government Governance review 2015 All aboard1 We note that the challenges faced by local authorities are intensifying as austerity and funding reductions combine with demographic pressures and technological changes to create a potential threat to the long term sustainability to some organisations Maintaining effective governance is becoming ever more complex and increasingly important Against this background we have focused this year s review on three key areas o An instinct for growth Governance of the organisation the main area of concern highlighted in this year s governance survey
9. ity is going to be affected they need to assess whether the liability can be reliably measured For an authority likely to be affected in a material way where it is possible to reliably measure that liability then appropriate provision should be made in the 2014 15 accounts The fact that the issue might go to Appeal at some uncertain time in the future is not of itself grounds for not including a provision The chances of any success would need to be taken account of in the legal analysis but in any case there are some indications that the key issue on Appeal would be whether to remove the three month cap if this were done then the provision would increase rather than dismissing the entire decision to include overtime in the calculation of holiday pay Challenge question e Has your authority taken legal advice and assessed if a provision is required in the 2014 15 accounts 2015 Grant Thornton UK LLP 14 Grant Thornton 2015 Grant Thornton UK LLP All rights reserved Grant Thornton means Grant Thornton UK LLP a limited liability partnership Grant Thornton is a member firm of Grant Thornton International Ltd Grant Thornton International References to Grant Thornton are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms as the context requires Grant Thornton International and the member firms are not a worldwide partnership Services are delivered independently b
10. lected in the pension fund liability This means that the pension reserve will not equal the pension liability We expect the background to the transactions and the reason for the difference to be disclosed in a note to the accounts Challenge question e Has your Authority paid pension fund contributions covering more than one year and if so have you obtained legal advice and documented the judgements on accounting for the early payment of pension contributions 2015 Grant Thornton UK LLP 13 Inclusion of overtime in the calculation of holiday pay Accounting and audit issues The Employment Appeal Tribunal EAT has delivered its judgement on the extent to which overtime pay should be included in the calculation of holiday pay This case stems from an apparent conflict between UK law and European Law The EAT found that non guaranteed overtime i e overtime which is not guaranteed by the employer but which the worker is obliged to work if it is offered should be included in the calculation of holiday pay Back dated claims can only be made if it is less than three months since the last incorrect payment of holiday pay It is likely that there will be an Appeal to this decision However that does not mean that authorities should hold off assessing the impact Local authorities should be considering their own circumstances and if necessary taking their own legal advice as to the extent they might be affected by the ruling If an author
11. ppropriate funding As aremedy the LGA calls on the next government to commit to devolving all nationally run education skills and employment schemes to local areas so councils can join up services to support their most vulnerable residents A report published by the National Institute of Economic and Social Research NIESR commissioned by the LGA explores in detail how a sample of councils across the country have provided a safety net for their most vulnerable and hardest to reach residents The NIESR report s lead author Dr Heather Rolfe said Local authorities have a unique position in their communities are able to bring services together forging partnerships and strengthening referral networks It is through such work that they are able to help unemployed people who are beyond the reach of national programmes Challenge question Are members aware of the headline messages from the NIESR report and its implications for the authority s strategies around community engagement employment regeneration and economic development 2015 Grant Thornton UK LLP DCLG Build to rent scheme Local government issues Housing Minister Lewis Brandon announced on 10 January 2015 a 55 million deal to provide nearly 800 homes for private sector rent in Manchester and Salford as part of the government s wider 1 billion Build to Rent scheme which has the objective of building 10 000 new homes for private rent The Chief Executive of the Hom
12. r external auditors The paper also includes a summary of emerging national issues and developments that may be relevant to you and a number of challenge questions in respect of these emerging issues which the Committee may wish to consider Members of the Audit Committee can find further useful material on our website www grant thornton co uk where we have a section dedicated to our work in the public sector http Avww grant thornton co uk en Services Public Sector Here you can download copies of our publications including All aboard our local government governance review 2015 Stronger futures development of the local government pension scheme Rising to the challenge the evolution of local government summary findings from our fourth year of financial health checks of English local authorities 2020 Vision exploring finance and policy future for English local government Where growth happens on the nature of growth and dynamism across England If you would like further information on any items in this briefing or would like to register with Grant Thornton to receive regular email updates on issues that are of interest to you please contact either your Engagement Lead or Audit Manager Karen Murray Engagement Lead T 0161 234 6364 M 07880 456 205 karen murray uk gt com Tommy Rooney Engagement Manager T 0161 214 6359 M07880 456169 tommy o rooney uk gt com 2015 Grant Thornton UK LLP Progress at March 2015 Work Planne
13. t do not have specific internal audit coverage and nearly half of funds have no information around the value of their liabilities in between the triennial valuations Hard copies of our report are available from your Engagement Lead or Audit Manager 2015 Grant Thornton UK LLP Independent Commission into Local Government Finance Local government issues The Independent Commission on Local Government Finance was established in 2014 to examine the system of funding local government in England and bring forward recommendations on how it can be reformed to improve funding for local services and promote sustainable economic growth It published its final report Financing English Devolution on 18 February 2015 The report notes that the core of the Commission s proposition is the devolution of powers funding and taxes to sub national entities over a 10 year period They estimate that this could lead to over 200 billion in public expenditure being controlled at a sub national level The expectation is that councils and their partners would work collaboratively to manage differences in capacity and resources They see local areas becoming self sufficient The Commission advocates a variable speed approach to reform with Pioneers able to and wishing to reform at a faster pace Reforms advocated for all authorities include An independent review of the functions and sustainability of local government in advance of the next spending r
14. thornton co uk Publications 2015 Stronger futures development of the LGPS With the local government pensions scheme LGPS continuing to face significant change and challenge there is a clear commitment to ensuring its survival and the provision of affordable pension benefits for the future Following the implementation of a career average pension scheme in 2014 administering authorities are preparing for significant changes in governance arrangements effective from April 2015 Some of the key messages from the report are Garetnomeon Stronger futures there are increasing strong examples of innovation and increased collaborative working across the LGPS to achieve reduced costs and improved use of specialist skills and knowledge implementation of the career average scheme from April 2014 went well and demonstrated good project management and effective communication with members and employers and there have been several other positive trends across the LGPS since our 2013 review particularly around the widening scope of reporting to Pension Committees including performance reporting risk management and internal audit reviews However we saw a wide variation in practice including a concentration of risk reporting on investment risk over half of funds have not implemented the CIPFA knowledge and skills framework as part of their member training 45 per cent of Pension Committees do not receive internal audit reports and 15 per cen
15. y member firms which are not responsible for the services or activities of one another Grant Thornton International does not provide services to clients grant thornton co uk
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