Welcome to the
Vale of Glamorgan Council

AUDIT COMMITTEE

 

Minutes of a meeting held on 24^th September, 2009.

 

Present:  Councillor A.C. Williams (Chairman); Councillor J. Clifford (Vice-Chairman); Councillors  J.F. Fraser, N. Moore and C.L. Osborne.

 

Also present: Ms. C. Thomas (Grant Thornton UK LLP).

 

 

384     APOLOGIES FOR ABSENCE  -

 

These were received from Councillor K. Hatton and Mr J. Golding (Grant Thornton UK LLP).

 

385     MINUTES -

 

RESOLVED - T H A T the minutes of the meeting held on 10^th June, 2009 be approved as a correct record.

 

 

386     DECLARATIONS OF INTEREST -

 

No declarations were received.

 

 

387     IFRS IMPLEMENTATION UPDATE (DFICTP) -

 

The Committee was provided with an update on the latest position regarding the implications of the introduction of the International Financial Reporting Standards (IFRS).  The annual financial statements of government departments and other entities in the public sector were currently prepared using accounting policies based on UK Generally Accepted Accounting Practice (UK GAAP).  However, from 2010/11 financial statements would need to be prepared using IFRS, and in order to achieve this, comparative data would be required for 2009/10.

 

CIPFA had produced a draft code and consultation was currently being undertaken.  The final code was expected to be issued in Autumn 2009.  Work had already been undertaken by the authority in relation to the major areas of change and progress had to date been made in the following areas leasing, component accounting, employment benefits and segmental reporting.

 

In respect of leasing arrangements, the method for classifying leases into “operating” or “finance” needed to be reviewed to ensure the correct classification.  In order to achieve this all departments, including schools, had been asked to provide details of the lease agreements that they had arranged relating to equipment.  With regard to component accounting, the IFRS required that the different elements of an asset were to be depreciated separately if they were significant in relation to the total cost of the asset.  A re-evaluation of assets due to be undertaken in 2009/10 would be considered for component valuation although it was not a requirement under existing rules.  For employment benefits there would be a requirement to accrue for holiday pay earned, including flexi and time in lieu, but not yet taken as at 31^st March each year.  This was complicated for the Vale of Glamorgan as some departments had staggered leave years.  Most school based staff also did not have a flexible annual leave entitlement and were only able to take leave during the school holidays.  To this end a specific formula had been agreed by CIPFA to calculate the leave accrual for these staff.  For other employees a sample of 10% of whole time equivalents from across the Authority had been asked to provide relevant information regarding their annual leave.  To date 191 replies had been received from 197 questionnaires issued.  The officer presenting the report advised Members that they had been most pleased with the responses from staff and the co-operation that had been afforded to the questionnaire completion. 

 

IFRS also required there be increased disclosure in the notes of the accounts to provide information on reportable segments based on the Authority’s internal reporting.  Having reviewed the format of financial information provided to the Cabinet it had been considered that the segments that could be used be based on directorates with smaller directorates being amalgamated.  Following completion of the work that had already been undertaken and outlined above, the opening 2009/10 balance sheet would be restated to an IFRS basis.  The Authority’s financial statements would also need to be reviewed as the 2010/11 accounts would have to be presented in a different format with additional notes and disclosures. 

 

The report also highlighted that there was a proposal that an All Wales Chief Accountants Group be set up in order that officers could discuss issues and share experiences.  Throughout the implementation discussions would also continue to be held with the Authority’s external auditors. During discussion of the report Members queried the expiry date for the lease of Hen Goleg and the officer advised that they would confirm the details and e-mail all Members with the up to date position.

 

Having considered the report it was

 

RESOLVED -

 

(1)       T H A T the contents of the report be noted.

 

(2)       T H A T a further update on IFRS implementation report be presented at an appropriate time in the future.

 

Reasons for decisions

 

(1&2)  To ensure issues relating to the changes in accounting practice were highlighted to the Audit Committee.

 

 

388     AUDIT OF THE 2008/09 FINANCIAL STATEMENTS - REPORTING TO THOSE CHARGED WITH GOVERNANCE (DFICTP) -

 

The Council was responsible for the preparation of Financial Statements that present fairly its financial position as at 31^st March 2009 and Grant Thornton UK LLP were the Council’s external auditors and were responsible for reporting whether, in their opinion, this was the case.  Attached as an appendix, was the Wales Audit Office report which had been prepared by the external auditors following the audit of the Council’s Financial Statements for 2008/09.  The Council’s draft Statement of Accounts for 2008/09 had been reported to Council on 30^th June 2009 and with the audit of these Financial Statements now substantially completed, a report detailing the key matters arising from the audit had to be reported in accordance with the International Standard on Auditing (ISA 260).  The Audit Committee represented the appropriate body to which the report must be communicated.  The provisional findings of Grant Thornton were noted as:

 

·         "There were no concerns with the qualitative aspects of the Council's accounting practices and financial reporting;

·         There were three uncorrected misstatements (none of which are deemed to be material in nature);

·         There were no expected modifications to the standard auditor's report;

·         The audit did not identify any material weaknesses in internal control;

·         There were no other matters which need to be reported as required by other ISAs; and

·         There were no other significant audit matters of governance interest to report."

 

Claire Thomas, representing Grant Thornton, presented the findings to the Committee.  During consideration of the report attention was drawn to three uncorrected misstatements, in particular the Fire Authority's balances.  The report stated that the Council had not recognised the income due back from the South Wales Fire and Rescue Authority as a result of unspent contributions that had built up over prior periods.  The report stated that the adjustment in the Council’s accounts should therefore be Debtors £745,705 and Creditors £745,705 to recognise the liability owed to the Council from the South Wales Fire and Rescue Authority.  However, recent advice from the Welsh Assembly Government had indicated that new regulations were soon to be agreed for the end of 2009 which would allow Fire Authorities to hold reserves in their accounts.  To this end the Auditor considered that the issue was not a material concern and accepted the Council’s response.   The Auditor considered that the other two misstatements were not material to the Financial Statements but that they were obliged to report them to the Committee.  Appendix C to the report advised on a summary of corrections to accounting statements and detailed the reasons for the corrections which had been accepted by the departments for future statements. 

 

Having considered the report, it was

 

RESOLVED - T H A T the report of Grant Thornton UK LLP on the audit of the Council’s Financial Statements for 2008/09 be approved and the Financial Statements, including the final Letter of Representation, be recommended for signature by those authorised to do so.

 

Reason for decision

 

To ensure that those charged with governance had considered the results of the audit of the Council’s Financial Statements for 2008/09 and approved the documents.

 

 

389     INTERNAL AUDIT OUTTURN REPORT - APRIL TO AUGUST 2009 (HARM) -

 

The purpose of the report was to inform the Committee of the actual Internal Audit performance against the 2009/10 Plan for the period 1^st April 2009 to 31^st August 2009.  The 2009/10 Internal Audit Operational Plan had been submitted to the Audit Committee for approval on 10^th June 2009 (Minute No. 90).  The Plan had outlined the assignments to be carried out, their respective priorities, an estimate of resources required and differentiated between those assurance and other work.  The actual position for April 2009 to August 2009 compared against the Plan was detailed at Appendices A and B to the report.  The following table detailed an analysis of work that had been done in relation to both the original and revised Plan days:

 

 

 

Appendix C to the report detailed the work that had been carried out during the first 5 months of the financial year and provided Members with details of a high level overview of audits that had been completed to date under each of the following categories - Assurance, Governance, Performance and Risk Management work, Value for Money and Anti Fraud and Corruption work. 

 

Members were also advised that at the completion of all the audits all recipients of reports are asked to comment on their satisfaction with the audit process by way of a survey questionnaire.  The survey results received had been excellent and the section hoped to sustain the same level of customer satisfaction throughout the remainder of the year.  Members were also advised of the number of internal investigations that the section had been involved in and the Head of Service advised that the section had spent a considerable amount of time on governance issues during the year with the result of at least 1 full time equivalent being involved on the project.  It was now opportune for further work to be undertaken to involve Members, other senior officers, partners and members of the public in round the table discussions.  To this end the Head of Service suggested that a small working group be established by the Chairman of the Committee to deal with these matters and that a further report on the outcome would be presented to the Committee in due course.  Members were also further apprised of the progress that had been made to date on three initiatives as detailed below which had been raised in the last Governance Statement:

 

·                    Communities First - Progress in relation to winding up the existing partnership was slow.  A task group had been set up to look at a new partnership for this project.

·                    Management of Capital Projects - A report was due to be presented to Cabinet and the Scrutiny Committee (Corporate Resources) on a revised methodology for project management initiatives. 

·                    NSPCC Action Plan - Various aspects of the Plan had been completed and the CSSIW were due to visit the Council to undertake a review of the Plan. 

 

Having considered the report it was

 

RESOLVED - T H A T the report on actual internal audit performance during the five months of the financial year be accepted.

 

Reason for decision

To facilitate monitoring of the audit function.