Agenda item

Report of the Strategic Director of Finance

The Chair agreed to take agenda items 4 and 5 at the same time.

Tony Crawley, Tom Tandy and Arvinder Khela of KPMG presented the External Audit ISA260 Report 2017/18 to the Committee which summarised the key findings in relation to KPMG’s 2017/18 external audit at Nottingham City Council. They also circulated a letter dated 18 July 2018 to Committee members. The letter was appended to the minutes after the meeting. During the presentation of the report, the following points were highlighted:

a)  Nottingham City Council’s accounts are very complex and the timescale for submission this year was shortened. Despite this, the auditors reported an impressive level of co-operation from finance colleagues in providing accounts from across the group by the deadline. KPMG expressed their thanks to colleagues for this.

b)  Regarding the process for signing off the accounts, the majority of Councils do this one week later than Nottingham. Tony Crawley suggested that delaying this meeting by one week next year might be beneficial.

c)  The Auditors’ key findings were summarised as follows:

i)  Organisational and IT control environment

No significant issues were identified and overall arrangements in place are reasonable.

ii)  Controls over key financial systems

The majority of key financial systems are sound. A recommendation was made in relation to building journal controls into the fit for the future programme.

iii)  Accounts Production

The overall process is sound and accounting practices are appropriate

iv)  Financial statements

Three significant risks were identified: Valuation of PPE, Pensions Liabilities and Faster Close. Recommendations were made and identified in the report.

v)  Value for money arrangements

The Authority has “made proper arrangements to secure economy, efficiency and effectiveness in its use of resources” but still faces significant challenges and uncertainty going forward and Delivery of Budgets and Group Governance were identified as significant Value for Money Audit Risks. The auditors emphasised the need to look at any non-recurrent measures that have been taken to address recurrent problems and stressed the need to continue developing a framework to support an understanding of Group Governance arrangements by September.

vi)  Exercising of audit powers

The auditors confirmed that they had not identified any matters that would require them to issue a public interest report.

d)  A minor breach of auditor independence requirements was identified in relation to Nottingham City Council’s status as an EU Public Interest Entity (EU PIE). The auditors were not aware of this status when carrying out some work for Nottingham City Transport but the work would not have been approved if the EU PIE status had been known at the time because it breaches independence requirements as detailed in the additional letter circulated to the Committee at the meeting. The letter also outlined that although the independence requirements had been breached, in KPMG’s view the impact was minor and, in the auditor’s professional judgement, they concluded that their objectivity has not been compromised and KPMG continues to be independent of the Council and its controlled entities for the year ended 31 March 2018. The Strategic Director of Finance and Head of Audit and Risk confirmed that they supported the conclusions of the auditors.

During the discussion that followed the presentation, the following points were made:

e)  Due to the timetabling of the accounts, there had not been the opportunity to include responsible officers or implementation deadlines against the recommendations. These would be added and a revised version circulated to Committee members by the Head of Audit and Risk.

f)  The findings relating to Group organisations would be communicated to those organisations by the responsible officer.

g)  The head of Audit and Risk acknowledged that this would be the last opinion provided by KPMG due to a change in auditors and thanked KPMG for their invaluable support and guidance.

Sue Risdall, Financial Team Leader, Technical Accounting then presented Nottingham City Council’s Statement of Accounts 2017/18 to the committee. During the presentation and the subsequent discussion the following points were highlighted:

h)  The version for consideration at this meeting was largely the same as that discussed at the Committee’s June meeting subject to some minor wording changes regarding Council Plan achievements and to reflect changes in accounts.

i)  Changes to Portfolio responsibilities year on year make the reporting process more complicated in Nottingham. However the reporting process cannot be changed and therefore this obstacle has to be worked around. Financial Accounting work closely with colleague in the budget team to ensure the process is robust.

RESOLVED to:

(1)  approve the final Statement of Accounts and authorise the Chair of the Audit Committee to sign them on the Committee’s behalf;

(2)  approve the Draft Management Representation Letter for signature by the Chair of the Audit Committee

(3)  delegate power to the Chair of the Audit Committee and the Strategic Director of Finance to approve any subsequent necessary amendments to the statement of accounts

(4)  confirm that the committee concur with the KPMG’s conclusion that their objectivity has not been compromised and KPMG continues to be independent of the Council and its controlled entities for the year ended 31 March 2018.