Issue - meetings

To receive a report from the external Auditor.

The Chief Finance Officer reported that external auditors appointed by the Public Sector Auditor Appointments, KPMG, were required, in accordance with international auditing standards, to annually report to the Council on:

·         Their opinion on the Statement of Accounts

·         Any uncorrected items in the Statement of Accounts

·         Qualitative aspects of the Council’s accounting practices and financial reporting

·         The Annual Governance Statement

·         Their annual Value for Money conclusion

They also report annually on their audit of the Council’s accounting and internal control systems.

KPMG had presented a draft ISA260 report to the Audit Committee in October 2017, pending completion of their Value For Money (VFM) work on the BP campus acquisition. An update on that work was provided at the July 2018 meeting. Having completed this work, KPMG had issued their opinions on the 2016/17 Accounts and on the Value for Money Statement.

Joanne Lees, on behalf of KPMG, presented the report. She stated that the financial statements required some adjustments, mainly due to turnover of staff in the Finance team. KPMG was ready to issue an unqualified opinion on the financial statements.

Ms Lees emphasised that it was the auditor’s responsibility to look at the arrangements the Council had in place to secure economy, efficiency and effectiveness in its use of resources (i.e. VFM), not to consider the ‘value for money’ of any specific investments themselves.  As reported to the July 2018 Audit Committee, KPMG were issuing an adverse VFM conclusion, making four recommendations on the BP acquisition process, which were set out on pages 116-121 of the supplementary agenda, along with the Management responses.

The Monitoring Officer commented that the Council disagreed with the auditor’s findings leading to the qualified conclusion and these had been set out in the Management responses to the auditor’s report. These particularly concerned the auditor’s assessment of the Council’s Value for Money arrangements in relation to the purchase of the BP campus.

He summarised the Management responses:

·         It was the Council’s opinion that the auditor had focussed on some factors which did not affect economy, efficiency and effectiveness, i.e. publication of decisions in line with Regulation 13 of the Local Authorities (Executive Arrangements) (Meetings and Access to Information) (England) Regulations 2012 and documented evidence that the Council had considered Counsel’s opinion on the proportionality of the BP investment.

·         The Council had provided the auditor with a large volume of documentation to evidence the decision making process and was disappointed that the email trails were not sufficient to satisfy the auditor in terms of a written record of decisions taken.

·         The Council had assessed the Council’s position at the end of the BP 20 year lease with regard to alternative use values for the site, bearing in the mind the strength of the location close to an expanding Heathrow and a future Crossrail 2 station. Reports from competent professionals on these assessments had been shared with the auditors.

·         Counsel’s opinion on the proportionality of investment property transactions only related to the BP transaction not all  ...  view the full minutes text for item 28

To receive a report from the External Auditor.

The Chief Finance Officer reported that external auditors appointed by the Audit Commission, KPMG, were required, in accordance with international auditing standards and statutory requirements, to report annually to the Council on:

·         Their opinion on the Council’s Statement of Accounts

·         Any uncorrected items in the Statement of Accounts

·         Qualitative aspects of the Council’s accounting practices and financial reporting

·         The Annual Governance Statement

·         Their annual Value for Money conclusion

They also reported annually on their audit of the Council’s accounting and internal control systems.

Phillip Johnstone, on behalf of KPMG, presented the report and responded to members’ questions. Mr Johnstone focused particularly on providing a detailed update on where KPMG were with concluding their Value for Money opinion with respect to the BP Campus purchase by the Council in 2016. He explained that KPMG in response to the very large size of the deal (the largest single commercial acquisition by a Council in England) had been taking a very thorough review and that this was nearing conclusion. Mr Johnstone indicated that whilst KPMG were satisfied that the Council had undertaken appropriate due diligence, had appropriate professional advisers, had undertaken appropriate financial modelling that the external auditors were minded to make some recommendations with respect to how the delegation decision was recorded and published and with respect to their view that additional analysis of future value options beyond year 20 should have been undertaken. As a result the Value for Money (VFM) opinion likely to be adverse. Once the 2016/17 VFM opinion is issued KPMG will be able to sign off the 2016/17 accounts. Mr Johnstone indicated that this would probably be late August.  Mr Johnstone indicated that KPMG were still reviewing the 2017/18 commercial acquisitions and that he could not yet advise therefore when the 2017/18 VFM opinion and in turn the opinion on the 2017/18 Statement of Accounts could be issued. The Chairman expressed the Council’s desire that this would be before the next scheduled meeting of the Audit Committee.

Resolved that:

1)    The External Auditor’s 2016/17 DRAFT audit report (Appendix A) be noted, with the expectation of the FINAL version being available by the end of August 2018.

2)    The recommendations, comments, lessons learned and risks (associated with ‘lease expiry’ of the BP property) as covered in the report be noted.

3)    The 2017/18 External Auditor’s DRAFT audit report shall follow after content of the 2016/17 (final) version has been noted, and shall offer additional considerations to the property acquisitions, based on recent ‘lessons learned’.

4)    That on receipt of the external auditors’ final reports for 2016/17 and 2017/18 the accounts for both 2016/17 and 2017/18 be signed off by the Chairman of the Audit Committee and Chief Finance Officer.