Issue - meetings

Report by the Chief Operating Officer.

5.1       The Cabinet considered a report by the Chief Operating Officer

5.2       It was RESOLVED to – approve the External Audit Plan for 2016/17

Reason

5.3       KPMG’s overall audit approach remains similar to last year with no fundamental changes. Officers will continue to liaise with KPMG to ensure that their work is delivered as efficiently and effectively as possible and that internal and external audit plans are complementary and make best use of audit resources.

Report by the Chief Operating Officer

52.1     The Head of Accounts and Pensions introduced report on the External Audit Plan for 2016/17. The External Auditor, KPMG has carried out a risk assessment of the Council’s arrangements to secure value for money and no items of concern have been identified. 

52.2     Jo Lees, Director KPMG outlined the External Audit Plan for the Council’s accounts in which the level of materiality has been set at £9.5million. The Plan identifies three significant risks which will be covered by the audit which are:

·          Local Government Pension Scheme (LGPS) triennial valuation and changes to pension liability;

·          Minimum Revenue Provision calculation; and

·          Accounting for Local Authority maintained schools – assets owned by third parties such as church bodies.

The audit will also look at the fair valuation of property, plant and equipment (PPE), as well as two standard risk areas relating to the management override of financial controls, and fraudulent revenue recognition.

52.3     The Committee discussed the accounting for Local Authority maintained schools and asked if there had been any progress with the Diocesan authorities in identifying the ownership of the remaining 22 schools.  The Head of Accounts and Pensions responded that there had been no progress from the Diocese in confirming ownership. Church and other organisations claim ownership, but often cannot prove it.

52.4     The Committee asked whether this uncertainty leads to any risks. Jo Lees, Director KPMG responded that the right thing to do is to keep these assets on the balance sheet. The Committee asked for further information on the implications of keeping these assets on the balance sheet, and what the Council can do to mitigate any risk that might arise.

52.5     The Committee RESOLVED to endorse the External Audit Plan for 2016/17.

52.1     The Committee considered a report by the Interim Chief Finance Officer on the External Audit Plan for the East Sussex Pension Fund (ESPF) during 2016/17.

52.2     The Committee RESOLVED to approve the External Audit Plan for the ESPF for 2016/17.

38.1     The Board considered a report on the External Audit Plan for East Sussex Pension Fund for 2016/17.

38.2     The Chair commented that a materiality of 1% of net assets seemed very high given that this equated to £27 million. He said it would make more sense to make it 1% of the pension administration costs. OO said that although the materiality level was high, non-trivial and trivial errors would still be recorded and reported by the external auditors. Furthermore, the materiality is classified as “creeping materiality”, so the £27 million trigger would be a cumulative figure of all errors discovered in the accounts, at which point the external auditor could issue a qualified opinion.

38.3     SM asked whether the external auditor was in a position to comment on investments and not just accounts. OO said that there were statutory requirements for the external auditor to discuss concerns about investments with pension fund officers, the Committee and the Pension Board.

38.4     The Board RESOLVED to note the report.