Agenda item

Georgia Jones, Key Audit Partner presented the Audit Findings report to the Committee.

Under the statutory Code of Audit Practice for Local Government bodies the Authority’s external auditors, Grant Thornton were required to issue a report to those charged with governance summarising the conclusions from their audit work.

Georgia Jones advised that at the time of writing the report the audit work was substantially complete and there were two recommendations that were agreed by management listed below: -

·       a review of the fixed asset register to ensure excess depreciation was not charged against fully depreciated assets; and

·       to consider if the general ledger could be updated to include additional journal details which had now been implemented.

The two recommendations and management responses were set out on page 26 of the report (page 46 of the agenda pack): -

1.     “We recommend the Authority examine the fixed asset register to ensure excess depreciation is not charged against fully depreciated assets and correct this for future years.”

“The assets with a negative net book value will be corrected during 2023/24 and new procedures will be put in place to ensure assets are not depreciated beyond their cost or value in the future.”

2.     “We recommend the Authority looks into whether the system can be updated to include details of preparer/authoriser."

“A new process was implemented towards the end of 2022/23 to record the journal preparer and approver. The approval of journals is required by Accountants, or more senior members of the Finance Team, and this is required to be saved within the journal file. A journal register records the unique journal reference, accounting period, preparer, and approver. This is reviewed to minimise the risk of self-authorisation on journal postings”.

The Value For Money (VFM) work had not yet been completed, however, a draft report had been issued the Auditors Annual Report was expected to be reported by the end of the calendar year. 

Georgia Jones informed that there were no matters of which they were aware that that required would require modification of the audit opinion or material change to the financial statements, subject to outstanding matters listed below: -

·       responses from the pension fund auditor to gain assurance on underpinning controls and supporting data for the pension fund net liability;

·       an international Financial Reporting Interpretation Committee (IFRIC 14) assessment from the actuary on the amount of pension fund asset (surplus) in the LGPS scheme;

·       an update Government Actuary Department (GAD) report to reflect part year inflation for the valuation of the Firefighters pension fund (currently in discussion);

·       completing testing on areas of land and buildings valuations, including an assessment of the impact of reinforced autoclaved aerated concrete (RAAC);

·       completion of testing on the fair value of financial instruments;

·       our Information Technology (IT) assessment on the data migration controls to the new Oracle Fusion system;

·       receipt of management representation letter;

·       review of the final set of financial statements; and

·       final quality procedures.

Georgia Jones drew the Members attention to pages 8 (page 28 of the agenda pack) to 11 (page 31 of the agenda pack) which detailed significant risk which required special audit consideration, which were management override of controls (which was a mandatory risk for all audit and journal testing had been completed with nothing to report), improper revenue recognition, valuation of land and buildings, and valuation of pension fund net liability.  

The Chair confirmed that the security of Oracle Fusion had now been enhanced by increasing the length of user passwords to a minimum of 16 characters.

County Councillor Salter asked if there had been a known issue with passwords in relation to password security for the Oracle Fusion database referenced on page 27 (page 47 of the agenda pack), Georgia Jones stated, last year, it had been identified that the password configuration was weak, and the strength could be improved which was then amended when the new ledger was implemented. The Chair added that, as the external auditors worked closely with LCC, it had led to early detection of the issues with the security of passwords.

County Councillor Salter inquired how the Committee would be updated when the VFM work had been completed. Georgia Jones explained that there would be a comprehensive report with more detail included in the External Auditors Annual Report with the potential for a meeting to be held before the March Committee to present the report.

County Councillor Singleton commented that, as referenced on Page 5 (Page 25 of the agenda pack), some local authorities had taken excessive risks by borrowing more than their revenue budgets whereas no areas of risk had been identified in the Service’s Treasury Management activities.

The Chair thanked Georgia Jones for her report.

Resolved: -   That the Committee: -

i)   Noted and endorsed the matters raised in the report;

ii)  Noted and endorsed the two recommendations and management responses on page 26 of the report.