Meeting documents

Barrie Morris (Key Audit Partner, Grant Thornton) presented the report as detailed in the agenda. He highlighted key headlines which were detailed on page 22 of the agenda, advising that there was still some outstanding work to be completed on the Financial Statements, which related to debtors. He explained that once the signed Letter of Representation had been received, an unmodified audit opinion would be provided before the 31^st July. The unqualified ‘Value for Money’ conclusion would also be issued before the end of July. 

He reminded members that they worked to the concept of materiality rather than looking at all figures in the accounts. Materiality was set at 2% of gross expenditure. He confirmed that matters which were under £76,500 which were considered to a be a trivial matter were not reported. The only exception to this was Senior Officers’ remuneration, which was set to £20,000.

He referred to the significant risks detailed on page 24 of the agenda.

He explained that the fraudulent transaction risk could been rebutted as there was little incentive to manipulate this revenue and that a robust system was in place to ensure that this could not occur and therefore following assessments, there were no issues.

The second significant finding identified was the Management override of controls. He explained that a robust controlling environment had been created and that procedures had been carried out to check compliance. He advised that there were no issues.

He explained that valuation of property, plant and equipment had been identified as a significant finding. He explained that the correct recording of these assets within the accounts required additional work to ensure that the valuations were appropriate, however explained that there were no issues.

He pointed out that a significant amount of estimations were represented in the valuation of pension fund net liability, however no issues were identified.

He advised that since the report had been published, the ‘Provisions for NNDR Appeals’ had now been completed satisfactorily. He summarised the significant findings – key judgements and estimates, which were detailed on pages 26-28 of the agenda.

He explained that the SSDC Opium Power venture had been discussed with management and was now able to confirm that the disclosures within the statements of accounts were appropriate.

He referred to the McCloud judgement which related to pensions. He advised that he considered that there was no risk of material error to the pension fund.

He confirmed that he was confident that the going concern assumption was appropriate for the authority’s financial statements and that SSDC were in a robust position.

He had no further issues to bring to the attention of the Committee.

In response to a member’s question, the S151 Officer advised that a group of trustees oversaw the pension fund and that they had a duty to protect and manage this fund. He added that this was managed by Somerset County Council. He suggested that this was being well-managed and was subject to valuations and estimates. He had not been made aware of any specific communications to suggest that there were concerns. He added that plans to reduce the deficit in the pension fund was in place and that this would be reviewed every three years. He assured members that the fund was separate to SCC funds and that these funds could not be drawn to support other financial issues.

In response to a question, the Section 151 Officer advised that the increase in investment properties included properties which were already owned, rather than just additional purchases from the last year. He added that the properties for valued annually and that new assets were purchased to provide a revenue and were not purchased to sell in the near future. He added that the market had tightened slightly and that the value of land and properties fluctuate, however these investment properties would be held long term. He also confirmed that the total purchase cost included fees such as agent fees and solicitor fees.

In response to another question, the Section 151 Officer advised that Opium Power Limited was a separate entity from SSDC and that both SSDC and Opium Power Limited hold 50% shares in the battery plant. He explained that funds had been lent to Opium Power Limited and that SSDC would receive full repayment before any profits would be distributed. He also pointed out that interest would be payable on the loan to Opium Power Limited and was therefore a positive investment.

David Johnson (Engagement Manager, Grant Thornton) summarised the Value for Money element of the report. He referred to the key findings on page 35 and 36 and highlighted the overall conclusion on page 36. He explained that these findings had been reported District Executive reports and following discussions, it had been concluded that appropriate processes were in place to achieve value for money.

He also drew members attention to the action plan detailed on page 38 and the responses which had been provided.

He referred to the recommendation detailed on page 39 and explained that only two assets had been re-evaluated and were not classified incorrectly. He also summarised the audit adjustments summarised on pages 40-41. 

The Key Audit Partner, Grant Thornton, summarised the audit fees and explained that these were reviewed annually.

In response to a question from a member, the Director – Strategy and Support Services, explained that ways to communicate details around investment properties and updates to the Commercial Strategy could be communicated to members was being considered. She suggested that the members portal could be an option to support this. She also explained that the role of the Scrutiny Committee enabled any decisions to be reviewed.

Some members agreed that it would be useful to receive news updates to the Commercial Strategy through the members portal.

In response to a question from a member of the Scrutiny Committee member, the Director – Strategy and Support, advised that the governance around the Commercial Strategy and investments had been agreed by Full Council in July 2017 and assured her regarding the role of the Audit Committee and Scrutiny Committee and how they were different functions. She added that she would advise against a joint meeting looking at Commercial issues between Audit and Scrutiny as both committees have very different roles.

RESOLVED: That the Audit Committee noted:

·         the matters identified in the Audit Findings Report 2018/19 and the draft audit findings as outlined in section 2 of two of the report.

·         the opinion of the financial arrangements for securing economy, efficiency and effectiveness in the authorities use of resources, as stated in appendix E.

·         the Chair of Audit Committee would write to the Chair of Scrutiny to explore ways of working on commercial issues.