Agenda item

2.40pm

Report by Ernst & Young

The Committee had before them the Progress Report & Grants Claim Report (AG7), circulated with the Agenda.

Maria Grindley referred to the Audit Plan, and confirmed that the Code and Standards had not changed but the Audit Code had changed.  The key area of the report was shown on the Specific Risks Table at page 29 of the report, providing information of the potential risks relating to:-

·        academies – it was noted that the financial statement reflected transfers of assets from the Council to academies;

·        management override – showing variation of the Council’s financial picture;

·        pension valuations – which can allow big numbers shifting significantly year on year, but which should provide enough evidence of valuations;

and

·        non achievement of savings on the Council.

In discussion, Maria Grindley confirmed that in terms of the use of resources, there were no real issues, and that maintaining financial stability was always a challenge.  Compared to other authorities, the systems and processes in place at the Council work, although this did not mean that there will not be issues to find this year.

Councillor Smith remarked that the externalisation of services concerned her and this would be a high priority issue next year.  She also queried the agreed budget which appears may have a gap in, in years to come.  Lorna Baxter clarified that this was not the case, and that the budget contained clearly attributable savings.  It was confirmed that some of the savings in later years were not detailed plans, but would be firmed up as they neared their implementation date as would be expected.

The assessed likelihood of the risk of Management Override and Non-achievement of Savings was also discussed.  Maria Grindley confirmed that with regards to the Non-achievement of Savings, her assessment was based on the past administration and management of the Council’s savings plans to date.  Dr Geoff Jones stated that he felt the risk of Management Override, should not have been assessed as “high/high”, and Maria Grindley confirmed that this was her judgment; there was no wider risk of this occurring or that it was likely to happen, and this element could be shifted.  Its placing is linked in with other findings nationally.  It was noted that Ernst & Young had partners who had experienced management over-manipulated a position to show a better financial position of an organisation, but equally, an organisation might be tempted to manage figures in order to worsen a financial position, and thereby bring an end to cuts.

Regarding the Risk of Management Override at page 31 of the report and the risk of fraud, Councillor Smith commented that she found the statement difficult, and possibly inappropriate in a local government situation.  However, Committee were advised by the Ernst & Young representatives that they had seen examples of this, and although they were not saying local authorities manipulate accounts, this ensures there is no bias in their position.

It was noted that at the next meeting, the Committee were due to receive a report on business strategy, covering plans being drawn together now.

Clarification was sought over the fee of £970.00 charged for 2012/13 fee and a refund which had been processed.

RESOLVED:  to note the report.