Audit Committee

Draft Annual Audit Report 2013/14 Item no: 04

Report by: David Sanni Job title: Head of Financial Accountin
Date: 2! Septem"er 2014
Contact
Officer:
David Sanni
Telephone: 020 #$34 $#04 Email: david%&anni'londoncouncil&%ov%u(
Summary )*i& report detail& t*e draft annual audit report to t*o&e c*ared +it*
overnance ,ISA2!0- from .rice+ater*ou&eCooper& ,.+C-/ 0ondon
Council&1 e2ternal auditor&/ in re&pect of t*e 2013/14 financial 3ear% )*e
draft i& included at Appendi2 A to t*i& report and contain& detail& of a
di&areement "et+een .+C and 0ondon Council& reardin t*e leal
po+er& 0ondon Council& *a& to provide t*e .ar(in on .rivate 0and
Appeal& ,.4.0A- &ervice and t*e la+fulne&& of t*e income and
e2penditure derived from t*e contract% It al&o include& t*e propo&ed
manaement re&pon&e to t*e internal control i&&ue& rai&ed "3 .+C
+*ic* i& detailed on pae 13 of t*e final draft% Ciaran 5c0au*lin/
appointed auditor for 0ondon Council& at .+C/ +ill attend t*e meetin to
pre&ent t*e draft document to mem"er&%
Recommendations )*e Audit Committee i& a&(ed:
)o note t*e (e3 i&&ue& detailed in t*e draft audit report in relation
to t*e .4.0A &ervice/ related part3 tran&action& and 3ear6end
pa3roll reconciliation7
)o aree t*e propo&ed manaement re&pon&e to t*e
recommendation +it* reard to 3ear6end pa3roll reconciliation/
detailed in pae 13 of t*e draft audit report7 and
)o note t*e draft letter of repre&entation included at Appendi2 1 of
t*e draft audit report%
Draft Annual Audit Report 20!"# Audit Committee $ 2% September 20#
A&enda 'tem #( )a&e *
Draft Annual Audit Report 2013/14
'ntroduction
1% 8nder t*e Audit Commi&&ion1& Code of .ractice ,t*e Code-/ .+C i& re9uired to i&&ue an
annual audit report to t*o&e c*ared +it* overnance% For t*e 2013/14 financial 3ear/ t*e
Statutor3 Deadline i& 30 Septem"er 2014% )*e late&t draft of t*e 2013/14 audit report i&
included at Appendi2 A to t*i& report%
2% )*e proce&& leadin to t*e final approval of t*e audit report i& a& follo+&:
:arl3 Septem"er 2014; draft audit report i&&ued "3 .+C7
Draft officer re&pon&e to matter& ari&in from t*e audit report provided to .+C7
.+C i&&ue revi&ed draft of audit report incorporatin propo&ed officer re&pon&e and
ot*er c*ane& areed7
2! Septem"er 2014 ; revi&ed draft of audit report and propo&ed officer re&pon&e to
matter& ari&in con&idered "3 0ondon Council& Audit Committee7
Audit report finali&ed/ ta(in on "oard an3 comment& made "3 t*e Audit Committee%
Audit report i&&ued to all mem"er& of t*e 0eader&1 Committee ; "3 30 Septem"er
20147 and
Audit report to "e included on t*e aenda for t*e 0eader&1 Committee meetin in
4cto"er 2014%
3% )*e Audit Committee i&/ t*erefore/ "ein a&(ed for it& comment& on t*e revi&ed draft of t*e
audit report to t*o&e c*ared +it* overnance prior to it "ein finali&ed and &ent to all
mem"er& of t*e 0eader&1 Committee "3 30 Septem"er 2014%
Audit 'ssues
4% .+C *a& completed t*e ma<orit3 of t*e audit +or( and anticipate& i&&uin an un9ualified "ut
modified opinion on t*e financial &tatement& &u"<ect to t*e &ati&factor3 conclu&ion of
Draft Annual Audit Report 20!"# Audit Committee $ 2% September 20#
A&enda 'tem #( )a&e %
out&tandin i&&ue& "ein: t*e revie+ and areement of di&clo&ure& in re&pect of t*e income
and e2penditure a&&ociated +it* t*e .4.0A contract/ approval of t*e Statement of Account&
and letter& of repre&entation/ identification of continencie& and commitment& relatin to
leal matter&/ and completion procedure&% .+C +ill provide an oral update on t*e&e
matter&%
=% .+C anticipate i&&uin a modified opinion on t*e financial &tatement& a& a re&ult of t*e
di&areement +it* manaement over 0ondon Council&1 leal po+er to provide t*e .4.0A
&ervice on "e*alf of t*e >riti&* .ar(in A&&ociation ,>.A-/ and t*e la+fulne&& of t*e income
and e2penditure derived from t*e contract/ +*ic* i& e2plained on pae ! of t*e audit report
at Appendi2 A% A mem"er of t*e pu"lic rai&ed an o"<ection on 0ondon Council& 2012/13
financial &tatement& &tatin t*at t*e )ran&port and :nvironment Committee ,):C- did not
*ave t*e leal po+er to operate t*e .4.0A &ervice on "e*alf of t*e >.A% .+C inve&tiated
t*e o"<ection prior to i&&uin a formal determination% A& part of t*i& proce&&/ .+C &ou*t it&
o+n independent leal advice and *a& come to t*e vie+ t*at ):C doe& not *ave t*e
deleated po+er& from t*e 0ondon local aut*oritie& to enter into and operate t*e contract
+it* t*e >.A for t*e .4.0A &ervice%
!% 0ondon Council& i& of t*e vie+/ "a&ed on leal advice/ t*at t*e &ervice +a&/ and i& currentl3/
"ein delivered "3 ):C la+full3 on "e*alf of all t*e participatin aut*oritie& +it* t*eir
con&ent and proper aut*orit3%
#% .+C *a& re9ue&ted t*at a di&clo&ure of t*e di&areement i& included in t*e account& and
t*at a lia"ilit3 in re&pect of all t*e income paid under t*e contract ,i%e% for 2012/13 and
2013/14- "e reconi&ed in t*e account& up to 31 5arc* 2014% ?*il&t 0ondon Council& *a&
complied +it* t*e re9ue&t to amend t*e financial &tatement& in accordance +it* .+C1&
re9ue&t/ it *a& 9ue&tioned t*e appropriatene&& of incorporatin a lia"ilit3 into t*e account&
a& 0ondon Council& i& of t*e vie+ t*at t*ere i& no o"liation to refund t*e income%
@% )o put t*e matter of la+fulne&& "e3ond dou"t 0ondon Council& *a& areed to addre&&
.+C1& concern& "3 &ee(in an e2pre&& deleation "3 t*e 0ondon local aut*oritie& of t*e
e2erci&e of t*eir &tatutor3 po+er& to ):C for t*e purpo&e& of deliverin t*e .4.0A &ervice%
4n 11 Septem"er 2014/ t*e ):C Su"6Committee approved t*i& cour&e of action/ and to
recommend it to t*e 0ondon local aut*oritie& +it* t*e intention t*at t*e e2pre&& deleation
to t*e <oint committee "e ac*ieved "3 31 Decem"er 2014%
Draft Annual Audit Report 20!"# Audit Committee $ 2% September 20#
A&enda 'tem #( )a&e +
$% .+C *a& al&o &tated t*at a completion certificate for t*e ):C and Con&olidated account&
+ill not "e i&&ued until it *a& completed +or( on t*e o"<ection to t*e 2012/13 account& +*ic*
it anticipate& completin "3 31 4cto"er 2014%
10% In addition to t*e .4.0A i&&ue/ .+C *a& *i*li*ted a c*ane in t*e Related .art3
)ran&action& di&clo&ure included +it*in t*e 2013/14 account& and *a& made one
recommendation +it* reard to internal control deficiencie& on t*e 3ear6end reconciliation
"et+een t*e pa3roll &3&tem and t*e eneral leder of t*e accountin &3&tem% )*i&
recommendation i& detailed on pae 13 of t*e audit report%
11% )*e Code of Audit .ractice ,t*e Code- re9uire& .+C to provide a conclu&ion on t*e
arranement& t*at 0ondon Council& *a& put in place to &ecure econom3/ efficienc3 and
effectivene&& in t*e u&e of re&ource&% .+C undertoo( it& audit in accordance +it* t*e Code
and uidance i&&ued "3 t*e Audit Commi&&ion% .+C anticipate i&&uin an un9ualified
conclu&ion on 0ondon Council&1 u&e of re&ource&%
12% )*e Audit Committee i& a&(ed to note t*e recommendation& +it* reard to internal control
deficiencie& on t*e 3ear6end reconciliation "et+een t*e pa3roll &3&tem and t*e eneral
leder detailed on pae 12 of t*e audit report and to endor&e t*e officer re&pon&e% An3
amendment& made "3 t*e Audit Committee +ill "e incorporated into t*e final ver&ion to "e
&ent to all mem"er& of t*e 0eader&1 Committee "3 30 Septem"er%
,ana&ement representation
13% )*e draft manaement repre&entation letter can "e found at Appendi2 1 of t*e audit report%
)*e letter declare&/ to t*e "e&t of t*e manaementA& (no+lede/ t*at t*e financial
&tatement& and ot*er information provided to t*e auditor are &ufficient and appropriate and
*ave not omitted an3 fact& t*at are material to t*e financial &tatement&% )*e letter +ill "e
&ined "3 t*e Director of Corporate Re&ource& once t*e final draft of t*e audit report *a&
"een approved% )*e Committee i& a&(ed to note and comment on t*e draft letter of
repre&entation%
Draft Annual Audit Report 20!"# Audit Committee $ 2% September 20#
A&enda 'tem #( )a&e -
.inancial 'mplications for /ondon Councils
Bone
/e&al 'mplications for /ondon Councils
Bone
E0ualities 'mplications for /ondon Councils
Bone
Appendices
Appendi2 A ; 2013/14 Draft Audit Report to t*o&e C*ared +it* Covernance
1ac2&round )apers
Final account& +or(in file& 2013/14
Draft Annual Audit Report 2013/14
Draft Annual Audit Report 20!"# Audit Committee $ 2% September 20#
A&enda 'tem #( )a&e 3