Issue - meetings

Debbie Hanson, Audit Director from Ernst & Young presented the Audit Plan for 2015/16. She advised the Committee that the auditors had identified 3 significant financial statement risks. These were:

·         Risk of fraud in revenue recognition;

·         Risk of management override; and

·         Valuation of investment property and property, plant and equipment.

She informed the Committee that these were risks which would be identified in any audit and did not indicate a specific problem for Havering.

The Committee was informed that new guidance in respect of the Value for Money risks had been issued. For 2015/16 this would be based on:

“In all significant respects, the audited body had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people.”

Proper arrangements were defined by statutory guidance issued by the National Audit Office. They comprised the Council’s arrangements to:

·         Take informed decisions;

·         Deploy resources in a sustainable manner; and

·         Work with partners and other third parties.

The one significant risk identified was ‘Sustainable resource deployment: Achievement of savings needed over the medium term. Ernst and Young were still looking at the Council’s work with third parties.

In response to questions from the Committee they were informed that the external auditors would not be looking at the Housing Holding Company as part of this audit but it would feature in next year’s audit. The Committee were given an assurance the Ernst & Young had experience in dealing with these types of entity.

The external auditors had indicated that they had determined that overall materiality for their audit of the Council’s financial statements was £12,191k. Using their norm of 5% they would not be communicating audit misstatements less than £609k to the Council.

The Committee had concern that given the rapid growth in their Government and Public Sector work Ernst & Young might not have sufficient resources to carry out the audit on time. Debbie Hanson had given an assurance that Ernst & Young were aware of a potential issue and had been recruiting at Manager and Executive level to ensure they had adequate resources to meet all their requirements. The next two years would present a greater challenge as the time they had to complete the audit would be reduced from three months to two months. Ernst & Young were already looking at ways to deal with this.

The report was noted.