Agenda item

Report of Grant Thornton, External Auditors

5.1     The Committee considered the external audit plan which outlined the work that Grant Thornton propose to undertake for the audit of the Council’s Financial Statements and the Pension Fund for the financial year 2016-17. The plans are based upon Grant Thornton’s risk based approach to audit planning.

5.2     The committee welcomed Paul Dossett, Engagement Lead, and Elizabeth Jackson, Engagement Manager, Grant Thornton, to the meeting. 

5.3     Members noted and asked questions about the identified significant risks on the Managed Services Partnership (MSP) and appeals provision for National Non-Domestic Rates (NNDR), the identified other risks around the valuation of property and the significant risk around value for money relating to capital projects.  With regards to the audit plan for the Council’s pension fund members also noted and asked questions about risks in relation to property funds.

5.4     With regards to the significant risk relating to MSP, members commented that due to on-going difficulties with the implementation the degree of cooperation from BT this year may differ compared to the previous year.  The committee questioned how this would affect the audit.  Mr Dossett advised that in this event Grant Thornton would write to the City Council to inform them of the circumstances and request that they ask BT to provide its cooperation.

5.5     The Council’s provision for business rates appeals is the largest in the country and is a highly material balance in the financial statements.  The provision is based on significant judgements made by management and uses a complex estimation technique to prepare provision.  The Committee expressed concern about the implications for the Council’s appeals provision following the new 2017 NNDR valuation list.  Officers advised that this would not affect the current year’s accounts but might affect those in the future.  Steve Mair, City Treasurer, explained that the finance team was in the process of addressing the impact of the changes in the same way that it had in when the NNDR valuation list was last updated in 2010.

5.6     Officers were asked how frequently the Council’s property assets are valued.  The City Treasurer explained that general fund investment assets are valued on an annual basis to comply with financial accounting requirements.  Other assets are valued at an average of 20% per annum.  In response to concerns that this proportion seemed low, Mr Mair explained that increasing the sample or undertaking a valuation more frequently would lead to increased costs for the Council.  Mr Dossett stated that a figure of 20% was common across local authorities.  Members questioned whether a greater proportion of assets should be assessed more frequently given property values in central London are likely to change more than in other parts of the country.  Concern was expressed that some properties could be incorrectly valued if assessed only once every 5 years

5.7     In respect of the significant value for money risk on capital projects, Ms Jackson advised that Grant Thornton would be reviewing the project management and risk assurance framework established by the Council in respect of the more significant projects, to establish how the Council is identifying, managing and monitoring these risks.  It would review any business cases that are near completion or approved by members by the end of the financial year.

5.8     Reference was made to the fact that Westminster employee pensions are administered by Surrey County Council.  The committee asked whether Grant Thornton audits their processes.  Ms Jackson advised that they sample test pension calculations and provide the Council with assurance that these are being applied correctly.

5.9     With regard to the audit of the Council’s pension fund, officers were referred to the fact that most investments are held as liquid investments.  Members considered that the area where there was likely to be risk related to the property funds managed by Hermes and Standard Life.  The auditor was asked to review these funds in relation to value for money.

5.10    RESOLVED:  That the audit plans be noted.