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AGENDA 8 APRIL 2015
10am, G21
Item Page No. 1. Apologies for Absence
2. Declarations of Interest by Members and Officers and as to the Party Whip
3. Declaration of any Intentions to Record the Meeting
4. Minutes of the Meeting held on 11 February 2015 1 - 6
5. Statement of Accounting Policies 7 - 20
6. External Audit Certification of Grant Claims and Returns 21 - 26
7. Annual External Audit Plan for 2014/15 Accounts and Value for Money Conclusion 27 - 54
8. Counter Fraud Activity report 55 - 56
9. Responses to Questions Raised at Previous Meeting 57 - 58
10. Audit Committee Work Programme 59 - 62
11 Date of Next Meeting- Wednesday, 8 April 2015 at 10am
Any questions relating to the agenda items should be submitted to David Dickinson- Director- Resources, at least 24 hours prior to the meeting in order that a full response can be provided.
Distribution Councillors:
Mrs R. Crowe J. Bradbury Mrs M. Dobson P. Handley Mrs S.M. Michael (C) D. Staples Officers:
D. Dickinson N. Lovely A. Hunt (Audit Lincs) Lucy Pledge (Audit Lincs) John Sketchley (Audit Lincs) John Cornett (KPMG) Helen Bayne (x2)
NEWARK & SHERWOOD DISTRICT COUNCIL
Minutes of the meeting of the AUDIT & ACCOUNTS COMMITTEE held in Room G21, Kelham Hall on Wednesday 11 February 2015 at 10:00am. PRESENT: Councillor Mrs S.M. Michael (Chairman) Councillors: J. Bradbury, G.P. Handley and D. Staples. ALSO IN ATTENDANCE: David Dickinson (Director – Resources (NSDC)) Nicola Lovely (Business Manager – Financial Services (NSDC)) Richard Bates (Safety and Risk Management Officer) Tara Beesley (Accountant- NSDC) John Sketchley (Audit Lincolnshire) Amanda Hunt (Audit Lincolnshire) John Cornett – (KPMG) 38. APOLOGIES FOR ABSENCE
Apologies for absence were submitted by Councillors Mrs R. Crowe, Mrs M. Dobson, and Helen Brookes- (KPMG).
39. DECLARATIONS OF INTEREST BY MEMBERS AND OFFICERS AND AS TO THE PARTY WHIP
NOTED: that no Member or Officer declared any interest pursuant to any statutory requirement in any matter discussed or voted upon at the meeting.
40. DECLARATION OF ANY INTENTION TO RECORD THE MEETING
None.
41. MINUTES OF MEETING HELD ON 5 NOVEMBER 2014
AGREED that the Minutes of the meeting held on 5 November 2014 be approved as a correct record and signed by the Chairman. The Chairman agreed to take the items on Risk Management Report, and Strategic Risk Register first, and then revert to original agenda order.
42. RISK MANAGEMENT REPORT The Safety and Risk Management Officer presented a report regarding the Council Risk Management progress, including corporate risk management and risk management across the Council. The Council’s Risk Management Policy was under review, with the assistance of the Council’s insurers Zurich, alongside work on the Council’s Risk Appetite. The Council’s Risk Management Group continued to meet which helped to raise insight into risks faced by the Council, including Safeguarding, the new office project, devolution and development of the new leisure company. In response to a query from a Member of the Committee, the Safety and Risk
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Management Officer explained that risks were presented to CMT on a quarterly basis, highlighting high risks and monitoring. It was acknowledged that the Council had risks that could not be minimised as they were outside of the control of the Council, however, it was important to identify and continue to monitor such risks.
AGREED That the report be noted.
43. STRATEGIC RISK REGISTER The Safety and Risk Management Officer presented a report advising the status of the Strategic Risk Register for the Council. The nine risks included on the Strategic Risk Register were those that had potential to cause the Authority to fail, and were broadly similar to those faced by all local authorities. Each of the risks were assigned to a member of CMT and with the assistance of relevant business managers, action plans have been developed to manage, mitigate or reduce the risk accordingly. Members reviewed the Strategic Risk Profile, noting that risks SR001 - Reduced public sector funding and major income streams leading to potential inability to meet objectives and SR003 - Growth Delivery, were both categorised as high risks and with both these risks, external issues beyond the control of the Council affected the impact and likelihood. SR007 had been renamed from Severe Weather to Continuity of Service. The risk still encompassed severe weather, but had been downgraded due to the increased capacity to prepare for such events and thus reduce the impact. The Committee considered the report, and in relation to SR002 - Major Projects, raised concern about the level of financial exposure these created for the Council. Officers advised the Committee that those projects relating to construction were required to have individual risk logs, which fed into the strategic risk. With regard to risk SR005 - Workforce Planning, Development and Transformational Change, Members questioned whether this risk was higher due to increased levels of sick leave and stress. Members also felt that SR006 - Community Cohesion could increase in risk profile due to the impending election, though it was noted that this would be reviewed prior to the election.
AGREED That the report be noted.
44. TREASURY PERFORMANCE REPORT- APRIL TO DECEMBER 2014 Members considered the Treasury Performance Report regarding the Council’s treasury activity and prudential indicators up to 31 December 2014. None of the prudential indicators had been breached during the period, and no new borrowing or investment had been undertaken. The base rate had remained the same and the Council’s treasury advisors, Arlingclose, had advised the Council that they felt it was unlikely to increase until next year.
AGREED That the report be noted.
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45. DRAFT TREASURY STRATEGY 2015/16 The Accountant presented the Draft Treasury Strategy 2015/16 which would be considered by Council on 10 March 2015. The Strategy set out the expected treasury operations for the period, based on the latest capital programme submitted, and adjusted for known variations. The report detailed Prudential Indicators, the Minimum Revenue Provision Policy, the Treasury Management Strategy statement and the Investment Strategy. Within the Investment Strategy, Member’s attention was drawn to an updated counterparty list, which had been amended due to a change in legislation. It was confirmed that the Director - Resources had authority to invest in overseas banks, but would consult the Audit and Accounts Committee prior to such action.
AGREED
(unanimously) that the Committee recommend to Council: a) The Treasury Management Strategy 2015/16; b) The investment counterparty criteria listed in paragraph 5.4 of the
report; c) The Prudential Indicators and Limits set out in the report; and d) The Minimum Revenue Provision statement contained in paragraph 7.3
of the report.
46. INTERNAL AUDIT PROGRESS REPORT The Committee considered the Internal Audit Progress Report, including the key messages, work completed and reports issued and the number of audits in progress. Officers from Audit Lincolnshire informed the Committee that it was anticipated that all fieldwork for the audits programmed would be completed by the end of April 2015, however, it was difficult to determine when final reports would be issued, due to the uncertainty around potential issues identified and recommendations, as well as feedback from business managers. With regard to audits for ICT Partnerships/Projects, and Treasury Management, both of which had been given an assurance level of ‘Some Improvement Needed’, Members noted there were a number of recommendations. Amanda Hunt explained that these would be monitored, although it was noted that the recommendations were not yet due.
AGREED
That the report be noted.
47. COMBINED ASSURANCE REPORT The Director - Resources presented the Combined Assurance Report for consideration by the Committee. The Committee considered the report, and noted the following: • Collaboration and Partnerships - should include reference to the proposed
Combined Authority; Officers advised that the report was as at a point in time and the Combined Authority was not in existence at the time. It would be included in the next report.
• Growth - Planning Policy - should include information regarding enforcement; • Members requested information on recycling levels, particularly comparison data
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with other neighbouring authorities; and • Safety - HR - Members noted that sickness levels were over target, although the
target had been reduced last year due to very good sickness level performance. It was also noted the performance for completion of appraisals was below target, although reasons for this were detailed in the report, and the Director-Resources explained that those staff on very short hours did not require an appraisal.
AGREED That the report be noted.
48. ANNUAL INTERNAL AUDIT PLAN AND STRATEGY
The Business Manager – Financial Services presented the Annual Internal Audit Plan and Strategy, detailing the proposed work of internal audit for 2015/16. Members considered whether it would be appropriate to request any additional items to include, with particular reference to affordable housing, and whether any gap between the Council’s policy and achieved affordable housing could be audited. The Director-Resources explained that individual committees had responsibility to monitor performance within their remits, but acknowledged some areas may cut across committees.
AGREED (unanimously) that the Annual Internal Audit Plan and Strategy be approved.
49.
EXTERNAL AUDITORS PROGRESS REPORT John Cornett, KPMG, was in attendance to present the External Auditors Annual Progress report, detailing progress on the 2013/14 Audit and the initial planning process for the 2014/15 Audit. The report also included an oversight of national issues and relevant developments. Mr Cornett explained that as part of the audit process for the Housing Benefits Claim, the Council’s benefits staff had undertaken completion of the testing, to help to reduce the Audit fee. It was noted that the Certification work had been delayed due to the nature of some of the errors found, but the issues were comparable to other authorities, with no unique issues. An additional fee of £900 for NNDR work for 2014/15 audit was highlighted. During the discussion regarding the report, in response to a query from the Director- Resources, Mr Cornett explained that the Council had the power to appoint an external auditor for a wholly owned Council company, such as the new Leisure Company which was in development. Details were also clarified regarding the split of responsibilities of the Audit Commission, which would close in March 2015. The setting of Audit Fees and Charges would be approved by a company set up and wholly owned by the LGA. The Code of Audit practice would be under the National Audit Office and National Fraud Initiative work would transfer to the Cabinet Office.
AGREED That the report be noted.
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50. RESULTS OF THE REVIEW OF THE EFFECTIVENESS OF THE INTERNAL AUDIT FUNCTION The Business Manager - Financial Services presented the results of the Assessment of the Effectiveness of the Internal Audit function. The review was split into two parts - the review of the internal audit function, and the self-assessment of the effectiveness of the Audit and Accounts Committee, and had been undertaken by a group comprising the Chairman of the Committee, plus one other member of the Committee, the Director - Resources and the Business Manager - Financial Services. The Group had highlighted and commended the quality of the audit reports, although acknowledged there were still some frustrations due to timing and delay of reports. Further evidence had been requested to support the statements included in the self-assessment. The Group also felt that the Chairman of Audit and Accounts Committee should keep regular meetings with chairs of the Council’s other functional committees. An action plan had been developed, reflecting the work of the group, which was included as an appendix to the report.
AGREED (unanimously) that the Committee: a) Notes the results of the Review of the Effectiveness of the Internal
Audit Function; b) Notes the results of the Self-Assessment of the Effectiveness of the
Audit and Accounts Committee; and c) Adopts the Action Plan.
51. REVIEW OF SIGNIFICANT GOVERNANCE ISSUES HIGHLIGHTED IN THE ANNUAL GOVERNANCE STATEMENT The Director-Resources presented a report updating the Committee in regard to significant governance issues identified in the Annual Governance Statement. The report included updates on Organisational Change, Devolution, Management of Leisure Services, Collaboration Agreement and Major Projects. The Committee noted the appointment of a consultant to oversee major projects, following the departure of the Business Manager - Asset Management.
AGREED That the Committee notes the results of the review of significant governance Issues highlighted in the Annual Governance Statement.
52. PROTECTING THE PUBLIC PURSE REPORT The Committee considered the report from the Audit Commission entitled Protecting the Public Purse - Fighting Fraud Against Local Government, summarising the findings from the annual survey on counter fraud in local government. This was the last report to be produced by the Commission prior to its closure in 2015. Common areas of fraud in local government were highlighted as Council Tax, Right to Buy, Social Care and Insurance. Concern was also raised in regard to tenancy fraud. Of particular note, one of the biggest issues facing local government was the fall in number of fraud investigators within local government, reducing the overall capacity,
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which was generally associated with lower detection rates. The Business Manager Financial Services detailed the work that the Council had undertaken towards counter fraud, including the Counter Fraud Strategy and training for officers and members. However, the impact of the development of the Single Fraud Investigation Service under the DWP would have a significant negative impact on the Council’s ability to detect fraud by removing the only dedicated officer resource the Council had in fraud detection. Members heard that a review of the Single Person Discount was currently on-going, across Nottinghamshire with co-operation of the County Council, Fire and Police. Members agreed that anti-fraud work was a very important part of overall prevention of fraud.
AGREED That the report be noted.
53. RESPONSES TO QUESTIONS RAISED AT PREVIOUS MEETING
AGREED that the questions and answers be noted.
54. WORK PLAN
AGREED that the workplan be noted.
55. DATE OF NEXT MEETING The next meeting would be on Wednesday 8 April 2015, 10am.
The meeting closed at 12.04pm Chairman
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AUDIT AND ACCOUNTS COMMITTEE AGENDA ITEM NO.5 8th April 2015 STATEMENT OF ACCOUNTING POLICIES 2014/2015 REPORT PRESENTED BY: NICOLA PICKAVANCE, ASSISTANT BUSINESS MANAGER FINANCIAL SERVICES 1.0 Purpose of Report 1.1 To provide Members with any updates made to the Council’s accounting policies in relation
to the closedown of the 2014/2015 financial year. 2.0 Introduction 2.1 Prior to the completion of the Statement of Accounts for 2014/2015 it is important that
Members are given the opportunity to discuss and comment on the accounting policies to be used in the production of the financial statements. These policies will be applied to the treatment of all transactions that make up the figures in the Statement of Accounts to ensure the accounts present a true and fair view of the financial position of the Council as at 31st March 2015.
2.2 The 2014/2015 Statement of Accounts will be prepared in accordance with the Code of
Practice on Local Authority Accounting in the United Kingdom 2014-15 (the Code) which is based on International Financial Reporting Standards (IFRS).
3.0 Updates to the Statement 3.1 The 2014/2015 Code introduces changes to the following standards
IAS1 - Presentation of Financial Statements IFRS 10 – Consolidated Financial Statements
IFRS 11 – Joint Arrangements IFRS 12 – Disclosure of Interest in Other Entities IAS 27 – Separate Financial Statements IAS 28 – Investments in Associates and Joint Ventures
IAS 32 – Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities.
3.2 Policy 1.3 Prior Period Adjustments, Changes to Accounting Policies and Estimates and
errors has been amended to describe changes which have been made to the Code but do not require a change in an existing, or adoption of a new, policy.
3.3 The Council’s policies 1.14 Financial Liabilities and 1.15 Financial Assets do not require amending following Code changes in respect of IAS 32 – Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities.
3.4 The Council’s policy 1.16 Interest in Companies and Other Entities does not require
amending in view if the Code changes in respect of consolidation of accounts and the recognition of interest in other bodies as detailed in:
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IFRS 10 – Consolidated Financial Statements IFRS 11 – Joint Arrangements IFRS 12 – Disclosure of Interest in Other Entities IAS 27 – Separate Financial Statements IAS 28 – Investments in Associates and Joint Ventures
3.5 The Council does not have a specific policy regarding how the statement of accounts is
presented, therefore the changes introduced by the Code to IAS1 - Presentation of Financial Statements will not require any change in policy for 2014/2015.
3.6 A complete set of the Accounting Policies for 2014/2015 are attached at Appendix A. 4.0 RECOMMENDATION
a) Members approve the amended Statement of Accounting Policies for 2014/2015 Background Papers Nil. For further information please contact Nicola Pickavance on extension 5326 D. Dickinson Director – Resources
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APPENDIX A
1 Accounting Policies
1.1 General Principles The Statement of Accounts summarises the Council's transactions for the 2014/2015 financial year and its position at the year-end of 31 March 2015. It has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15 (the Code). The accounting convention adopted is historical cost, modified firstly by the revaluation of certain categories of non current assets and secondly as regards the valuation of stocks. Accounting policies and estimation techniques have been selected and exercised, having regard to the accounting principles and concepts set out in IAS 8, specifically the qualitative characteristics of financial information: • Relevance • Reliability • Comparability • Understandibility • Materiality
and pervasive accounting concepts: • Accruals • Going Concern • Primacy of legislative requirements
1.2 Accruals of Income and Expenditure
Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: • Fees, charges and rents due from customers are accounted for as income at the date the
Council provides the relevant goods or services. • Supplies are recorded as expenditure when they are consumed - where there is a gap
between the date supplies are received and their consumption, they are carried as stocks on the Balance Sheet.
• Works are charged as expenditure when they are completed, before which they are carried as works in progress on the Balance Sheet.
• Interest payable on borrowings and receivable on investments is accounted for on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract.
• Where income and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where it is doubtful that debts will be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.
Income and expenditure are credited and debited to the relevant service revenue account, unless they properly represent capital receipts or capital expenditure. 1.3 Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors
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Prior period adjustments may arise as a result of a change in accounting policy or to correct a material error. Changes in accounting estimates are accounted for prospectively ie in the current and future years affected by the change and do not give rise to a prior period adjustment.
Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance. Where a change is made, it is applied retrospectively (unless stated otherwise) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Amendments have been made to the following accounting standards which have been adopted fully by the Council in the 2014/2015 statements:
• IFRS 10 Consolidated Financial Statements • IFRS 11 Joint Arrangements • IFRS 12 Disclosure of Interest in Other Entities • IAS 27 Separate Financial Statements • IAS 28 Investments in Associates and Joint Ventures • IAS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial
Liabilities • IAS 1 Presentation of Financial Statements
The preparation of IFRS accounts requires the use and calculation of estimates. It also requires management to exercise its judgement in applying the use of the Council’s accounting policies. The areas involved in a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the financial statements are disclosed in the relevant sections of the financial statements. Although these estimates are based on management’s best knowledge of current events and actions they may undertake in the future, actual results may differ from these estimates.
1.4 Provisions
Provisions are made where an event has taken place that gives the Council an obligation that probably requires settlement by a transfer of economic benefits, but where the timing of the transfer is uncertain. For instance, the Council may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation.
Provisions are charged to the appropriate service revenue account in the year that the authority becomes aware of the obligation, based on the best estimate of the likely settlement. When payments are eventually made, they are charged to the provision set up in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year - where it becomes more likely than not that a transfer of economic benefits will not now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service revenue account.
Where some or all of the payment required to settle a provision is expected to be met by another party (e.g. from an insurance claim), this is only recognised as income in the relevant service revenue account if it is virtually certain that reimbursement will be received if the obligation is settled.
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Provisions may also be created where there is some uncertainty over the Council’s entitlement to receive income. This may arise in connection with changes in the eligibility criteria of central government programmes or as a result of the interpretation of new legislation.
1.5 Reserves
The Council sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service revenue account in that year to score against the Surplus/Deficit on Continuing Operations in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance statement so that there is no net charge against council tax for the expenditure.
Certain reserves are kept to manage the accounting processes for non current fixed assets and retirement benefits and do not represent usable resources for the Council - these reserves are explained in the relevant policies below.
1.6 Government and Other Grants and Contributions
Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations (including donated assets), both revenue and capital, are recognised as due to the Council when there is reasonable assurance that
• The Council will comply with any conditions attached to the payments • The grants or contributions will be received.
Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution have been satisfied. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied the grant or contribution is credited to the Comprehensive Income and Expenditure Account. Revenue grants are matched in service revenue accounts with the service expenditure to which they relate. Grants to cover general expenditure (e.g. Revenue Support Grant and New Homes Bonus Grant) and all capital grants and contributions are credited to Taxation and Non Specific Grant Income. Capital grants are reversed out of the General Fund Balance in the Movement in Reserves Statement. 1.7 Post Employment Benefits
The Council fully complies with the requirements of IAS 19 Employee Benefits and recognises the cost of retirement benefits in the revenue account when employees earn them rather than when the benefits are eventually paid as pensions.
Employees of the Council are members of the Local Government Pensions Scheme, administered by Nottinghamshire County Council (the pension fund). The scheme provides
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defined benefits to members (retirement lump sums and pensions), earned as employees worked for the Council.
The liabilities of the pension scheme attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method - i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projections of projected earnings for current employees.
Liabilities are discounted to their value at current prices, using a discount rate based on the indicative rate of return on high quality corporate bonds.
The assets of the pension fund attributable to the Council are included in the Balance Sheet at their fair value:
• quoted securities – current bid price • unquoted securities - professional estimate • unitised securities - current bid price • property - market value.
The change in the net pensions liability is analysed into the following components:
• Service Cost comprising • current service cost - the increase in liabilities as a result of years of service earned
this year - allocated in the Comprehensive Income and Expenditure Statement to the revenue accounts of services for which the employees worked
• past service cost - the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years - debited to the (Surplus)/Deficit on Continuing Operations in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs
• net interest on the net defined benefit liability or asset ie net interest expense for the authority – the change during the period in the net defined benefit liability or asset that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement – this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability or asset at the beginning of the period – taking into account any changes in the net defined benefit liability or asset during the period as a result of contribution and benefit payments
• Remeasurements comprising • the return on plan assets – excluding amounts included in net interest on the
defined benefit liability or asset – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure
• actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure
• Contributions paid to the pension fund - cash paid as employer's contributions to the pension fund in settlement of liabilities; not accounted for as an expense.
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Statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement on the General Fund Balance this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and any amounts payable to the fund but unpaid at the year-end. The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.
1.8 Value Added Tax
Income and expenditure excludes any amounts related to VAT, as all VAT collected is payable to HM Revenue and Customs and all VAT paid is recoverable from them. 1.9 Overheads and Support Services
The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2013/2014 (SeRCOP). The total absorption costing principle is used - the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:
• Corporate and Democratic Core - costs relating to the Council's status as a multi-functional, democratic organisation.
• Non Distributed Costs - discretionary benefits awarded to employees retiring early and depreciation and impairment losses chargeable on non operational properties.
These two cost categories are defined in SeRCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement Account, as part of Continuing Operations. The bases of allocation used for the main categories of overhead and support services are outlined below:
Service Basis of Charge Administrative Buildings Area occupied Information Communication Technology Systems operated and equipment utilised Audit Staff time Revenue Collection Services Transactions Human Resources Staff numbers Administrative Services Staff time Legal Staff time Financial Services Staff time and transactions Central printing, telephones and postages Transactions Corporate Property Services Staff time Management and Administration Staff time
1.10 Non Current Assets
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Non current assets are assets that have physical substance and are held for use in the provision of services or for administrative purposes on a continuing basis.
Recognition: expenditure on the acquisition, creation or enhancement of non current assets is capitalised on an accruals basis, provided that it yields benefits to the Council and the services that it provides for more than one financial year. Expenditure that secures but does not extend the previously assessed standards of performance of an asset (e.g. repairs and maintenance) is charged to revenue as it is incurred. Expenditure under the value of £15,000 is treated as de-minimis. Measurement: assets are initially measured at cost, comprising all expenditure that is directly attributable to bringing the asset into working condition for its intended use. Assets are then carried in the Balance Sheet using the following measurement bases:
• Investment properties – fair value • Infrastructure assets – are written off in full if they have no tangible value • Community Assets (including property Heritage Assets) and Assets Under
Construction (excluding Investment Property under construction) – measured at historical cost
• Other Land and Buildings, Vehicles, Plant and Equipment and Surplus Assets – fair value or, where there is no market based evidence of fair value, depreciated historical cost
• Council dwellings – fair value measured using existing use value – social housing • Assets Held for Sale – the lower of carrying amount and fair value less costs to sell • Heritage Assets (non property) – insurance cost valuation
Fair Value is defined as the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction and can be further assessed as follows:
• Property Plant and Equipment – the amount that would be paid for the asset in its existing use • Investment Properties – the amount that would be paid for the asset in its highest
and best use ie market value • Assets Held for Sale – the amount that would be paid for the asset in its highest and
best use ie market value Valuation: assets are included in the Balance Sheet at current value on the basis recommended by CIPFA and in accordance with the Appraisal and Valuation Manual issued by the Royal Institution of Chartered Surveyors (RICS). Non current assets are classified into the groupings required by the CIPFA Code of Practice on Local Authority Accounting. Assets included in the Balance Sheet at current value are revalued where there have been material changes in the value, but as a minimum every five years. Community Assets, Infrastructure Assets and Assets Under Construction are held at historical cost and are not revalued. Increases in valuations (except increases in Investment Properties) are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of an impairment loss previously charged to a service revenue account. All gains on Investment Properties are charged to a service revenue account.
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The Revaluation Reserve contains revaluation gains recognised since 1st April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. Impairment: the values of each category of assets and of material individual assets that are not being depreciated are reviewed at the end of each financial year for evidence of reductions in value. Where impairment is identified as part of this review or as a result of a valuation exercise, this is accounted for by:
• Non-revalued asset – recognised in the Comprehensive Income and Expenditure Statement
• Revalued asset (for both asset specific and non asset specific impairment) - recognised in the Revaluation Reserve up to the credit balance existing in respect of the asset and thereafter to the Comprehensive Income and Expenditure Statement
• Investment Properties and Assets Held for Sale– all impairments are charged direct to the Comprehensive Income and Expenditure Statement
Impairment losses are not proper charges to the General Fund and any such amounts are transferred to the Capital Adjustment Account and reported in the Movement in Reserves Statement. Disposals: when an asset is disposed of or decommissioned, the value of the asset in the Balance Sheet is written off to the Comprehensive Income and Expenditure Statement as part of other operating expenditure. Receipts from disposals are credited to the Comprehensive Income and Expenditure Statement as part of other operating expenditure (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains in the Revaluation Reserve are transferred to the Capital Adjustment Account. Amounts in excess of £10,000 are categorised as capital receipts. A proportion of receipts relating to housing disposals is payable to the Government. The balance of receipts is required to be credited to the Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the Council's underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Reserve from the Movement in Reserves Statement. The written-off value of disposals is not a charge against council tax, as the cost of non current assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the Movement in Reserves Statement. The Council has taken advantage of the ability to earmark all sales of non right to buy housing revenue account land and property for the provision of affordable housing. In this way 100% of such sales can be retained. Depreciation: depreciation is provided for on all non current assets with a determinable finite life (except for investment properties, assets held for sale and land with an unlimited useful life) by allocating the value of the asset in the Balance Sheet over the periods expected to benefit from their use. Depreciation is calculated on the following bases:
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Asset Depreciation Method Useful Life in Years
Council Dwellings Straight line allocation over the life of the property
as estimated by the Valuer 35 – 50
Other Buildings Straight line allocation over the life of the property as estimated by the Valuer
20 – 100
Vehicle, Plant and Equipment
Straight line allocation, taking into account any residual value, over their useful life as advised by a
suitably qualified officer
5 – 10
Infrastructure Straight line (where asset has tangible value) 25 Community Assets Straight line 100 Surplus Assets Straight line 10 -100 Land No depreciation charged Assets Under Construction No depreciation charged Assets Held for Sale No depreciation charged Investment Properties No depreciation charged
Where an asset has major components with different estimated useful lives these are depreciated separately. Land and buildings are separate assets and are accounted for separately, even when they are acquired together. Revaluation gains are also depreciated with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account. Heritage Assets: Heritage Assets are assets with historical, artistic, scientific, technological, geophysical or environmental qualities that are held and maintained principally for their contribution to knowledge and culture. Assets are recognised and valued in accordance with the policy on Property, Plant and Equipment unless the cost of the valuation is not commensurate with the benefit to the users of the financial statement; in such an instance historical cost (less any accumulated depreciation, amortisation and impairment losses) is used. Valuation is made by an appropriate method and after an appropriate period. Depreciation is not charged on heritage assets which have indefinite lives, however, the value of an asset will be reviewed where there is evidence of impairment and any such impairment will be dealt with in accordance with the non current asset impairment policy above. Disposals of heritage assets are dealt with in accordance with the non current asset disposal policy above. Intangible Assets: expenditure on assets that do not have physical substance but are identifiable and controlled by the Council (e.g. software licences) is capitalised when it will bring benefits to the Council for more than one financial year. The balance is amortised to the relevant service revenue account over the economic life of the investment to reflect the pattern of consumption of benefits. 1.11 Charges to Revenue for Non Current Assets
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General Fund service revenue accounts, support services and trading accounts are debited with the following amounts to record the real cost of holding non current assets during the year:
• depreciation attributable to the assets used by the relevant service • impairment losses where there are no accumulated gains in the Revaluation Reserve
against which they can be written off or which have been recognised on investment properties and assets held for sale
• amortisation of intangible assets attributable to the service.
The Council is not required to raise council tax to cover depreciation, impairment losses or amortisations. However, it is required to make an annual contribution from revenue to contribute towards the reduction in its overall borrowing requirement (equal to at least 4% of the underlying amount measured by the adjusted Capital Financing Requirement, excluding amounts attributable to HRA activity). Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.
1.12 Revenue Expenditure Funded from Capital under Statute
Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of non current assets has been charged as expenditure to the relevant service revenue account in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer to the Capital Adjustment Account then reverses out the amounts charged in the Movement in Reserves Statement so there is no impact on the level of council tax.
1.13 Leased Assets
Finance leases. Assets acquired under finance leases are capitalised in the authority's accounts, together with the liability to pay future rentals. The Council accounts for leases as finance leases when substantially all the risks and rewards relating to the leased property transfer to the Council. Rentals payable are apportioned between
• a charge for the acquisition of the interest in the property (recognised as a liability in the Balance Sheet at the start of the lease, matched with a non current asset - the liability is written down as the rent becomes payable) and
• a finance charge (debited to (Surplus)/Deficit on Continuing Services in the Comprehensive Income and Expenditure Statement as the rent becomes payable).
Non current assets recognised under finance leases are accounted for using the policies applied generally to Non Current Assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life.
Operating Leases. Leases that do not meet the definition of finance leases are accounted for as operating leases. Rentals payable are charged to the relevant service revenue account on a straight-line basis over the term of the lease, generally meaning that rentals are charged when they become payable.
1.14 Financial Liabilities
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Financial liabilities are recognised on the Balance Sheet where the authority becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and carried at their amortised cost. Annual charges to the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability multiplied by the effective rate of interest for the instrument. The effective annual interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised. For most of the borrowings held by the Council this means the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement. Gains and losses on the repurchase or early settlement of borrowing are credited and debited to (Surplus)/Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain/loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.
1.15 Financial Assets Financial assets are classified into two types:
• Loans and Receivables – assets that have fixed or determinable payments but are not quoted in an active market
• Available for Sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments. The Council does not hold any assets of this type.
Loans and Receivables: are recognised in the Balance Sheet when the authority becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and carried at their amortised cost. Annual credits to the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans the Council has made this means the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement.
18
However, the Council has made a number of loans under its Enterprise Scheme to help new businesses at less than market rates (soft loans). Where these are material a loss is recorded in the Comprehensive Income and Expenditure Statement in line with statutory guidelines. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the Comprehensive Income and Expenditure Statement. Any gains and losses that arise on the derecognition of the asset are credited/debited to the Comprehensive Income and Expenditure Statement.
Instruments entered into before 1st April 2006: the Council does not hold any instruments of this type.
1.16 Interests in Companies and Other Entities
The Council has material interests in companies and other entities that have the nature of subsidiaries, associates and joint ventures and require it to prepare group accounts. In the Council’s own single entity accounts the interests in companies and other entities are recorded as investments i.e. at cost less any provision for losses. Newark and Sherwood Homes Ltd is a wholly owned subsidiary of the authority which manages the housing stock, owned by the Council, under an arms length arrangement and their accounts are consolidated with the authority’s in accordance with IAS 27. Mansfield Crematorium has been recognised as a joint arrangement between Mansfield District Council, Ashfield District Council and Newark and Sherwood District Council. The authority accounts directly for its part of the assets, liabilities, income, expenditure and cash flows held arising from the operations of the crematorium.
1.17 Cash Equivalents
Cash equivalents are held for the purpose of meeting short term commitments rather than for investment or other purposes. The Council classifies the following as cash equivalents:
• Overdrawn balances on the Council’s bank accounts. Bank overdrafts are an integral part of the authority’s cash management and bank balances fluctuate on a regular basis from being positive to overdrawn.
• Short term investments with immediate call back or instant access. Any short term investment which is for a fixed term, regardless of the remaining length of that term, is accounted for as a financial instrument. Interest follows the related investment.
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AUDIT AND ACCOUNTS COMMITTEE AGENDA ITEM NO.6 8TH APRIL 2015 EXTERNAL AUDITORS’ CERTIFICATION OF CLAIMS AND RETURNS 2012/13 1.0 Purpose of Report 1.1 To present the external auditor’s report on the certification of grant claims and returns
for 2013/14 for Newark & Sherwood District Council. 2.0 Introduction 2.1 Each year an audit of the Council’s grant claims and returns is carried out by the Council’s
external auditors, KPMG. 2.2 The report for 2013/14 covers one grant claim totalling £27.20m and one return totalling
£1.47m. 3.0 Certification of Claims & Returns 3.1 A qualified opinion was given for the audit of the Housing Benefit Subsidy grant worth
£27.2m. The reasons for the qualification were small value errors identified in a sample of benefits payments. No adjustments were necessary to the amount of grant as a result of the audit work.
3.2 An error relating to omission of a buy-back was found in the Capital Receipts Pooling
Return amounting to £37,500. 4.0 Fees 4.1 The total fee for the grants and returns certification work was £11,203. This was an
increase of £3,408 on the indicative fee, but is comparable to that charged for the 2012/13 certification work. The increase was due to additional work required.
5.0 RECOMMENDATION that
Members consider the external auditors report on the certification of grant claims and returns for 2013/14.
Background Papers Nil For further information please contact David Dickinson, Director of Resources on extension 5300. D. Dickinson Director of Resources
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22
KPMG LLP Tel +44 (0) 116 256 6064 Audit Fax +44 (0) 115 935 3500 St Nicholas House DX 728460 Nottingham 47
Park Row [email protected] Nottingham NG1 6FQ Mobile 07854 479507 United Kingdom
s
David Dickinson Director of Resources Newark and Sherwood District Council Kelham Hall Kelham Newark NG23 5QX
25 February 2015
Our ref HB/1B9
Dear David
Certification of claims and returns - annual report 2013/14 The Audit Commission requires its external auditors to prepare an annual report on the claims and returns it certifies for each client. This letter is our annual report for the certification work we have undertaken for 2013/14. In 2013/14 we carried out certification work on the following claims/returns:
Claim/return Certified value (£) BEN01 – Housing Benefit Subsidy Claim 27,202,866 CFB06 – Pooling of Housing Capital Receipts 1,467,553 Total 28,670,419
Matters arising Housing Benefit Subsidy As in previous years, our certification work identified a range of issues in relation to the Housing Benefit Subsidy claim as follows:
• Although no specific errors in respect of self-employed income were identified in the initial sample, issues were identified in the previous year with miscalculation of allowable expenses against self-employed income and this necessitated further testing in the current year. This testing identified 3 cases (value £128) where benefit had been underpaid as self- employed income had been incorrectly calculated.
• We had to issue a qualification letter due to various issues we identified as a result of our sample testing from which we could not reach a conclusion as to whether the claim was fairly stated. These issues included errors relating to:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity.
Registered in England No OC301540 Registered office: 15 Canada Square, London, E14 5GL
23
ABCD
KPMG LLP Certification of claims and returns - annual report 2013/14 25 February 2015
o overpaid benefit which had been awarded twice for the same period - the error occurred because the Authority had correctly cancelled the council tax support element of the claim but had failed to cancel the housing benefit element;
o underpaid benefit where the Authority had failed to diminish notional capital income;
o underpaid benefit as the Civica benefits system duplicated an offset of the benefit award. The Authority discussed the issue with the software supplier, who become aware of it during an audit in September, and have issued a bulletin confirming that they have discussed it with the Audit Commission and will fix the calculation in 2014.
o miscalculation of earned income which can result in either underpayment or overpayment of benefit. This issue was also a feature of the 2012/13 certification work.
As there are no specific causes for these errors, with all arising from general processing errors, we have made no recommendations to the Authority to improve its claims completion processes in respect of this claim for this year. There were, however, significant delays in the certification work due to issues with the Authority’s completion of the testing and the nature of the errors found. This resulted in extra work at all levels, to support Authority staff in completing the worksheets and in interpreting the results. For the coming year, the Authority should clarify responsibilities and timescales for testing at an early stage in order to meet the deadline of 30 November 2015.
Pooling of Housing Capital Receipts Our certification work in respect of this claim identified one error of £37,500 relating to the omission of a buy back. The claim was amended for this error and further work was required to evidence and process this amendment. This was a general processing error and consequently we have made no recommendations to the Authority in respect of this claim for this year. There are no further matters to report to you regarding our certification work. Certification work fees
The Audit Commission set an indicative fee for our certification work in 2013/14 of £7,795 which is based on the fee for 2011/12, adjusted for certain factors. Our actual fee was higher than the indicative fee due to the effect of the errors found in this year and the roll forward of errors from 2012/13. The fee for 2013/14 compares to the 2012/13 fee for these claims of £11,737. The fee variation is subject to approval by the Audit Commission.
2
24
ABCD
KPMG LLP Certification of claims and returns - annual report 2013/14 25 February 2015
The details are set out in the table below.
Claim 2013/14 Indicative
fee (£)
2013/14 Final fee
(£)
2012/13 Final fee
(£) BEN01 – Housing Benefit subsidy claim 7,367 10,613 11,170 CFB06 – Pooling of Housing Capital Receipts 428 590 567 Total 7,795 11,203 11,737
Yours sincerely
John Cornett Director, for and on behalf of KPMG LLP
3
25
ABCD
KPMG LLP Certification of claims and returns - annual report 2013/14 25 February 2015
This report is addressed to the Authority and has been prepared for the sole use of the Authority. We take no responsibility to any member of staff acting in their individual capacities, or to third parties. The Audit Commission has issued a document entitled Statement of Responsibilities of Auditors and Audited Bodies. This summarises where the responsibilities of auditors begin and end and what is expected from the audited body. We draw your attention to this document. External auditors do not act as a substitute for the audited body’s own responsibility for putting in place proper arrangements to ensure that public business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively. If you have any concerns or are dissatisfied with any part of KPMG’s work, in the first instance you should contact John Cornett, who is the engagement leader to the Authority (telephone 0116 256 6082; e-mail [email protected] who will try to resolve your complaint. If you are dissatisfied with your response please contact Trevor Rees (telephone 0161 236 4000, e-mail [email protected]) who is the national contact partner for all of KPMG’s work with the Audit Commission. After this, if you are still dissatisfied with how your complaint has been handled you can access the Audit Commission’s complaints procedure. Put your complaint in writing to the Complaints Unit Manager, Audit Commission, 3rd Floor, Fry Building, 2 Marsham Street, London, SW1P 4DF or by email to [email protected]. Their telephone number is 0303 444 8330.
4
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AUDIT AND ACCOUNTS COMMITTEE AGENDA ITEM NO. 7 8th APRIL 2015 ANNUAL EXTERNAL AUDIT PLAN 2014/15 REPORT PRESENTED BY: JOHN CORNETT - DIRECTOR KPMG 1.0 Purpose of Report
1.1 To present the External Audit Plan for 2014/15. 2.0 Introduction 2.1 The External Audit Plan (Appendix A) sets out the proposed work of the Council’s external
auditors for 2014/15, relating to the audit of the financial statements and the Value for Money conclusion.
2.2 The plan describes the audit approach, the key financial statement audit risks and the Value
for Money audit approach. It details the audit team, the deliverables from the work, the timeline and the planned audit fee.
3.0 RECOMMENDATION
That the Audit Committee note the External Audit plan. Background Papers Nil. For further information please contact John Cornett on 0116 2566064 David Dickinson Director of Resources
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Exte
rnal
Aud
it Pl
an
2014
/15
New
ark
and
Sher
woo
d D
istr
ict C
ounc
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April
201
5
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MG
LLP
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Con
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The
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at K
PMG
in
con
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re
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are
:
John
Cor
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Eng
agem
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KP
MG
LLP
(UK
)
Tel:
0116
256
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john
.cor
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kpm
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Hel
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Man
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KP
MG
LLP
(UK
)
Tel:
0791
9 22
8632
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n.br
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Sund
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KP
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Tel:
0779
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sund
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gill@
kpm
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This
rep
ort i
s ad
dres
sed
to th
e A
utho
rity
and
has
been
pre
pare
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r th
e so
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Aut
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indi
vidu
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, or t
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he A
udit
Com
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has
issu
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doc
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Sta
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f Res
pons
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ties
of A
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rs a
nd A
udite
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his
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aud
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beg
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our
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the
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s a
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aud
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at p
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that
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If yo
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the
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116
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, the
app
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com
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f you
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you
r re
spon
se p
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Ree
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016
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r by
emai
l to
trev
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kpm
g.co
.uk,
who
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tact
par
tner
for a
ll of
KPM
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wor
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Com
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f you
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d yo
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the
Aud
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com
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2 M
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03
0344
4833
0.
Page
Rep
ort s
ectio
ns
■In
trodu
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n2
■H
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ines
3
■O
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15
Appe
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1.In
depe
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nd o
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requ
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2.Q
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sura
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and
tech
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3.As
sess
men
tof F
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Ris
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4. T
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19 20 22 23
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net
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All
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Sect
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one
Intr
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This
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how
we
will
del
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our
aud
it w
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for N
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Scop
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This
doc
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plem
ents
our
Aud
it Fe
e Le
tter 2
014/
15 p
rese
nted
to
you
in A
pril
2014
. It d
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how
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l st
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aud
it w
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for N
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wor
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and
upd
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if n
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sary
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Stat
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d po
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s ar
e se
t out
in th
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d th
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ever
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it re
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it/re
view
and
repo
rt on
you
r:
■fin
anci
al s
tate
men
ts (i
nclu
ding
the
Ann
ual G
over
nanc
e S
tate
men
t):
prov
idin
g an
opi
nion
on
your
acc
ount
s; a
nd
■us
e of
reso
urce
s:co
nclu
ding
on
the
arra
ngem
ents
in p
lace
for
secu
ring
econ
omy,
effi
cien
cy a
nd e
ffect
iven
ess
in y
our u
se o
f re
sour
ces
(the
Valu
e fo
r Mon
ey c
oncl
usio
n).
The
Audi
t Com
mis
sion
’s S
tate
men
t of R
espo
nsib
ilitie
s of
Aud
itors
and
A
udite
d B
odie
s se
ts o
ut th
e re
spec
tive
resp
onsi
bilit
ies
of th
e au
dito
r an
d th
e Au
thor
ity.
The
Audi
t Com
mis
sion
will
cea
se to
exi
st o
n 31
Mar
ch 2
015.
Det
ails
of
the
new
arra
ngem
ents
are
set
out
in A
ppen
dix
4. T
he A
utho
rity
can
expe
ct fu
rther
com
mun
icat
ion
from
the
Audi
t Com
mis
sion
and
its
succ
esso
r bod
ies
as th
e ne
w a
rrang
emen
ts a
re e
stab
lishe
d.Th
is p
lan
rest
ricts
itse
lf to
refe
renc
e to
the
exis
ting
arra
ngem
ents
.
Stru
ctur
e of
this
repo
rt
This
repo
rt is
stru
ctur
ed a
s fo
llow
s:
■Se
ctio
n 2
incl
udes
our
hea
dlin
e m
essa
ges,
incl
udin
g an
y ke
y ris
ks
iden
tifie
d th
is y
ear f
or th
e fin
anci
al s
tate
men
ts a
udit
and
Valu
e fo
r M
oney
(VFM
) Con
clus
ion.
■Se
ctio
n 3
desc
ribes
the
appr
oach
we
take
for t
he a
udit
of th
e fin
anci
al s
tate
men
ts.
■Se
ctio
n 4
prov
ides
furth
er d
etai
l on
the
finan
cial
sta
tem
ents
aud
it ris
ks.
■Se
ctio
n 5
expl
ains
our
app
roac
h to
VFM
arra
ngem
ents
and
set
s ou
t ou
r ini
tial r
isk
asse
ssm
ent f
or th
e VF
M c
oncl
usio
n..
■Se
ctio
n 6
prov
ides
info
rmat
ion
on th
e au
dit t
eam
, our
pro
pose
d de
liver
able
s, th
e tim
esca
les
and
fees
for o
ur w
ork.
Ack
now
ledg
emen
ts
We
wou
ld li
ke to
take
this
opp
ortu
nity
to th
ank
offic
ers
and
Mem
bers
fo
r the
ir co
ntin
uing
hel
p an
d co
-ope
ratio
n th
roug
hout
our
aud
it w
ork.
31
3©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
two
Hea
dlin
es
This
tabl
e su
mm
aris
es th
e he
adlin
e m
essa
ges.
The
rem
aind
er o
f thi
s re
port
pro
vide
s fu
rthe
r det
ails
on
each
are
a.A
udit
appr
oach
Our
ove
rall
audi
t app
roac
h is
unc
hang
ed fr
om la
st y
ear.
Our
wor
k is
car
ried
out i
n fo
ur s
tage
s an
d th
e tim
ings
for
thes
e, a
nd s
peci
fical
ly o
ur o
n si
te w
ork,
hav
e be
en a
gree
d w
ith th
e As
sist
ant B
usin
ess
Man
ager
Fin
anci
al S
ervi
ces.
Our
aud
it st
rate
gy a
nd p
lan
rem
ain
flexi
ble
as ri
sks
and
issu
es c
hang
e th
roug
hout
the
year
. We
will
revi
ew th
e in
itial
as
sess
men
ts p
rese
nted
in th
is d
ocum
entt
hrou
ghou
t the
yea
r and
sho
uld
any
new
risk
s em
erge
we
will
eva
luat
e th
ese
and
resp
ond
acco
rdin
gly.
Key
fina
ncia
l st
atem
ents
aud
it ris
ks
We
have
com
plet
ed o
ur in
itial
risk
ass
essm
ent f
or th
e fin
anci
al s
tate
men
tsau
dita
nd h
ave
iden
tifie
d no
spe
cific
si
gnifi
cant
risk
s, b
eyon
d th
e st
anda
rd ri
sks
that
are
des
crib
ed o
n pa
ge 1
0.
VFM
aud
it ap
proa
chW
e ha
ve id
entif
ied
no s
peci
ficVF
M ri
sks.
Aud
it te
am,
deliv
erab
les,
tim
elin
e an
d fe
es
We
have
refre
shed
our
aud
it te
am th
is y
ear.
We
have
a n
ew A
ssis
tant
Man
ager
, Sun
deep
Gill
. His
role
and
re
spon
sibi
litie
s ar
e de
taile
d on
pag
e 15
.
Our
aud
it tim
elin
e is
det
aile
d on
pag
e 17
. In
sum
mar
y ou
r int
erim
is s
ched
uled
for m
id M
arch
201
5 an
d th
e m
ain
finan
cial
sta
tem
ents
aud
it is
sch
edul
ed to
com
men
ce o
n 6th
July
201
5.
Upo
n co
nclu
sion
of o
ur w
ork
we
will
aga
in p
rese
nt o
ur fi
ndin
gs to
you
in o
ur R
epor
t to
Thos
e C
harg
ed w
ith
Gov
erna
nce
(ISA
260
Rep
ort).
The
plan
ned
fee
for t
he 2
014/
15 a
udit
is £
64,4
38. T
his
is £
900
high
er th
an th
e po
sitio
n se
t out
in o
ur A
udit
Fee
Lette
r 20
14/1
5,du
e to
the
incr
ease
agr
eed
by th
e Au
dit C
omm
issi
on to
refle
ct th
e w
ork
asso
ciat
ed w
ith N
ND
R.
32
4©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
thre
eO
ur a
udit
appr
oach
We
have
sum
mar
ised
the
four
key
sta
ges
of o
ur fi
nanc
ial s
tate
men
ts a
udit
proc
ess
for y
ou b
elow
:W
e un
dert
ake
our w
ork
on
your
fina
ncia
l sta
tem
ents
in
four
key
sta
ges:
■Pl
anni
ng –
Jan u
ary/
Febr
uary
201
5
■C
ontr
ol E
valu
atio
n -
Mar
ch 2
015
■Su
bsta
ntiv
e Pr
oced
ures
-Ju
ly 2
015
■C
ompl
etio
n -S
epte
mbe
r 20
15
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
2 3 41Pl
anni
ng
Con
trol
ev
alua
tion
Subs
tant
ive
proc
edur
es
Com
plet
ion
■U
pdat
e ou
r bus
ines
s un
ders
tand
ing
and
risk
asse
ssm
ent.
■As
sess
the
orga
nisa
tiona
l con
trol e
nviro
nmen
t.
■D
eter
min
e ou
r aud
it st
rate
gy a
nd p
lan
the
audi
t app
roac
h.
■Is
sue
our A
ccou
nts
Aud
it P
roto
col.
■Ev
alua
te a
nd te
st s
elec
ted
cont
rols
ove
r key
fina
ncia
l sys
tem
s.
■R
evie
w th
e ac
coun
ts p
rodu
ctio
n pr
oces
s.
■R
evie
w p
rogr
ess
on c
ritic
al a
ccou
ntin
g m
atte
rs.
■Pl
an a
nd p
erfo
rm s
ubst
antiv
e au
dit p
roce
dure
s.
■C
oncl
ude
on c
ritic
al a
ccou
ntin
g m
atte
rs.
■Id
entif
y au
dit a
djus
tmen
ts.
■R
evie
w th
e An
nual
Gov
erna
nce
Stat
emen
t.
■D
ecla
re o
ur in
depe
nden
ce a
nd o
bjec
tivity
.
■O
btai
n m
anag
emen
t rep
rese
ntat
ions
.
■R
epor
t mat
ters
of g
over
nanc
e in
tere
st.
■Fo
rm o
ur a
udit
opin
ion
and
repo
rt to
thos
e ch
arge
d w
ith
gove
rnan
ce.
33
5©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
thre
eO
ur a
udit
appr
oach
–pl
anni
ng (c
ontin
ued)
Dur
ing
Janu
ary
and
Febr
uary
201
5 w
e co
mpl
ete
our p
lann
ing
wor
k.
We
asse
ss th
e ke
y ris
ks
affe
ctin
g th
e A
utho
rity’
s fin
anci
al s
tate
men
ts a
nd
disc
uss
thes
e w
ith o
ffice
rs.
We
asse
ss if
ther
e ar
e an
y w
eakn
esse
s in
resp
ect o
f ce
ntra
l pro
cess
es th
at w
ould
im
pact
on
our a
udit.
Our
pla
nnin
g w
ork
take
s pl
ace
in J
anua
ry a
nd F
ebru
ary
2015
. Thi
s in
volv
es th
e fo
llow
ing
aspe
cts:
Bus
ines
s un
ders
tand
ing
and
risk
asse
ssm
ent
We
upda
te o
ur u
nder
stan
ding
of t
he A
utho
rity’
s op
erat
ions
and
iden
tify
any
area
s th
at w
ill re
quire
par
ticul
ar a
ttent
ion
durin
g ou
r aud
it of
the
Auth
ority
’s fi
nanc
ial s
tate
men
ts.
We
iden
tify
the
key
risks
,inc
ludi
ng ri
sk o
f fra
ud a
ffect
ing
the
Auth
ority
’s
finan
cial
sta
tem
ents
. The
se a
re b
ased
on
our k
now
ledg
e of
the
Auth
ority
, our
sec
tor e
xper
ienc
e an
d ou
r ong
oing
dia
logu
e w
ith
Auth
ority
sta
ff. A
ny ri
sks
iden
tifie
d to
dat
e th
roug
h ou
r ris
k as
sess
men
t pr
oces
s ar
e se
t out
in th
is d
ocum
ent.
Our
aud
it st
rate
gy a
nd p
lan
will
, ho
wev
er, r
emai
n fle
xibl
e as
the
risks
and
issu
es c
hang
e th
roug
hout
the
year
. It i
s th
e Au
thor
ity’s
resp
onsi
bilit
y to
ade
quat
ely
addr
ess
thes
e is
sues
. We
enco
urag
e th
e Au
thor
ity to
rais
e an
y te
chni
cal i
ssue
s w
ith
us a
s ea
rly a
s po
ssib
le s
o th
at w
e ca
n ag
ree
the
acco
untin
g tre
atm
ent
in a
dvan
ce o
f the
aud
it vi
sit.
We
mee
t with
the
finan
ce te
am o
n a
regu
lar b
asis
to c
onsi
der i
ssue
s an
d ho
w th
ey a
re a
ddre
ssed
dur
ing
the
finan
cial
yea
r end
clo
sedo
wn
and
acco
unts
pre
para
tion.
Org
anis
atio
nal c
ontr
ol e
nviro
nmen
t
Con
trols
ope
rate
d at
an
orga
nisa
tiona
l lev
el o
ften
have
an
impa
ct o
n co
ntro
ls a
t an
oper
atio
nal l
evel
and
if th
ere
wer
e w
eakn
esse
s th
is
wou
ld im
pact
on
our a
udit.
In p
artic
ular
risk
man
agem
ent,
inte
rnal
con
trol a
nd e
thic
s an
d co
nduc
t ha
ve im
plic
atio
ns fo
r our
fina
ncia
l sta
tem
ents
aud
it. T
he s
cope
of t
he
rele
vant
wor
k of
you
r int
erna
l aud
itors
als
o in
form
s ou
r ris
k as
sess
men
t.
Aud
it st
rate
gy a
nd a
ppro
ach
to m
ater
ialit
y
Our
aud
it is
per
form
ed in
acc
orda
nce
with
Inte
rnat
iona
l Sta
ndar
ds o
n Au
ditin
g (IS
As) (
UK
and
Irela
nd).
The
Enga
gem
ent L
ead
sets
the
over
all d
irect
ion
of th
e au
dit a
nd d
ecid
es th
e na
ture
and
ext
ent o
f aud
it ac
tiviti
es. W
e de
sign
aud
it pr
oced
ures
in re
spon
se to
the
risk
that
the
finan
cial
sta
tem
ents
are
mat
eria
lly m
isst
ated
. The
mat
eria
lity
leve
l is
a m
atte
r of p
rofe
ssio
nal j
udge
men
t and
is s
et b
y th
e En
gage
men
t Lea
d.
In a
ccor
danc
e w
ith IS
A 32
0 (U
K&I)
‘Aud
it m
ater
ialit
y’, w
e pl
an a
nd
perfo
rm o
ur a
udit
to p
rovi
de re
ason
able
ass
uran
ce th
at th
e fin
anci
al
stat
emen
ts a
re fr
ee fr
om m
ater
ial m
isst
atem
ent a
nd g
ive
a tru
e an
d fa
ir vi
ew. I
nfor
mat
ion
is c
onsi
dere
d m
ater
ial i
f its
om
issi
on o
r mis
stat
emen
t co
uld
influ
ence
the
econ
omic
dec
isio
ns o
f use
rs ta
ken
on th
e ba
sis
of
the
finan
cial
sta
tem
ents
.
Furth
er d
etai
ls o
n as
sess
men
t of m
ater
ialit
y is
set
out
on
page
6 o
f thi
s do
cum
ent.
Planning
■U
pdat
e ou
r bus
ines
s un
ders
tand
ing
and
risk
asse
ssm
ent i
nclu
ding
frau
d ris
k.
■As
sess
the
orga
nisa
tiona
l con
trol e
nviro
nmen
t.
■D
eter
min
e ou
r aud
it st
rate
gy a
nd p
lan
the
audi
t ap
proa
ch.
■Is
sue
our A
ccou
nts
Aud
it P
roto
col.
34
6©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
thre
eO
ur a
udit
appr
oach
–pl
anni
ng (c
ontin
ued)
Whe
n w
e de
term
ine
our
audi
t str
ateg
y w
e se
t a
mon
etar
y m
ater
ialit
y le
vel
for p
lann
ing
purp
oses
.
For 2
014/
15 w
e ha
ve s
et th
is
at £
1.4m
.
We
will
repo
rt a
ll au
dit
diffe
renc
es o
ver £
70k
to
Aud
it an
d A
ccou
nts
Com
mitt
ee.
Mat
eria
lity
The
asse
ssm
ent o
f wha
t is
mat
eria
l is
a m
atte
r of p
rofe
ssio
nal
judg
men
t and
incl
udes
con
side
ratio
n of
thre
e as
pect
s: m
ater
ialit
y by
va
lue,
nat
ure
and
cont
ext.
■M
ater
ial e
rrors
by
valu
e ar
e th
ose
whi
ch a
re s
impl
y of
sig
nific
ant
num
eric
al s
ize
to d
isto
rt th
e re
ader
’s p
erce
ptio
n of
the
finan
cial
st
atem
ents
. Our
ass
essm
ent o
f the
thre
shol
d fo
r thi
s de
pend
s up
on
the
size
of k
ey fi
gure
s in
the
finan
cial
sta
tem
ents
, as
wel
l as
othe
r fa
ctor
s su
ch a
s th
e le
vel o
f pub
lic in
tere
st in
the
finan
cial
st
atem
ents
.
■Er
rors
whi
ch a
re m
ater
ial b
y na
ture
may
not
be
larg
e in
val
ue, b
ut
may
con
cern
acc
ount
ing
disc
losu
res
of k
ey im
porta
nce
and
sens
itivi
ty, f
or e
xam
ple
the
sala
ries
of s
enio
r sta
ff.
■Er
rors
that
are
mat
eria
l by
cont
ext a
re th
ose
that
wou
ld a
lter k
ey
figur
es in
the
finan
cial
sta
tem
ents
from
one
resu
lt to
ano
ther
–fo
r ex
ampl
e, e
rrors
that
cha
nge
succ
essf
ul p
erfo
rman
ce a
gain
st a
ta
rget
to fa
ilure
.
Mat
eria
lity
for p
lann
ing
purp
oses
has
bee
n se
t at £
1.4m
this
is b
ased
on
201
3/14
repo
rted
gros
s ex
pend
iture
. Thi
s fig
ure
is a
gui
de o
nly.
We
desi
gn o
ur p
roce
dure
s to
det
ect e
rrors
in s
peci
fic a
ccou
nts
at a
lo
wer
leve
l of p
reci
sion
.
Rep
ortin
g to
Aud
it an
d A
ccou
nts
Com
mitt
ee
Whi
lst o
ur a
udit
proc
edur
es a
re d
esig
ned
to id
entif
y m
isst
atem
ents
w
hich
are
mat
eria
l to
our o
pini
on o
n th
e fin
anci
al s
tate
men
ts a
s a
who
le, w
e ne
verth
eles
s re
port
to th
e Au
dit a
nd A
ccou
nts
Com
mitt
ee
any
mis
stat
emen
ts o
f les
ser a
mou
nts
to th
e ex
tent
that
thes
e ar
e id
entif
ied
by o
ur a
udit
wor
k.
Und
er IS
A 26
0(U
K&I)
‘Com
mun
icat
ion
with
thos
e ch
arge
d w
ith
gove
rnan
ce’,
we
are
oblig
ed to
repo
rt un
corre
cted
om
issi
ons
or
mis
stat
emen
ts o
ther
than
thos
e w
hich
are
‘cle
arly
triv
ial’
to th
ose
char
ged
with
gov
erna
nce.
ISA
260
(UK&
I) de
fines
‘cle
arly
triv
ial’
as
mat
ters
that
are
cle
arly
inco
nseq
uent
ial,
whe
ther
take
n in
divi
dual
ly o
r in
agg
rega
te a
nd w
heth
er ju
dged
by
any
quan
titat
ive
or q
ualit
ativ
e cr
iteria
.
ISA
450
(UK&
I), ‘E
valu
atio
n of
mis
stat
emen
ts id
entif
ied
durin
g th
e au
dit’,
requ
ires
us to
requ
est t
hat u
ncor
rect
ed m
isst
atem
ents
are
co
rrect
ed.
In th
e co
ntex
t of t
he A
utho
rity,
we
prop
ose
that
an
indi
vidu
al d
iffer
ence
co
uld
norm
ally
be
cons
ider
ed to
be
clea
rly tr
ivia
l if i
t is
less
than
£70
k.
If m
anag
emen
t hav
e co
rrect
ed m
ater
ial m
isst
atem
ents
iden
tifie
d du
ring
the
cour
se o
f the
aud
it, w
e w
ill c
onsi
der w
heth
er th
ose
corre
ctio
ns
shou
ld b
e co
mm
unic
ated
to A
udit
and
Acco
unts
Com
mitt
ee to
ass
ist i
t in
fulfi
lling
its
gove
rnan
ce re
spon
sibi
litie
s.
2014
/15
£73m
020406080M
ater
ialit
y ba
sed
on 2
013/
14
repo
rted
gro
ss e
xpen
ditu
re
£1.4
m
35
7©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
thre
eO
ur a
udit
appr
oach
–co
ntro
l eva
luat
ion
Dur
ing
Mar
ch 2
015
we
will
co
mpl
ete
our i
nter
im a
udit
wor
k.
We
asse
ss if
con
trol
s ov
er
key
finan
cial
sys
tem
s w
ere
effe
ctiv
e du
ring
2014
/15.
We
wor
k w
ith y
our
finan
ce
team
to e
nhan
ce th
e ef
ficie
ncy
of th
e ac
coun
ts
audi
t.
We
will
repo
rt a
ny s
igni
fican
t fin
ding
s ar
isin
g fr
om o
ur
wor
k to
the
Aud
it an
d A
ccou
nts
Com
mitt
ee.
Our
on
site
inte
rim v
isit
will
be
com
plet
ed d
urin
g M
arch
201
5. D
urin
g th
is ti
me
we
will
com
plet
e w
ork
in th
e fo
llow
ing
area
s:
Con
trol
s ov
er k
ey fi
nanc
ial s
yste
ms
We
upda
te o
ur u
nder
stan
ding
of t
he A
utho
rity’
s ke
y fin
anci
al p
roce
sses
w
here
our
risk
ass
essm
ent h
as id
entif
ied
that
thes
e ar
e re
leva
nt to
our
fin
al a
ccou
nts
audi
t and
whe
re w
e ha
ve d
eter
min
ed th
at th
is is
the
mos
t effi
cien
t aud
it ap
proa
ch to
take
. We
conf
irm o
ur u
nder
stan
ding
by
com
plet
ing
wal
kthr
ough
s fo
r the
se s
yste
ms.
We
then
test
sel
ecte
d co
ntro
ls th
at a
ddre
ss k
ey ri
sks
with
in th
ese
syst
ems.
The
stre
ngth
of
the
cont
rol f
ram
ewor
k in
form
s th
e su
bsta
ntiv
e te
stin
g w
e co
mpl
ete
durin
g ou
r fin
al a
ccou
nts
visi
t.
Rev
iew
of i
nter
nal a
udit
Whe
re o
ur a
udit
appr
oach
is to
und
erta
ke c
ontro
ls w
ork
on fi
nanc
ial
syst
ems,
we
seek
to
revi
ew a
ny re
leva
nt w
ork
inte
rnal
aud
it ha
ve
com
plet
ed to
min
imis
e un
nece
ssar
y du
plic
atio
n of
wor
k. T
his
will
in
form
our
ove
rall
risk
asse
ssm
ent p
roce
ss.
Acc
ount
s pr
oduc
tion
proc
ess
We
will
ass
ess
the
Auth
ority
’s p
rogr
ess
in p
repa
ring
for t
he c
lose
dow
n an
d ac
coun
ts p
repa
ratio
n.
Crit
ical
acc
ount
ing
mat
ters
We
will
dis
cuss
the
wor
k co
mpl
eted
to a
ddre
ss th
e sp
ecifi
c ris
ks w
e id
entif
ied
at th
e pl
anni
ng s
tage
. Whe
reve
r pos
sibl
e, w
e se
ek to
revi
ew
rele
vant
wor
king
s an
d ev
iden
ce a
nd a
gree
the
acco
untin
g tre
atm
ent a
s pa
rt of
our
inte
rim w
ork.
If th
ere
are
any
sign
ifica
nt fi
ndin
gs a
risin
g fro
m o
ur in
terim
wor
k th
ese
will
be
disc
usse
d at
the
next
ava
ilabl
e Au
dit a
nd A
ccou
nts
Com
mitt
ee.
Control Evaluation
■Ev
alua
te a
nd te
st c
ontro
ls o
ver k
ey fi
nanc
ial s
yste
ms
iden
tifie
d as
par
t of o
ur ri
sk a
sses
smen
t.
■R
evie
w th
e w
ork
unde
rtake
n by
the
inte
rnal
aud
it fu
nctio
n on
con
trols
rele
vant
to o
ur ri
sk a
sses
smen
t.
■R
evie
w th
e ac
coun
ts p
rodu
ctio
n pr
oces
s.
■R
evie
w p
rogr
ess
on c
ritic
al a
ccou
ntin
g m
atte
rs.
36
8©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
thre
eO
ur a
udit
appr
oach
–su
bsta
ntiv
e pr
oced
ures
Dur
ing
July
201
5 w
e w
ill b
e on
site
for o
ur s
ubst
antiv
e w
ork.
We
com
plet
e de
taile
d te
stin
g of
acc
ount
s an
d di
sclo
sure
s an
d co
nclu
de o
n cr
itica
l ac
coun
ting
mat
ters
, suc
h as
sp
ecifi
c ris
k ar
eas.
We
then
ag
ree
any
audi
t adj
ustm
ents
re
quire
d to
the
finan
cial
st
atem
ents
.
We
also
revi
ew th
e A
nnua
l G
over
nanc
e St
atem
ent f
or
cons
iste
ncy
with
our
un
ders
tand
ing.
We
will
pre
sent
our
ISA
260
R
epor
tto
the
Aud
it an
d A
ccou
nts
Com
mitt
ee in
Se
ptem
ber2
015.
Our
fina
l acc
ount
s vi
sit o
n si
te h
as b
een
prov
isio
nally
sch
edul
ed fo
r 6th
July
201
5. D
urin
g th
is ti
me,
we
will
com
plet
e th
e fo
llow
ing
wor
k:
Subs
tant
ive
audi
t pro
cedu
res
We
com
plet
e de
taile
d te
stin
g on
sig
nific
ant b
alan
ces
and
disc
losu
res.
Th
e ex
tent
of o
ur w
ork
is d
eter
min
ed b
y th
e En
gage
men
t Lea
d ba
sed
on v
ario
us fa
ctor
s su
ch a
s ou
r ove
rall
asse
ssm
ent o
f the
Aut
horit
y’s
cont
rol e
nviro
nmen
t, th
e ef
fect
iven
ess
of c
ontro
ls o
ver i
ndiv
idua
l sy
stem
s an
d th
e m
anag
emen
t of s
peci
fic ri
sk fa
ctor
s.
Crit
ical
acc
ount
ing
mat
ters
We
conc
lude
our
test
ing
of k
ey ri
sk a
reas
iden
tifie
d at
the
plan
ning
st
age
and
any
addi
tiona
l iss
ues
that
may
hav
e em
erge
d si
nce.
We
will
dis
cuss
our
ear
ly fi
ndin
gs o
f the
Aut
horit
y’s
appr
oach
to
addr
ess
the
key
risk
area
s w
ith th
e Bu
sine
ss M
anag
er F
inan
cial
Se
rvic
es p
rior t
o re
porti
ng to
the
Audi
t and
Acc
ount
s C
omm
ittee
.
Aud
it ad
just
men
ts
Dur
ing
our o
n si
te w
ork,
we
will
mee
t with
the
Assi
stan
t Bus
ines
s M
anag
er F
inan
cial
Ser
vice
s on
a w
eekl
y ba
sis
to d
iscu
ss th
e pr
ogre
ss
of th
e au
dit,
any
diffe
renc
es fo
und
and
any
othe
r iss
ues
emer
ging
.
At th
e en
d of
our
on
site
wor
k, w
e w
ill h
old
a cl
osur
e m
eetin
g, w
here
w
e w
ill p
rovi
de a
sch
edul
e of
aud
it di
ffere
nces
and
agr
ee a
tim
etab
le
for t
he c
ompl
etio
n st
age
and
the
acco
unts
sig
n of
f.
To c
ompl
y w
ith a
uditi
ng s
tand
ards
, we
are
requ
ired
to re
port
unco
rrect
ed a
udit
diffe
renc
es to
the
Audi
t and
Acc
ount
s C
omm
ittee
. W
e al
so re
port
any
mat
eria
l mis
stat
emen
ts w
hich
hav
e be
en c
orre
cted
an
d w
hich
we
belie
ve s
houl
d be
com
mun
icat
ed to
you
to h
elp
you
mee
t you
r gov
erna
nce
resp
onsi
bilit
ies.
Ann
ual G
over
nanc
e St
atem
ent
We
are
also
requ
ired
to s
atis
fy o
urse
lves
that
you
r Ann
ual G
over
nanc
e St
atem
ent c
ompl
ies
with
the
appl
icab
le fr
amew
ork
and
is c
onsi
sten
t w
ith o
ur u
nder
stan
ding
of y
our o
pera
tions
. Our
revi
ew o
f the
wor
k of
in
tern
al a
udit
and
cons
ider
atio
n of
you
r ris
k m
anag
emen
t and
go
vern
ance
arra
ngem
ents
are
par
t of t
his.
We
repo
rt th
e fin
ding
s of
our
fina
l acc
ount
s w
ork
in o
ur IS
A 2
60
Rep
ort,
whi
ch w
e w
ill is
sue
to A
udit
and
Acco
unts
Com
mitt
ee in
Se
ptem
ber 2
015.
Substantive Procedures
■Pl
an a
nd p
erfo
rm s
ubst
antiv
e au
dit p
roce
dure
s.
■C
oncl
ude
on c
ritic
al a
ccou
ntin
g m
atte
rs.
■Id
entif
y an
d as
sess
any
aud
it ad
just
men
ts.
■R
evie
w th
e An
nual
Gov
erna
nce
Stat
emen
t.
37
9©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
thre
eO
ur a
udit
appr
oach
–ot
her m
atte
rs
In a
dditi
on to
the
finan
cial
st
atem
ents
, we
also
revi
ew
the
Aut
horit
y’s
Who
le o
f G
over
nmen
t Acc
ount
s pa
ck.
We
may
nee
d to
und
erta
ke
addi
tiona
l wor
k if
we
rece
ive
obje
ctio
ns to
the
acco
unts
fr
om lo
cal e
lect
ors.
We
will
com
mun
icat
e w
ith
you
thro
ugho
ut th
e ye
ar,
both
form
ally
and
info
rmal
ly.
Who
le o
f Gov
ernm
ent A
ccou
nts
(WG
A)
We
are
requ
ired
to re
view
you
r WG
A co
nsol
idat
ion
and
unde
rtake
the
wor
k sp
ecifi
ed u
nder
the
appr
oach
that
is a
gree
d w
ith H
M T
reas
ury
and
the
Nat
iona
l Aud
it O
ffice
. D
eadl
ines
for p
rodu
ctio
n of
the
pack
and
th
e sp
ecifi
ed a
ppro
ach
for 2
014/
15 h
ave
not y
et b
een
conf
irmed
.
Elec
tor c
halle
nge
The
Audi
t Com
mis
sion
Act
199
8 gi
ves
elec
tors
cer
tain
righ
ts. T
hese
ar
e:
■Th
e rig
ht to
insp
ect t
he a
ccou
nts;
■Th
e rig
ht to
ask
the
audi
tor q
uest
ions
abo
ut th
e ac
coun
ts; a
nd
■Th
e rig
ht to
obj
ect t
o th
e ac
coun
ts.
As a
resu
lt of
thes
e rig
hts,
in p
artic
ular
the
right
to o
bjec
t to
the
acco
unts
, we
may
nee
d to
und
erta
ke a
dditi
onal
wor
k to
form
our
de
cisi
on o
n th
e el
ecto
r's o
bjec
tion.
The
add
ition
al w
ork
coul
d ra
nge
from
a s
mal
l pie
ce o
f wor
k w
here
we
inte
rvie
w a
n of
ficer
and
revi
ew
evid
ence
to fo
rm o
ur d
ecis
ion,
to a
mor
e de
taile
d pi
ece
of w
ork,
whe
re
we
have
to in
terv
iew
a ra
nge
of o
ffice
rs, r
evie
w s
igni
fican
t am
ount
s of
ev
iden
ce a
nd s
eek
lega
l rep
rese
ntat
ions
on
the
issu
es ra
ised
.
The
cost
s in
curre
d in
resp
ondi
ng to
spe
cific
que
stio
ns o
r obj
ectio
ns
rais
ed b
y el
ecto
rs is
not
par
t of t
he fe
e. T
his
wor
k w
ill b
e ch
arge
d in
ac
cord
ance
with
the
Audi
t Com
mis
sion
's fe
e sc
ales
.
Rep
ortin
g an
d co
mm
unic
atio
n
Rep
ortin
g is
a k
ey p
art o
f the
aud
it pr
oces
s, n
ot o
nly
in c
omm
unic
atin
g th
e au
dit f
indi
ngs
for t
he y
ear,
but a
lso
in e
nsur
ing
the
audi
t tea
m a
re
acco
unta
ble
to y
ou in
add
ress
ing
the
issu
es id
entif
ied
as p
art o
f the
au
dit s
trate
gy. T
hrou
ghou
t the
yea
r we
will
com
mun
icat
e w
ith y
ou
thro
ugh
mee
tings
with
the
finan
ce te
am a
nd th
e Au
dit a
nd A
ccou
nts
Com
mitt
ee. O
ur d
eliv
erab
les
are
incl
uded
on
page
16.
Inde
pend
ence
and
obj
ectiv
ity c
onfir
mat
ion
Prof
essi
onal
sta
ndar
ds re
quire
aud
itors
to c
omm
unic
ate
to th
ose
char
ged
with
gov
erna
nce,
at l
east
ann
ually
, all
rela
tions
hips
that
may
be
ar o
n th
e fir
m’s
inde
pend
ence
and
the
obje
ctiv
ity o
f the
aud
it en
gage
men
t par
tner
and
aud
it st
aff.
The
stan
dard
s al
so p
lace
re
quire
men
ts o
n au
dito
rs in
rela
tion
to in
tegr
ity, o
bjec
tivity
and
in
depe
nden
ce.
The
stan
dard
s de
fine
‘thos
e ch
arge
d w
ith g
over
nanc
e’ a
s ‘th
ose
pers
ons
entru
sted
with
the
supe
rvis
ion,
con
trol a
nd d
irect
ion
of a
n en
tity’
. In
your
cas
e th
is is
the
Audi
t and
Acc
ount
s C
omm
ittee
.
KPM
G L
LP is
com
mitt
ed to
bei
ng a
nd b
eing
see
n to
be
inde
pend
ent.
APB
Ethi
cal S
tand
ard
1 In
tegr
ity, O
bjec
tivity
and
Inde
pend
ence
re
quire
s us
to c
omm
unic
ate
to y
ou in
writ
ing
all s
igni
fican
t fac
ts a
nd
mat
ters
, inc
ludi
ng th
ose
rela
ted
to th
e pr
ovis
ion
of n
on-a
udit
serv
ices
an
d th
e sa
fegu
ards
put
in p
lace
, whi
ch in
our
pro
fess
iona
l jud
gem
ent,
may
reas
onab
ly b
e th
ough
t to
bear
on
KPM
G L
LP’s
inde
pend
ence
and
th
e ob
ject
ivity
of t
he E
ngag
emen
t Lea
d an
d th
e au
dit t
eam
.
Appe
ndix
1 p
rovi
des
furth
er d
etai
l on
audi
tors
’ res
pons
ibilit
ies
rega
rdin
g in
depe
nden
ce a
nd o
bjec
tivity
.
Con
firm
atio
n st
atem
ent
We
conf
irm th
at a
s of
Mar
ch20
15 in
our
pro
fess
iona
l jud
gem
ent,
KPM
G L
LP is
inde
pend
ent w
ithin
the
mea
ning
of r
egul
ator
y an
d pr
ofes
sion
al re
quire
men
ts a
nd th
e ob
ject
ivity
of t
he E
ngag
emen
t Lea
d an
d au
dit t
eam
is n
ot im
paire
d.
38
10©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
four
Key
fina
ncia
l sta
tem
ents
aud
it ris
ks
Prof
essi
onal
sta
ndar
ds re
quire
us
to c
onsi
der t
wo
stan
dard
risk
s fo
r all
orga
nisa
tions
. We
are
not e
labo
ratin
g on
thes
e st
anda
rd ri
sks
in th
is p
lan
but c
onsi
der t
hem
as
a m
atte
r of c
ours
e in
our
aud
it an
d w
ill in
clud
e an
y fin
ding
s ar
isin
g fro
m o
ur w
ork
in o
ur IS
A 2
60 R
epor
t.
■M
anag
emen
t ove
rride
of c
ontro
ls –
Man
agem
ent i
s ty
pica
lly in
a p
ower
ful p
ositi
on to
per
petra
te fr
aud
owin
g to
its
abili
ty to
man
ipul
ate
acco
untin
g re
cord
s an
d pr
epar
e fra
udul
ent f
inan
cial
sta
tem
ents
by
over
ridin
g co
ntro
ls th
at o
ther
wis
e ap
pear
to b
e op
erat
ing
effe
ctiv
ely.
Our
au
dit m
etho
dolo
gy in
corp
orat
es th
e ris
k of
man
agem
ent o
verri
de a
s a
defa
ult s
igni
fican
t ris
k. In
line
with
our
met
hodo
logy
, we
carry
out
ap
prop
riate
con
trols
test
ing
and
subs
tant
ive
proc
edur
es, i
nclu
ding
ove
r jou
rnal
ent
ries,
acc
ount
ing
estim
ates
and
sig
nific
antt
rans
actio
ns th
at
are
outs
ide
the
norm
al c
ours
e of
bus
ines
s, o
r are
oth
erw
ise
unus
ual.
■Fr
audu
lent
reve
nue
reco
gniti
on –
We
do n
ot c
onsi
der t
his
to b
e a
sign
ifica
nt ri
sk fo
r loc
al a
utho
ritie
s as
ther
e ar
e lim
ited
ince
ntiv
es a
nd
oppo
rtuni
ties
to m
anip
ulat
e th
e w
ay in
com
e is
reco
gnis
ed. W
e th
eref
ore
rebu
t thi
s ris
k an
d do
not
inco
rpor
ate
spec
ific
wor
k in
toou
r aud
it pl
an
in th
is a
rea
over
and
abo
ve o
ur s
tand
ard
fraud
pro
cedu
res.
We
will
revi
sit o
ur a
sses
smen
t thr
ough
out t
he y
ear a
nd s
houl
d an
y ad
ditio
nalr
isks
pre
sent
them
selv
es w
e w
ill a
djus
t our
aud
it st
rate
gy a
s ne
cess
ary.
Appe
ndix
3 c
over
s m
ore
deta
ils o
n ou
r ass
essm
ent o
f fra
ud ri
sk.
In th
is s
ectio
n w
e se
t out
our
as
sess
men
t of t
he
sign
ifica
nt ri
sks
to th
e au
dit
of th
e A
utho
rity'
s fin
anci
al
stat
emen
ts fo
r 201
4/15
.
.
39
11©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
five
VFM
aud
it ap
proa
ch
Bac
kgro
und
to a
ppro
ach
to V
FM w
ork
In m
eetin
g th
eir s
tatu
tory
resp
onsi
bilit
ies
rela
ting
to e
cono
my,
ef
ficie
ncy
and
effe
ctiv
enes
s, th
e C
omm
issi
on’s
Cod
e of
Aud
it P
ract
ice
requ
ires
audi
tors
to:
pl
an th
eir w
ork
base
d on
con
side
ratio
n of
the
sign
ifica
nt ri
sks
of
givi
ng a
wro
ng c
oncl
usio
n (a
udit
risk)
; and
ca
rry o
ut o
nly
as m
uch
wor
k as
is a
ppro
pria
te to
ena
ble
them
to
give
a s
afe
VFM
con
clus
ion.
To p
rovi
de s
tabi
lity
for a
udito
rs a
nd a
udite
d bo
dies
, the
Aud
it C
omm
issi
on h
as k
ept t
he V
FM a
udit
met
hodo
logy
unc
hang
ed fr
om
last
yea
r. Th
ere
are
only
rela
tivel
y m
inor
am
endm
ents
to re
flect
the
key
issu
es fa
cing
the
loca
l gov
ernm
ent s
ecto
r.
The
appr
oach
is s
truct
ured
und
er tw
o th
emes
, as
sum
mar
ised
bel
ow:
Our
app
roac
h to
VFM
wor
k fo
llow
s gu
idan
ce p
rovi
ded
by th
e A
udit
Com
mis
sion
.
Spec
ified
crit
eria
for V
FM
conc
lusi
onFo
cus
of th
e cr
iteria
Sub-
sect
ions
The
orga
nisa
tion
has
prop
er
arra
ngem
ents
in p
lace
for s
ecur
ing
finan
cial
resi
lienc
e.
The
orga
nisa
tion
has
robu
st s
yste
ms
and
proc
esse
s to
:
m
anag
e ef
fect
ivel
y fin
anci
al ri
sks
and
oppo
rtuni
ties;
and
se
cure
a s
tabl
e fin
anci
al p
ositi
on th
at e
nabl
es it
to
cont
inue
to o
pera
te fo
r the
fore
seea
ble
futu
re.
Fi
nanc
ial g
over
nanc
e
Fi
nanc
ial p
lann
ing
Fi
nanc
ial c
ontro
l
The
orga
nisa
tion
has
prop
er
arra
ngem
ents
for c
halle
ngin
g ho
w it
se
cure
s ec
onom
y, e
ffici
ency
and
ef
fect
iven
ess.
The
orga
nisa
tion
is p
riorit
isin
g its
reso
urce
s w
ithin
tigh
ter
budg
ets,
for e
xam
ple
by:
ac
hiev
ing
cost
redu
ctio
ns; a
nd
im
prov
ing
effic
ienc
y an
d pr
oduc
tivity
.
Pr
iorit
isin
g re
sour
ces
Im
prov
ing
effic
ienc
y an
d pr
oduc
tivity
40
12©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
five
VFM
aud
it ap
proa
ch (c
ontin
ued)
Ove
rvie
w o
f the
VFM
aud
it ap
proa
chTh
e ke
y el
emen
ts o
f the
VFM
aud
it ap
proa
ch a
re s
umm
aris
ed b
elow
.
Each
of t
hese
sta
ges
are
sum
mar
ised
furth
er b
elow
.
We
will
follo
w a
risk
bas
ed
appr
oach
to ta
rget
aud
it ef
fort
on
the
area
s of
gr
eate
st a
udit
risk.
VF
M a
udit
risk
asse
ssm
ent
Fina
ncia
l st
atem
ents
and
ot
her a
udit
wor
k
Asse
ssm
ent o
f re
sidu
al a
udit
risk
Iden
tific
atio
n of
sp
ecifi
c VF
M
audi
t wor
k (if
an
y)
Con
clud
e on
ar
rang
emen
ts
to s
ecur
e VF
M
No
furth
er w
ork
requ
ired
Asse
ssm
ent o
f wor
k by
ot
her r
evie
w a
genc
ies
Spec
ific
loca
l ris
k ba
sed
wor
k
VFM conclusion
VFM
aud
it st
age
Aud
it ap
proa
ch
VFM
aud
it ris
k as
sess
men
tW
e co
nsid
er th
e re
leva
nce
and
sign
ifica
nce
of th
e po
tent
ial b
usin
ess
risks
face
d by
all
loca
l aut
horit
ies,
and
oth
er
risks
that
app
ly s
peci
fical
ly to
the
Auth
ority
. The
se a
re th
e si
gnifi
cant
ope
ratio
nal a
nd fi
nanc
ial r
isks
in a
chie
ving
st
atut
ory
func
tions
and
obj
ectiv
es, w
hich
are
rele
vant
to a
udito
rs’ r
espo
nsib
ilitie
s un
der t
he C
ode
of A
udit
Pra
ctic
e.
In d
oing
so
we
cons
ider
:
th
e Au
thor
ity’s
ow
n as
sess
men
t of t
he ri
sks
it fa
ces,
and
its
arra
ngem
ents
to m
anag
e an
d ad
dres
s its
risk
s;
in
form
atio
n fro
m th
e Au
dit C
omm
issi
on’s
VFM
pro
file
tool
;
ev
iden
ce g
aine
d fro
m p
revi
ous
audi
t wor
k, in
clud
ing
the
resp
onse
to th
at w
ork;
and
th
e w
ork
of o
ther
insp
ecto
rate
s an
d re
view
age
ncie
s.
41
13©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Our
VFM
aud
it w
ill d
raw
he
avily
on
othe
r aud
it w
ork
whi
ch is
rele
vant
to o
ur V
FM
resp
onsi
bilit
ies
and
the
resu
lts o
f las
t yea
r’s V
FM
audi
t.
We
will
then
form
an
asse
ssm
ent o
f res
idua
l aud
it ris
k to
iden
tify
if th
ere
are
any
area
s w
here
mor
e de
taile
d VF
M a
udit
wor
k is
re
quire
d.
Sect
ion
five
VFM
aud
it ap
proa
ch (c
ontin
ued)
VFM
aud
it st
age
Aud
it ap
proa
ch
Link
ages
with
fin
anci
al s
tate
men
ts
and
othe
r aud
it w
ork
Ther
e is
a d
egre
e of
ove
rlap
betw
een
the
wor
k w
e do
as
part
of th
e VF
M a
udit
and
our f
inan
cial
sta
tem
ents
aud
it.
For e
xam
ple,
our
fina
ncia
l sta
tem
ents
aud
it in
clud
es a
n as
sess
men
t and
test
ing
of th
e Au
thor
ity’s
org
anis
atio
nal
cont
rol e
nviro
nmen
t, in
clud
ing
the
Auth
ority
’s fi
nanc
ial m
anag
emen
t and
gov
erna
nce
arra
ngem
ents
, man
y as
pect
s of
whi
ch a
re re
leva
nt to
our
VFM
aud
it re
spon
sibi
litie
s.
We
have
alw
ays
soug
ht to
avo
id d
uplic
atio
n of
aud
it ef
fort
by in
tegr
atin
g ou
r fin
anci
al s
tate
men
ts a
nd V
FM w
ork,
an
d th
is w
ill c
ontin
ue. W
e w
ill th
eref
ore
draw
upo
n re
leva
nt a
spec
ts o
f our
fina
ncia
l sta
tem
ents
aud
it w
ork
to in
form
th
e VF
M a
udit.
Ass
essm
ent o
f re
sidu
al a
udit
risk
It is
pos
sibl
e th
at fu
rther
aud
it w
ork
may
be
nece
ssar
y in
som
e ar
eas
to e
nsur
e su
ffici
ent c
over
age
of th
e tw
o VF
M
crite
ria.
Such
wor
k m
ay in
volv
e in
terv
iew
s w
ith re
leva
nt o
ffice
rs a
nd /
or th
e re
view
of d
ocum
ents
suc
h as
pol
icie
s, p
lans
and
m
inut
es. W
e m
ay a
lso
refe
r to
any
self
asse
ssm
ent t
he A
utho
rity
may
pre
pare
aga
inst
the
char
acte
ristic
s.
To in
form
any
furth
er w
ork
we
mus
t dra
w to
geth
er a
n as
sess
men
t of r
esid
ual a
udit
risk,
taki
ng a
ccou
nt o
f the
wor
k un
derta
ken
alre
ady.
Thi
s w
ill id
entif
y th
ose
area
s re
quiri
ng fu
rther
spe
cific
aud
it w
ork
to in
form
the
VFM
con
clus
ion.
At th
is s
tage
it is
not
pos
sibl
e to
indi
cate
the
num
ber o
r typ
e of
resi
dual
aud
it ris
ks th
at m
ight
requ
ire a
dditi
onal
aud
it w
ork,
and
ther
efor
e th
e ov
eral
l sca
le o
f wor
k ca
nnot
be
easi
ly p
redi
cted
. If a
sig
nific
ant a
mou
nt o
f wor
k is
nec
essa
ry
then
we
will
nee
d to
revi
ew th
e ad
equa
cy o
f our
agr
eed
audi
t fee
.
Iden
tific
atio
n of
sp
ecifi
c VF
M a
udit
wor
k
If w
e id
entif
y re
sidu
al a
udit
risks
, the
n w
e w
ill h
ighl
ight
the
risk
to th
e Au
thor
ity a
nd c
onsi
der t
he m
ost a
ppro
pria
te
audi
t res
pons
e in
eac
h ca
se, i
nclu
ding
:
co
nsid
erin
g th
e re
sults
of w
ork
by th
e Au
thor
ity, i
nspe
ctor
ates
and
oth
er re
view
age
ncie
s; a
nd
ca
rryin
g ou
t loc
al ri
sk-b
ased
wor
k to
form
a v
iew
on
the
adeq
uacy
of t
he A
utho
rity’
s ar
rang
emen
ts fo
r sec
urin
g ec
onom
y, e
ffici
ency
and
effe
ctiv
enes
s in
its
use
of re
sour
ces.
42
14©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
five
VFM
aud
it ap
proa
ch (c
ontin
ued)
Whe
re re
leva
nt, w
e m
ay
draw
upo
n th
e ra
nge
of a
udit
tool
s an
d re
view
gui
des
deve
lope
d by
the
Aud
it C
omm
issi
on.
We
have
com
plet
ed o
ur
initi
al ri
sk a
sses
smen
t and
ha
ve n
ot id
entif
ied
any
spec
ific
risks
to o
ur V
FM
conc
lusi
on a
t thi
s st
age.
We
will
upd
ate
our a
sses
smen
t at
yea
r en
d.
We
will
con
clud
e on
the
resu
lts o
f the
VFM
aud
it th
roug
h ou
r ISA
260
Rep
ort.
VFM
aud
it st
age
Aud
it ap
proa
ch
Del
iver
y of
loca
l ris
k ba
sed
wor
kD
epen
ding
on
the
natu
re o
f the
resi
dual
aud
it ris
k id
entif
ied,
we
may
be
able
to d
raw
on
audi
t too
ls a
nd s
ourc
es o
f gu
idan
ce w
hen
unde
rtaki
ng s
peci
fic lo
cal r
isk-
base
d au
dit w
ork,
suc
h as
:
lo
cal s
avin
gs re
view
gui
des
base
d on
sel
ecte
d pr
evio
us A
udit
Com
mis
sion
nat
iona
l stu
dies
; and
up
date
brie
fings
for p
revi
ous
Audi
t Com
mis
sion
stu
dies
.
The
tool
s an
d gu
ides
will
sup
port
our w
ork
whe
re w
e ha
ve id
entif
ied
a lo
cal r
isk
that
is re
leva
nt to
them
. For
any
re
sidu
al a
udit
risks
that
rela
te to
issu
es n
ot c
over
ed b
yon
e of
thes
e to
ols,
we
will
dev
elop
an
appr
opria
te a
udit
appr
oach
dra
win
g on
the
deta
iled
VFM
gui
danc
e an
d ot
her s
ourc
es o
f inf
orm
atio
n.
Con
clud
ing
on V
FM
arra
ngem
ents
At th
e co
nclu
sion
of t
he V
FM a
udit
we
will
con
side
r the
resu
lts o
f the
wor
k un
derta
ken
and
asse
ss th
e as
sura
nce
obta
ined
aga
inst
eac
h of
the
VFM
them
es re
gard
ing
the
adeq
uacy
of t
he A
utho
rity’
s ar
rang
emen
ts fo
r sec
urin
g ec
onom
y, e
ffici
ency
and
effe
ctiv
enes
s in
the
use
of re
sour
ces.
If an
y is
sues
are
iden
tifie
d th
at m
ay b
e si
gnifi
cant
to th
is a
sses
smen
t, an
d in
par
ticul
ar if
ther
e ar
e is
sues
that
in
dica
te w
e m
ay n
eed
to c
onsi
der q
ualif
ying
our
VFM
con
clus
ion,
we
will
dis
cuss
thes
e w
ith m
anag
emen
t as
soon
as
pos
sibl
e. S
uch
issu
es w
ill a
lso
be c
onsi
dere
d m
ore
wid
ely
as p
art o
f KPM
G’s
qua
lity
cont
rol p
roce
sses
, to
help
en
sure
the
cons
iste
ncy
of a
udito
rs’ d
ecis
ions
.
Rep
ortin
gW
e ha
ve c
ompl
eted
our
initi
al V
FM ri
sk a
sses
smen
t and
hav
e no
t ide
ntifi
ed a
ny s
peci
fic k
ey is
sues
.
We
are
awar
e of
the
finan
cial
and
ope
ratio
nal p
ress
ures
that
you
are
dea
ling
with
. At p
rese
nt, w
e co
nsid
er th
at w
e w
ill b
e ab
le to
obt
ain
the
assu
ranc
es th
at w
e ne
ed to
fulfi
l our
resp
onsi
bilit
ies
for t
he V
FM c
oncl
usio
n fro
m o
ur
stan
dard
pro
gram
me
of w
ork.
We
will
upd
ate
our a
sses
smen
t thr
ough
out t
he y
ear s
houl
d an
y is
sues
pre
sent
th
emse
lves
and
repo
rt ag
ains
t the
se in
our
ISA2
60.
We
will
repo
rt on
the
resu
lts o
f the
VFM
aud
it th
roug
h ou
r IS
A 2
60 R
epor
t. Th
is w
ill s
umm
aris
e an
y sp
ecifi
c m
atte
rs
aris
ing,
and
the
basi
s fo
r our
ove
rall
conc
lusi
on.
The
key
outp
ut fr
om th
e w
ork
will
be
the
VFM
con
clus
ion
(i.e.
our
opi
nion
on
the
Auth
ority
’s a
rrang
emen
ts fo
r se
curin
g VF
M),
whi
ch fo
rms
part
of o
ur a
udit
repo
rt.
43
15©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
six
Audi
t tea
m
Your
aud
it te
am h
as b
een
draw
n fr
om o
ur s
peci
alis
t pu
blic
sec
tor a
ssur
ance
de
part
men
t. O
ur a
udit
team
ha
ve b
een
refr
eshe
d fr
om
last
yea
r’s a
udit,
with
a n
ew
Ass
ista
nt M
anag
er.
Con
tact
det
ails
are
sho
wn
on p
age
1.
The
audi
t tea
m w
ill b
e as
sist
ed b
y ot
her K
PMG
sp
ecia
lists
as
nece
ssar
y.
“My
role
is to
lead
our
te
am a
nd e
nsur
e th
e de
liver
y of
a h
igh
qual
ity
exte
rnal
aud
it op
inio
n. I
will
be
the
mai
n po
int o
f co
ntac
t for
the
Audi
t and
Ac
coun
ts C
omm
ittee
an
d C
orpo
rate
D
irect
ors.
”
“I am
resp
onsi
ble
for t
he
man
agem
ent,
revi
ew
and
deliv
ery
of th
e w
hole
aud
it an
d pr
ovid
ing
qual
ity
assu
ranc
e fo
r any
te
chni
cal a
ccou
ntin
g ar
eas.
I w
ill w
ork
clos
ely
with
the
Dire
ctor
to
ensu
re w
e ad
d va
lue.
”
John
Cor
nett
Dire
ctor
Hel
en B
rook
es
Man
ager
“I w
ill b
e re
spon
sibl
e fo
r th
e on
-site
del
iver
y of
ou
r wor
k an
d w
ill
supe
rvis
e th
e w
ork
of
our a
udit
assi
stan
ts.”
Sund
eep
Gill
Ass
ista
nt M
anag
er
44
16©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
six
Audi
t del
iver
able
s
At t
he e
nd o
f eac
h st
age
of
our a
udit
we
issu
e ce
rtai
n de
liver
able
s, in
clud
ing
repo
rts
and
opin
ions
.
Our
key
del
iver
able
s w
ill b
e de
liver
ed to
a h
igh
stan
dard
an
d on
tim
e.
We
will
dis
cuss
and
agr
ee a
s ap
prop
riate
eac
h re
port
with
th
e A
utho
rity’
s of
ficer
s pr
ior
to p
ublic
atio
n.
Del
iver
able
Purp
ose
Com
mitt
ee d
ates
Plan
ning
Exte
rnal
Aud
it Pl
an■
Out
lines
our
aud
it ap
proa
ch.
■Id
entif
ies
area
s of
aud
it fo
cus
and
plan
ned
proc
edur
es.
Apr
il 20
15
Con
trol
eva
luat
ion
and
subs
tant
ive
proc
edur
es
Rep
ort t
o Th
ose
Cha
rged
with
G
over
nanc
e (IS
A 2
60
Rep
ort)
■D
etai
ls c
ontro
l and
pro
cess
issu
es.
■D
etai
ls th
e re
solu
tion
of k
ey a
udit
issu
es.
■C
omm
unic
ates
adj
uste
d an
d un
adju
sted
aud
it di
ffere
nces
.
■H
ighl
ight
s pe
rform
ance
impr
ovem
ent r
ecom
men
datio
ns id
entif
ied
durin
g ou
r aud
it.
■C
omm
ents
on
the
Auth
ority
’s v
alue
for m
oney
arra
ngem
ents
.
Sept
embe
r 201
5
Com
plet
ion
Aud
itor’s
Rep
ort
■Pr
ovid
es a
n op
inio
n on
you
r acc
ount
s (in
clud
ing
the
Annu
al G
over
nanc
e St
atem
ent).
■C
oncl
udes
on
the
arra
ngem
ents
in p
lace
for s
ecur
ing
econ
omy,
effi
cien
cy a
nd
effe
ctiv
enes
s in
you
r use
of r
esou
rces
(the
VFM
con
clus
ion)
.
Sept
embe
r 201
5
Who
le o
f Gov
ernm
ent
Acc
ount
s■
Prov
ide
our a
ssur
ance
sta
tem
ent o
n th
e Au
thor
ity’s
WG
A pa
ck s
ubm
issi
on.
Sept
embe
r 201
5
Ann
ual A
udit
Lette
r■
Sum
mar
ises
the
outc
omes
and
the
key
issu
es a
risin
g fro
m o
ur a
udit
wor
k fo
r the
yea
r.N
ovem
ber 2
015
Gra
nt C
ertif
icat
e Le
tter
■Su
mm
aris
es th
e ou
tcom
es a
nd th
e ke
y is
sues
aris
ing
from
our
gra
nt w
ork
for t
he
year
.Ja
nuar
y 20
16
45
17©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
six
Audi
t tim
elin
e
We
will
be
in c
ontin
uous
di
alog
ue w
ith y
ou
thro
ugho
ut th
e au
dit.
Key
form
al in
tera
ctio
ns w
ith
the
Aud
it an
d A
ccou
nts
Com
mitt
ee a
re:
■A
pril
2015
-Ext
erna
l A
udit
Plan
;
■Se
ptem
ber -
ISA
260
R
epor
t;
■N
ovem
ber -
Ann
ual A
udit
Lette
r.
We
wor
k w
ith th
e fin
ance
te
am a
nd in
tern
al a
udit
thro
ugho
ut th
e ye
ar.
Our
mai
n w
ork
on s
ite w
ill
beou
r:
■In
terim
aud
it vi
sits
dur
ing
Mar
ch 2
015.
■Fi
nal a
ccou
nts
audi
t du
ring
July
201
5.
Reg
ular
mee
tings
bet
wee
n th
e En
gage
men
t Lea
d an
d th
e C
hief
Exe
cutiv
e an
d D
irect
or o
f Res
ourc
es
Audit workflowCommunication
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Dec
Oct
Nov
Pres
enta
tion
of
the
Exte
rnal
A
udit
Plan
8thA
pril
2015
Pres
enta
tion
of th
e IS
A26
0 R
epor
t
Pres
enta
tion
of
the
Ann
ual A
udit
Lette
r
Con
tinuo
us li
aiso
n w
ith th
e fin
ance
team
and
inte
rnal
aud
it
Inte
rim a
udit
visi
tFi
nal a
ccou
nts
visi
t
Con
trol
ev
alua
tion
Aud
it pl
anni
ngSu
bsta
ntiv
e pr
oced
ures
Com
plet
ion
Key:
Au
dit a
nd A
ccou
nts
Com
mitt
ee m
eetin
gs.
Ben
efit
Test
ing/
Gra
nt
wor
k
46
18©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Sect
ion
six
Audi
t fee
The
fee
for t
he 2
014/
15 a
udit
of th
e A
utho
rity
is £
64,4
38.
The
fee
has
chan
ged
from
th
at s
et o
ut in
our
Aud
it Fe
e Le
tter 2
014/
15 is
sued
in A
pril
2014
bec
ause
of a
n up
lift o
f £9
00 fo
r NN
DR
wor
k.
Our
aud
it fe
e re
mai
ns
indi
cativ
e an
d ba
sed
on y
ou
mee
ting
our e
xpec
tatio
ns o
f yo
ur s
uppo
rt.
Mee
ting
thes
e ex
pect
atio
ns
will
hel
p th
e de
liver
y of
our
au
dit w
ithin
the
prop
osed
au
dit f
ee
Aud
it fe
e
Our
Aud
it Fe
e Le
tter 2
014/
15se
nt to
you
in A
pril
2014
firs
t set
out
our
fe
es fo
r the
201
4/15
aud
it. T
he p
lann
ed a
udit
fee
for 2
014/
15 is
£6
4,43
8, (£
63,5
38 in
201
3/14
) and
this
refle
cts
an in
crea
se o
f £90
0 fo
r ad
ditio
nal w
ork
arou
nd th
e N
ND
R a
s w
e ar
e no
long
er re
quire
d to
aud
it th
e N
ND
R (L
A01)
cla
im.
Our
aud
it fe
e in
clud
es o
ur w
ork
on th
e VF
M c
oncl
usio
n an
d ou
r aud
it of
th
e Au
thor
ity’s
fina
ncia
l sta
tem
ents
.
Aud
it fe
e as
sum
ptio
ns
The
fee
is b
ased
on
a nu
mbe
r of a
ssum
ptio
ns, i
nclu
ding
that
you
will
pr
ovid
e us
with
com
plet
e an
d m
ater
ially
acc
urat
e fin
anci
al s
tate
men
ts,
with
goo
d qu
ality
sup
porti
ng w
orki
ng p
aper
s, w
ithin
agr
eed
timef
ram
es.
It is
impe
rativ
e th
at y
ou a
chie
ve th
is. I
f thi
s is
not
the
case
and
we
have
to
com
plet
e m
ore
wor
k th
an w
as e
nvis
aged
, we
will
nee
d to
cha
rge
addi
tiona
l fee
s fo
r thi
s w
ork.
In s
ettin
g th
e fe
e, w
e ha
ve a
ssum
ed:
■th
e le
vel o
f ris
k in
rela
tion
to th
e au
dit o
f the
fina
ncia
l sta
tem
ents
is
not s
igni
fican
tly d
iffer
ent f
rom
that
iden
tifie
d fo
r 201
3/14
;
■yo
u w
ill in
form
us
of a
ny s
igni
fican
t dev
elop
men
ts im
pact
ing
on o
ur
audi
t;
■yo
u w
ill id
entif
y an
d im
plem
ent a
ny c
hang
es re
quire
d un
der t
he
CIP
FA C
ode
of P
ract
ice
on L
ocal
Aut
horit
y A
ccou
ntin
g in
the
UK
20
14/1
5 w
ithin
you
r 201
4/15
fin
anci
al s
tate
men
ts;
■yo
u w
ill c
ompl
y w
ith th
e ex
pect
atio
ns s
et o
ut in
our
Acc
ount
s A
udit
Pro
toco
l, in
clud
ing:
–th
e fin
anci
al s
tate
men
ts a
re m
ade
avai
labl
e fo
r aud
it in
line
with
th
e ag
reed
tim
esca
les;
–go
od q
ualit
y w
orki
ng p
aper
s an
d re
cord
s w
ill b
e pr
ovid
ed a
t the
st
art o
f the
fina
l acc
ount
s au
dit;
–re
ques
ted
info
rmat
ion
will
be
prov
ided
with
in th
e ag
reed
t im
esca
les;
–pr
ompt
resp
onse
s w
ill b
e pr
ovid
ed to
que
ries
and
draf
t rep
orts
;
■in
tern
al a
udit
mee
ts a
ppro
pria
te p
rofe
ssio
nal s
tand
ards
;
■in
tern
al a
udit
adhe
res
to o
ur jo
int w
orki
ng p
roto
col a
nd c
ompl
etes
ap
prop
riate
wor
k on
all
syst
ems
that
pro
vide
mat
eria
l fig
ures
for t
he
finan
cial
sta
tem
ents
and
we
can
plac
e re
lianc
e on
them
for o
ur
audi
t; an
d
■ad
ditio
nal w
ork
will
not
be
requ
ired
to a
ddre
ss q
uest
ions
or
obje
ctio
ns ra
ised
by
loca
l gov
ernm
ent e
lect
ors
or fo
r spe
cial
in
vest
igat
ions
suc
h as
thos
e ar
isin
g fro
m d
iscl
osur
es u
nder
the
Publ
ic In
tere
st D
iscl
osur
e Ac
t 199
8.
Mee
ting
thes
e ex
pect
atio
ns w
ill h
elp
ensu
re th
e de
liver
y of
our
aud
it w
ithin
the
agre
ed a
udit
fee.
The
Audi
t Com
mis
sion
requ
ires
us to
info
rm y
ou o
f spe
cific
act
ions
you
co
uld
take
toke
ep th
e au
dit f
ee lo
w. F
utur
e au
dit f
ees
can
be k
ept t
o a
min
imum
if th
e Au
thor
ity a
chie
ves
an e
ffici
ent a
nd w
ell-c
ontro
lled
finan
cial
clo
sedo
wn
and
acco
unts
pro
duct
ion
proc
ess
whi
ch c
ompl
ies
with
goo
d pr
actic
e an
d ap
prop
riate
ly a
ddre
sses
new
acc
ount
ing
deve
lopm
ents
and
risk
are
as.
Cha
nges
to th
e au
dit p
lan
Cha
nges
to th
is p
lan
and
the
audi
t fee
may
be
nece
ssar
y if:
■ne
w s
igni
fican
t aud
it ris
ks e
mer
ge;
■ad
ditio
nal w
ork
is re
quire
d of
us
by th
e Au
dit C
omm
issi
on o
r oth
er
r egu
lato
rs; a
nd
■ad
ditio
nal w
ork
is re
quire
d as
a re
sult
of c
hang
es in
legi
slat
ion,
pr
ofes
sion
al s
tand
ards
or f
inan
cial
repo
rting
requ
irem
ents
.
If ch
ange
s to
this
pla
n an
d th
e au
dit f
ee a
re re
quire
d, w
e w
ill d
iscu
ss
and
agre
e th
ese
initi
ally
with
the
Dire
ctor
of R
esou
rces
.
47
19©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Appe
ndic
esAp
pend
ix 1
: Ind
epen
denc
e an
d ob
ject
ivity
req
uire
men
ts
This
App
endi
x su
mm
aris
es
audi
tors
’ res
pons
ibili
ties
rega
rdin
g in
depe
nden
ce a
nd
obje
ctiv
ity.
Inde
pend
ence
and
obj
ectiv
ityAu
dito
rs a
re re
quire
d by
the
Cod
e to
: ■
carry
out
thei
r wor
k w
ith in
depe
nden
ce a
nd o
bjec
tivity
;■
exer
cise
thei
r pro
fess
iona
l jud
gem
ent a
nd a
ct in
depe
nden
tly o
f bot
h th
e C
omm
issi
on a
nd th
e au
dite
d bo
dy;
■m
aint
ain
an o
bjec
tive
attit
ude
at a
ll tim
es a
nd n
ot a
ct in
any
way
t h
at m
ight
giv
e ris
e to
, or b
e pe
rcei
ved
to g
ive
rise
to, a
con
flict
of
inte
rest
; and
■re
sist
any
impr
oper
atte
mpt
to in
fluen
ce th
eir j
udge
men
t in
the
c ond
uct o
f the
aud
it.In
add
ition
, the
Cod
e sp
ecifi
es th
at a
udito
rs s
houl
d no
t car
ry o
ut w
ork
for a
n au
dite
d bo
dy th
at d
oes
not r
elat
e di
rect
ly to
the
disc
harg
e of
the
audi
tors
’ fun
ctio
ns u
nder
the
Cod
e. If
the
Auth
ority
invi
tes
us to
car
ry
out r
isk-
base
d w
ork
in a
par
ticul
ar a
rea,
whi
ch c
anno
t oth
erw
ise
be
just
ified
to s
uppo
rt ou
r aud
it co
nclu
sion
s, it
will
be
clea
rly d
iffer
entia
ted
as w
ork
carri
ed o
ut u
nder
sec
tion
35 o
f the
Aud
it C
omm
issi
on A
ct
1998
.Th
e C
ode
also
sta
tes
that
the
Com
mis
sion
issu
es g
uida
nce
unde
r its
po
wer
s to
app
oint
aud
itors
and
to d
eter
min
e th
eir t
erm
s of
ap
poin
tmen
t. Th
e St
andi
ng G
uida
nce
for A
udito
rs in
clud
es s
ever
al
refe
renc
es to
arra
ngem
ents
des
igne
d to
sup
port
and
rein
forc
e th
e re
quire
men
ts re
latin
g to
inde
pend
ence
, whi
ch a
udito
rs m
ust c
ompl
y w
ith. T
hese
are
as
follo
ws:
■Au
dito
rs a
nd s
enio
r mem
bers
of t
heir
staf
f who
are
dire
ctly
invo
lved
i n
the
man
agem
ent,
supe
rvis
ion
or d
eliv
ery
of C
omm
issi
on-re
late
d w
ork,
and
sen
ior m
embe
rs o
f the
ir au
dit t
eam
s sh
ould
not
take
par
t in
pol
itica
l act
ivity
.■
No
mem
ber o
r em
ploy
ee o
f the
firm
sho
uld
acce
pt o
r hol
d an
ap
poi n
tmen
t as
a m
embe
r of a
n au
dite
d bo
dy w
hose
aud
itor i
s, o
r is
pro
pose
d to
be,
from
the
sam
e fir
m. I
n ad
ditio
n, n
o m
embe
r or
empl
oyee
of t
he fi
rm s
houl
d ac
cept
or h
old
such
app
oint
men
ts a
t re
late
d bo
dies
, suc
h as
thos
e lin
ked
to th
e au
dite
d bo
dy th
roug
h a
stra
tegi
c pa
rtner
ship
.
■Au
dit s
taff
are
expe
cted
not
to a
ccep
t app
oint
men
ts a
s G
over
nors
at
cer
tain
type
s of
sch
ools
with
in th
e lo
cal a
utho
rity.
■Au
dito
rs a
nd th
eir s
taff
shou
ld n
ot b
e em
ploy
ed in
any
cap
acity
( w
heth
er p
aid
or u
npai
d) b
y an
aud
ited
body
or o
ther
org
anis
atio
n pr
ovid
ing
serv
ices
to a
n au
dite
d bo
dy w
hils
t bei
ng e
mpl
oyed
by
the
firm
.■
Firm
s ar
e ex
pect
ed to
com
ply
with
the
requ
irem
ents
of t
he
Com
mis
sion
's p
roto
cols
on
prov
isio
n of
per
sona
l fin
anci
al o
r tax
ad
vice
to c
erta
in s
enio
r ind
ivid
uals
at a
udite
d bo
dies
, ind
epen
denc
e co
nsid
erat
ions
in re
latio
n to
pro
cure
men
t of s
ervi
ces
at a
udite
d bo
dies
, and
are
a w
ide
inte
rnal
aud
it w
ork.
■Au
dito
rs a
ppoi
nted
by
the
Com
mis
sion
sho
uld
not a
ccep
t en
gage
men
ts w
hich
invo
lve
com
men
ting
on th
e pe
rform
ance
of
othe
r Com
mis
sion
aud
itors
on
Com
mis
sion
wor
k w
ithou
t firs
t co
nsul
ting
the
Com
mis
sion
.■
Audi
tors
are
exp
ecte
d to
com
ply
with
the
Com
mis
sion
’s p
olic
y fo
r t h
e En
gage
men
t Lea
d to
be
chan
ged
on a
per
iodi
c ba
sis.
■Au
dit s
uppl
iers
are
requ
ired
to o
btai
n th
e C
omm
issi
on’s
writ
ten
appr
oval
prio
r to
chan
ging
any
Eng
agem
ent L
ead
in re
spec
t of
each
aud
ited
body
.■
Cer
tain
oth
er s
taff
chan
ges
or a
ppoi
ntm
ents
requ
ire p
ositi
ve a
ctio
n t o
be
take
n by
Firm
s as
set
out
in th
e st
andi
ng g
uida
nce.
48
20©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Appe
ndic
es
Appe
ndix
2: K
PMG
Aud
it Q
ualit
y Fr
amew
ork
At K
PMG
we
cons
ider
aud
it qu
ality
is n
ot ju
st a
bout
reac
hing
the
right
op
inio
n, b
ut h
ow w
e re
ach
that
opi
nion
. KPM
G v
iew
s th
e ou
tcom
e of
a
qual
ity a
udit
as th
e de
liver
y of
an
appr
opria
te a
nd in
depe
nden
t opi
nion
in
com
plia
nce
with
the
audi
ting
stan
dard
s. It
is a
bout
the
proc
esse
s,
thou
ght a
nd in
tegr
ity b
ehin
d th
e au
dit r
epor
t. Th
is m
eans
, abo
ve a
ll,
bein
g in
depe
nden
t, co
mpl
iant
with
our
lega
l and
pro
fess
iona
l re
quire
men
ts, a
nd o
fferin
g in
sigh
t and
impa
rtial
adv
ice
to
you
, our
clie
nt.
KPM
G’s
Aud
it Q
ualit
y Fr
amew
ork
cons
ists
of
se
ven
key
driv
ers
com
bine
d w
ith th
e
com
mitm
ent o
f eac
h in
divi
dual
in K
PMG
. We
use
our s
even
driv
ers
of a
udit
qual
ity to
ar
ticul
ate
wha
t aud
it qu
ality
mea
ns to
KPM
G.
We
belie
ve it
is im
porta
nt to
be
trans
pare
nt
abou
t the
pro
cess
es th
at s
it be
hind
a K
PMG
au
dit r
epor
t, so
you
can
hav
e ab
solu
te
conf
iden
ce in
us
and
in th
e qu
ality
of o
ur a
udit.
Tone
at t
he to
p: W
e m
ake
it cl
ear t
hat a
udit
qu
ality
is p
art o
f our
cul
ture
and
val
ues
and
th
eref
ore
non-
nego
tiabl
e. T
one
at th
e to
p is
the
umbr
ella
that
cov
ers
all t
he d
rives
of q
ualit
y th
roug
h
a
focu
sed
and
cons
iste
nt v
oice
. Joh
n C
orne
ttas
the
Enga
gem
ent L
ead
sets
the
tone
on
the
audi
t and
lead
s by
exam
ple
with
a c
lear
ly a
rticu
late
d au
dit s
trate
gy a
nd c
omm
its a
si
gnifi
cant
pro
porti
on o
f his
tim
e th
roug
hout
the
audi
t dire
ctin
g an
d su
ppor
ting
the
team
.A
ssoc
iatio
n w
ith ri
ght c
lient
s: W
e un
derta
ke ri
goro
us c
lient
and
en
gage
men
t acc
epta
nce
and
cont
inua
nce
proc
edur
es w
hich
are
vita
l to
the
abili
ty o
f KPM
G to
pro
vide
hig
h-qu
ality
pro
fess
iona
l ser
vice
s to
our
cl
ient
s.C
lear
sta
ndar
ds a
nd ro
bust
aud
it to
ols:
We
expe
ct o
ur a
udit
prof
essi
onal
s to
adh
ere
to th
e cl
ear s
tand
ards
we
set a
nd w
e pr
ovid
e a
rang
e of
tool
s to
sup
port
them
in m
eetin
g th
ese
expe
ctat
ions
. The
gl
obal
rollo
ut o
f KPM
G’s
eAu
dIT
appl
icat
ion
has
sign
ifica
ntly
enh
ance
d
exis
ting
audi
t fun
ctio
nalit
y. e
AudI
T en
able
s KP
MG
to d
eliv
er a
hig
hly
tech
nica
lly e
nabl
ed a
udit.
All
of o
ur s
taff
have
a s
earc
habl
e da
ta b
ase,
Ac
coun
ting
Res
earc
h O
nlin
e, th
at in
clud
es a
ll pu
blis
hed
acco
untin
g
stan
dard
s, th
e KP
MG
Aud
it M
anua
l Gui
danc
e as
wel
l as
othe
r rel
evan
t se
ctor
spe
cific
pub
licat
ions
, suc
h as
the
Audi
t Com
mis
sion
’s C
ode
of
Au
dit P
ract
ice.
Rec
ruitm
ent,
deve
lopm
ent a
nd a
ssig
nmen
t of
appr
opria
tely
qua
lifie
d pe
rson
nel:
One
of t
he k
ey
driv
ers
of a
udit
qual
ity is
ass
igni
ng p
rofe
ssio
nals
ap
prop
riate
to th
e Au
thor
ity’s
risk
s. W
e ta
ke
grea
t car
e to
ass
ign
the
right
peo
ple
to th
erig
ht c
lient
s ba
sed
on a
num
ber o
f
fa
ctor
s in
clud
ing
thei
r ski
ll se
t, ca
paci
tyan
d re
leva
nt e
xper
ienc
e.
We
have
a w
ell d
evel
oped
tech
nica
l in
frast
ruct
ure
acro
ss th
e fir
m th
at p
uts
us in
a
stro
ng p
ositi
on to
dea
l with
any
em
ergi
ngis
sues
. Thi
s in
clud
es:
-A n
atio
nal p
ublic
sec
tor t
echn
ical
dire
ctor
w
ho h
as re
spon
sibi
lity
for c
o-or
dina
ting
our
resp
onse
to e
mer
ging
acc
ount
ing
issu
es,
influ
enci
ng a
ccou
ntin
g bo
dies
(suc
h as
C
IPFA
) as
wel
l as
actin
g as
a s
ound
ing
boar
d fo
r our
aud
itors
.
-A n
atio
nal t
echn
ical
net
wor
k of
pub
lic s
ecto
r aud
it pr
ofes
sion
als
is
esta
blis
hed
that
mee
ts o
n a
mon
thly
bas
is a
nd is
cha
ired
by o
ur
natio
nal t
echn
ical
dire
ctor
.
-A d
edic
ated
Dep
artm
ent o
f Pro
fess
iona
l Pra
ctic
e co
mpr
ised
of o
ver
100
s taf
f tha
t pro
vide
sup
port
to o
ur a
udit
team
s an
d de
liver
our
web
-ba
sed
quar
terly
tech
nica
l tra
inin
g.
We
cont
inua
lly fo
cus
on
deliv
erin
g a
high
qua
lity
audi
t.
This
mea
ns b
uild
ing
robu
st
qual
ity c
ontr
ol p
roce
dure
s in
to th
e co
re a
udit
proc
ess
rath
er th
an b
oltin
g th
em o
n at
the
end,
and
em
bedd
ing
the
right
atti
tude
and
ap
proa
ches
into
m
anag
emen
t and
sta
ff.
KPM
G’s
Aud
it Q
ualit
y Fr
amew
ork
cons
ists
of
seve
n ke
y dr
iver
s co
mbi
ned
with
the
com
mitm
ent o
f eac
h in
divi
dual
in K
PMG
.
The
diag
ram
sum
mar
ises
ou
r app
roac
h an
d ea
ch le
vel
is e
xpan
ded
upon
.
49
21©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
Appe
ndic
es
Appe
ndix
2: K
PMG
Aud
it Q
ualit
y Fr
amew
ork
Com
mitm
ent t
o te
chni
cal e
xcel
lenc
e an
d qu
ality
ser
vice
del
iver
y:
Our
pro
fess
iona
ls b
ring
you
up-t
he-m
inut
e an
d ac
cura
te te
chni
cal
solu
tions
and
toge
ther
with
our
spe
cial
ists
are
cap
able
of s
olvi
ng
com
plex
aud
it is
sues
and
del
iver
ing
valu
ed in
sigh
ts.
Our
aud
it te
am d
raw
s up
on s
peci
alis
t res
ourc
es in
clud
ing
Fore
nsic
, C
orpo
rate
Fin
ance
, Tra
nsac
tion
Serv
ices
, Adv
isor
y, T
axat
ion,
Act
uaria
l an
d IT
. We
prom
ote
tech
nica
l exc
elle
nce
and
qual
ity s
ervi
ce d
eliv
ery
thro
ugh
train
ing
and
accr
edita
tion,
dev
elop
ing
busi
ness
und
erst
andi
ng
and
sect
or k
now
ledg
e, in
vest
men
t in
tech
nica
l sup
port,
dev
elop
men
t of
spec
ialis
t net
wor
ks a
nd e
ffect
ive
cons
ulta
tion
proc
esse
s.
Perf
orm
ance
of e
ffect
ive
and
effic
ient
aud
its: W
e un
ders
tand
that
ho
w a
n au
dit i
s co
nduc
ted
is a
s im
porta
nt a
s th
e fin
al re
sult.
Our
dr
iver
s of
aud
it qu
ality
max
imis
e th
e pe
rform
ance
of t
he e
ngag
emen
t te
am d
urin
g th
e co
nduc
t of e
very
aud
it. W
e ex
pect
our
peo
ple
to
dem
onst
rate
cer
tain
key
beh
avio
rs in
the
perfo
rman
ce o
f effe
ctiv
e an
d ef
ficie
nt a
udits
.The
key
beh
avio
rs th
at o
ur a
udito
rs a
pply
thro
ugho
ut
the
audi
t pro
cess
to d
eliv
er e
ffect
ive
and
effic
ient
aud
its a
re o
utlin
ed
belo
w:
■tim
ely
Enga
gem
ent L
ead
and
man
ager
invo
lvem
ent;
■cr
itica
l ass
essm
ent o
f aud
it ev
iden
ce;
■ex
erci
se o
f pro
fess
iona
l jud
gmen
t and
pro
fess
iona
l sce
ptic
ism
;■
ongo
ing
men
torin
g an
d on
the
job
coac
hing
, sup
ervi
sion
and
r e
view
;■
appr
opria
tely
sup
porte
d an
d do
cum
ente
d co
nclu
sion
s;■
if re
leva
nt, a
ppro
pria
te in
volv
emen
t of t
he E
ngag
emen
t Qua
lity
Con
trol r
evie
wer
(EQ
C re
view
);■
clea
r rep
ortin
g of
sig
nific
ant f
indi
ngs;
■in
sigh
tful,
open
and
hon
est t
wo-
way
com
mun
icat
ion
with
thos
e c h
arge
d w
ith g
over
nanc
e; a
nd■
clie
nt c
onfid
entia
lity,
info
rmat
ion
secu
rity
and
data
priv
acy.
Com
mitm
ent t
o co
ntin
uous
impr
ovem
ent:
We
empl
oy a
bro
ad
rang
e of
mec
hani
sms
to m
onito
r our
per
form
ance
, res
pond
to fe
edba
ck
and
unde
rsta
nd o
ur o
ppor
tuni
ties
for i
mpr
ovem
ent.
Our
qua
lity
revi
ew re
sults
We
are
able
to e
vide
nce
the
qual
ity o
f our
aud
its th
roug
h th
e re
sults
of
Audi
t Com
mis
sion
revi
ews.
The
Aud
it C
omm
issi
on p
ublis
hes
info
rmat
ion
on th
e qu
ality
of w
ork
prov
ided
by
KPM
G (a
nd a
ll ot
her
firm
s) fo
r aud
its u
nder
take
n on
beh
alf o
f the
m (h
ttp://
ww
w.a
udit-
com
mis
sion
.gov
.uk/
audi
t-reg
ime/
audi
t-qua
lity-
revi
ew-
prog
ram
me/
prin
cipa
l-aud
its/k
pmg-
audi
t-qua
lity)
.
The
late
st A
nnua
l Reg
ulat
ory
Com
plia
nce
and
Qua
lity
Rep
ort (
issu
ed
June
201
4) s
how
ed th
at w
e ar
e m
eetin
g th
e Au
dit C
omm
issi
on’s
ov
eral
l aud
it qu
ality
and
regu
larit
y co
mpl
ianc
e re
quire
men
ts.
We
cont
inua
lly fo
cus
on
deliv
erin
g a
high
qua
lity
audi
t.
This
mea
ns b
uild
ing
robu
st
qual
ity c
ontr
ol p
roce
dure
s in
to th
e co
re a
udit
proc
ess
rath
er th
an b
oltin
g th
em o
n at
the
end,
and
em
bedd
ing
the
right
atti
tude
and
ap
proa
ches
into
m
anag
emen
t and
sta
ff.
Qua
lity
mus
t bui
ld o
n th
e fo
unda
tions
of w
ell t
rain
ed
staf
f and
a ro
bust
m
etho
dolo
gy.
50
22©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
■R
evie
w o
f acc
ount
ing
polic
ies.
■R
esul
ts o
f ana
lytic
al
proc
edur
es.
■Pr
oced
ures
to id
entif
y fra
ud
risk
fact
ors.
■D
iscu
ssio
n am
ongs
t en
gage
men
t per
sonn
el.
■En
quiri
es o
f man
agem
ent,
Audi
t and
Acc
ount
s C
omm
ittee
and
othe
rs.
■Ev
alua
te c
ontro
ls th
at
prev
ent,
dete
r and
det
ect
fraud
.
KPM
G’s
iden
tific
atio
nof
fraud
risk
fact
ors
■Ac
coun
ting
polic
y as
sess
men
t.
■Ev
alua
te d
esig
n of
m
itiga
ting
cont
rols
.
■Te
st e
ffect
iven
ess
of
cont
rols
.
■Ad
dres
s m
anag
emen
t ov
errid
e of
con
trols
.
■Pe
rform
sub
stan
tive
audi
t pr
oced
ures
.
■Ev
alua
te a
ll au
dit
evid
ence
.
■C
omm
unic
ate
to A
udit
and
Acco
unts
Com
mitt
ee
and
man
agem
ent.
KPM
G’s
resp
onse
to
iden
tifie
d fra
udris
k fa
ctor
s
■W
e w
ill m
onito
r the
fo
llow
ing
area
s th
roug
hout
th
e ye
ar a
nd a
dapt
our
au
dit a
ppro
ach
acco
rdin
gly.
–R
even
ue re
cogn
ition
.
–M
anag
emen
t ove
rride
of
con
trols
.
KPM
G’s
iden
tifie
dfra
udris
kfa
ctor
s
■Ad
opt s
ound
acc
ount
ing
polic
ies.
■W
ith o
vers
ight
from
thos
e ch
arge
d w
ith g
over
nanc
e,
esta
blis
h an
d m
aint
ain
inte
rnal
con
trol,
incl
udin
g co
ntro
ls to
pre
vent
, det
er
and
dete
ct fr
aud.
■Es
tabl
ish
prop
er
tone
/cul
ture
/eth
ics.
■R
equi
re p
erio
dic
conf
irmat
ion
by e
mpl
oyee
s of
thei
r res
pons
ibilit
ies.
■Ta
ke a
ppro
pria
te a
ctio
n in
re
spon
se to
act
ual,
susp
ecte
d or
alle
ged
fraud
.
■D
iscl
ose
to A
udit
and
Acco
unts
Com
mitt
ee a
nd
audi
tors
:
–an
y si
gnifi
cant
de
ficie
ncie
s in
inte
rnal
co
ntro
ls.
–an
y fra
ud in
volv
ing
thos
e w
ith a
sig
nific
ant
role
in in
tern
al c
ontro
ls.
Mem
bers
/Offi
cers
resp
onsi
bilit
ies
Appe
ndice
sAp
pend
ix 3
: As
sess
men
toff
raud
risk
We
are
requ
ired
to c
onsi
der
frau
d an
dth
eim
pact
that
this
has
on o
urau
dit
appr
oach
.
We
will
upd
ate
ourr
isk
asse
ssm
entt
hrou
ghou
tthe
audi
tpro
cess
and
adap
tour
appr
oach
acco
rdin
gly.
51
23©
201
5 KP
MG
LLP
, a U
K lim
ited
liabi
lity
partn
ersh
ip a
nd a
mem
ber
firm
of t
he K
PMG
net
wor
k of
inde
pend
ent m
embe
r firm
s af
filia
ted
with
KPM
G In
tern
atio
nal C
oope
rativ
e (“
KPM
G In
tern
atio
nal”)
, a S
wis
s en
tity.
All
right
s re
serv
ed.
The
Aud
it C
omm
issi
on w
ill
be w
ritin
g to
aud
ited
bodi
es
and
othe
r sta
keho
lder
s in
th
e co
min
g m
onth
s w
ith
mor
e in
form
atio
n ab
out t
he
tran
sfer
of t
he C
omm
issi
on
regu
lato
ry a
nd o
ther
fu
nctio
ns.
From
1 A
pril
2015
a tr
ansi
tiona
l bod
y, P
ublic
Sec
tor A
udit
Appo
intm
ents
Lim
ited
(PSA
A), e
stab
lishe
d by
the
Loca
l Gov
ernm
ent
Asso
ciat
ion
(LG
A) a
s an
inde
pend
ent c
ompa
ny, w
ill o
vers
ee th
e C
omm
issi
on’s
aud
it co
ntra
cts
until
they
end
in 2
017
(or 2
020
if ex
tend
ed b
y D
CLG
). PS
AA’s
resp
onsi
bilit
ies
will
incl
ude
setti
ng fe
es,
appo
intin
g au
dito
rs a
nd m
onito
ring
the
qual
ity o
f aud
itors
’ wor
k. T
he
resp
onsi
bilit
y fo
r mak
ing
arra
ngem
ents
for p
ublis
hing
the
Com
mis
sion
’s v
alue
for m
oney
pro
files
tool
will
als
o tra
nsfe
r to
PSAA
.
From
1 A
pril
2015
, the
Com
mis
sion
’s o
ther
func
tions
will
tran
sfer
to
new
org
anis
atio
ns:
•re
spon
sibi
lity
for p
ublis
hing
the
stat
utor
y C
ode
of A
udit
Prac
tice
and
gui d
ance
for a
udito
rs w
ill tr
ansf
er to
the
Nat
iona
l Aud
it O
ffice
(N
AO) f
or a
udits
of t
he a
ccou
nts
from
201
5/16
;
•th
e C
omm
issi
on’s
resp
onsi
bilit
ies
for l
ocal
val
ue fo
r mon
ey s
tudi
es
will
als
o tra
nsfe
r to
the
NAO
; and
•th
e N
atio
nal F
raud
Initi
ativ
e (N
FI) w
ill tr
ansf
er to
the
Cab
inet
O
ffice
.
Appe
ndic
esAp
pend
ix 4
: Tra
nsfe
r of A
udit
Com
mis
sion
func
tions
52
© 2
015
KPM
G L
LP, a
UK
limite
d lia
bilit
y pa
rtner
ship
and
a m
embe
r firm
of t
he
KPM
G n
etw
ork
of in
depe
nden
t mem
ber f
irms
affil
iate
d w
ith K
PMG
In
tern
atio
nal C
oope
rativ
e (“K
PMG
Inte
rnat
iona
l”), a
Sw
iss
entit
y. A
ll rig
hts
rese
rved
.
The
KPM
G n
ame,
logo
and
“cut
ting
thro
ugh
com
plex
ity” a
re re
gist
ered
tra
dem
arks
or t
rade
mar
ks o
f KPM
G In
tern
atio
nal.
53
54
AUDIT & ACCOUNTS COMMITTEE AGENDA ITEM NO.8 8TH APRIL 2015 COUNTER-FRAUD ACTIVITIES FROM 1st OCTOBER 2014 TO 24TH MARCH 2015 1.0 Purpose of Report 1.1 To inform Members of counter-fraud activity undertaken since the last update reported on
5th November 2014. 2.0 Background Information 2.1 An element of the role of the Audit & Accounts Committee is to provide assurance to the
Council that its anti-fraud arrangements are operating effectively. In order to do this counter-fraud activity reports are brought to the Committee twice a year. These reports detail the number of cases detected, amounts lost, the outcome of cases and amounts recovered, together with any other counter fraud work that has been undertaken.
3.0 Counter Fraud Detection 3.1 Since the beginning of October 2014, the Council has successfully prosecuted one person
for a fraudulent benefit claim. This fraudulent claim resulted in overpayments of housing benefit of £16,434.29 and council tax benefit/support of £4,071.65. These overpayments are recoverable.
3.2 One person accepted an administration penalty for a fraudulent housing benefit claim of
£3,057.67 and council tax benefit/support of £228.90. Administration penalties are implemented where the fraud is admitted, and the person chooses to accept a penalty rather than be prosecuted, reducing officer time and costs.
3.3 Six other cases of overpayments have also been identified, totalling £14,064.67 for housing
benefit and £1,345.93 for council tax benefit/support. However, these cases were identified as errors on the part of the claimant that were not fraudulent. These overpayments are also recoverable.
3.4 The actual court costs charged to the Council since October 2014 are £7,131. These costs
relate to cases of non-payment of Council Tax, as well as to fraud cases. The Revenues and Benefits Business Unit recovers costs from claimants wherever possible.
4.0 Other Counter-Fraud Work 4.1 A counter-fraud audit was carried out early in 2015 looking at the controls in place to
manage procurement/contract fraud risks. The review confirmed that the Council has effective controls in place to manage the risks.
4.2 A county-wide single persons discount review is underway.
55
5.0 The National Fraud Initiative (NFI) 5.1 The National Fraud Initiative (NFI) is a bi-annual data-matching exercise where electronic
data is collected from numerous agencies including police authorities, local probation boards, fire and rescue authorities as well as local councils and a number of private sector bodies. The data collection is carried out by the Audit Commission and is reviewed for any matches that might reveal fraudulent activity. e.g. a record of a person’s death exists, but that person is still claiming state pension. The potential matches are sent to individual bodies for investigation to check if there is another, innocent explanation. The NFI is successful nationally.
5.2 Data was submitted for the 2014/15 exercise and possible matches have been returned.
Staff are currently working through these to determine whether they are potentially fraudulent.
6.0 Equalities Implications 6.1 There are no equality implications, as all cases of fraud and error are investigated,
regardless of the characteristics of the persons involved. 7.0 Impact on Budget/Policy Framework 7.1 Overpayments can be a serious drain on the Council's resources, whether due to fraud or
error. Work undertaken to prevent and detect fraud and error and to reclaim overpayments can support the Councils' budget at a time of funding cuts.
8.0 Comments of Director - Resources 8.1 Successful prosecution of fraudulent claims sends out a message that fraud will be
detected and action will be taken. Publicity is important as a deterrent, and training will ensure that all staff are aware of their role in preventing and detecting fraud.
8.2 The NFI data matching exercise requires resources to investigate the potential matches,
and it is a government requirement that Councils take part. 9.0 RECOMMENDATION That Members note the content of the report. Reason for Recommendations To promote a strong counter-fraud culture, it is important that Members are aware of the Council’s response to fraud and the results of any actions taken. Background Papers None For further information please contact Nicky Lovely on Ext 5317 David Dickinson Director - Resources
56
AUDIT & ACCOUNTS COMMITTEE AGENDA ITEM NO.9 8th APRIL 2015 RESPONSES TO QUESTIONS RAISED AT THE PREVIOUS MEETING REPORT PRESENTED BY: BUSINESS MANAGER – FINANCIAL SERVICES 1.0 Purpose of Report 1.1 To provide answers to questions raised at the last meeting of the Audit & Accounts
Committee. 2.0 The Committee would like to see details of the Council’s recycling performance together
with any comparison data from other neighbouring authorities. 2.1 The recycling rates for Nottinghamshire authorities in 2013/14 are shown below.
Percentage of Household Waste sent for Reuse, Recycling or Composting NSDC Ashfield Bassetlaw Broxtowe Gedling Mansfield Nottingham
City Rushcliffe
26.50% 32.9% 21.4% 40.2% 36.8% 38.1% 32.9% 51.3% 2.2 For 2013/14 the national average recycling rate was 44.2%. However, this figure includes
urban areas where the cost of waste collection is lower due to the lower cost of transport. There is also a correlation between the amount of resources an authority chooses to apply to waste collection and the level of recycling.
3.0 RECOMMENDATION
That Members consider the response provided.
Background Papers Nil For further information contact Nicky Lovely, Business Manager - Financial Services, on extension 5317. David Dickinson Director - Resources
57
58
AU
DIT
& A
CCO
UN
TS C
OM
MIT
TEE
AG
END
A IT
EM N
O.1
0 8
APR
IL 2
015
WO
RK P
LAN
M
eeti
ng a
t w
hich
ac
tion
to
be
unde
rtak
en
Subj
ect
and
Brie
f Des
crip
tion
W
ho w
ill p
rese
nt t
he r
epor
tIn
tend
ed O
utco
me
11th
Feb
ruar
y 20
15
Trea
sury
Per
form
ance
Rep
ort
Ta
ra B
eesl
eyG
ain
assu
ranc
e th
at tr
easu
ry m
anag
emen
t ac
tiviti
es a
re in
line
with
the
curr
ent
Trea
sury
Man
agem
ent S
trat
egy
D
raft
Tre
asur
y St
rate
gy
Tara
Bee
sley
Gai
n as
sura
nce
that
ris
ks in
rel
atio
n to
the
Coun
cil’s
trea
sury
man
agem
ent a
ctiv
ities
are
to
be
man
aged
in a
ccor
danc
e w
ith n
eed
and
the
Coun
cil’s
ris
k ap
petit
e
Inte
rnal
Aud
it P
rogr
ess
Repo
rt
Lucy
Ple
dge/
John
Ske
tchl
ey
(Aud
it L
incs
) U
nder
stan
d th
e le
vel o
f ass
uran
ce fo
r au
dite
d ac
tivit
ies
and
ensu
re m
anag
emen
t pr
ogre
ss r
ecom
men
ded
actio
ns to
miti
gate
id
entif
ied
risk
s
Dra
ft A
nnua
l Int
erna
l Aud
it P
lan
2014
/15
Lucy
Ple
dge/
John
Ske
tchl
ey
(Aud
it L
incs
) En
sure
that
an
appr
opri
ate
plan
is in
pla
ce
whi
ch w
ill p
rovi
de a
ssur
ance
on
the
Coun
cil’s
act
ivit
ies
Co
mbi
ned
Ass
uran
ce R
epor
tD
avid
Dic
kins
on
Und
erst
and
the
leve
l of a
ssur
ance
for
criti
cal
syst
ems,
due
dili
genc
e ac
tivi
ties,
key
ris
ks
and
proj
ects
Ex
tern
al A
udit
Pro
gres
s Re
port
Jo
hn C
orne
tt/H
elen
Bro
okes
(K
PMG
) G
ain
assu
ranc
e th
at c
laim
s an
d re
turn
s ar
e m
anag
ed a
ppro
pria
tely
Resu
lts
of t
he R
evie
w o
f th
e A
sses
smen
t of
Eff
ecti
vene
ss
of th
e In
tern
al A
udit
Fun
ctio
n N
icky
Lov
ely
Gai
n as
sura
nce
that
the
Inte
rnal
Aud
it
func
tion
is o
pera
ting
effe
ctiv
ely
and
that
an
acti
on p
lan
is in
pla
ce to
add
ress
any
re
quir
ed im
prov
emen
ts
Revi
ew o
f sig
nific
ant
gove
rnan
ce is
sues
hig
hlig
hted
in t
he
Ann
ual G
over
nanc
e St
atem
ent
Dav
id D
icki
nson
Gai
n as
sura
nce
that
the
Coun
cil i
s m
akin
g pr
ogre
ss o
n an
y go
vern
ance
issu
es th
at w
ere
rais
ed in
the
AG
S
Risk
Man
agem
ent r
epor
t Li
sa L
anca
ster
G
ain
assu
ranc
e th
at a
ppro
pria
te r
isk
man
agem
ent a
rran
gem
ents
are
in p
lace
59
St
rate
gic
Risk
Reg
iste
rLi
sa L
anca
ster
G
ain
assu
ranc
e th
at th
e Co
unci
l con
side
rs it
s st
rate
gic
risk
s an
d th
at th
ese
are
bein
g m
anag
ed e
ffec
tivel
y
Prot
ecti
ng th
e Pu
blic
Pur
se r
epor
t
Nic
ky L
ovel
yU
nder
stan
d th
e le
vel o
f fra
ud in
loca
l go
vern
men
t and
the
appr
oach
take
n to
co
unte
r it.
Ena
ble
com
pari
son
with
the
frau
d ri
sks
faci
ng N
SDC
Re
spon
ses
to q
uest
ions
rai
sed
at p
revi
ous
mee
ting
Nic
ky L
ovel
y
A
udit
Com
mit
tee
Wor
k Pr
ogra
mm
e
Dav
id D
icki
nson
8th A
pril
2015
Stat
emen
t of A
ccou
ntin
g Po
licie
s N
icol
a Pi
ckav
ance
G
ain
assu
ranc
e th
at th
e Co
unci
l has
ap
prop
riat
e ac
coun
ting
polic
ies
in p
lace
that
re
flect
the
way
item
s ar
e tr
eate
d in
the
annu
al S
tate
men
t of A
ccou
nts
Ex
tern
al A
udit
Cer
tific
atio
n of
Gra
nt C
laim
s an
d Re
turn
s Jo
hn C
orne
tt/H
elen
Bro
okes
(K
PMG
) G
ain
assu
ranc
e th
at c
laim
s an
d re
turn
s ha
ve
been
man
aged
app
ropr
iate
ly
Exte
rnal
Aud
it
Plan
for
201
4/15
Acc
ount
s an
d V
FM
Conc
lusi
on
John
Cor
nett
/Hel
en B
rook
es
(KPM
G)
Ensu
re th
at a
n ap
prop
riat
e pl
an is
in p
lace
w
hich
will
pro
vide
ass
uran
ce o
n th
e Co
unci
l’s S
tate
men
t of A
ccou
nts
and
arra
ngem
ents
to a
chie
ve V
alue
for
Mon
ey
Co
unte
r-Fr
aud
Act
ivity
Rep
ort
Nic
ky L
ovel
y
Gai
n as
sura
nce
that
cou
nter
-fra
ud a
ctiv
ity is
ap
prop
riat
ely
targ
eted
and
eff
ecti
ve
Re
spon
ses
to q
uest
ions
rai
sed
at p
revi
ous
mee
ting:
N
icky
Lov
ely
A
udit
Com
mit
tee
Wor
k Pr
ogra
mm
e
Dav
id D
icki
nson
25th
June
201
5Tr
easu
ry M
anag
emen
t Out
turn
Rep
ort
Ta
ra B
eesl
eyG
ain
assu
ranc
e th
at tr
easu
ry m
anag
emen
t ac
tiviti
es w
ere
in li
ne w
ith th
e Tr
easu
ry
Man
agem
ent S
trat
egy
for
the
past
fina
ncia
l ye
ar
IAS
19 P
ensi
on A
ssum
ptio
ns
Nic
ola
Pick
avan
ceG
ain
assu
ranc
e th
at th
e pe
nsio
n as
sum
ptio
ns u
sed
by th
e ac
tuar
y to
pro
duce
th
e fig
ures
in th
e St
atem
ent o
f Acc
ount
s ar
e ap
prop
riat
e fo
r th
e Co
unci
l’s c
ircu
mst
ance
s
60
In
tern
al A
udit
Pro
gres
s Re
port
Lu
cy P
ledg
e/Jo
hn S
ketc
hley
(Aud
it L
incs
) U
nder
stan
d th
e le
vel o
f ass
uran
ce fo
r au
dite
d ac
tivit
ies
and
ensu
re m
anag
emen
t pr
ogre
ss r
ecom
men
ded
actio
ns to
miti
gate
id
entif
ied
risk
s
Ann
ual I
nter
nal A
udit
Rep
ort
Lu
cy P
ledg
e/Jo
hn S
ketc
hley
(Aud
it L
incs
) G
ain
assu
ranc
e th
at th
e Co
unci
l’s A
nnua
l G
over
nanc
e St
atem
ent a
ccur
atel
y re
pres
ents
gov
erna
nce
arra
ngem
ents
, tha
t fu
ture
ris
ks a
re id
enti
fied
and
that
go
vern
ance
arr
ange
men
ts s
uppo
rt th
e ac
hiev
emen
t of t
he C
ounc
il’s
obje
ctiv
es
Kn
owle
dge
and
skill
s as
sess
men
t fo
r Co
mm
ittee
m
embe
rs
Nic
ky L
ovel
yEn
sure
that
the
Com
mit
tee
has
the
appr
opri
ate
skill
s
Resp
onse
s to
que
stio
ns r
aise
d at
pre
viou
s m
eetin
g:
Nic
ky L
ovel
y
A
udit
Com
mit
tee
Wor
k Pr
ogra
mm
eD
avid
Dic
kins
on
TBA
Tr
aini
ng s
essi
on o
n St
atem
ent o
f Acc
ount
sN
icol
a Pi
ckav
ance
Ensu
re th
at th
e Co
mm
itte
e ha
s th
e ap
prop
riat
e sk
ills
to b
e ab
le to
rev
iew
the
Coun
cil’s
Sta
tem
ent o
f Acc
ount
s a
nd
cons
ider
the
inte
grit
y of
fina
ncia
l rep
orti
ng
Sept
embe
r 20
15Ex
tern
al A
udit
Ann
ual G
over
nanc
e Re
port
John
Cor
nett
/Hel
en B
rook
esTo
gai
n as
sura
nce
that
the
Coun
cil’s
St
atem
ent o
f Acc
ount
s ar
e a
true
and
fair
re
pres
enta
tion
of t
he C
ounc
il’s
finan
cial
pe
rfor
man
ce fo
r th
e pr
evio
us fi
nanc
ial y
ear
and
finan
cial
sta
ndin
g as
at t
he B
alan
ce
Shee
t dat
e, a
nd th
at th
e Co
unci
l has
ef
fect
ive
arra
ngem
ents
for
achi
evin
g V
alue
fo
r M
oney
St
atem
ent o
f Acc
ount
s &
Ann
ual G
over
nanc
e St
atem
ent
D
avid
Dic
kins
on /
Nic
ola
Pick
avan
ce
Gai
n as
sura
nce
on th
e in
tegr
ity
of fi
nanc
ial
repo
rtin
g By
con
side
ring
the
assu
ranc
e ga
ined
thro
ugh
its
acti
viti
es th
roug
hout
the
prev
ious
yea
r, to
gi
ve a
ssur
ance
that
the
Coun
cil’s
Ann
ual
Gov
erna
nce
Stat
emen
t acc
urat
ely
repr
esen
ts g
over
nanc
e ar
rang
emen
ts, t
hat
futu
re r
isks
are
iden
tifie
d, a
nd th
at
61
arra
ngem
ents
in p
lace
sup
port
the
achi
evem
ent o
f the
Cou
ncil’
s ob
ject
ives
Inte
rnal
Aud
it P
rogr
ess
Repo
rt
Lucy
Ple
dge/
John
Ske
tchl
ey(A
udit
Lin
cs)
Und
erst
and
the
leve
l of a
ssur
ance
for
audi
ted
activ
itie
s an
d en
sure
man
agem
ent
prog
ress
rec
omm
ende
d ac
tions
to m
itiga
te
iden
tifie
d ri
sks
Fr
aud
Risk
Ass
essm
ent
N
icky
Lov
ely
Gai
n as
sura
nce
that
the
Coun
cil u
nder
stan
ds
its
frau
d ri
sks
and
that
act
ions
are
in p
lace
to
addr
ess
them
.
Prop
osal
s fo
r Fu
ture
Tra
inin
g fo
r th
e Co
mm
itte
eN
icky
Lov
ely
Re
spon
ses
to q
uest
ions
rai
sed
at p
revi
ous
mee
ting:
N
icky
Lov
ely
A
udit
Com
mit
tee
Wor
k Pr
ogra
mm
e
Dav
id D
icki
nson
Nov
embe
r 20
15
Trea
sury
Per
form
ance
hal
f-ye
arly
rep
ort
Ta
ra B
eesl
eyG
ain
assu
ranc
e th
at tr
easu
ry m
anag
emen
t ac
tiviti
es a
re in
line
with
the
curr
ent
Trea
sury
Man
agem
ent S
trat
egy
In
tern
al A
udit
Pro
gres
s Re
port
Lucy
Ple
dge/
John
Ske
tchl
ey
(Aud
it L
incs
) U
nder
stan
d th
e le
vel o
f ass
uran
ce fo
r au
dite
d ac
tivit
ies
and
ensu
re m
anag
emen
t pr
ogre
ss r
ecom
men
ded
actio
ns to
miti
gate
id
entif
ied
risk
s
Ann
ual A
udit
Let
ter
John
Cor
nett
/Hel
en B
rook
es
(KPM
G)
Gai
n as
sura
nce
on th
e Co
unci
l’s S
tate
men
t of
Acc
ount
s an
d ar
rang
emen
ts fo
r ac
hiev
ing
Val
ue fo
r M
oney
Co
unte
r-Fr
aud
Act
ivity
Rep
ort
Nic
ky L
ovel
y
Gai
n as
sura
nce
that
cou
nter
-fra
ud a
ctiv
ity is
ap
prop
riat
ely
targ
eted
and
eff
ecti
ve
In
itiat
ing
the
Ann
ual
Revi
ew o
f th
e Ef
fect
iven
ess
of t
he
Inte
rnal
Aud
it F
unct
ion
Dav
id D
icki
nson
/Nic
ky L
ovel
yTo
con
side
r w
heth
er th
e In
tern
al A
udit
fu
nctio
n is
ope
ratin
g ef
fect
ivel
y an
d pr
oduc
e an
act
ion
plan
to a
ddre
ss a
ny r
equi
red
impr
ovem
ents
Re
spon
ses
to q
uest
ions
rai
sed
at p
revi
ous
mee
ting
Nic
ky L
ovel
y
A
udit
Com
mit
tee
Wor
k Pr
ogra
mm
eD
avid
Dic
kins
on
62
