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External Audit Results Report 2017/18

Meeting: 30/07/2018 - Audit Committee (Item 161)

161 External Audit Results Report 2017/18 pdf icon PDF 5 MB

The National Audit Office’s Code of Audit Practice (the Code) requires the Council’s external auditors to report to those charged with governance – the Audit Committee – on the work they have carried out to discharge their statutory audit responsibilities together with any governance issues identified. This report summarises the findings from the Ernst and Young 2017/18 audit.


The Council’s external auditors, Ernst & Young, submitted a report which detailed the outcome of their audit of the Council’s 2017/18 Statement of Accounts. The Associate Partner for Ernst and Young LLP (EY) reported that all work on the audit of the Council’s 2017/18 accounts was now completed in line with the shorter time scale.


A number of the items marked as outstanding had since been received.  For example the Elstree Film Studios audited accounts had now been submitted and the external audit report had raised no issues.  The outstanding external investment confirmations had now been received from various banks.


The audit had been completed with a 2% level of materiality of gross expenditure, there had been only one significant (non-material) change since the report at the end of May.


The External Auditor noted that the declaration of related party transactions and Members Declarations of Interests needed to be maintained to protect against conflicts of interest and potential reputational risks.  The Head of Finance & Business Services confirmed that officers had reviewed the member register of interests to determine related party transactions.


The downward valuation of Bushey Golf and Country Club had been noted and a review had concluded that the revaluation was correct.  It was recognised that this would change based on its potential future usage.


The largest significant change was to the valuation of the Pension Fund Assets. EY advised that the actual asset value had moved significantly from the estimated year-end position included in the draft statements which had been calculated at December 2017. This was a favourable change increasing the pension fund assets value by £1.408m, just below the materiality level of £1.470m. This issue had been discussed between EY and Officers and the 2017/18 Statement of Accounts had been updated to reflect the actual position.


Members raised concerns about whether this was appropriate as it was not consistent with previous years where estimates had always been used and accepted by external auditors. It was also not the approach taken by other external audit firms in Hertfordshire. Members also raised concern that this could impact on the earlier closedown timetable if applied in the future. The External Auditor noted that the valuation was more accurate and this position had been taken nationally by EY as the amount was significant and above tolerability within a single performance area even though it was below materiality.


The Corporate Director confirmed that the restatement had incurred additional cost in terms of additional officer time and actuarial fees.


The External Auditor finished the report by noting that in line with previous years the scale fee would remain as set with the only change being potential costs for the specialist asset valuations.  He confirmed that EY would be recommending an unqualified conclusion.


RESOLVED that the report of Ernst & Young detailing their unqualified opinion of Hertsmere’s 2017/18 statement of accounts, be noted.