Agenda item

A report by the Chief Finance Officer is attached.

The Chairman drew the Committees attention to the report, in particular the Accounts production and audit process (page 24 of the agenda refers) KPMG stated ‘The quality of the accounts and the supporting working papers provided to us were excellent’.

The Chief Finance Officer explained that this had been a challenging year, whilst coping with a management restructure and transition to IFRS which has resulted in additional work for both the finance team and KPMG. He thanked KPMG for the report and the comments within that he agreed with.

Chris Wilson, Partner, KPMG, led the Committee through the salient points of the report, of note were;

• Issuing an unqualified audit opinion
• Audit adjustments were made but these were technical adjustments, presentational points
• Implementation of IFRS had been challenging, the Council had dealt with these issues appropriately
• The Council has implemented nearly all the recommendations from ISA 260 Report 2009/10  and the majority of this years
• Unable to fully rely on the operation of key automated controls within the IT Control environment, additional audit work was required
• VFM – Council has made proper arrangements to secure economy, efficiency, and effectiveness.  There are no areas of risk

Members were reassured and pleased by the quality of the accounts and supporting documentation and thanked the Finance team for their hard work.

Members sought clarification on a number of points regarding IT including;

·       Were ongoing IT issues surrounding security a threat to the Councils security?  Carlton Brand, Corporate Director Transformation and Resources explained that security regarding passwords and user accounts had either been addressed or were ongoing.  He explained that IT had been brought back ‘in house’ with a saving of £2M which had been directed to frontline services.  Discussion of these issues in the public domain would not undermine the Council’s integrity system.

• IT appear to be reactive rather than proactive, HR should be providing IT with supporting data to ensure rapid response to account closure.  Director of Transformation and Resources explained that work had taken place with HR to revise and strengthen processes.  Care had to be taken when revoking passwords as often individuals in frontline services needed to use their accounts right up until the day they leave their position.
• Confirmation was sought that STERIA had handed over all the required documentation and that outstanding IT issues that had been rectified had been audited. Director of Transformation and Resources confirmed that all required documentation had been received from STERIA. KPMG had not undertaken further testing, however Internal Audit had, and had given a substantial assurance.

Council systems have been vulnerable for several years and this indicates complacency by the Council in rectifying these issues. The Chairman explained that the Review of ICT Provision Task Groups role is to scrutinise the in-house ICT provision, including legacy software, proposed equipment and ways of working. Corporate Director Transformation and Resources stressed that there was no complacency and that Internal Audit had given a substantial assurance.  Mark Stone, Interim Programme Director ICT, IM and Campus Operational Delivery Programme explained that the work surrounding Implementation Improvements (Appendix A of the Project Initiation Document (PID)) had been completed and work was on schedule to finish the Essential Business Developments (Appendix B of the PID).  He went on to explain that after any large scale IT implementation there would be post implementation issues.  Cllr Carter, Chairman of the Review of ICT Provision Task Group acknowledged the concerns over IT security and integrity and that the task group would be monitoring the work undertaken, he also confirmed the substantial assurance given by Internal Audit. 

• Additional Audit Work.  Confirmation was requested regarding the fee for the additional IT audit work undertaken by KPMG.  Chris Wilson, KPMG, confirmed that additional IT work required both during the and after the interim audit visit was agreed with management. The additional costs with the extra IT audit work were £42,000. This was offset by a £60,000 reduction for the cancellation of two VFM audit projects which were originally scheduled when the fee for the 2010/11 audit year was agreed, however these were no longer considered necessary when the Audit Commission made changes to the VFM audit approach.

Resolved

a)    That the audit committee delegates, the signing of the management representation letter, to the Chairman.

b)    That the Committee note the Report.

c)    That the Committee receive the draft accounts for 2010/2011.