Agenda item

To note, and comment as appropriate, on BDO’s 2015/16 Audit Report and the action plan agreed by management.

The Committee received a report from the External Auditor which highlighted the key

Issues arising from the audit of the Council's financial statements for the year ended 31 March 2016. This enabled BDO to discharge their responsibilities in accordance with International Standards of Auditing (ISA) 260. It also reported their conclusion on whether the Council had put in place proper

arrangements to secure economy, efficiency and effectiveness in its use of resources.

Overall the auditors anticipated issuing an unqualified audit opinion on the Council's financial statements and an unqualified VFM conclusion. A number of recommendations had been made to management with regard to improvements required. Management responses to the recommendations were set out in the Action Plan.

Points arising from discussion were –

1.     Formal sign off of the Accounts was expected to be by 21 October 2016;

2.     General progress was good and assistance from the Finance team was of high quality;

3.    The External Auditor advised that, with regard to Lender Option Borrower Option loans (LOBO’s) that had been taken out, a number of local authorities, including Bristol City Council, had received objections from local electors as to the lawfulness of local authorities obtaining borrowings through LOBO loans. Whilst the LOBO loans held by the Council had not currently been found to be unlawful, there was ongoing analysis of LOBO’s generally by councils affected, their auditor and specialist lawyers. The law in relation to this matter was complex and there was uncertainty as to what the consequences could be should a local authority had obtained borrowing through a LOBO that was found to be unlawful. In the event of a LOBO loan being found to be unlawful, restitutionary remedies might result in the outstanding balances on these loans having to be repaid in full to the lender and might result in additional costs resulting from losses incurred by the lender. It was necessary therefore that the Council include a contingent liability to acknowledge this risk;

4.     It was noted that the LOBO issue was a national issue and was being overseen by the National Audit Office;

5.     A further report would be brought to the Committee in respect of the LOBO issue when records had been accessed and analysed;

6.     The Bristol Port Company value had increased significantly, the External Auditor advised that a professional valuation should be done in the future;

7.     The ‘gap’ between target for budget savings and actual savings was significant and although acceptable from a purely audit perspective, due to contingency balances, the next few years would present real challenges for the Council;

8.     Budget information was a key concern and scrutiny of budgets would be overseen by the OSMB. The Committee was assured that in future clear financial information would be available in parallel with appropriate training for members;

9.     Energy company borrowing would be looked at in more detail next year;

10.  Housing benefit overpayment levels were not directly an audit concern as the accounting processes were found to be acceptable;

11.  Partnerships had not been looked at in depth but the overall situation was considered to be acceptable.

Resolved: that, subject to the comments made by the Committee, the report be noted.