Agenda item

Note: this report is not yet available but will be circulated as soon as available in advance of the meeting.

The committee considered the External Auditor’s ISA 260 report.

Prior to the presentation of the report, the Chair and committee members expressed concern that this report had not been available at the time of the publication of the agenda ahead of this meeting (i.e. the report should have been published with the agenda at least 5 clear working days in advance of the meeting).  

Matthew Hepenstal, BDO, apologised for the fact that the report had not been available at the time of the original agenda publication.

Matthew Hepenstal then presented the report, highlighting the following:

a.      The External Auditor intended to issue an unqualified audit opinion on the Council’s financial statements. The audit would be formally concluded by the deadline date of 30 September.

b.      In relation to the Council’s use of resources /sustainable finances, however, the External Auditor intended to issue a qualified conclusion.  This was essentially as a result of appropriate arrangements not being in place at the start of the 2016-17 financial year to address the Council’s budget deficit.  It was recognised that measures had been taken to mitigate the overspend during the course of the financial year, but the External Auditor view had been taken on the basis that measures were not in place for the entirety of 2016-17.

c.       A number of recommendations for improvement had been made.  Officers would respond to these recommendations at the next Audit Committee on 23 November.

Main points raised/clarified/noted in discussion:

a.      Page 20 – Group Accounts: It was noted that Bristol Energy had incurred significant losses to date, although it had built up a customer base.  Bristol Waste was profitable and had built up reserves of £4m.  BDO had identified that the Council’s investment in its subsidiaries was carried at £7.2m, which had been calculated on the basis of the net asset value of the subsidiaries.  The method employed to value this investment was not in line with accounting guidance but BDO was satisfied that the actual amount was materially correct.  BDO expected the difference between cost and valuation (£6.7m) to be a charge against expenditure in the year, with general fund balances therefore reducing by that amount.

b.      The governance arrangements for the Council owned subsidiary companies were currently the subject of a separate external review.  In discussion, it was suggested that as part of that review, it would be appropriate for consideration to be given to requiring the Bristol Waste and Bristol Energy audit committees to report to this committee annually on their respective governance arrangements.

c.       Page 29-30 - Sustainable finances: Members noted the summary of action taken in 2016-17.  It was also noted that in 2017-18, reasonable progress has been made towards achieving the Council’s savings target.  However, the most recent financial monitoring reports indicated that approx. £3m of the 2017-18 planned savings were at risk.  Adult and children’s social care in particular were experiencing increased care package costs – functional areas across the organisation had held in abeyance a number of management controls to enable expenditure to be managed (primarily deferring non-committed expenditure and workforce savings) to ensure the Council kept within its financial resource.

Noting and taking account of the above, the committee

RESOLVED:

That the BDO 2016-17 ISA 260 report and action plan be noted.

Note: The meeting was adjourned at this point (4.10 p.m.) and reconvened at

4.20 p.m.