BAKER TILLY
London Borough of Bromley
Prepared by: Andrew Lovett and David Dobbs
Audit of the Financial Statements 2003/04
10 November 2004 Audit Sub-Committee
BAKER TILLY
1.
Introduction
Under the Statement of Auditing Standard 610, as external auditors, we have a duty to report to the Audit Sub-Committee those issues arising from the audit of the financial statements of the London Borough of Bromley Council (‘the Council’). The purpose of this report is to discharge this duty. The published accounts of the Council are an essential means by which it accounts for its stewardship of the resources at its disposal and its financial performance in the use of those resources. It is the responsibility of the Council to: · · · prepare accounts that ‘present fairly’ the financial position of the Council and its expenditure and income maintain proper accounting records ensure the regularity of transactions, by putting in place systems of internal control to ensure that financial transactions are lawful.
In this report we set out: · · 2. Matters of note regarding the preparation of the financial statements (covering the main Statement of Accounts, the Pension Fund Accounts and the ex-LRB fund) Details of any unadjusted items Approval of the financial statements
The Authority set a challenging timetable for the closedown of the accounts and preparation of the 2003/04 financial statements. We were therefore pleased to note that the draft financial statements were presented for approval to the General Purposes Committee on 28 July 2004, well in advance of the statutory approval deadlines for local government of 31 August 2004. The accelerated timetable for approval and certification of the accounts for 2004/05 and onwards is shown below. In our view the Council is well placed to achieve this timetable Accounts for year 2004/05 2005/06 3. Member Approval 31 July 30 June Audit Opinion 31 October 30 September
Matters of note regarding the preparation of the financial statements
The draft financial statements and supporting evidence files were of good quality and were provided to the agreed timetable. The financial statements comply with financial reporting standards applicable to local authorities. The audit fieldwork went smoothly and finance staff were able to respond satisfactorily to our queries.
London Borough of Bromley Audit of the Financial Statements 2003/04
2
BAKER TILLY
4.
Qualitative aspects of reporting financial performance
The Council has prepared its financial statements in accordance with the requirements of the CIPFA SORP as amended where required for aspects that are not relevant to the activities of the Authority. The Consolidated Revenue Account is presented in accordance with Best Value Accounting Code of Practice requirements. Changes arising from audit The changes to the accounts that arose from our audit are shown in the table at Appendix A. There are three items that we have agreed will remain adjusted (numbers 9, 10 and 11). No significant changes were made to the amounts shown in the accounts, and the unadjusted items are immaterial. Matters forward from 2003/04 We are also pleased to report that the Authority has taken action to rectify the issues that we identified as part of our 2002/03 audit. · · The Authority is now depreciating its Community Assets where appropriate. The Accounting treatment of Deferred Charges is now in line with best practice.
Proposed audit opinion We consider that the financial statements present fairly the financial position of the Council and propose to issue an unqualified opinion on the financial statements following receipt of a number of representations from Officers and Members (Appendix B) and receipt of signed accounts from the Director of Resources.
London Borough of Bromley Audit of the Financial Statements 2003/04
3
APPENDIX A Schedule of Matters Arising from the 2003/04 audit General disclosure
No. 1 Issue Statement of Internal Control – this can be enhanced; we will provide separate comments to Officers for their consideration. Accounts should refer to the 1996 Code of Practice – this should refer to the current SORP. Capital Commitments - would be helpful to explain what the £2.89m is being spent on at Bishop Justice School. Accounts should refer to the London Development Agency not Government Office for London’ in relation to SRB grant. Proposed action For discussion. Council response Agreed - SIC redrafted.
2 3
Amendment Amendment
Agreed - delete reference to 1996. Agreed - explanatory note to be added.
4
Amendment
Agreed.
Consolidated Revenue Account
5 Related Parties Disclosure: Councillor Bloom is Chief Executive of Mission Care, accounts state he “works for” Mission Care. Need to reword paragraph to state he is Chief Executive. The Revenue Account figures have been adjusted to incorporate FRS 17 requirements on retirement benefits and deferred charges chargeable to net cost of services. There should be a note to mention this in the CRA. Amendment Agreed.
6
For discussion
Agreed.
7
Exceptional Items. Narrative should refer to income from assets held in the ex-LRB accounts (rather than ex- GLC assets). The accounts need to state if there have been any payments been made in year to fund added years for Teachers.
Amendment
Agreed.
8
Amendment
Agreed.
Collection Fund
9 There is a difference of £16k between the figure for NNDR arrears on the ledger and the amount in the Collection Fund. Amendment Unadjusted item - The error is immaterial and the Council will amend this in 2004/05. There is no effect on the overall financial position of the Council.
Capital Finance
10 There is an error of £23k on the 2003/04 reconciliation spreadsheet for capital charges. For discussion. Unadjusted item - The error is immaterial and the Council will amend this in 2004/05. There is no effect on the overall financial position of the Council.
Debtors
11 Recoupment debtors: £8,474 debtor balance with Southwark was not confirmed by their auditors For discussion. Unadjusted item which will be investigated during the current year. There is no effect on the overall financial position of the Council. Agreed.
Bank & Cash/Investments
12 Bishop Justice hold a cash balance of £1.3 in their bank account. There should be a note disclosing that LBB acts as custodian for this amount but it does not belong to LBB. Amendment.
Reserves, Provisions & Contingent Liabilities
13 14 The contingent liability issue disclosed in respect of Education is no longer valid and should be removed. Amendment. Agreed - item to be deleted. Agreed - item to be included.
Monitoring Officer has suggested disclosure of an Amendment. additional contingent liability re possible civil claim following HSE prosecution.
Pension Fund
15 The draft statements do not accord with the pensions SORP, and as a result are also inconsistent with the format used by most other pension funds. There should be an Accounting Policies note added, which should refer to the statements being compiled in line with the CIPFA Code of Practice and Pensions SORP. Amendment. Agreed.
16
Amendment.
Agreed.
LRB Fund
17 18 There should be a disclosure note stating exactly what funds 1 and 2 represent. There should be a further primary statement showing the reconciliation of the movement on the Balance Sheet. The expenditure and income on the fund should be shown gross rather than net figures. Amendment Amendment Agreed. Agreed.
19
Amendment
Agreed.
APPENDIX B TO BE TYPED ON COUNCIL’S LETTERHEAD Baker Tilly Lancaster House 7 Elmfield Road Bromley BR1 1LT Dear Sirs AUDIT OF FINANCIAL STATEMENTS – 31st MARCH 2004 We confirm, to the best of our knowledge and belief, the following representations given to you in connection with your audit of the Authority’s financial statements, including the Pension Fund and the former LRB Fund for the year ended 31st March 2004. 1. We acknowledge as Members and as the Director of Resources our responsibility for the financial statements. All the accounting records have been made available to you for the purpose of your audit and all transactions undertaken by the Authority have been properly reflected and recorded in the accounting records. All other records and related information and explanations, including minutes of all Authority and sub Committee meetings held between the beginning of the accounting period and the date of this letter, have been made available to you. 2. There are three unadjusted items raised by you in your report to Members of this Authority. These, as agreed with yourselves, have not been adjusted in the accounts as they are not material or significant. 3. We confirm that full disclosure is made in the financial statements of: a. transactions and balances with related parties including: the names of the transacting parties; a description of the relationship between the parties; a description of the transactions; the amounts involved (even if nil); any other elements of the transactions necessary for an understanding of the financial statements; vi. the amounts due to or from related parties at the balance sheet date and provisions for doubtful debts due form such parties at that date; and vii. amounts written off in the period in respect of debts due to or from related parties. b. outstanding capital commitments contracted for at the balance sheet date. c. all contingent liabilities including details of pending litigation and material claims against the Authority. i. ii. iii. iv. v.
Date:
d. all known cash balances and investments 4. We are not aware of any instances of non-compliance with laws and regulations, which are likely to have a significant effect on the finance or operation of the Authority. 5. There have been no events (other than those already disclosed in the financial statements) since the balance sheet date, which necessitate revision of the figures in the financial statements or inclusion of a note thereto. Should such further material events occur prior to your signature of the audit report we will advise you accordingly. 6. We are satisfied that the actuarial assumptions underlying the valuation of the pension scheme liabilities are consistent with our knowledge of the Authority and that the information provided by the scheme actuary to calculate the present value of scheme liabilities is complete and accurate. 7. We confirm that the above representations are made on the basis of enquiries of management and staff with relevant knowledge and experience (and, where appropriate, of inspection of supporting documentation) sufficient to satisfy ourselves that we can properly make each of the above representations to you. In addition, we believe that a key role of External Audit is to bring to the attention of the Authority any matters requiring to be reported under the Audit Code of Practice. In making this declaration we have therefore relied on the quality of the external audit as well as on the work of our staff. We acknowledge that we have considered the matters contained in the External Auditor’s SAS 610 report, discussed with the Audit Sub Committee on 10 November 2004. We are content that these items are immaterial and should remain unadjusted. Yours faithfully,
Signed on behalf of Bromley Council
Paul Dale Director of Resources
Councillor I A Buckley Chair of the Audit Sub-Committee