BAKER TILLY London Borough of Bromley Prepared by Andrew

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					                                                BAKER TILLY

   London Borough of Bromley

   Prepared by: Andrew Lovett and David Dobbs

          Audit of the Financial Statements

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:

     ·   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

2.       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       Member Approval      Audit Opinion
     2004/05                 31 July              31 October
     2005/06                 30 June              30 September

3.       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                                                                    2
Audit of the Financial Statements 2003/04
                                                                                  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                                                                  3
Audit of the Financial Statements 2003/04
                                                                                                                                  APPENDIX A

                                                Schedule of Matters Arising from the 2003/04 audit

                                                                   General disclosure
No.                            Issue                                   Proposed action                        Council response
 1    Statement of Internal Control – this can be enhanced;     For discussion.          Agreed - SIC redrafted.
      we will provide separate comments to Officers for
      their consideration.

2     Accounts should refer to the 1996 Code of Practice –      Amendment                Agreed - delete reference to 1996.
      this should refer to the current SORP.

3     Capital Commitments - would be helpful to explain         Amendment                Agreed - explanatory note to be added.
      what the £2.89m is being spent on at Bishop Justice

4     Accounts should refer to the London Development           Amendment                Agreed.
      Agency not Government Office for London’ in
      relation to SRB grant.

                                                              Consolidated Revenue Account
5     Related Parties Disclosure: Councillor Bloom is Chief     Amendment                Agreed.
      Executive of Mission Care, accounts state he “works
      for” Mission Care. Need to reword paragraph to state
      he is Chief Executive.

6     The Revenue Account figures have been adjusted to         For discussion           Agreed.
      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
7    Exceptional Items. Narrative should refer to income     Amendment                 Agreed.
     from assets held in the ex-LRB accounts (rather than
     ex- GLC assets).

8    The accounts need to state if there have been any       Amendment                 Agreed.
     payments been made in year to fund added years for

                                                                  Collection Fund
9    There is a difference of £16k between the figure for    Amendment                 Unadjusted item - The error is immaterial and the Council
     NNDR arrears on the ledger and the amount in the                                  will amend this in 2004/05. There is no effect on the overall
     Collection Fund.                                                                  financial position of the Council.

                                                                  Capital Finance
10   There is an error of £23k on the 2003/04                For discussion.           Unadjusted item - The error is immaterial and the Council
     reconciliation spreadsheet for capital charges.                                   will amend this in 2004/05. There is no effect on the overall
                                                                                       financial position of the Council.

11   Recoupment debtors: £8,474 debtor balance with          For discussion.           Unadjusted item which will be investigated during the
     Southwark was not confirmed by their auditors                                     current year. There is no effect on the overall financial
                                                                                       position of the Council.
                                                             Bank & Cash/Investments
12   Bishop Justice hold a cash balance of £1.3 in their     Amendment.                Agreed.
     bank account. There should be a note disclosing that
     LBB acts as custodian for this amount but it does not
     belong to LBB.
                                                   Reserves, Provisions & Contingent Liabilities
13   The contingent liability issue disclosed in respect of   Amendment.                Agreed - item to be deleted.
     Education is no longer valid and should be removed.

14   Monitoring Officer has suggested disclosure of an Amendment.                       Agreed - item to be included.
     additional contingent liability re possible civil claim
     following HSE prosecution.

                                                                   Pension Fund
15   The draft statements do not accord with the pensions     Amendment.                Agreed.
     SORP, and as a result are also inconsistent with the
     format used by most other pension funds.

16   There should be an Accounting Policies note added,       Amendment.                Agreed.
     which should refer to the statements being compiled
     in line with the CIPFA Code of Practice and Pensions

                                                                    LRB Fund
17   There should be a disclosure note stating exactly what   Amendment                 Agreed.
     funds 1 and 2 represent.

18   There should be a further primary statement showing      Amendment                 Agreed.
     the reconciliation of the movement on the Balance

19   The expenditure and income on the fund should be         Amendment                 Agreed.
     shown gross rather than net figures.
                                                                                APPENDIX B


Baker Tilly
Lancaster House
7 Elmfield Road
BR1 1LT                                                                      Date:

Dear Sirs


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:

     i.   the names of the transacting parties;
     ii.  a description of the relationship between the parties;
     iii. a description of the transactions;
     iv.  the amounts involved (even if nil);
     v.   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.
   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

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