www.pwc.co.uk
Government and Public Sector
North Norfolk District
Council
Report to those charged with
governance (ISA 260 (UK&I))
September 2011
2010/11 Audit
North Norfolk District Council – Report to those charged with governance September
2011
PricewaterhouseCoopers LLP
The Atrium
St Georges Street
Norwich NR3 1AG
Telephone +44 (0) 1603 615244
Facsimile +44 (0) 1603 883327
www.pwc.com/uk
The Members of the Audit Committee
North Norfolk District Council
Council Offices
Holt Road
Cromer
Norfolk. NR27 9EN
September 2011
Dear Sirs
We are pleased to enclose our report to the Audit Committee in respect of our audit
of North Norfolk District Council (“the Authority” ) for the year ended 31 March 2011,
the primary purpose of which is to communicate the significant findings arising from
our audit.
The scope and proposed focus of our audit work was summarised in our audit plan,
which we presented to the Audit Committee in March 2011. We have subsequently
reviewed our audit plan and concluded that our original risk assessment remains
appropriate. The procedures we have performed in response to our assessment of
significant audit risks are detailed on page 2.
We have completed the majority of our audit work and expect to be able to issue an
unqualified audit opinion on the financial statements on, or before, 30 September
2011. At the time of writing, the key outstanding matters, where our work has
commenced but is not yet finalised are provided on page 4.
We will provide an oral update on these matters at the meeting on 13 September 2011.
We look forward to discussing our report with you on 13 September. Attending the
meeting from PwC will be Julian Rickett and Sarah Brown.
Yours faithfully
PricewaterhouseCoopers LLP
North Norfolk District Council – Report to those charged with governance September
2011
Contents
Executive summary
1
Audit approach
2
Significant audit and accounting matters
4
Fees update
9
Recent developments
10
Accounting developments
10
Appendices
11
Summary of uncorrected misstatements
12
Summary of misstatements
14
Letter of representation
15
Code of Audit Practice and Statement of Responsibilities of Auditors and of Audited Bodies
In April 2010 the Audit Commission issued a revised version of the ‘Statement of responsibilities of
auditors and of audited bodies’. It is available from the Chief Executive of each audited body. The
purpose of the statement is to assist auditors and audited bodies by explaining where the responsibilities
of auditors begin and end and what is to be expected of the audited body in certain areas. Our reports
and management letters are prepared in the context of this Statement. Reports and letters prepared by
appointed auditors and addressed to members or officers are prepared for the sole use of the audited
body and no responsibility is taken by auditors to any Member or officer in their individual capacity or
to any third party.
North Norfolk District Council – Report to the Audit Committee
September 2011
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North Norfolk District Council – Report to the Audit Committee
September 2011
Executive summary
The purpose of this report
Under the Auditing Practices Board’s International Auditing Standard (UK and Ireland) 260 (ISA (UK&I) 260)
- “Communication of audit matters with those charged with governance” we are required to report to those
charged with governance on the significant findings from our audit before giving our audit opinion on the
accounts of North Norfolk District Council (‘the Authority’). As agreed with you, we consider that “those
charged with governance”, at the Authority, are the Audit Committee.
This letter contains the significant matters we wish to report to you arising from all aspects of our audit
programme of work in accordance with ISA (UK&I) 260.
Our audit work during the year was performed in accordance with the plan that we presented to you on 8 March
2011. An audit of financial statements is not designed to identify all matters that may be relevant to those
charged with governance. Accordingly, the audit does not ordinarily identify all such matters.
We have set out below what we consider to be the most significant matters that we have discussed with you in
the course of our work.
Significant matters
The most significant matters that we have discussed with management during the course of our work relating to
our “true and fair” opinion on the financial statements are:

Additional disclosures were required in order for the financial statements to be compliant with the
International Financial Reporting Standards (IFRS). Most notably the Authority had included a
Balance Sheet for 1 April 2009 in the draft financial statements however breakdowns of the significant
financial line items were omitted from the relevant supporting notes. A disclosure note detailing
material adjustments as a result of the transition to IFRS was also omitted.

Some of the working papers produced by the Authority to support asset valuations were delayed and
not of the required standard. In addition some of the assumptions used in the valuations were deemed
to be inappropriate. We have discussed these matters in more detail with the finance team and will also
hold a further debrief to ensure that the requirements for audit working papers are understood and met
for the future.
Please note that this report will be sent to the Audit Commission in accordance with the requirements of their
standing guidance.
We would also like to take this opportunity to express our thanks for the co-operation and assistance we have
received from the management and staff of the Authority throughout our work.
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North Norfolk District Council – Report to the Audit Committee
September 2011
Audit approach
ISA (UK&I) 260 requires us to communicate to you relevant matters relating to the audit of the financial
statements sufficiently promptly to enable you to take appropriate action.
In the table below we have detailed the risks and planned responses shown in our March audit plan, as updated
for the work we have subsequently performed.
Risks
Proposed Audit approach
Outcome
Significant risks
2010/11 – the first year of
reporting under IFRS
We are working closely with the Council in
relation to the transition to IFRS and to
ensure that any accounting issues can be
For all local authorities transition to
resolved on a timely basis.
IFRS involves both new and
We will perform an early review of the
considerably revised financial
restated financial statements to identify
statements and an increase in the depth prior year restatement matters and
of disclosures required in the notes to
disclosure issues at the planning stage of the
the accounts. There is a risk of material audit. We will communicate the results of
errors in the restatements and
this review to management so they may take
reclassifications required in preparing
action to address issues in advance of the
the accounts in their new format and of final audit.
material omissions of information
At the final audit stage we will perform an
required to be disclosed by the new
independent ‘hot review’ of the financial
Code of Practice on Local Authority
statements and disclosures.
Accounting.
We will understand and evaluate accounting
Our early work has identified particular policies adopted by the Council for leases
against Code requirements. We will perform
audit risks in the area of leases. IFRS
requires building and land elements of detailed testing to establish the
completeness of leases and lease type
leases to be analysed separately,
arrangements including minute review and
increasing the possibility that the land
review of contracts. We will also perform
element may need to be classified
testing of lease classification and accounting
separately as an operating lease. The
entries.
lease accounting rules have also been
extended to cover arrangements that
have the substance of a lease even
though they do not have the legal form
of a lease. There is a risk that relevant
agreements might not be identified and
classified correctly and that income and
expenses relating to the agreements
might be accounted for inappropriately.
Approach applied as planned. As
previously noted in this report
several additional disclosures were
required in order for the financial
statements to be IFRS compliant.
Income and Expenditure
Recognition
Approach applied as planned. No
material misstatements noted.
We are required by the International
Standards on Auditing (ISAs) to
specifically consider the risk of material
misstatement in relation to revenue
recognition. We have also considered
the risk of material misstatement in
relation to expenditure recognition.
There is a risk that the Council could
adopt accounting policies or treat
income and expenditure transactions in
We will understand and evaluate controls
relating to this risk and:

See page 5 for issues identified in
relation to leases.
where appropriate, seek to place
reliance on internal audit work on key
controls; and

test key controls to confirm they are
operating effectively.
We will consider the accounting policies
adopted by the Council and subject income
and expenditure to the appropriate level of
testing to identify any material
misstatement.
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North Norfolk District Council – Report to the Audit Committee
September 2011
Risks
Proposed Audit approach
Outcome
such as way as to lead to material
misstatement in the reported revenue
position.
Management Override of Controls We will understand and evaluate internal
control processes and procedures as part of
Under International Standard on
our planning work and perform testing of
Auditing (UK and Ireland) 240, there is relevant controls as part of the interim audit
a presumed significant risk of
visit.
management override of the system of
We will review the appropriateness of
internal control. In any organisation,
journals processed during the year. We will
management may be in a position to
also look carefully at any management
override the financial controls that you estimations and consider if they are subject
have in place. A control breach of this
to bias.
nature may result in a material
We will design and perform procedures in
misstatement. Under the new clarity
relation to the business rationale for
International Standards of Auditing
significant transactions. Our audit
(ISA), for all of our audits, we are
procedures are also planned to include an
required to consider this a significant
unpredictable element that varies year on
risk and adapt our audit procedures
year.
accordingly.
Approach applied as planned. No
issues were identified with the
appropriateness of journals
processed by the Authority however
we were not able to validate, for 4
of the 57 journals tested, that
appropriate authorisation had
taken place in all journals tested
due to original documentation
being misplaced. We will raise this
matter in our report to
management on matters arising
from our audit.
See page 5 in respect of property,
plant and equipment valuations.
Other risks
Increased pressures on budgets
The Council is likely to be experiencing
increased pressures on many of its
budgets as economic conditions have
worsened. Budget holders may feel
under pressure to try to push costs into
future periods, or to miscode
expenditure to make use of resources
intended for different purposes.
Local government bodies are expected
to make significant efficiency savings
over the next three years. There is a
risk that savings plans may not be
robust or based on long term solutions
which could result in short term, year
end actions to ensure that the targets
are met.
There are also risks in relation to
financial reporting, that the
requirement to report particular
financial results overrides best financial
reporting practice.
We will review the Council’s budget
monitoring processes to identify any areas of
concern. We will also bear these risks in
mind when carrying out cut-off testing.
As part of our use of resources work as well
as our work on financial standing, we will
consider the entity’s savings plans and
consider their robustness.
We will also consider the accounting
implications of any savings plans and would
welcome early discussion of any new and
unusual proposals. In particular, we will
consider the impact of the efficiency
challenge on the recognition of both income
and expenditure.
Approach applied as planned. No
material misstatements noted in
cut-off testing.
Our work performed as part of the
use of resources assessment has
resulted in an unqualified value for
money opinion.
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North Norfolk District Council – Report to the Audit Committee
September 2011
Significant audit and accounting
matters
Accounts
We have completed our audit, subject to the following outstanding matters:

Receipt of third party confirmation for the pension scheme asset valuation;

Receipt and satisfactory review of a number audit queries from the Authority. Areas impacted include
contingent liabilities, allowance for doubtful debts and capital accounting;

Testing of the cash-flow statement;

Receipt and review of the final draft financial statements;

Completion of PwC internal quality control procedures in relation to a small number of audit areas. This
may result in additional queries for the Authority and/or work to be undertaken to resolve any matters
arising on review;

Approval of the financial statements and letters of representation; and

Completion procedures including subsequent events review.
Subject to the satisfactory resolution of these matters, the finalisation of the financial statements and their
approval by those charged with governance we expect to issue an unqualified audit opinion.
Accounting issues
Implementation of IFRS
The 2010/11 financial statements represent the transitional year to reporting under IFRS. The transition to
IFRS required the Authority to produce considerably revised financial statements from previous years. Our
audit work identified several omissions and errors in the accounts directly related to the reporting requirements
under IFRS. Several disclosures required expansion or were omitted altogether including breakdowns of the
significant financial line items for the 1 April 2009 balances in the relevant supporting notes and a disclosure
note detailing material adjustments as a result of the transition to IFRS. We identified errors in the accounting
treatment of assets held for sale and leases under IFRS as detailed below.
Assets held for Sale
As part of the transition to IFRS exercise the Council classified assets sold during the period April 2009 to
March 2011 and those expected to be sold in the period April 2011 to March 2012 as Assets held for sale on the
Balance Sheet. In accordance with IFRS 5 “Non current Assets Held for Sale and Discontinued Operations”
there are four criteria which have to be met before an asset can be classified as held for sale. We identified an
asset classified by the Authority as held for sale which does not met one of the recognition criteria specifically
“The asset (or disposal group) must be actively marketed for a sale at a price that is reasonable in relation to
its current fair value”. The asset identified was transferred for £1 and therefore was not actively marketed or
sold at the current fair value. The Authority have amended the accounts for this error in terms of classification
on the Balance sheet, as the asset is land there is no impact to the depreciation charge and therefore no impact
to the general fund balance.
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North Norfolk District Council – Report to the Audit Committee
September 2011
Leases
Our early work identified particular audit risks in the area of leases. The lease accounting rules have been
extended to cover arrangements that have the substance of a lease even though they do not have the legal form
of a lease. The Council identified that the waste collection contract with Norse contained the substance of a
finance lease. The Authority accounted for the finance lease over the period matching the deprecation policy,
which is not to depreciate in the year of acquisition. As a result the term applied to the lease for accounting
purposes is in excess of the contract end date by one year. The contract with Norse ceased on 31 March 2011
however because the accounting period does not match the lease term period the financial statements include a
£52k liability in relation to the future minimum lease payments and a £317k asset in relation to the vehicles
used for domestic refuse collection. These items do not meet the recognition criteria for a liability or an asset as
there is no future obligation or economic benefit. The Authority has not amended the financial statements for
this error and as such the item is included within the summary of uncorrected misstatements in appendix 1.
Valuation of property, plant and equipment
The Code of Practice on Local Authority Accounting in the United Kingdom generally requires that items of
Property, Plant and Equipment are carried at fair value in the Balance Sheet, with a minimum specification that
formal valuations are carried out at least every five years. However this is a minimum requirement and the
specification does not provide an exemption from valuations on a more regular basis where these might be
necessary to give a true and fair view.
The Authority’s policy on valuation, as stated in the financial statements, is that assets included in the Balance
Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially
different from their fair value at the year-end, but as a minimum every five years.
Specific valuations performed by the Authority as at 31 March 2011
The Authority (using an internal property specialist) performed valuations on approximately 4.5% of its asset
base as at 31 March 2011.
We tested the calculations used by the Authority in the valuations and identified discrepancies in the level of
rounding used and identified that some changes in valuations were not being fully recognised in the fixed asset
register, and as a direct result of this omitted from the financial statements. These errors do not result in a
significant misstatement and as such no adjustment to the financial statements is proposed.
In addition our internal valuations team reviewed the assumptions used in the valuations for reasonableness.
Discrepancies were identified in certain of the valuations of assets valued on a depreciated replacement cost
basis. In valuing land the Authority used an assumption that residential land values decreased by 10% on
average between April 2008 and 2010. However this fall in value refers to house prices rather than land values.
This is supported by the Nationwide regional Quarterly Index which reflected a fall of 10% in house prices in
East Anglia between Q1 2008 and Q1 2010. The same index indicates that land values decreased by 19% over
the same period. On this basis, the assumption that land values have fallen by 10% over the period appears to
underestimate the negative movement.
In valuing buildings the Authority based its assumptions on the Building Cost Index (a measure of the cost of
raw materials) and identified from this index that prices increased over the period by approximately 6%.
However, we would suggest that a more appropriate index would be of tender prices (being the change in the
price quotes received by developers). Using the Spons Architects & Builders Price Book 2011 the tender price
index has actually fallen by 16% over the period. The discrepancy is that although raw material prices have
indeed increased the down turn in construction during the economic recession has meant that building
contractors have been unable to pass on these increases and indeed the lack of contracts has forced fierce price
competition.
Since the depreciated replacement cost approach is the cost to an owner of replacing the asset then we consider
the tender price index to be more appropriate. This is likely to compound risks of overstating the values.
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North Norfolk District Council – Report to the Audit Committee
September 2011
However the Authority did not take into account the positive impact of improvement works carried out on these
assets in 2010/11 which are likely to have a positive impact on the depreciated replacement cost. This
counteracts some of the risk of valuation overstatement and as such the monetary value of the differing
valuation assumptions is not considered to be significant. The Authority should however take care in ensuring
the reasonableness of asset valuations going forward. The Assets in question are valued at approximately £691k.
Valuations on the bulk of the asset base
The Authority’s last full valuation of its asset base was carried out in 2008 as at 1 April 2008 by Norfolk
Property Services with an update as at 31 March 2009 and this was reflected in the 2008/09 accounts. The
Authority has provided us with a paper that seeks to justify why the valuations performed in 2008/09, with
adjustments for depreciation and additions, is still appropriate to use as the basis for the valuation as at 31
March 2011. Our internal valuations team have considered the paper prepared by the Authority. The
Authority’s analysis is that the full valuation performed in 2008/09 covers the more volatile period of the
market which represents the greater risk of misstatement and therefore considers that there have been no
indicators of impairment from a market perspective. Based on the information we have considered, we are not
minded to challenge this analysis.
We ask the Audit Committee to consider whether the Authority has taken necessary steps to enable it t0
conclude that the valuations attributed to property detailed above as at 31 March 2011 in the financial
statements are not materially misstated.
Housing Subsidy liability
A liability of £161,883 was included within the Authority’s draft financial statements in relation to the potential
claw back of housing and Council Tax subsidy income received by Authority from the Department of Work and
Pensions (DWP). The Authority based this amount on 0.5% of the subsidy within the 2010/11 claim. However,
the Authority is unable to provide evidence to demonstrate that the DWP had clawed back, or intended to claw
back or retain, subsidy due as a result of exceptions noted in previous audit certifications of the Housing and
Council Tax Benefit Subsidy claim. In addition, the Council could not provide any evidence to support the
liability at 0.5% of 2010/11 subsidy due.
Under International Accounting Standard 18 (Revenue recognition), we do not consider that the £161,883
creditor meets the definition of liability because there is no contractual obligation. We consider it meets the
definition of a contingent liability which requires only narrative disclosure in the financial statements. As such,
the Authority has de-recognised the liability but set the money aside in a reserve instead. This has had the
impact of increasing income by £161,883 and therefore reducing the deficit on the Income and Expenditure
Account by the same amount. A transfer to earmarked reserves £161,883 has also been made, increasing
earmarked reserves by the same amount.
Suspense Accounts
Suspense accounts are used to hold transactions temporarily prior to fully identifying them and therefore being
able to assign them to the correct code within the general ledger. As such, they should be regularly reviewed and
cleared to zero at year end as they represent unidentified balances which, unless identified, could be incorrectly
accounted for within the financial statements.
The Authority has a number of suspense accounts which have balances outstanding on them as at 31 March
2011. They are detailed below:
Account Number and Description
Balance as at 31
March 2011 (£)
9911 -"VAT Invoices Awaited"
1,263.55
9915 - "Coast Protection Suspense"
6,736.83
9999 - "Other Suspense Items"
(947.58)
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North Norfolk District Council – Report to the Audit Committee
September 2011
TOTAL
7,052.80
We ask the Committee to confirm that the inclusion of suspense accounts in the financial statements is
reasonable. We also recommend that the suspense accounts are cleared quickly and, in future, on a timely basis.
Misstatements and significant audit adjustments
We are required to report to you all unadjusted misstatements which we have identified during the course of
our audit, other than those of a trivial nature( which we have agreed with you are those below £50,000).
We confirm that there are no identified uncorrected misstatements which would have a material effect on the
financial statements. These misstatements are described in Appendix 1 to this report.
We have also brought to your attention the misstatements relating to the DWP liability and Assets held for sale
earlier in this report which has been corrected by management but which we consider you should be aware of in
fulfilling your governance responsibilities.
Significant accounting principles and policies
Significant accounting principles and policies are disclosed in the notes to the financial statements. We will ask
the Audit Committee to represent to us that they have considered the selection of, or changes in, significant
accounting policies and practices that have, or could have, a material effect on the entity's financial statements.
Judgments and accounting estimates
We have reported in the sections above in respect of key judgments and estimates in relation to the property
plant and equipment valuations. Note 3 to the accounts summarises the key areas where management consider
judgment has been exercised in applying accounting policies. There are no other significant judgements and
accounting estimates (subject to the completion of our work) which we wish to draw to your attention.
Disagreements with management
There were no disagreements with management about matters that, individually or in aggregate, could be
significant to the entity's financial statements or our audit report thereon.
Management representations
The final draft of the representation letter that we are requesting management to sign and those charged with
governance to approve is attached in Appendix 2. Whilst much of this letter is standard for local government
entities, we have specifically asked the Audit Committee to confirm the values attributed to the Authority’s
property, plant and equipment in the financial statements are not materially misstated.
Audit independence
We confirm that, in our professional judgement, as at the date of this document, we are independent auditors
with respect to the Authority and its related entities, within the meaning of UK regulatory and professional
requirements and that the objectivity of the audit engagement leader and the audit staff is not impaired.
Accounting systems and systems of internal control
It is the responsibility of the Authority to develop and implement systems of internal financial control and to
put in place proper arrangements to monitor their adequacy and effectiveness in practice. As auditors, we
review these arrangements for the purposes of our audit of the financial statements and our review of the
annual governance statement.
We are required to report to management and those charged with governance any deficiencies in internal
control that we have identified during the audit. No significant issues arose which we wish to draw to the
attention of those charged with governance within this report other then issues identified in property valuations
which have been detailed on page 5.
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North Norfolk District Council – Report to the Audit Committee
September 2011
We have identified from our audit work a number of matters which management will need to be aware of when
producing the 2011/12 financial statements or where procedural improvements can be made. These include
matters relating to the issues noted earlier in this report. We will summarise these at the conclusion of our audit
in a report to management, together with our recommendations and management responses. This report will be
presented to the Audit Committee at the meeting on 6 December 2011. In our view, these matters do not have a
bearing on our opinion on the truth and fairness of the Council’s 2010/11 statement of accounts.
Annual Governance Statement
Local Authorities are required to produce an Annual Governance Statement (AGS), which is consistent with
guidance issued by CIPFA / SOLACE: ‘Delivering Good Governance in Local Government’. The AGS was
included in the financial statements.
We reviewed the AGS to consider whether it complied with the CIPFA / SOLACE ‘Delivering Good Governance
in Local Government’ framework and whether it is misleading or inconsistent with other information known to
us from our audit work. We found no areas of concern to report in this context.
Economy, efficiency and effectiveness
Our value for money code responsibility requires us to carry out sufficient and relevant work in order to
conclude on whether you have put in place proper arrangements to secure economy, efficiency and effectiveness
in the use of resources.
In accordance with guidance issued by the Audit Commission, in 2010/11 our conclusion is based on two
criteria:

The organisation has proper arrangements in place for securing financial resilience; and

The organisation has proper arrangements for challenging how it secures economy, efficiency and
effectiveness.
Unlike in previous years, we have not been required to reach a scored judgement in relation to these criteria and
the Audit Commission has not developed ‘key lines of enquiry’ for each criteria. Instead, we have determined a
local programme of audit work based on our audit risk assessment, informed by these criteria and our statutory
responsibilities.
We have completed our work, subject to the following outstanding matters:

Confirmation of the level of savings achieved, compared to target, in respect of the 2010/11 financial year;

Internal quality control procedures including local and national moderation.
Subject to the satisfactory resolution of these matters we expect to issue an unqualified value for money
conclusion.
Risk of fraud
We discussed with the Audit Committee their understanding of the risk of fraud and corruption and any
instances thereof when presenting our Audit Plan.
In presenting this report to the Audit Committee we seek members’ confirmation that there have been no
changes to their view of fraud risk and that no additional matters have arisen that should be brought to our
attention. A specific confirmation from management in relation to fraud is included in the letter of
representation.
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[North Norfolk District Council – Report to the Audit Committee]
September 2011
Fees update
Fees update for 2010/11
2010/11, being the first year of introduction of IFRS, has required a large number of changes to the financial
statements, increased disclosure requirements and changes to the supporting documentation required for audit
purposes. In common with a number of other local authorities, this has caused some difficulty to get everything
right first time. We have spent additional time as a result and have varied our fee from that we reported as part
of the Audit Plan for 2010/11.
We have varied our fee because:

The availability of certain deliverables caused delays. The working papers, as detailed in the audit
deliverables document agreed with officers prior to the audit, were not all available on the first day of the
audit and were not as easily accessible for our audit purposes as expected. Furthermore some working
papers provided were out of date. The information technology department were not able to grant us access
to the accountancy shared drives as expected by the Finance department this greatly contributed to the
delays. We will be working closely with the finance team as part of the debriefing process to ensure a
mutual understanding of what is required for next year’s audit.

As discussed previously in this report weaknesses in the supporting working papers and discrepancies in
the assumptions used to support property valuations were identified. As a result additional audit
procedures were performed including further use of our internal valuations team then initially planned;

Our review of journals identified that staff are able to manually adjust the input journal date onto the
general ledger system. We reported this issue in the prior year; the Authority has investigated our
recommendation to liaise with the software provider in implementing an automated system control to
prevent manual adjustment and have been advised that this will involve bespoke consultancy services. The
Authority has opted not to pursue this on the basis of cost. Instead the finance department updated
procedures informing staff to refrain from manually manipulating the date. However this procedure has not
been adhered to in all instances. As a result we could not rely upon the accuracy of data reports regarding
journal inputs from the general ledger system and asked our internal data assurance specialists to obtain a
system report for audit purposes directly from the Cedar information system;

As discussed previously in this report several IFRS required disclosures were omitted from the financial
statements; and

Errors were identified in the accounting treatments of liabilities, leases and assets held for sale.
The updated audit fees, which in total are £1,605 higher than the fee set out in our audit plan, are detailed in
the table below:
Financial Statements
Value for Money Conclusion
TOTAL
Audit commission rebate 6% of scale
fee*
Total cost to the Authority
2010/11 Outturn
83,600
42,400
126,000
(6,495)
2010/11 Budgeted Fee
75,500
42,400
117,900
-
119,505
117,900
*The Audit Commission awarded the Authority a rebate of 6% of the scale fee towards costs incurred as part of the
transition to IFRS.
9
[North Norfolk District Council – Report to the Audit Committee]
September 2011
Recent developments
Accounting developments
There are a number of minor updates to the CIPFA Code of Practice on Local Authority Accounting in the UK
2011/12
The main accounting change relates to the adoption of the requirements of FRS 30 Heritage Assets in the
CIPFA Code. This requires heritage assets to be measured at valuation in normal circumstances, and permits
authorities to use the measurement and disclosure principles of FRS 30 for Community Assets.
The Authority has provided interim disclosures in respect of the accounting developments above in Note 2 of
the Accounts, as required by the Code.
10
[Date]
Appendices
11
North Norfolk District Council– Report to the Audit Committee
Appendix 1
September 2011
Summary of uncorrected misstatements
We have identified the following errors during our audit of the financial statements that have not been adjusted
by management. The Audit Committee are requested formally to consider the unadjusted errors listed and
determine whether they would wish the accounts to be amended. If the errors are not adjusted we will require a
written representation from you explaining your reasons for not making the adjustments.
No
Description of misstatement
(factual, judgemental,
projected)
1
Dr: Cultural, environmental,
regulatory and planning
services expenditure
Income
statement
£’000
Dr
Cr
Balance
sheet
£’000
Dr
Cr
60
Cr: Non-Current Assets
additions (Assets under
construction)
60
Dr: Capital adjustment
account reserve
60
Cr: Movement in reserves
adjustments between
accounting basis and funding
basis under regulations
(Revenue expenditure funded
from capital under statute)
2
60
Being an adjustment to correct
the treatment of £60,000
expenditure relating to a
village hall which has been
treated as an asset under
construction. The expenditure
meets the recognition criteria
for Revenue Expenditure
Funded from Capital under
Statute and as such should not
be capitalised. The
expenditure should be charged
to the relevant service in the
Income and Expenditure
Statement.
Dr: Deferred liabilities finance
lease principle
52
Cr: Finance lease payments
Dr: Financing and investment
expenditure external interest
paid
52
3
12
North Norfolk District Council– Report to the Audit Committee
Appendix 1
No
Description of misstatement
(factual, judgemental,
projected)
Income
statement
£’000
Dr
Cr
Cr: Finance lease payments
Dr: Depreciation expenditure
September 2011
Balance
sheet
£’000
Dr
Cr
3
317
Cr: Operating equipment
depreciation
317
Dr: Capital adjustment
account depreciation
neutralisation
317
Cr: Asset management
revenue account capital
charges reserve
Dr: Provision for debt
repayment
317
52
Cr: Capital adjustment
account financing
52
Being an adjustment to
remove the asset, liability and
interest charge in relation to
the embedded finance lease
because the contract ceased on
31 March 2011 and as such
there is no future obligation or
economic benefit.
Total uncorrected misstatements
432
432
429
429
13
North Norfolk District Council– Report to the Audit Committee
Appendix 1
September 2011
Summary of misstatements
The following misstatements were also identified during the course of our audit; however these have been
corrected by the Authority. We have not listed misstatements which are considered to be clearly trivial as
detailed earlier in this report:
No
Description of misstatement
(factual, judgemental, projected)
Income statement
Dr
£
1
Dr government department creditors
Cr income
2
Cr
£
Balance sheet
Dr
£
161,883
Cr
£
161,883
Removal of Housing subsidy liability
Dr Other land and buildings
250,000
Cr Assets held for sale
250,000
Reclassification of assets which do not met
the recognition criteria for assets held for
sale
Total corrected misstatements
Nil
161,883
411,883
250,000
14
North Norfolk District Council – Report to the Audit Committee
Appendix 2
13 September 2011
Letter of representation
(To be placed on the Council’s letterhead)
PricewaterhouseCoopers LLP
The Atrium
St Georges Street
Norwich
NR3 1AG
Dear Sirs
This representation letter is provided in connection with your audit of the Statement of Accounts of North Norfolk
District Council (the “authority”) for the year ended 31 March 2011 for the purpose of expressing an opinion as to
whether the Statement of Accounts gives a true and fair view, and has been properly prepared in accordance with
the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom and the Best Value
Accounting Code of Practice.
My responsibilities as Deputy Chief Executive for preparing the financial statements are set out in the Statement of
Responsibilities for the Statement of Accounts. I am also responsible for the administration of the financial affairs of
the authority. I also acknowledge that I am responsible for making accurate representations to you.
I confirm that the following representations are made on the basis of enquiries of other chief officers and members
of North Norfolk District Council with relevant knowledge and experience and, where appropriate, of inspection of
supporting documentation sufficient to satisfy myself that I can properly make each of the following representations
to you.
I confirm, to the best of my knowledge and belief, and having made the appropriate enquiries, the following
representations:
Financial Statements

I have fulfilled my responsibilities, for the preparation of the Statement of Accounts in accordance with the
CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom; in particular the
financial statements give a true and fair view in accordance therewith.

All transactions have been recorded in the accounting records and are reflected in the financial
statements.

Significant assumptions used by the authority in making accounting estimates, including those surrounding
measurement at fair value, are reasonable.

All events subsequent to the date of the financial statements for which the CIPFA/LASAAC Code of
Practice on Local Authority Accounting in the United Kingdom requires adjustment or disclosure have been
adjusted or disclosed.

I confirm that the reason why the misstatements that you have brought to the attention of those charged
with governance, the Audit Committee of North Norfolk District Council, as set out below have not been
adjusted in the financial statements is that those charged with governance believe their effect both
individually and in aggregate is not material to the financial statements either taken as a whole or in
connection with the ability properly to assess the performance and/or the financial position of the Council.
15
North Norfolk District Council – Report to the Audit Committee
Appendix 2
No
Description of misstatement
(factual, judgemental,
projected)
1
Dr: Cultural, environmental,
regulatory and planning
services expenditure
Income
statement
£’000
Dr
Cr
13 September 2011
Balance
sheet
£’000
Dr
Cr
60
Cr: Non-Current Assets
additions (Assets under
construction)
60
Dr: Capital adjustment account
reserve
60
Cr: Movement in reserves
adjustments between
accounting basis and funding
basis under regulations
(Revenue expenditure funded
from capital under statute)
2
60
Being an adjustment to correct
the treatment of £60,000
expenditure relating to a village
hall which has been treated as
an asset under construction.
The expenditure meets the
recognition criteria for Revenue
Expenditure Funded from
Capital under Statute and as
such should not be capitalised.
The expenditure should be
charged to the relevant service
in the Income and Expenditure
Statement.
Dr: Deferred liabilities finance
lease principle
52
Cr: Finance lease payments
Dr: Financing and investment
expenditure external interest
paid
52
3
Cr: Finance lease payments
Dr: Depreciation expenditure
3
317
Cr: Operating equipment
depreciation
Dr: Capital adjustment account
depreciation neutralisation
317
317
16
North Norfolk District Council – Report to the Audit Committee
Appendix 2
No
Description of misstatement
(factual, judgemental,
projected)
Income
statement
£’000
Dr
Cr
Cr: Asset management revenue
account capital charges reserve
13 September 2011
Balance
sheet
£’000
Dr
Cr
317
Dr: Provision for debt
repayment
52
Cr: Capital adjustment account
financing
52
Being an adjustment to remove
the asset, liability and interest
charge in relation to the
embedded finance lease
because the contract ceased on
31 March 2011 and as such
there is no future obligation or
economic benefit.
Total uncorrected misstatements
432
432
429
429
Information Provided

I have taken all the steps that I ought to have taken in order to make myself aware of any relevant audit
information and to establish that you (the authority's auditors) are aware of that information.

I have provided you with:
 Access to all information of which I am aware that is relevant to the preparation of the financial
statements such as records, documentation and other matters, including minutes of the Council, the
Cabinet, the Audit Committee and relevant management meetings;
 Additional information that you have requested from us for the purpose of the audit; and
 Unrestricted access to persons within the authority from whom you determined it necessary to obtain
audit evidence.

So far as I am aware, there is no relevant audit information of which you are unaware.
Fraud and non-compliance with laws and regulations

I acknowledge responsibility for the design, implementation and maintenance of internal control to prevent
and detect fraud.

I have disclosed to you the results of our assessment of the risk that the financial statements may be
materially misstated as a result of fraud.

I have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that
affects the authority and involves:
–
–
–
Management;
Employees who have significant roles in internal control; or
Others where the fraud could have a material effect on the financial statements.
17
North Norfolk District Council – Report to the Audit Committee
Appendix 2
13 September 2011

I have disclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the
authority’s financial statements communicated by employees, former employees, analysts, regulators or
others.

I have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and
regulations whose effects should be considered when preparing financial statements.
I am not aware of any instances of actual or potential breaches of or non-compliance with laws and regulations
which provide a legal framework within which the authority conducts its business and which are central to the
authority’s ability to conduct its business or that could have a material effect on the financial statements.
I am not aware of any irregularities, or allegations of irregularities including fraud, involving members, management
or employees who have a significant role in the accounting and internal control systems, or that could have a
material effect on the financial statements.
Related party transactions
I confirm that we have disclosed to you the identity of the authority’s related parties and all the related party
relationships and transactions of which we are aware.
Related party relationships and transactions have been appropriately accounted for and disclosed in accordance
with the requirements of Section 3.9 of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the
United Kingdom.
We confirm that we have identified to you all senior officers, as defined by the Accounts and Audit Regulations
2011, and included their remuneration in the disclosures of senior officer remuneration.
Employee Benefits
I confirm that the authority has made you aware of all employee benefit schemes in which employees of the
authority participate.
Contractual arrangements/agreements
All contractual arrangements (including side-letters to agreements) entered into by the authority have been
properly reflected in the accounting records or, where material (or potentially material) to the financial statements,
have been disclosed to you.
Litigation and claims
I have disclosed to you all known actual or possible litigation and claims whose effects should be considered when
preparing the financial statements and such matters have been appropriately accounted for and disclosed in
accordance with the Code of Practice on Local Authority Accounting in the United Kingdom.
Taxation
I have complied with UK taxation requirements and have brought to account all liabilities for taxation due to the
relevant tax authorities whether in respect of any direct tax or any indirect taxes. I am not aware of any noncompliance that would give rise to additional liabilities by way of penalty or interest and I have made full disclosure
regarding any Revenue Authority queries or investigations that we are aware of or that are ongoing.
In particular:

In connection with any tax accounting requirements, I am satisfied that our systems are capable of
identifying all material tax liabilities and transactions subject to tax and have maintained all documents
18
North Norfolk District Council – Report to the Audit Committee
Appendix 2


13 September 2011
and records required to be kept by the relevant tax authorities in accordance with UK law or in accordance
with any agreement reached with such authorities.
I have submitted all returns and made all payments that were required to be made (within the relevant time
limits) to the relevant tax authorities including any return requiring us to disclose any tax planning
transactions that have been undertaken the authority’s benefit or any other party’s benefit.
I am not aware of any taxation, penalties or interest that are yet to be assessed relating to either the
authority or any associated company for whose taxation liabilities the authority may be responsible.
.
Pension fund assets and liabilities
All known assets and liabilities including contingent liabilities, as at the 31 March 2011, have been taken into
account or referred to in the financial statements.
Details of all financial instruments, including derivatives, entered into during the year have been made available to
you. Any such instruments open at the 31 March 2011 have been properly valued and that valuation incorporated
into the financial statements.
The pension fund has satisfactory title to all assets and there are no liens or encumbrances on the pension fund's
assets.
The value at which assets and liabilities are recorded in the net assets statement is, in the opinion of the authority,
the market value. We are responsible for the reasonableness of any significant assumptions underlying the
valuation, including consideration of whether they appropriately reflect our intent and ability to carry out specific
courses of action on behalf of the pension fund. Any significant changes in those values since the date of the
financial statements have been disclosed to you.
Pension fund registered status
I confirm that the Local Government Pension Scheme is a Registered Pension Scheme. We are not aware of any
reason why the tax status of the scheme should change.
Bank accounts
I confirm that we have disclosed all bank accounts to you including those that are maintained in respect of the
pension fund.
Other matters
Property Valuations
We have undertaken the necessary steps to enable us to conclude that the values attributed to the authority’s
property, plant and equipment in the financial statements are not materially misstated compared to the current
values calculated in accordance with the accounting policies.
Retirement benefits
All significant retirement benefits that authority is committed to providing, including any arrangements that are
statutory, contractual or implicit in authorities actions, wherever they arise, whether funded or unfunded, approved
or unapproved, have been identified and accounted for and/or disclosed.
The following actuarial assumptions underlying the valuation of retirement benefit scheme liabilities are consistent
with my knowledge of the business and, after taking advice from the actuary, in my view would lead to the best
estimate of the future cash flows that will arise under the scheme liabilities:
19
North Norfolk District Council – Report to the Audit Committee
Appendix 2
13 September 2011
As at 31 March
2011
Inflation / Pension Increase Rate
2.8%
Salary Increase Rate
5.1%
Expected Return on Assets
6.7%
Discount Rate
5.5%
Long term expected rates of return on assets
Equities
7.5%
Bonds
4.9%
Property
5.5%
Cash
4.6%
Mortality assumptions
Longevity at 65 for current pensioners
Men
21.2 years
Women
23.4 years
Longevity at 65 for future pensioners
Men
23.6 years
Women
25.8 years
I have considered the assumptions made by our actuary in relation to the take-up of the entitlement to a lump sum
under Regulation 3 of the Local Government Pension Scheme (Amendment) Regulations 2006 (Statutory
Instrument 2006/966), and, I am satisfied that the actuary is best qualified to make the assumption that 50% of
future retirements will elect to take a tax-free lump sum up to HMRC limits for pre April 2008 service and 75% of
the maximum tax-free cash for post April 2008 service in the preparation of our financial statements and leads to
the best estimate of scheme liabilities. I am not aware of any reason to disagree with their approach.
As minuted by the Audit Committee at its meeting on 13 September 2011
........................................
(Chief Financial Officer/Treasurer) *
For and on behalf of ……………………
……………………………………..........................
Date ……………………
20
In the event that, pursuant to a request which North Norfolk District Council has received
under the Freedom of Information Act 2000, it is required to disclose any information
contained in this report, it will notify PwC promptly and consult with PwC prior to
disclosing such report. North Norfolk District Council agrees to pay due regard to any
representations which PwC may make in connection with such disclosure North Norfolk
District Council shall apply any relevant exemptions which may exist under the Act to such
report. If, following consultation with PwC, North Norfolk District Council discloses this
report or any part thereof, it shall ensure that any disclaimer which PwC has included or
may subsequently wish to include in the information is reproduced in full in any copies
disclosed.