DRAFT
The Annual Audit Letter
for Luton Borough Council
Year ended 31 March 2014
October 2014
Paul Dossett
Engagement Lead
T 0207 728 3180
E paul.dossett@uk.gt.com
Nick Taylor
Manager
T 01223 225514
E nick.taylor@uk.gt.com
© 2014 Grant Thornton UK LLP | Annual Audit Letter | October 2014
This version of the
report is a draft. Its
contents and subject
matter remain under
review and its contents
may change and be
expanded as part of the
finalisation of the report.
DRAFT
Contents
Section
1. Key messages
Page
3
Appendices
A Key issues and recommendations
B Summary of reports and audit fees
© 2014 Grant Thornton UK LLP | Annual Audit Letter | October 2014
2
DRAFT
Key messages
Our Annual Audit Letter summarises the key findings arising from the work that we have carried out at Luton Borough Council ('the Council') for the year ended 31
March 2014.
The Letter is intended to communicate key messages to the Council and external stakeholders, including members of the public. Our annual work programme, which
includes nationally prescribed and locally determined work, has been undertaken in accordance with the Audit Plan that we issued on 12 March 2014 and was conducted
in accordance with the Audit Commission's Code of Audit Practice, International Standards on Auditing (UK and Ireland) and other guidance issued by the Audit
Commission.
Financial statements audit
(including audit opinion)
We reported our findings arising from the audit of the financial statements in our Audit Findings Report on 17 September
2014 to the Audit Committee. The key messages reported were:
• The financial statements were adjusted to reflect that the old site for their PFI school has now been disposed of, leading
to a book loss on disposal within the financial statements.
• Audit work identified a small number of grants where it was not possible to identify attached conditions requiring the
income to be deferred. As such, the Council amended the financial statements to recognise the income in full.
• The Council had not completed all asset valuations in line with its policy. The policy requires whole classes of assets to be
revalued within a single year, yet audit work identified that some assets had been missed. The Council performed an
assessment supporting the fact that any difference in valuation as a result of this is unlikely to be material.
• Whilst we received draft financial statements in line with the national deadline of 30 June 2014, some of the
accompanying working papers were not made available at the agreed start of the audit on 2 July 2014, in part due to some
communication issues, and had not been collated into a central file. This led to some delays in the audit process and is
reflected in the additional time that the audit team had to spend on site at the Council. The Finance Team worked hard
to respond to audit requests, but the lack of some detailed working papers was an issue through the audit. In our view
there needs to be a cultural change in the way in which the wider Council supports the work of the central finance team
who have responsibility for closing the accounts and responding to the audit. Unless this happens the Council will not be
able to deliver the audit of the accounts to the tighter deadline of July 31st which is proposed by Government.
We issued an unqualified opinion on the Council's 2013/14 financial statements on 26 September 2014, meeting the deadline
set by the Department for Communities and Local Government. Our opinion confirms that the financial statements give a
true and fair view of the Council's financial position and of the income and expenditure recorded by the Council.
© 2014 Grant Thornton UK LLP | Annual Audit Letter | October 2014
3
DRAFT
Key messages
Value for Money (VfM) conclusion
We issued an unqualified VfM conclusion for 2013/14 on 26 September 2014.
On the basis of our work, and having regard to the guidance on the specified criteria published by the Audit
Commission, we are satisfied that in all significant respects the Council put in place proper arrangements to secure
economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2014.
In common with local authorities nationally, the financial challenges facing the Council are significant. The Council
is, however, meeting these challenges well and has good arrangements in place to ensure it remains resilient to deal
with the new financial risks as they emerge.
Our review of the Council's arrangements against the expected characteristics of proper arrangements as defined by
the Audit Commission led us to assess the Council as 'green' in a red/amber/green rating matrix for all four
characteristics, which are: key indicators of financial performance; financial planning; financial governance; and
financial control.
Whole of Government Accounts
We reviewed the consolidation pack which the Council prepared to support the production of Whole of
Government Accounts. We reported that the Council's pack was consistent with the audited financial statements.
Certification of grant claims and returns
We are currently in the process of certifying the 2013/14 grant claims and returns. Details have been provided below
of the claims that have been certified:
• Pooling of Housing Capital Receipts (CFB06) – no amendment / no qualification
The following claims are yet to be certified:
• Housing Benefits Subsidy claim (BEN01)
• Local Transport Plan (TRA11)
Once all certification work is complete we will report in full on the findings of our work to the Audit Committee.
Audit fee
© 2014 Grant Thornton UK LLP | Annual Audit Letter | October 2014
Our planned fee for 2013/14 was set out in the Audit Plan as £162,000, excluding VAT, which was in line with our
fee in the previous year. The final fee may be in excess of this level due to the additional work required to complete
the audit. Further detail (including the certification fee) is included within appendix B.
4
DRAFT
Appendix A: Key issues and recommendations
This appendix summarised the significant recommendations identified during the 2013/14 audit.
No.
Issue and recommendation
1.
Audit recommendation:
The Council should review its process for accounting for
disposals through the fixed asset register to ensure that
they are appropriately recorded on the general ledger.
High
Audit recommendation:
The Council should reconcile the fixed asset register
with the fixed asset department records to ensure that all
assets within a class are identified for valuation by the
valuations team.
High
Audit recommendation:
The Council should put in place suitable arrangements
for the preparation of detailed audit working papers in
line with the agreed audit deliverables listing. These
working papers should be collated centrally and made
available at the outset of the audit process.
High
Audit recommendation:
The Council should review its arrangements for
assessing grants received to provide for clear
consideration of the existence of conditions. This will
help to ensure that grants are correctly accounted for
going forward.
Medium
Audit recommendation:
The Council should review its treatment of credit notes
and expenditure discounts to ensure that these are
correctly accounted for going forward.
Medium
2.
3.
4.
5.
© 2014 Grant Thornton UK LLP | Annual Audit Letter | October 2014
Priority
Management response/ responsible office/ due date
Agreed. This is currently being reviewed.
Responsible officer: Tracy Stone, Chief Accountant.
Due date: 31 March 2015
Agreed. All of the assets will be reconciled with fixed assets prior to the
valuation process commencing,
Responsible officer: Tracy Stone, Chief Accountant.
Due date: 31 March 2015
Agreed. A revised audit working paper checklist is being compiled and a report
is being created to show a full breakdown of transactions that will tie back to
the trial balance and CIES
Responsible officer: Tracy Stone, Chief Accountant.
Due date: 31 March 2015
Agreed. All grants are to be individually reviewed and a checklist is to be issued
to finance teams to check existence of conditions.
Responsible officer: Tracy Stone, Chief Accountant.
Due date: 31 March 2015
Agreed. The finance teams have been updated.
Responsible officer: Tracy Stone, Chief Accountant.
Due date: 31 March 2015
5
DRAFT
Appendix B: Reports issued and fees
We confirm below the fee charged for the audit and confirm there were no fees for the provision of non audit services.
Fees for other services
Fees
Per Audit plan Actual fees
£
£
Audit Fee (i)
Grant certification fee (ii)
Total fees
162,000
TBC
26,500
TBC
188,500
TBC
Service
Fees £
None
Nil
i.
The actual audit fee may be in excess of budget due to the cost of additional time required by the audit team to complete the audit given the delays in availability
of information. This will be discussed in detail with the Council before submission to the Audit Commission in order for them to determine the additional fee
payable by the Council. In addition, the Audit Commission has approved, in principle, a fee variation of £1,070 at unitary authorities for the additional work
required on business rates following the removal of the requirement to certify the NNDR claim form.
ii.
Certification of grant claims and returns is on-going, so this remains a work in progress at the date of this letter. Based on the work completed to date, we expect
our fees to be in line with the revised scale fee of £22,424. Confirmation of the final fee will be included within the separate Certification Report later in the year.
Reports issued
Report
Date issued
Audit Plan
March 2014
Audit Findings Report
September 2014
VfM – Financial Resilience Report (included within the Audit Findings Report)
September 2014
Certification report (on completion of certification work)
December 2014
Annual Audit Letter
© 2014 Grant Thornton UK LLP | Annual Audit Letter | October 2014
October 2014
6
DRAFT
© 2014 Grant Thornton UK LLP. All rights reserved.
'Grant Thornton' means Grant Thornton UK LLP, a limited
liability partnership.
Grant Thornton is a member firm of Grant Thornton International Ltd
(Grant Thornton International). References to 'Grant Thornton' are
to the brand under which the Grant Thornton member firms operate
and refer to one or more member firms, as the context requires.
Grant Thornton International and the member firms are not a
worldwide partnership. Services are delivered independently by
member firms, which are not responsible for the services or activities
of one another. Grant Thornton International does not provide
services to clients.
grant-thornton.co.uk
© 2014 Grant Thornton UK LLP | Annual Audit Letter | October 2014