22 September 2015

Present

Councillor Edgell (Chairman), Berry, Clarance, Hannan, Hannon and B Hughes

Apologies

Councillors Biederman

*65 Minutes

RESOLVED that the Minutes of the meeting held on 30 June 2015 be signed as a correct record.

*66 Devon County Council Audit Findings Report

The Committee received the Report of Grant Thornton (CT/15/82 - text only | pdf | supplementary information CT/15/82) outlining the findings arising from the audit of the County Council s financial statements and the work undertaken in relation to the value for money conclusion. The Report also described the work undertaken by the external auditors to address the risks identified in the Audit Plan, presented to the Committee in March 2015.

The Report stated that the audit was substantially complete and it was anticipated that an unqualified opinion on the financial statements and the value for money conclusion would be provided.

Grant Thornton highlighted the work undertaken by the Council in accounting for school buildings on or off the balance sheet which had been reviewed in line with changes to the Code in 2014/15. Grant Thornton were satisfied with the Council s interpretation of the guidance and that the Council s assessment of school assets was reasonable.

Grant Thornton had made two recommendations in its action plan, namely to identify savings plans further ahead and to consider increasing the period of its annual savings plan to fully cover two to three years. The County Treasurer advised the Committee that although the Council recognised that longer term savings plans would be helpful to the authority, it was difficult to produce definite medium term savings plans at a time when government funding plans were unknown.

*67 Devon Pension Fund Audit Findings Report

The Committee received the Report of Grant Thornton (CT/15/81 - text only | pdf | supplementary information CT/15/81) outlining the findings arising from the audit of the Pension Fund for 2014/15 and described the work undertaken by the external auditors to address the risks identified in the Audit Plan presented to the Committee in March 2015, including one change which had been made to re-classify the risk to the valuation of level 3 investments, to a significant risk.

Grant Thornton advised the Committee that despite their new approach to auditing the Pension Fund which proved to be less onerous and required less interrogation, the fee set by the Audit Commission was in their view appropriate for the work required for this type of external audit.

*68 Statement of Accounts

The Committee considered the report of the County Treasurer (CT/15/79 - text only | pdf | supplementary information CT/15/79) together with

the Statement of Accounts booklet. The Report highlighted the key messages from the

Statement of Accounts for 2014/15 including:

the changes to accounting for school buildings on or off the balance sheet, as required by the CIPFA Code of Practice;

the addition of historic teachers pension liabilities to the balance sheet;

that neither of the above had an impact on usable reserves or balances;

that as expected the Council had a negative balance sheet due to pension liabilities and that this gave no cause for concern;

that no new borrowing had taken place;

that there had been a decrease in earmarked reserves due to the use of reserves to fund service transformation.

In response to Members questions the County Treasurer further advised that:

the main cost of service transformation was for redundancy payments;

if assets were to be sold, funds would go to capital reserves;

stricter Government guidelines had meant that it had not been possible to use capital reserves for substantial redundancy payments;

in the case of PFI schools which had transferred to academy status, liability for the PFI remained on the Council s balance sheet but the assets removed;

the interest charge of 10.31% payable to PFI operators each year was set at the outset of the PFI agreement, but that this was funded by government.

Members also thanked the County Treasurer and her team for the excellent work done to prepare the statement of accounts, particularly in relation to the complex work around accounting for schools required this year.

It was MOVED by Councillor Edgell, SECONDED by Councillor Clarance and

RESOLVED

(a) that the Letters of Management Representation for the Devon Pension Fund and the County Council be approved;

(b) that the 2014/15 Statement of Accounts for the Pension Fund and the County Council be approved.

*69 Internal Audit Progress Report

The Committee considered the Report of the Head of Devon Audit Partnership (CT/15/80 - text only | pdf | supplementary information CT/15/80) providing an update on issues identified as improvement required in the Annual Internal Audit Report.

The Report indicated that two of the nine areas which previously required improvement were now at a good standard and that in all but one area (where agreed actions were no longer applicable due to a significant change in arrangements) action plans had been partially or wholly implemented.

In response to Members questions the Head of Devon Audit Partnership advised that:

the risks identified in relation to PLUSS remained relevant and that further work was being carried out to mitigate these risks;

the main area of risk identified in payroll remained at improvements required , but that good progress had been made overall;

an update on three areas identified at improvement required in the Annual Internal Audit Report which were not detailed in the Progress Report would be brought to a future meeting of the Committee.

The County Treasurer also undertook to clarify the classification of the new ICT Strategy document referred to in the Report and advise Members as appropriate.

Members also noted the positive impact of the Committee s contribution to the Audit Plan in relation to Children Missing in Education.

It was MOVED by Councillor Edgell, SECONDED by Councillor Clarance and

RESOLVED that the progress made by management to address weaknesses identified through the internal audit process be noted.

*70 Highways Network Asset Consultation

The Committee considered the Report of the County Treasurer (CT/15/78 - text only | pdf CT/15/78) and the Council s proposed response to the CIPFA consultation on the 2016/17 Code of Practice on local authority accounting in the UK.

Members discussed the Government s decision to revalue transport infrastructure assets at the depreciated replacement cost, resulting in a significant increase in the value of these assets on the balance sheet from 425 millions to almost 16 billions, and the underlying reasons for the change.

The County Treasurer advised the Committee that the revaluation was required to bring consistency in transport infrastructure asset values nationally, and addressed a historical undervaluing of highway assets.

Following discussions the County Treasurer undertook to gauge the view of the Local Government Association on the issue of transport infrastructure asset revaluation.

It was MOVED by Councillor Hannon, SECONDED by Councillor B Hughes and

RESOLVED that Council s proposed response to the CIPFA consultation on the 2016/17 Code of Practice on local authority accounting in the UK be approved, and that the response be copied to the Local Government Association and the National Audit Office.

*71 Future Meetings

The Audit Committee will meet on Thursday 19 November 2015 and Wednesday 23 March 2016 at County Hall at 2 pm.

*DENOTES DELEGATED MATTER WITH POWER TO ACT

The meeting started at 2.00pm and finished at 3.32pm.

The Minutes of the Committee are published on the County Council s Website at:-