1 Blackburn with Darwen Council Audit Committee Progress Report and Update Year ended 31 March 2016 May 2016 Karen Murray Engagement Lead T E Chris Whittingham Senior Manager T (0) E Zak Francis In Charge Auditor T E
2 The contents of this report relate only to the matters which have come to our attention, which we believe need to be reported to you as part of our audit process. It is not a comprehensive record of all the relevant matters, which may be subject to change, and in particular we cannot be held responsible to you for reporting all of the risks which may affect your business or any weaknesses in your internal controls. This report has been prepared solely for your benefit and should not be quoted in whole or in part without our prior written consent. We do not accept any responsibility for any loss occasioned to any third party acting, or refraining from acting on the basis of the content of this report, as this report was not prepared for, nor intended for, any other purpose.
3 Introduction This paper provides the Audit Committee with a report on progress in delivering our responsibilities as your external auditors. Members of the Audit Committee can find further useful material on our website where we have a section dedicated to our work in the public sector. Here you can download copies of our publications: Innovation in public financial management (December 2015); in-public-financial-management/ Knowing the Ropes – Audit Committee; Effectiveness Review (October 2015); Making devolution work: A practical guide for local leaders (October 2015) If you would like further information on any items in this briefing, or would like to register with Grant Thornton to receive regular updates on issues that are of interest to you, please contact either your Engagement Lead or Engagement Manager.
4 Progress at May 2016 2015/16 work Planned Date Complete? CommentsFee Letter We are required to issue a 'Planned fee letter for 2015/16' by the end of April 2015 April 2015 Yes The 2015/16 fee letter was issued in line with the published timetable. Accounts Audit Plan We are required to issue a detailed accounts audit plan to the Council setting out our proposed approach in order to give an opinion on the Council's financial statements. Marc 2016 The Audit Plan was agreed with management and presented to the Audit Committee on 12 April 2016. Interim accounts audit Our interim fieldwork visit plan included: updated review of the Council's control environment updated understanding of financial systems review of Internal Audit reports on core financial systems early work on emerging accounting issues early substantive testing Value for Money risk assessment. February and March 2016 Partially We completed the majority of our interim audit work by the end of March. This included early audit testing where practical to support a more efficient final accounts audit. We will conclude our planned work alongside the audit of your financial statements and will report any issues in our Audit Findings Report. Final accounts audit Including: audit of the financial statements proposed opinion on the Council's accounts proposed Value for Money conclusion review of the Council's disclosures against the Code of Practice on Local Authority Accounting in the United Kingdom 2015/16 June and July 2016 Not started We are planning to complete our audit by 31st July 2016 as part of the transition to the earlier closedown from 2018.
5 Local Government Accounting and other issues
6 IFRS 13 'Fair value measurementThe 2015/16 Accounting Code applies IFRS 13 'Fair Value Measurement' for the first time. The standard sets out in a single framework for measuring fair value and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. There is no public sector adaptation to IFRS13 but the Treasury and therefore the Code has adapted IAS 16 Property, Plant and Equipment so that operational assets (providing service potential) are no longer held at fair value but current value. As such IFRS 13 does not apply to operational assets. This new definition of current value means that the measurement requirements for operational property, plant and equipment providing service potential have not changed from the prior year. However, surplus assets will need to be measured under the new definition of fair value, reflecting the highest and best use from the market participant perspective. Other areas affected by the new standard include investment property, available for sale financial assets and those items where fair values are disclosed - for example, long term loans and PFI liabilities. IFRS 13 also introduces extensive disclosure requirements.
7 Highways Network AssetCIPFA announced at the recent Local Government Accounting Conferences some key messages with regards to changes in accounting for the Highways Network Asset form 2016/17. These included: Transport Infrastructure Assets will now be referred to as single asset, the Highways Network Asset (HNA); this will be measured at Depreciated Replacement Cost (DRC) using the Modern Equivalent Asset (MEA) basis of valuation from 1 April 2016 and will be applied prospectively rather than requiring a full retrospective restatement; and the new requirements only apply to authorities with assets meeting the definition of a single HNA asset. CIPFA expects that the transport infrastructure assets held by district councils/ non-highways authorities will be scoped out of the new requirements as assets are unlikely to form a single interconnected network. However, district councils will need to consider the nature of their transport infrastructure assets to assure themselves and evidence that their transport infrastructure assets are not part of an interconnected network. The 2016/17 Accounting Code which will include further details on these announcements is expected to be published in Spring Grant Thornton has produced a short briefing on these announcements which is available from your Engagement Lead and Engagement Manager and will provide further briefings as further details become available requirements.
8 CIPFA guidance Audit PanelsIn December the Chartered Institute of Public Finance and Accountancy (CIPFA) published its guidance on the establishment of auditor panels. Under the Local Audit and Accountability Act 'relevant authorities' are able to appoint their own local auditors via an auditor panel. The Secretary of State for Communities and Local Government has decided to implement a phased introduction of the new local audit framework, with all health bodies and smaller local government bodies moving to the new framework as planned on 1st April 2017 and larger local government bodies a year later, on 1st April In practice, this means that smaller local authorities must have appointed their local auditors by 31st December 2016 and larger principal authorities by 31st December 2017. The guidance sets out the options available to local authorities in England for establishing an auditor panel; what form such a panel can take; the operation and functions of the panel; and the main task of the panel – that is, advising the authority in connection with the appointment of the local auditor Better Care Fund The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Healthcare Financial Management Association (HFMA) have issued a joint report examining the progress that has been made six months into the implementation of the government's £5.3bn Better Care Fund (BCF) arrangements. While the report points out that the fund has already begun to produce improved working relationships between NHS bodies and local public services, it highlights that more needs to be done to ensure the success of the BCF. The report is based on the results of a CIPFA and HFMA joint finance staff survey of NHS bodies and local authorities representing almost a third of BCF sites, and is available from the CIPFA website -
9 National Audit Office publicationsCouncil accounts: a guide to your rights The NAO has published an updated version of Council accounts: a guide to your rights on its website. The guide has been updated to reflect the new requirements of the Local Audit and Accountability Act 2014, and applies to accounts. The document provides information on how people can ask questions and raise objections about the accounts of their local authority. https://www.nao.org.uk/code-audit-practice/council-accounts-a-guide-to-your-rights/ Arrangements for the exercise of public rights: The Accounts and Audit Regulations 2015 set out new arrangements for the exercise of public rights from 2015/16 onwards. A key implication of the Act is that the final approval of the statement of the accounts by an authority prior to publication cannot take place until after the conclusion of the period for the exercise of public rights. As the thirty working day period for the exercise of public rights must include the first ten working days of July, authorities will not be able to approve their audited accounts or publish before 15th July 2016. Smaller authorities must also wait until the conclusion of the thirty working day period for the exercise of public rights before publishing their accounts and the auditor’s report.
10 Grant Thornton Publications
11 Reforging local government: Summary findings of financial health checks and governance reviewsThe recent autumn statement represents the biggest change in local government finance in 35 years. The Chancellor announced that in 2019/20 councils will spend the same in cash terms as they do today and that "better financial management and further efficiency" will be required to achieve the projected 29% savings. Based on our latest review of financial resilience at English local authorities, this presents a serious challenge to many councils that have already become lean. Our research suggests that: the majority of councils will continue to weather the financial storm, but to do so will now require difficult decisions to be made about services most councils project significant funding gaps over the next three to five years, but the lack of detailed plans to address these deficits in the medium-term represents a key risk Whitehall needs to go further and faster in allowing localities to drive growth and public service reform including proper fiscal devolution that supports businesses and communities local government needs a deeper understanding of their local partners to deliver the transformational changes that are needed and do more to break down silos elected members have an increasingly important role in ensuring good governance is not just about compliance with regulations, but also about effective management of change and risk councils need to improve the level of consultation with the public when prioritising services and make sure that their views help shape council development plans. Our report is available at or in hard copy from your Engagement Lead or Engagement Manager.
12 CFO Insights – driving performance improvementCFO insights is an online analysis tool that gives those aspiring to improve the financial position of their local authority instant access to insight on the financial performance, socio- economy context and service outcomes of every council in England, Scotland and Wales. . The tool provides a three-dimensional lens through which to understand council income and spend by category, the outcomes for that spend and the socio-economic context within which a council operates. This enables comparison against others, not only nationally, but in the context of their geographical and statistical neighbours. CFO Insights is an invaluable tool providing focused insight to develop, and the evidence to support, financial decisions. We are happy to organise a demonstration of the tool if you want to know more.
13 Innovation in public financial managementGrant Thornton reports In December 2015 we issued a report, which drew on a survey of almost 300 practitioners worldwide, also includes insights from experts at the International Consortium on Governmental Financial Management (ICGFM) and the Massachusetts Institute of Technology's Centre for Finance and Policy. The report is the latest in a decade-long series jointly published by Grant Thornton and the ICGFM and it covers four major topics that, globally, will impact on the future of public financial management: Changing practices: Our research showed that the biggest issue ahead will be finding the political commitment to support more difficult innovations on the agenda – such as increasing public engagement. The right PPP formula: 90% of respondents felt that substantial investment in infrastructure was required to drive economic growth. In this age of austerity, most governments are also seeking ways to attract outside investment – with the majority using some form of public-private partnership (PPP). Many countries remain inexperienced with such arrangements and the results of their application have been mixed. There has been little improvement since our 2011 survey, which shows that it takes a long time to develop the requisite skills and experience to make PPPs work. Transparency with technology: Public financial managers are convinced of the importance of enhancing transparency and most are trying to be innovative in this area. However, most are using outdated digital tools. Fewer than half use social media to enhance openness. Even among the best, most transparency efforts are focussed on releasing data sets than data insights. The new normal: Public financial management remains weighed down by the effects of the global financial crisis, but respondents also focussed on important developments since 2008, such as the Eurozone problems and the collapse of commodity prices. This suggests that public financial management is having to come to terms with not just the lessons one major financial crisis, but with how governments can live with less over the long term. Our report, Innovation in public financial management, can be downloaded from our website: novation-in-public-financial-management/
14 2016 Transparency Report Grant Thornton reportsGrant Thornton's commitment to quality underpins all that we do and this is reflected in our 2016 Transparency Report. We have more than 42,000 people in over 130 countries and this report is a public statement of our commitment to provide high-quality services to businesses and organisations operating throughout the world. It is designed to help clients, audit committees, regulators and the public, who make up our many stakeholders, understand us better. The report covers the three key aspects of our business, namely: Audit and assurance; Taxation; and Advisory services. The report provides information on our audit methodology and sets out how we monitor the quality of our work and engage with external regulators. It also covers our arrangements for governance and management and sets our most recent financial information. The report can be downloaded from our website: firms/global/grant-thornton-global-transparency-report pdf Alternatively, hard copies can be provided by your Engagement Lead or Audit Manager.
15 GRT102468