The Head of Finance presented a report on the final Statement of Accounts for 2016-17 which was now due to be certified by the external auditors, Wales Audit Office (WAO), the associated Letter of Representation of the Council and the final audited Annual Return for the Harbour Authority.

WAO updated Members on their main findings and summarised the audit work carried out in respect of the 2016-17 financial year and presented their Audit of Financial Statements Report, which required the Appointed Auditor to report these key findings to those charged with governance

The unaudited Statement of Accounts for 2016-17 was previously presented to Audit Committee on 29 June 2017 for noting and had been signed by the Responsible Financial Officer on 19 June 2017. During the intervening period, the external audit had taken place resulting in a number of amendments being made to the financial statements.

The Head of Finance explained that the audited Statement of Accounts 2016-17 was attached to the report and was required to be signed off as presenting a true and fair view of the financial position of the Council as at 31 March 2017 by 30 September 2017.

The Council Fund and earmarked reserves balances as at 31 March 2017 presented in the pre-audit Statement of Accounts were detailed in the report.

There had been no adjustments as a result of the external audit that had impacted on the year-end figures.  However the WAO Audit of Financial Statements Report included a number of findings from the audit which should be brought to the attention of the committee.

The Head of Finance explained that the Auditor General was not seeking absolute assurance that the financial statements were correctly stated but he was adopting the concept of materiality. The quantitative levels at which he judged a misstatement to be material was £4.5 million.

Wales Audit Office reported that at the time of the audit 20% of councillors had not submitted their related party return as required. Subsequently, all of the outstanding returns were rigorously pursued and by 19 September only one return remained outstanding.  

A Final Letter of Representation was required by the Appointed Auditor to complete the process and enable the accounts to be signed off. This was included as Appendix B to the report.

Appendix D contained the Annual Return for the Porthcawl Harbour Authority. Appendix E containedthe audit letter that confirmed that there had been no adjustments to the draft return presented to Audit committee in June 2017. As a result, there was therefore no requirement for Audit Committee to re-approve this Annual Return. The Return would be published on the Council’s website.

Appendix F contained the Annual Return for County Borough Supplies which ceased operation on the 31 March 2016 but had some additional transactions within 2016-17 which needed auditing. Appendix G contained the audit letter on County Borough Supplies which now needed approval by this Committee.

There was a legal requirement for the Statement of Accounts to be signed by the responsible financial officer and approved by the relevant committee by 30 September following the end of the financial year.

The Head of Finance explained that during the audit potential issues relating to the processing of housing benefit claims had been identified. Initially a sample of 20 housing benefit cases were tested, of which eight cases were identified which contained an error. Because of the high error rate, the sample was extended by a further 25 additional cases and three of these contained an error. Errors ranged from 30 pence to £1,889 and the value of the 11 errors totalled £3,087. The level of extrapolated error was significant but did not exceed the materiality of £4.5 million. The Head of Finance confirmed that further testing work had commenced and that findings would be reported to the November meeting.      

The Head of Finance also explained the incorrect calculation of an exit package payment as detailed in the report.

Members raised a number of issues identified in the report. A member referred to the processing of housing benefit claims and asked what sample size WAO deemed appropriate for internal purposes. WAO explained that it depended on what was being tested and the purpose of the review. The auditor had to maintain its independence and is not therefore in a position specify precise sample sizes to the Council. The Head of Finance also explained a meeting had taken place with Internal Audit and a report was due in the autumn.

Members asked what the financial impact would be of writing off the overpayments. The Head of Finance explained that if the claimant could be expected to know then the overpayment would be recovered but if they could not be expected to know then it would be written off. He further explained that there were two overpayments the council would not be recovering, of values £24 and £16 respectively.

Members asked if the overpayment total was likely to increase following the additional checks. He explained that it was unknown as to whether this was symptomatic of a larger problem and that last year no errors were identified. Further work would entail looking at 40 cases for the three error types which totalled 120 cases. A member asked what percentage the 45 cases represented and was advised that it was a small proportion and the total number of claims was 16,000.

Members raised concerns about the impact of the errors and the risk of claimants losing their homes. The Head of Finance explained that he did not believe this was not the case and that those with significant errors had been contacted by phone. Members raised concerns that following the testing of the additional sample, other claimants could be identified at risk of losing their homes. The Head of Finance commented that if the sample indicated that there could be a high error rate then further work would be undertaken. A large number of claimants were in receipt of full rent so they would not have been overpaid. He confirmed that there was no discernible trend when it came to the errors and different staff were involved, and the errors covered different types of claim.  It was recognised that Managers were trying to implement changes with an ever decreasing budget and there is always a need to achieve a quick response time, but without compromising accuracy.

The Head of Finance explained that there would be two further reviews by WAO and Internal Audit in the following months and these would help to identify if any additional management controls needed to be added. If the recent media articles resulted in more phone calls then the service had flexibility to increase temporary capacity to deal with additional enquiries.

A member commented that it was a question of balance and that the overall audit report was favourable. 

A Member asked for clarification regarding who owned the intellectual rights to the WCCIS system and was advised that the authority owned the software and hardware.   

RESOLVED            That Audit Committee:-

·         Approved the audited Statement of Accounts 2016-17 (Appendix A)

·         Noted and agreed the Final Letter of Representation to the Wales Audit Office (Appendix B)

·         Noted the Appointed Auditors’ Audit of Financial Statements Report (Appendix C)

·         Noted the Annual Return for Porthcawl Harbour (Appendix D) and noted the Wales Audit Office’s Letter on the Return (Appendix E)

·         Approved the Annual Return for Catalogue Supplies (Appendix F) and noted the Wales Audit Office’s Letter on the Return (Appendix G).