Decision details

A report was presented by Karen Murray, external auditor, on the overall findings on the audit of the accounts for Lancashire County Council, the proposed opinion on those accounts and the Value for Money conclusion.  The external auditor thanked the Council's finance team and other staff for the level of support and assistance provided during the audit.

In commenting on the county council's accounts, the external auditor, informed the committee that the Council’s accounts and working papers had again been prepared to a good standard and that none of the matters arising from the audit impacted on the Council’s reported financial position. A small number of amendments had been made in agreement with the Interim S.151 officer, in respect of misclassifications and errors. In addition, the Interim S.151 officer had agreed to include some additional disclosures in the accounts in respect of the waste PFI buyout. The accounts had also been amended to strengthen the disclosures in a number of areas to ensure compliance with the Code of Practice and to better identify the nature of the transactions and this was an area where the external audit team would continue to work with the Council to further improve disclosures.

The report also included commentary on the Value for Money conclusion. The external auditor concluded that the Council did not have proper arrangements in place in its use of resources. This related primarily to weaknesses in the Council’s arrangements for financial governance. It was recognised that this has been a challenging year for the Council and that Management Team had acknowledged the weaknesses in the Council’s governance framework in the Annual Governance Statement for 2014/15.

The key issues impacting on the Value for Money conclusion were that the Council’s Head of Internal Audit was unable to provide an overall opinion on the Council’s system of internal control for the year. The external auditor noted that the Council had received assurance from internal audit that action had been taken to address specific issues raised from their work in 2013/14; that there was assurance from work on 4 key financial systems for 2014/15; and that there were some external assurances as reflected in the Annual Governance Statement. However, the changes to the internal audit plan approved in January 2014/15 meant that the internal audit plan in place for the year wasn’t sufficiently broad.

Although Management Team agreed some actions, reported in the Annual Governance Statement approved by Committee in July, to support the development and strengthening of the internal control framework, there had not yet been any progress in delivering this work. As a result, there was a risk the Council would not be able to receive a Head of Internal Audit opinion for 2015/16. Secondly, the Value for Money opinion was impacted by the weaknesses identified in the Council’s procurement arrangements which were identified when this was transferred back in-house on 1 April 2014.  At that time, the Council identified a number of contracts that had either expired or would do so before a tender process could be run. In total, some £20m of council contracts were identified. It was acknowledged that action had since been taken to address the issues in the Council’s procurement function.

The external auditor also commented on the Council’s arrangements for strategic financial planning and noted that the Council had identified increasing financial pressures because of risks associated with the identification and delivery of savings schemes and on-going demand-side pressures. She also noted that significant work was underway across the Council to address the position, reporting back in the Autumn in line with the budget setting timetable.

The external auditor reported that the audit would not be certified as closed because the audits for 2012/13 and 2013/14 remained open, pending the conclusion of issues arising in 2014.

Resolved: 

(i)  That the external audit findings report covering the audit of the County Council for year ended 31 March 2015 be noted.

(ii)  That the adjustments to the financial statements and other issues raised by the external auditor, as set out in the report presented, be noted.