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Audit of the Financial Statements Report

Carmarthenshire County Council

Audit year: 2010-11

Issued: September 2011

Document reference: 513A2011


Anthony Barrett as Appointed Auditor intends to issue an unqualified audit report on your financial statements. There are some issues to report to you prior to their approval.

Summary Report

 

Introduction

4

Proposed audit report

4

Significant issues arising from the audit

4

Appendices

 

Final Letter of Representation

7

Proposed audit report of the Appointed Auditor

9

Summary of corrections and amendments made to the draft financial statements

12

Introduction

1. Anthony Barrett as Appointed Auditor is responsible for providing an opinion on whether the financial statements give a true and fair view of the financial position of Carmarthenshire County Council at 31 March 2011 and its income and expenditure for the year then ended.

2. We received the draft financial statements for the year ended 31 March 2011 on
30 June 2011 and have now substantially completed our audit work. We are reporting to you the more significant issues arising from the audit, which we believe you must consider prior to approval of the financial statements. The audit team have already discussed these issues with officers.

3. We do not try to obtain absolute assurance that the financial statements are correctly stated, but adopt the concept of materiality. In planning and conducting the audit,
we seek to identify material misstatements in your financial statements, namely,
those that might result in a reader of the accounts being misled.

4. The quantitative levels at which we judge such misstatements to be material are
5.7 million for income and expenditure items and working capital balances, and
14.5 million for other balances. Whether an item is judged to be material can also be affected by certain qualitative issues such as legal and regulatory requirements and political sensitivity.

5. A separate report has been issued for the Dyfed Pension Fund.

Proposed audit report

6. It is the Appointed Auditor’s intention to issue an unqualified audit report on the financial statements once you have provided us with a Letter of Representation as set out in Appendix 1. The proposed audit report is set out in Appendix 2.

Significant issues arising from the audit

Uncorrected misstatements

7. There no uncorrected misstatements in the financial statements.

Corrected misstatements and amendments

8. There are misstatements and amendments that have been corrected by management, but which we consider should be drawn to your attention. These misstatements are set out in Appendix 3. The net impact of these amendments is to reduce expenditure by some 269k.

Other significant issues arising from the audit

9. In the course of the audit, we consider a number of matters both qualitative and quantitative relating to the accounts and report any significant issues arising to you. There were some issues arising in these areas this year:

Financial system

Improvements required

Fixed Assets

Last year we reported that the system for capital accounting and fixed assets required significant improvement. This year we have seen little improvement,
the Council still needs to (
Ex 133, 159):

Improve joint working between property and finance staff to ensure that the asset register is kept up to date. Responsibility is currently confused and responses to our audit enquiries delayed. (Ex 122)

Improve asset verification arrangements. The Council undertook an asset verification exercise in 2010-11 but the response rate was poor and where issues were identified, the asset register was not updated. (Ex 102)

Improve processes for ensuring that assets are revalued in line with accounting requirements and revaluations are better evidenced. (Ex 142 and 155)

Ensure capitalisation limits are complied with. A number of assets have been capitalised below the Council’s deminimus limit. (Ex 122, 150)

Review capital reserves annually. Last year we reported a 448,000 balance within the Deferred Capital Receipts Reserve could not be substantiated. This was not reviewed in 2010-11 as agreed. (Ex 124)

Financial system

Improvements required

Fixed Assets

Improve processes for identifying year-end capital accruals. (Ex 168)

Implement a quality assurance process over the fixed asset register and capital accounting arrangements. (Ex 122)

Debtors

Ensure there is a robust co-ordinated approach for collecting all sources of income. (Ex 107)

Require all debtors’ invoices be authorised by a second officer prior to issue (this has been actioned from July 2011). (Ex 108)

Establish processes to avoid significant delays in some departments raising debtor invoices (Ex 161)

ICT arrangements

(Systems report)

Undertake a risk assessment to assess financial systems network resilience.

Ensure password controls are robust across all financial systems.

Store back-up tapes at least nine miles from the main data centre.

Final Letter of Representation

Mr Anthony Barrett

Appointed Auditor

Wales Audit Office

24 Cathedral Road

Cardiff

CF11 9LJ

Date

Representations regarding the 2010-11 Financial Statements

This letter is provided in connection with your audit of the financial statements of Carmarthenshire County Council for the year ended 31 March 2011.

We confirm that to the best of our knowledge and belief, having made enquiries as we consider sufficient, we can make the following representations to you.

Management Representations

Responsibilities:

We have fulfilled our responsibilities for the preparation of the financial statements in accordance with legislative requirements and CIPFA’s Code; in particular the financial statements give a true and fair view in accordance therewith.

We acknowledge our responsibility for the design, implementation, maintenance and review of internal control to prevent and detect fraud and error.

Information Provided:

We have provided you with:

Financial Statement representations:

All transactions, assets and liabilities have been recorded in the accounting records and are reflected in the financial statements.

Significant assumptions used in making accounting estimates, including those measured at fair value, are reasonable.

Related party relationships and transactions have been appropriately accounted for and disclosed.

All events occurring subsequent to the reporting date which require adjustment or disclosure have been adjusted for or disclosed.

All known actual or possible litigation and claims whose effects should be considered when preparing the financial statements have been disclosed to the auditor and accounted for and disclosed in accordance with the applicable financial reporting framework.

The financial statements are free of material misstatements, including omissions. There are no uncorrected misstatements.

Representations by the Audit Committee – those charged with governance:

We acknowledge that the representations made by management, above, have been discussed with us.

We acknowledge our responsibility for the preparation of true and fair financial statements in accordance with the applicable financial reporting framework. The financial statements were approved by the Audit Committee on 30 September 2011.

Signed by:

Signed by:

Director of Resources

Chair of the Audit Committee

Date:

Date:

Proposed audit report of the Appointed Auditor

Independent auditor’s report to the Members of Carmarthenshire County Council

I have audited the accounting statements and related notes of:

for the year ended 31 March 2011 under the Public Audit (Wales) Act 2004.

Carmarthenshire County Council’s accounting statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement, the Movement on the Housing Revenue Account Statement and the Housing Revenue Account Income and Expenditure Statement.

Dyfed Pension Fund’s accounting statements comprise the Fund Account and the Net Assets Statement.

The financial reporting framework that has been applied in their preparation is applicable law and the Code of Practice on Local Authority Accounting in the United Kingdom 2010-11 based on International Financial Reporting Standards (IFRSs).

Respective responsibilities of the responsible financial officer and the independent auditor

As explained more fully in the Statement of Responsibilities for the Statement of Accounts set out on page 6, the responsible financial officer is responsible for the preparation of the statement of accounts, including the pension fund accounts, which gives a true and fair view.

My responsibility is to audit the accounting statements and related notes in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require me to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the accounting statements

An audit involves obtaining evidence about the amounts and disclosures in the accounting statements and related notes sufficient to give reasonable assurance that the accounting statements and related notes are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to Carmarthenshire County Council and Dyfed Pension Fund’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the responsible financial officer and the overall presentation of the accounting statements and related notes.

In addition, I read all the financial and non-financial information in the Explanatory Foreword to identify material inconsistencies with the audited accounting statements and related notes. If I become aware of any apparent material misstatements or inconsistencies, I consider the implications for my report.

Opinion on the accounting statements of Carmarthenshire County Council

In my opinion, the accounting statements and related notes:

Opinion on the accounting statements of Dyfed Pension Fund

In my opinion, the pension fund accounts and related notes:

Opinion on other matters

In my opinion, the information contained in the Explanatory Foreword for the financial year for which the accounting statements and related notes are prepared, is consistent with the accounting statements and related notes.

Matters on which I report by exception

I have nothing to report in respect of the Governance Statement on which I report to you if,
in my opinion, it does not reflect compliance with Delivering Good Governance in Local Government: Framework published by CIPFA/SOLACE in June 2007, or if the statement is misleading or inconsistent with other information I am aware of from my audit.

Certificate of completion of audit

I certify that I have completed the audit of the accounts of Carmarthenshire County Council in accordance with the requirements of the Public Audit (Wales) Act 2004 and the Code of Audit Practice issued by the Auditor General for Wales.

Anthony Barrett

Appointed Auditor

30 September 2011

Summary of corrections made to the draft financial statements

Value

Nature of issue and correction/amendment

Cashflow Statement

Various items within the Cashflow Statement were amended or reclassified. No material impact. (Ex 139)

Note 13 Property, Plant & Equipment

The gross value of Vehicles, Plant and Equipment brought forward was overstated by 742,000. Brought forward depreciation was overstated by the same amount. (Ex 125)

Investment properties were overstated by 551,000 with Assets held for disposal being understated by the same amount. (Ex 138)

Assets under construction were overstated by 241,000 with operational assets being understated by the same amount. (Ex 152)

286,000

Note 14 Investment Properties

2010-11 ‘Direct operating expenses arising from investment properties’ were overstated by 286,000 and the 2009-10 figure was overstated by 181,000.
(
Ex 136)

4,639,000

Note 15 Financial Instruments

The net assets of CWM Environmental Ltd disclosed in the draft financial statements were amended from 351,000 to 4,990,000. (Ex 120)

478,000

Note 17 Receivables

NHST debtors were overstated by 411,000, sundry debtors were overstated by 67,000 and Police, Fire, National Parks and Local Authorities were understated by 478,000. Nil net impact. (Ex 103)

270,000

Note 21 Provisions

Provisions were overstated by 270,000 with reserves being understated by the same amount. (Ex 169)

Annual Governance Statement

The draft Statement was amended to more clearly define roles and responsibilities and to correct a number of minor errors. (Ex 172)

Subsequent events

A note was added setting out the fact that the Government is proposing to link public service pension uplifts to the Consumer Price Index (CPI) rather than the Retail Price Index (RPI) but this is subject to a judicial review. (Ex 184)

Other notes

Various other minor corrections and disclosures were made to the draft financial statements. (Ex 115 )