The Head of Corporate Finance introduced the report which set out the external auditors detailed findings from their review of the 2014/15 financial statements. It was added that the Council had continued to work effectively with external audit to build on the positive improvements noted in the 2013/14 financial statements. Members were informed that the issues identified in the prior year had been addressed and the overall quality of the financial statements had been reviewed and improved in 2014/15 and the audit had progressed well and in a shorter timeframe to date. The Ernst and Young Auditor informed the Committee that they would sign the Audit report off the following week.

Ernst and Young highlighted how they had difficulty in reviewing and testing some of the year estimates for debtor and creditor balances it was added that this was due to the method used by the Council to account for these balances. It was explained that rather than raising a new debtor/creditor in year and reversing this out of the accounts after the year end when paid, the balances led to difficulties in identifying which balances represented genuine current year assets or liability at year end for audit testing. It was added that Ernst and Young did not identify any specific errors in the year end debtors or creditors position. It was advised that management should review the approach to raising year end debtors and creditors to ensure clear audit trails. The Chair questioned why this was an insufficient process, the Committee was informed that to gain consistency the council should have one approach to recording debt and creditor balance as it had shown difficult to review and test.

Ernst and young confirmed that the Council had responded well and felt satisfied with the current arrangements in place for criteria 1 (arrangements for securing financial resilience) in relation to the level of budget gap for future year reflected in the Councils Medium Term Financial Strategy (MFTS).

Councillor C Kent thanked and showed appreciation for the Officers and all their hard work.

The Chair of the Committee asked for clarification regarding the budget review panel. The Head of Corporate Finance explained that the Panel consists of the leader and deputy leader of each political party, their aim would be to build an understanding and gain ideas which would then follow the democratic procedure.

The Chair of the Committee questioned whether the £3 million contingency and reserves in Adult Social Care would be assigned back into the general fund if not allocated. The Head of Corporate Finance informed the Committee that historically the Council budgeted Medium Term Financial Strategy (MTFS) at £3 million for democratic pressures, it was added that it was not just a reserve for Adults Social Care but for all services. It was further reported that the reserve was an estimate of what the Council thought was needed to deal with the demand from services.

Councillor Johnson queried why the reserves were not reducing in conjunction with the Council’s budget. The Head of Corporate Finance explained that the Council could equally argue an increase in the reserves when dealing with a reduced budget. It was explained to the Committee how increasing the reserves would enable the Council more flexibility when dealing with uncontrollable demands.

Councillor Ray asked the Head of Corporate Finance to estimate how much the Council would need to increase rates to offset the budget cuts. The Head of Corporate finance estimated that the Council would need to increase Council Tax 5-6 % each year up until 2019/20 to accumulate £28 million.

Officers were pleased to note that subject to completing the audit, the external auditors intended to give an unqualified opinion on the Financial Statement; and Value for Money assessment.

Resolved:

1.         That the Standards and Audit Committee considered the comments of the external auditors as set out in the attached report and note their findings.