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Accounts Commission Papers 11 January 2018

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Accounts Commission Papers 11 January 2018 442nd meeting of the Accounts Commission for Scotland Thursday 11 January 2018, 10.15am in the offices of Audit Scotland, 102 West Port, Edinburgh Agenda 1. Apologies for absence. 2. Declarations of interest. 3. Decisions on taking business in private: The Commission will consider whether to take items 13 to 16 in private. 4. Minutes of meeting of Financial Audit and Assurance Committee of 30 November 2017. 5. Minutes of meeting of 8 December 2017. 6. Update report by the Secretary to the Accounts Commission: The Commission will consider a report by the Secretary to the Commission. 7. Update report by the Controller of Audit: The Commission will consider a verbal report by the Controller of Audit. 8. Equalities Sub-Group update: The Commission will consider a report by the Secretary to the Commission. 9. Briefing: Scottish Budget: The Commission will consider a draft report by the Director of Performance Audit and Best Value 10. New financial powers update: The Commission will consider a draft report by the Director of Performance Audit and Best Value. 11. Audit of Best Value Follow Up Report: Falkirk Council: The Commission will consider a report by the Controller of Audit. 12. Best Value Assurance Report: Clackmannanshire Council: The Commission will consider a report by the Controller of Audit. The following items are proposed to be considered in private: 13. Audit of Best Value Follow Up Report: Falkirk Council: The Commission will consider the action that it wishes to take. 14. Best Value Assurance Report: Clackmannanshire Council: The Commission will consider the action that it wishes to take. 15. Scottish Government Consultation – Empowering Schools: Commission Response: The Commission will consider a report by the Secretary. 16. Commission business matters: The Commission will discuss matters of interest. * It is proposed that items 13 to 16 be considered in private because: • Items 13 and 14 require the Commission to consider actions in relation to a report by the Controller of Audit. The Commission is then obliged by statute to inform the council in question of its decision, which the Commission does before making the decision public. • Item 15 is a draft response to a Scottish Government consultation on which the Commission may wish to discuss confidential policy matters. • Item 16 may be required if there are any confidential matters that require to be discussed outwith the public domain. The Chair will inform the meeting in public at the start of the meeting if this item is required and what it covers. The following papers are enclosed for this meeting: Agenda Item Paper number Agenda Item 4: Minutes of meeting of Financial Audit & Assurance Committee of AC.2018.1.1 30 November 2017 Agenda Item 5: Minutes of meeting of 8 December 2017 AC.2018.1.2 Agenda Item 6: Report by Secretary to the Commission AC.2018.1.3 Agenda Item 8: Report by Secretary to the Commission AC.2018.1.4 Agenda Item 9: Report by Director of Performance Audit and Best Value AC.2018.1.5 Agenda Item 10: Report by Assistant Director, Audit Services and Performance AC.2018.1.6 Audit and Best Value Agenda Item 11: Report by Controller of Audit AC.2018.1.7 Agenda Item 12: Report by Controller of Audit AC.2018.1.8 Agenda Item 15: Report by Secretary AC.2018.1.9 AGENDA ITEM 4 Paper: AC.2018.1.1 MEETING: 11 JANUARY 2017 MINUTES OF MEETING OF FINANCIAL AUDIT AND ASSURANCE COMMITTEE OF 30 NOVEMBER 2017 Minutes of the FINANCIAL AUDIT AND ASSURANCE COMMITTEE of the ACCOUNTS COMMISSION held in the offices of Audit Scotland at 102 West Port, Edinburgh, on Thursday 30 NOVEMBER 2017 PRESENT: Pauline Weetman (Chair) Sheila Gunn Tim McKay Geraldine Wooley IN ATTENDANCE: Paul Reilly, Secretary to the Commission Fraser McKinlay, Controller of Audit and Director of Performance Audit and Best Value (PABV) Carol Calder, Senior Manager, PABV (Item 7) Russell Frith, Assistant Auditor General (Item 6) John Gilchrist, Manager, Appointments & Assurance Team (Item 6) Morgan Kingston, Senior Auditor, ASG (Item 8) Anne MacDonald, Senior Audit Manager, ASG (Item 4) Keith Macpherson, Head - Government & Public Sector Audit, Scotland, EY (Item 5) Ronnie Nicol, Assistant Director, PABV (Item 7) Paul O’Brien, Senior Manager, Professional & Support Team (Item 9) Michael Oliphant, Senior Audit Manager, ASG (Item 8) Owen Smith, Senior Manager, Appointments & Assurance Team (Item 6) Stephen Reid, Partner, EY (Item 5) Item No Subject 1. Apologies for absence 2. Declarations of interest 3. Minutes of meeting of 28 September 2017 4. Current issues from the local authority audits 5. The auditor perspective: EY 6. Audit quality: first report 2017/18 7. Local government overview – emerging messages 8. Briefing: Non Domestic Rate and Business Rates Incentive Scheme 9. Accounting and auditing update 10. Any other business 1 1. Apologies for absence It was noted that apologies for absence were received from Graham Sharp. 2. Declarations of interest The following declaration of interest was made: • Geraldine Wooley, in item 8, as a member of Fife Valuation Appeal Committee. 3. Minutes of meeting of 28 September 2017 The minutes of the meeting of 28 September 2017 were approved as a correct record. Arising therefrom, the Committee: • In relation to item 3, first bullet point, in response to a query from Tim McKay, noted advice from the Controller of Audit that he was yet to report to the Committee on how ‘affordability’ featured in the Aberdeen City Council’s consideration of its capital bond. • In relation to item 4, fourth bullet point, in response to a query from Pauline Weetman, noted advice from the Controller of Audit that he would report further on Aberdeen City Council’s assessment of risk in relation to its joint venture with Hunchbuzz Limited. Action: Controller of Audit 4. Current issues from the local authority audits The Committee considered a paper by the Controller of Audit advising of emerging issues and recurring themes, as well as individual issues of interest, in Scottish councils. During discussion, the Committee agreed: • To recommend to the Commission that it advise council chief executives to stress to them the importance of councils ensuring the highest quality final accounts process, and that this be done following consideration by the Commission in February of the Controller of Audit’s Annual Assurance and Risk Report. • To continue its interest and receive information appropriately on the progress of councils’ contracts with CGI for information technology services. • That further information be provided on the arrangements in place around the masterplan for physical developments around Winchburgh, West Lothian. • That further information be provided on Scottish Borders Council’s review and ‘lessons learned’ activities around its cancelled waste management facility, including relating to the scoping of the contract. Actions: Controller of Audit Thereafter, the Committee noted the report. 2 5 The auditor perspective: EY The Committee considered a paper by the Secretary on the latest in a series of presentations from auditors on the auditor perspective of audit work in the context of the first year’s implementation of the new Code of Audit Practice and audit planning guidance. The Chair welcomed Stephen Reid, Partner, and Keith Macpherson, Head - Government & Public Sector Audit, Scotland, EY, who undertook a presentation in this regard. During discussion, the Committee agreed to recommend to the Commission that the strengths, challenges and risks set out by Stephen Reid and Keith Macpherson be considered in the development of the approach to audit, `including in relation to: • Criticality of good auditor/client relationships • Importance of the shared risk assessment process • Alignment of strategic audit priorities, audit dimensions and Best Value requirements. Action: Secretary Thereafter, the Chair thanked Stephen Reid and Keith Macpherson for their presentation. 6. Audit quality: first report 2017/18 The Committee considered a report by the Assistant Director, Appointments and Assurance presenting the first Audit Quality report as part of the new Audit Quality Framework. During discussion, the Committee agreed: • That future versions of the report include: o Greater depth and coverage of reporting of quality issues beyond compliance matters. o More detail on the outcome of Financial Reporting Council audit quality inspection of audit service providers. o Clearer explanation in the introduction of responsibilities and lines of reporting of the report, including the role of the Appointments and Assurance Team. o More detail around modified opinions on accounts o More explanation around reporting of International Standard on Quality Control 1 o More detail around material prior period errors. • To note advice from the Assistant Director that further discussions with the Commission have to take place with regard to key performance indicators, with a view to reporting in this regard in the second audit quality report in Spring 2018. • To note advice from the Assistant Director that further discussion will take place with the Commission in relation to ongoing development of: o Quality assurance in relation to performance audits and auditing Best Value 3 o Approaches to gauging stakeholder feedback. Following discussion, the Committee agreed to endorse the Audit Quality First Report 2017/18. 7. Local government overview – emerging messages The Committee considered a report by the Director of PABV proposing the emerging messages for the 2017/18 local government overview
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