Prepared by Client List Final Audit - Waltham...

Prepared by Client List Final AuditLondon Borough of Waltham Forest

—March 2017

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Document Classification: KPMG Confidential

© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Contents

Page

Section 1: Background, purpose and benefits 4

Section 2: Prepared by client schedules – guidance 5

Section 3: Third party confirmations

Section 4: KPMG requirements: Final visit

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7

ContactsThe contacts at KPMG in connection with this report are:

The contacts at KPMG in connection with this report are:

Neil HewitsonDirector

KPMG LLP (UK)

Tel: +44 20 [email protected]

Satinder JasManager

KPMG LLP (UK)


Kenwyn WalcottAssistant Manager

KPMG LLP (UK)


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Background

Our External Audit Plan sets out a summary of our audit approach, key financial statement audit and VFM Conclusion risks, the audit team and the high level audit timetable.

The purpose of this document is to outline our detailed requirements to enable us to complete our initial planning and interim audit. The agreed audit fee is dependent on the Authority delivering the expectations regarding the timeliness and quality of the accounts and supporting working papers.

Purpose and benefits

This document aims to:

— ensure shared understanding of our requirements for the interim audit

— maximise the ownership and accountability of key officers for their working papers;

— improve the efficiency of our accounts audit and VFM Conclusion work by ensuring that working papers address our requirements clearly, and minimise the amount of time that we need to spend with officers.

Note

This list is not meant to be exhaustive and there may be other documents and information we may request as part of our audit.

We will send a separate request in respect of any Value for Money Conclusion work we require for the interim visit.

We will provide a further document request to support our work on the year end financial statements and work we complete on Value for Money conclusion after the receipt of the financial statements.

Section 1

Background, purpose and benefits

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Requirements

The following sections set out the working papers and documents we are requesting from you for the interim audit. We would ask the Authority to complete the client contact and file ref columns prior to the commencement of the audit. We request that where possible documents are provided to us in electronic format .

To assist with our staff planning and to ensure that all of your audit resources are fully utilised we would expect at a minimum that:

— Electronic schedules are clearly referenced or provided in a clearly divided file where unavailable electronically;

— All schedules are available by the agreed deadline;

— The preparer and reviewer of the schedules are available to respond to queries we might have and do so in a timely manner following the guidance below on preparing good quality working papers. In instances where this may not be possible, we request reasonable notice of the member of staff’s absence and an appropriate substitute to be available for queries; and

Please note that this is a non-exhaustive list and we will inevitably require more information and explanation during the course of the audit as issues arise.

This document has been prepared on the basis that the schedules requested are provided by for the start of the audit so that the audit fee can be contained to that agreed within the audit plan.

Guidance on producing good quality working papers

A good quality set of working papers will:

— include a copy of the relevant accounts extract;

— make clear who the preparer and any other key contacts are;

— be referenced to the schedule breaking down the balance; and

— be referenced to underlying source system documentation (e.g. system prints).

We would also expect a named officer to take responsibility for ensuring that all working papers are sent to us before the agreed start date of the interim audit. Individual officers should be responsible for completing their working papers, but we would expect reviewers to ensure that all working papers for which they have responsibility are compiled to an appropriate standard. Reviewers will also need to have sufficient knowledge of the area to enable them to complete the review (and also answer queries on the working papers if required).

Section 2

Prepared by client schedules - guidance

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Third party confirmations

Our audit approach requires us to obtain third party confirmation of certain balances within the Authority’s financial statements. We also seek to rely on audit evidence such as reports provided by external experts. We would be grateful if you could confirm the accuracy and completeness of these details and remind the organisations of the importance of providing us with information in a timely fashion, so that this does not delay the completion of the audit.

Bankers You will need to request independent confirmations of all bank accounts and balances at the year end to be sent directly to us. We will require a monitoring record that this has been completed by 27 March 2017. These can be sent to Kenwyn Walcott electronically at [email protected] or through the post at the address below:

15 Canada Square,

Canary Wharf

London

E14 5GL

Loans and Investments

You will need to request independent confirmations of all investment and loan balances at the year end to be sent directly to us as above. We will require a monitoring record that this has been completed by 31 March 2017

This does not include loans with the Public Loans Work Board (PWLB) as these are available centrally.

In relation to the Pension Fund, you will need to request that Fund Manager and Custodian lists of investments at 31 March 2017, together with their latest ISAE3402 Service Organisation Control reports are sent directly to us as above.

External Experts

Where external experts provide information, data or calculations incorporated in the financial statements and provide audit evidence in the form of reports, opinions, valuation or statements, we are required to evaluate the professional competence and objectivity of the external experts and to consider the adequacy of the external experts’ work for the purpose of the audit. We may want to contact external experts to assist with our evaluation.

We have identified that the Authority is using the following external experts to provide information to be incorporated into the 2016/17 financial statements:

■ Mercer– to provide accounting entries and disclosures for the Local Government and Teacher’s Pension Schemes; and

■ Council Valuer– to provide valuations for property, plant and equipment.

The Authority should bring to our attention the use of any further external experts. This includes external legal advice.

Other Auditors

We will communicate with the auditors of the following organisations in order to gain assurance over certain accounts and disclosures:

■ London Borough of Wandsworth – administration of the LG Pension Scheme;

Section 3

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Section 4

KPMG requirementsFinal Audit visit – General Working papersRef Your Reference and

hyperlink to w/p Request Preparer Reviewer

1.1 Accounts closedown procedures – as soon as available.

A copy of the closedown timetable operated by the Authority.

A list of the staff involved in the closure process, together with an indication of their roles andresponsibilities.

A copy of accounting instructions and closedown forms issued to teams.

1.2 N/A Prior Year Recommendations

A working paper to demonstrate action that the Authority has taken to implement the ISA260recommendations raised in 2015/16

1.3 In year journals

An Excel download containing all journals raised in periods 1 to 13. We will pick a sample and requestsupporting documentation for individual journals.

For each journal entry, the download should include (if possible) the value of the transaction; adescription of the journal entry; the journal number/reference; the account the journal entry is postedto; the account name the journal entry is posted to; the date and time the journal was posted; the userID of the person who posted the journal.

1.4 Laws and Regulations

Correspondence with any licensing or regulatory authorities, such as HMRC, with regard to anyinvestigations and enforcement actions for 2016/17.

1.5 Litigation and Claims

A list detailing current descriptions of litigation, claims and assessments and management'sassessment of each (i.e. an estimate of the related financial statement implication, including costsinvolved to resolve the matter). The list should detail those matters handled by in-house legal counseland those handled externally.

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KPMG requirementsFinal Audit visit – General Working papers (cont.)Ref

Your Reference and hyperlink to w/p

Request Preparer Reviewer

1.6 Legal Expense Accounts

A breakdown of legal expense accounts incurred by the Authority, detailed by supplier, and brief explanation for any expenditure exceeding £10,000.

1.7 Fraud and Corruption

Details of any special investigations or reviews undertaken in 2016/17.

Copies of any outstanding AF70s for any fraud cases over £10,000 not supplied to audit on a quarterlybasis.

A summary if available of reported instances or concerns of misconduct or unethical behaviour by officers or Members.

1.8 Set of proposed Accounting Policies for 2016/17

Proposed set of accounting policies for the 2016/17 accounts, highlighting any changes from 2015/16.

Extract of Code Guidance Notes example accounting policies annotated to show all relevantaccounting policies have been included, with brief annotation of why any excluded examples havebeen omitted from the Authority’s proposed set.

1.9 Template set of accounts for 2016/17 and Disclosure Checklist

Setting out the proposed layout of the accounts with prior year comparatives rolled forward.

The Disclosure Checklist should ideally be completed at this stage, where applicable, to demonstratethe Authority’s compliance with mandatory disclosures.

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1.10 Related Party Disclosures

Details of the Authority’s review of its 2016/17 related party transactions against the revised criteria per the 2016/17 code and working papers to support any additional disclosures made as a result of the review.

A written explanation of the Authority’s approach to identifying interests to be disclosed under IAS24 (to include how the Authority is satisfied that all such interests have been identified, and how IAS24 has been complied with). (Supporting documentation for all significant related party transactions is requested as part of our final accounts audit visit.)

1.11 Information supplied to actuary

A copy of the information supplied by the Authority to the actuary which is used as the basis for computing their reports.

Confirmation that the Authority has considered any events such as outsourcing of more than 5% of the workforce; bulk transfer to or from the pension fund of more than 5% of the employer's workforce;amalgamation/reorganisation of employers; redundancy/restructuring programs involving a loss of more than 5% of the workforce; average real pay increases of more than 3% in excess of the assumptions adopted by the actuary and communicated these to the actuary.

Evidence that the assumptions used by the actuary have been reviewed by senior management and have been challenged where necessary.

1.12 Valuations A paper setting out the Authority’s valuations to be undertaken in 2016/17 and compliance with the rolling program of valuations.

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1.13 Council Dwellings valuationA paper setting out the Council Dwelling valuation. In addition the Council should maintain a file, that we will review at the time of the interim audit, setting out:■ Valuation process■ Spreadsheet log of meeting dates with valuers, and key correspondence with valuers■ Instructions to valuers■ Authority’s assessment of the appropriateness of beacon groups■ Individual beacon record sheets■ Authority’s assessment of the final valuation and any subsequent challenge to the valuers

1.14 SeRCOP

A paper setting out any changes in the Authority’s mapping of SERCOP.

A full mapping to the draft trial balance (we note that this has previously been done via mapping the trial balance to the directorate analysis and then reconciled to the CIES).

1.15 Review of the Contracts Register

A working paper setting out the Authority’s approach to reviewing its contract register for contractsentered into during 2016/17 that could constitute or contain a lease or a financial instrument.

For those contracts above £10m, provide a copy of the Authority’s assessment against the standard, todetermine the appropriate treatment. We will request a sample of assessments for smaller contracts.

1.16 Annual Review of Asset Classification

Evidence that Finance, in conjunction with the team responsible for Asset Management have undertaken an annual review of the change in use of assets and any consequential reclassification of assets within the FAR.

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Section 4

KPMG requirementsFinal Audit visit – General Working papers (cont.)

RefYour Reference and hyperlink to w/p


1.17 Control account reconciliations

A copy of the monthly reconciliations for the following control accounts and subsidiary systems:

■ Bank

■ Benefits

■ Rents

■ Council Tax

■ NNDR

1.18 Suspense and holding accounts

Details of any suspense/holding accounts with balances of more than £10m.

1.19 Savings plans

A copy of the most current version of the following:

■ Medium Term Financial Plan

■ Documentation supporting the identification and monitoring of savings plans.

■ Documentation supporting the risk management of these plans.

Note, as part of our final accounts audit we will review the appropriateness of estimation and valuation techniques employed by the Council to determine any significant changes to the value of its fixed, financial and current assets and liabilities.

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1.20 Valuation of PPE

A copy of the following:

■ The Terms of Reference provided to the valuer.During our final accounts visit, we will perform substantive procedures over a sample of valuations and their associated depreciation calculations to obtain assurance that the accounting treatment of such has been applied correctly.

1.21 Heritage assets

Details of any follow up on

■ Internal Audit report on the governance of heritage assets including those held at the William Morris Gallery.

1.22 Actuarial present value of retirement benefits

A copy of the:

■ Instructions provided to the Actuary and the information supplied to the Actuary to come to their conclusions.

As part of our final accounts audit, we will also undertake tests of detail on the accounting entries performed as a result of the information returned from the actuary and ensure they are compliant with IAS 19.

1.23 Grant fundingA copy of the grants register you maintain.

1.24 Principal sources of financeDCLG confirmation of RSG allocation and NDR pool income.

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1.25 Levies External confirmation (i.e. letters from levying bodies) for all levies over £10m disclosed within the CI+E.

1.26 Disposals and capital receipts

A breakdown of asset sales during the year and associated reserves and usable capital receipts including right-to-buy receipts, other housing related receipts and non-housing disposals.

For receipts in excess of £10m sales documentation confirming sale price or similar (and where appropriate, reconciliation to the capital receipt noted within the accounts).

For schools transferred to Foundation Trusts and Academies, minutes to confirm the disposal and legal deeds/titles.

We may request documentation for a sample of capital receipts below £10m during our final accounts visit.

1.28 Asset verification

A working paper setting out any work completed during 2016/17 to verify assets recorded on theAuthority’s fixed asset register (e.g. physical verification or reconciliation to asset management data).

1.29 Impairments

Documentation to support the Authority’s review of factors that may have lead to material changes to asset values in year.

Details of how the Authority has complied with IAS36 with regards to impairment reviews in the current year including both existing assets, and Assets Under Construction brought into use during 2016/17.

A breakdown of all impairments completed within the year with explanations for the reasons for each one.

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1.30 Payroll

We would like to set up our predictive analytical reviews for payroll. To do this we will need the following information for each month up to Jan/Feb (latest available) separately for council payroll and schools payroll:

Analysis showing total gross pay, tax, NI (employer and employee), pension contributions (EE and ER) and other payments/deductions month by month for 2016/17.

A summary of monthly FTE staff numbers for 2016/17 for all payrolls together with an explanation of the basis used to calculate the figures/reports run;

Details of the pay increases awarded during 2016/17 for all key groups (including NJC and teachers);

1.31 Collectability of debts An aged debt report as at 30 June 2017 which allows us to separately identify debts pre 1 April 2017 and pre 1 April 2016. An explanation for any individual debts over £10m relating to 2015/16 (or before) still outstanding as at 30 June 2017 including an assessment as to whether the amount is still collectable.For significant debtors above £10m, confirmation that monies have been received by 30 June 2017.

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2.1 Trial balance/ledger download

A trial balance/general ledger download (preferably into Excel) showing the opening and closing balances and in year movements for every account on the general ledger.

A copy of the general ledger mapping structure providing a full audit trail between the accounts and the general ledger. The format will need to allow us to map all accounts on the trial balance to the financial statements and vice versa.

2.2 CIPFA Code ChecklistA completed 2016/17 Code checklist referenced to the accounts with written explanations for any non-compliance (i.e. where the answer is ‘No’) .

Where a section is not applicable, a brief narrative should be included to justify this.

2.3 Financial reports

A copy of the 2016/17 final Revenue and Capital Outturn reports as presented to Cabinet, and a reconciliation of these outturn figures to the I+E.

2.4 Segmental ReportingWorkings to support the reconciliation between the segment reporting analysis and net cost of services.Reconciliation between segmental reporting note and outturn report – The Authority should crossreference the Segmental Reporting note to the budgeted outturn reporting to Members.The workings in the segmental analysis should be mapped to the trial balance.

KPMG requirementsFinal Audit visit – General Working papers (part 2)

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2.5 Balance sheet consolidation

Working papers showing the year end consolidation of the single entity balance sheet, including:

■ Summary schools balance sheet and balance sheets for all individual schools;

■ Documentary evidence for any verification exercises completed in respect of balances disclosed by schools (e.g. review of bank reconciliations or agreement of internal debtors and creditors);

■ Supporting working papers for all other manual adjustments as part of the year end consolidation, such as balancing of internal contra accounts.

2.6 Changes to accounting policies, prior period adjustments and exceptional itemsDetails of any changes to accounting policies, prior period adjustments or exceptional items.

2.7 Apportionments An explanation of the method used to apportion support costs (e.g. Finance, HR) across front line services and supporting documentation showing the apportionment calculations.

2.8 Independent review of the financial statementsEvidence for the independent review of the draft financial statements prior to being presented for audit by the s.151 Officer.

2.10 Events after the balance sheet date

Details of any post-balance sheet events where disclosed within the accounts.

A working paper setting out the Authority’s approach to identify events after the balance sheet date and any queries raised.

2.11 Suspense and holding accounts

Details of any suspense/holding accounts with balances of more than £10m.


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2.12 Annual Governance Statement

A copy of the Annual Governance Statement.

A copy of the Head of Internal Audit’s opinion on the annual review of internal control for 2016/17.

A note outlining the approach taken to complying with the guidance for the Annual Governance Statement, including an annotated copy of the AGS requirements in Delivering Good Governance in Local Government to demonstrate that the Authority has incorporated all of these.

Evidence to support any new statements from the prior year or anything that has not previously been linked to a Committee decision.

2.13 Foreword to the Accounts

Reconciliation of the figures contained within the foreword to the accounts to the remainder of the statement of accounts and supporting documents for all figures not derived from the statement of accounts (e.g. budget figures).


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3.1 Analytical review of Net Cost of ServicesA comparison of 2016/17 and 2015/16 gross income and expenditure for each service heading in the accounts.Any year on year variances at service level that vary by more than five per cent should be explained and supporting evidence provided as follows:■ For variances up to :£10m a brief written explanation (2-3 lines) and general ledger support for the

movement;■ For variances in excess of £10m: a more detailed explanation (1-2 paragraphs) together with

general ledger support and other documentary evidence (e.g. internal reports). The factors to consider should include:■ Significant accounting adjustments, especially where not comparable year on year, such as

impairments;■ Budget movements, either as part of the initial financial planning for the year, or significant in year

virements;■ Outturn variances in either year.Reference should be made to specific budget setting/ outturn reports, or for accounting adjustments notes to the accounts as appropriate.

KPMG requirementsComprehensive Income and Expenditure Statement

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3.2 Grant fundingA breakdown of grant income for the year by individual grants, showing:■ Cash receipts in year and amounts accrued at year end;■ Grant Income credited to the CI&E (both to Services, and to Taxation and Non-specific Grant

Income);■ Opening and closing balances within grants receipts in advance (Revenue Grants and Capital

Grants);■ Reversals to the Capital Grants Unapplied Account, or Earmarked Reserves;■ Applications to finance capital spend both from the Capital Grants Unapplied Account and in year

through the Movement in Reserves Statement.Evidence of a review of grants received and receivable in 2016/17 for the existence of any conditions to support the accounting treatment.Copies of grant allocation letters and remittance advices for all grants over £10m.Working papers to support the Grant disclosure notes in the accounts.

3.3 Dedicated Schools Grant

Documentary evidence or independent confirmations for the

■ original grant allocation to schools;

■ adjustment to finalised grant allocation;

■ top of funding of individual schools budgets;

■ statutory maximum for central expenditure (or any higher amount approved by the schools forum).

Ledger support for any other figures disclosed, including actual expenditure. Copies of outturn forms received from schools.

KPMG requirementsComprehensive Income and Expenditure Statement (cont.)

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3.4 Payroll Reconciliation

A reconciliation of employee costs per the subjective analysis to employee costs per ledger.

A breakdown and explanation of employee costs through non-payroll feeds where the balance is more than £10m.

3.5 Payroll

Council payroll:

Analysis showing total gross pay, tax, NI (employer and employee), pension contributions (EE and ER) and other payments/deductions month by month for 2016/17.



Schools payroll:

Consolidated analysis showing total gross pay, tax, NI (employer and employee), pension contributions (EE and ER) and other payments/deductions month by month for 2016/17. We will sample test some of the supporting analyses for individual schools back to supporting payrolls.




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3.6 IAS19 Workings

A copy of the actuary’s reports for the Local Government Pension Scheme and Teacher’s Pension Scheme;

Working papers to show the calculation of IAS19 accounting entries for Pensions Interest Cost, Expected return on Pensions Assets, charges made for retirement benefits and Actuarial Gains or Losses.

Supporting documents and workings for all IAS19 disclosures.

3.7 Transfers from and to earmarked reserves

Explanations for any transfers from and to earmarked reserves in excess of £10m.

3.8 Profit and loss upon disposal

A working paper showing the Authority’s approach to assessing and calculating profit and loss upondisposal, together with supporting workings, including:

■ review if the asset was/should have been subject to revaluation prior to disposal (e.g. as part of the annual revaluation programme or when taken out of use);

■ review of proceeds against asset values and incidental costs.

3.9 Benefits expenditureA reconciliation of the benefits expenditure for Non HRA, HRA, Rent Allowances and Council Tax downloads provided as part of the BEN01 audit to the general ledger.

3.10 Benefits reconciliations

Copies of the year end reconciliations between the housing benefits system and the rents and council tax systems.

All reconciliations should clearly show how they reconcile to relevant balances within the accounts. Supporting system prints should be provided where possible.


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4.1 Debtors analysisA high level analysis of the debtor balance within the accounts at the level of the Debtors disclosure note together with explanations for any year on year movements in excess of 10 per cent for individual categories of debtors accounting for more than £10m.

4.2 Debtors ListingA breakdown listing all year end debtors consolidated onto into one schedule for us to statistically sample individual transactions from. This will be at a detailed transaction level breakdown (excluding offsetting debits and credits, such as reversals). This should include all system debtors and manual income accruals and reconcile to the debtors balance in the accounts.For individually significant system debtor balances (over £10m) please provide evidence that the debtor is valid and external (e.g. invoice or grant claim).For individually significant manual income accruals (over £10m): ■ Evidence that the accrual is valid and external (e.g. invoice subsequently issued or grant claim);■ Confirmation (e.g. system print) that monies were received post year end. For significant debts that

have not been paid post year-end provide an explanation as to why monies have not been received and whether the debt is still collectable).

During the course of the audit, we may request a sample of accruals below £10m and review supporting documentation.

4.3 Cut-off testing

A copy of all bank statements for March and April 2017 to enable us to sample test year end cut off of receipts and payments – please could you put the value of debits and credits in an excel spreadsheet to enable us to select our sample.

We will request supporting information for a sample of these transactions ahead of our final accounts visit, to confirm that these have been accounted for in the correct period.

KPMG requirementsBalance Sheet - Debtors

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4.4 NNDR, Council Tax and Rent ArrearsWorking papers showing how the NNDR, Council Tax and rents debtors have been derived from the NNDR, Council Tax and rents systems. Working papers should reconcile the figure per the system to the balance within the accounts. Where figures have been obtained from the system, supporting prints should be provided and clearly reference to the calculation.

4.5 VAT debtor A reconciliation of the VAT debtor in the accounts to the relevant monthly return(s).

4.6 Doubtful debt provisionA breakdown of general bad debts provisions together with supporting calculations and clear links to the categories of debts that these relate to.A comparison of the level of bad debt provisions between years.A breakdown of all specific provisions made against doubtful debts at 31 March 2017 or confirmation that none have been made. For all specific provisions over £10m an explanation what these relate to.

KPMG requirementsBalance Sheet – Debtors (cont.)

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5.1 Creditors analysisA high level analysis of the creditor balances within the accounts at the level of the Creditors disclosure note, together with explanations for any year on year movements in excess of 10 per cent for individual categories of creditors accounting for more than £10m.

5.2 Creditors breakdown

A breakdown listing all year end creditors consolidated into one schedule for us to statistically sample from. This will be at a detailed transaction level breakdown (excluding offsetting debits and credits, such as reversals). This should include all system creditors and manual expenditure accruals and reconcile to the creditors balance in the accounts.

For system creditors:

A transaction level breakdown of all year end balances on the creditors system

For individually significant balances (over £10m):

■ Evidence that the creditor is external and relates to correct period (e.g. invoice);

■ Confirmation (e.g. system print) that monies were paid post year end; where partial payment has been made, general ledger support for the reduction in the level of creditor; where no payment has been made, an explanation and assessment if the amount is still creditor.

For manual expenditure accruals, a genuine breakdown (credit entries only) rather than a transaction listing (debits and credits) with supporting documentation (e.g. invoices received post year end) for all individual accruals in excess of £10m.

During the course of the audit, we may select a sample of accruals below £10m and review supporting documentation. To facilitate this, we are requesting an Excel spreadsheet setting out all manual accruals, to assist in our sample selection.

5.3 Open orders

A working paper setting out the Authority’s approach for reviewing open orders at year end to identify unrecorded liabilities.

KPMG requirementsBalance Sheet - Creditors

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5.4 Cut-off testing

A copy of all bank statements for March and April 2017 to enable us to sample test year end cut off of receipts and payments.

We will request supporting information for a sample of these transactions ahead of our final accounts visit, to confirm that these have been accounted for in the correct period.

A breakdown of invoices accounted for in periods 1 and 2 of 2017/18 in an Excel spreadsheet.

We will request supporting information for a sample of these transactions during our final accounts visit, to confirm that these have been accounted for in the correct period.

5.5 Receipts in advance

A breakdown of receipts in advance as at 31 March 2017 together with an explanation and supporting documentation for all individual receipts in advance accounting for more than £10m.

During the course of the audit, we may select a sample of accruals below £10m and review supporting documentation. To facilitate this, we are requesting an Excel spreadsheet setting out all receipts in advance, to assist in our sample selection.

We have requested information on capital and revenue grants received in advance as part of Ref 3.2.

5.6 Payroll deductions creditor

A breakdown of sundry creditors accruals showing March NI, tax and pension payments to be made post year end, referenced back to the March payroll(s).

KPMG requirementsBalance Sheet – Creditors (cont.)

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6.1 Analysis of cash and cash equivalents

A breakdown of the cash and cash equivalents figure(s) shown on the Balance Sheet, clearly showing which elements relate to Authority and school bank accounts.

6.2 Bank reconciliation

An overall reconciliation of the Authority’s cash balances as per the general ledger to the balances on the Authority’s bank accounts as at 31 March 2017 together with supporting papers (e.g. bank statements, general ledger). All significant reconciling items should be appropriately substantiated (e.g. breakdown of unpresented cheques).

6.3 Borrowings and Investments

Where some borrowings or investments are held on a basis other than historic cost (e.g. amortised cost), provide a reconciliation from the historic cost to the balance sheet value, supported by calculations of the balance sheet value.

6.4 PWLB Loans

Third party confirmation from PWLB confirming the outstanding debt as at 31 March 2017.

6.5 Market and inter local authority loans

Certificates from the lending institutions for all loans over £10m confirming amount, maturity date and interest rate. As indicated on page 4 the Authority should request independent confirmations for all loan balances as at year end to be sent directly to us.

KPMG requirementsBalance Sheet – Cash and Treasury Management

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6.6 Investments

A breakdown of investments held at 31 March 2017, detailing investment body, value of investment, interest rate and maturity date. Reconciliation to the figure disclosed within the accounts, and supporting papers to show how the figure has been derived from the general ledger.

Where some investments are held on a basis other than historic cost (e.g. amortised cost), provide a reconciliation from the historic cost to the balance sheet value, supported by calculations of the balance sheet value.

6.7 Financial Instruments disclosures

A list of financial instruments disclosures, as set out in the Code, annotated to confirm that the Authority has include all of the required disclosures.

Working papers supporting the financial instrument disclosures included in the financial statements.

6.8 Internal investments

A copy of the Authority’s records for internal investments held by schools as at 31 March 2017 and an explanation for any discrepancies between the total as per the spreadsheet and the ledger total for the corresponding contra account.

6.9 School bank accounts

A working paper setting out the Authority’s process for verifying cash balances disclosed by schools supported by documentary evidence. This should specifically consider the process for reconciling schools’ bank balances to cash balances as per their balance sheets.

A schedule comparing cash balances disclosed by schools to balances as per year end bank statements.

We will discuss at our interim visit whether we will also require copies of the year end bank statements.

KPMG requirementsBalance Sheet – Cash and Treasury Management (cont.)

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7.1 Fixed asset registerA copy of the Authority’s fixed asset register and a reconciliation between the asset register and capital transactions per the Fixed Assets note.

7.2 Capital expenditureA transaction level breakdown of all 2016/17 capital expenditure. To facilitate our sample selection, an Excel download would be preferable.With the help of the fixed asset register and other documents provided, it should be possible to identify how each transaction has been treated in the accounts (fixed asset addition incl. asset category, revenue expenditure classed as capital under statute). Other documents required for this specifically include capital closedown forms completed by services. For all individual transactions in excess of £10m, documents to support the value and accounting treatment of the transaction. In the case of acquisition of land and buildings, this should include the legal title or other proof of ownership. Copies of any capitalisation directions.We m ay select an additional sample of transactions below £10m during our final accounts visit.

7.3 Capital contractsContract monitoring documents for all capital contracts with a total contract value exceeding £10m. This should include details of the contract value and interim payments made during 2016/17.

7.4 Capital commitmentsA breakdown of capital commitments disclosed within the accounts. This should show: ■ the capital project which the commitment relates to;■ the value of the commitments and the basis on which this was identified.Schedules should include supporting working papers (e.g. extracts from signed contracts with a value in excess of £10m to confirm contract value and date. See 7.3 above.

KPMG requirementsBalance Sheet – Property, Plant and Equipment

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7.5 Revenue expenditure funded from capital under statute

A breakdown of capital expenditure split between expenditure treated as a fixed asset addition and as revenue expenditure treated as capital under statute.

For significant items (in excess of £10m) not treated as asset additions, an explanation of the rationale behind the treatment together with supporting evidence to confirm this.

7.6 Capital financing

A breakdown of capital expenditure by scheme showing how each scheme has been financed.

This analysis should be supported by appropriate working papers to confirm the sources of capital financing, e.g.

■ Capital grants and other contributions – For grants in excess of £10m, allocation letters from grant-paying bodies, details of the capital expenditure financed through these, and evidence that any conditions have been complied with.

■ Prudential borrowing – Evidence that the borrowing has been approved (e.g. Treasury Management Strategy/Prudential indicators).

■ Backing for split between supported/unsupported borrowing.

7.7 Revaluation Reserve

A copy of the detailed Revaluation Reserve showing opening and closing balances as well as in year movements for each asset.

7.8 Revaluations

A breakdown of asset revaluations in year, together with supporting papers (e.g. valuation certificates) confirming for each asset: the revised valuation, remaining useful economic life and valuation method.

For Council Dwellings, the Authority’s working file setting out the valuation process to reflect any changes from our initial review at the Interim Audit. An audit trail to support the application of the valuation in the accounts.

KPMG requirementsBalance Sheet – Property, Plant and Equipment (cont.)

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Section 4



7.9 Depreciation

A breakdown of depreciation charged within the accounts (by type of asset) with supporting details of the useful economic life used.

Details of any significant assets not depreciated with explanations as to why no depreciation needs to be charged.

If the Major Repairs Allowance has been used as an estimate for depreciation on Council dwellings, an explanation as to why this is considered to be a reasonable estimate.

Details of accounting transactions for depreciation, including the rationale for allocating charges to services and the transactions for HRA depreciation in line with the item 8 determination.

7.10 Capital Reserves

Details of all journals posted to capital reserves in the year, including:

■ Revaluation Reserve;

■ Capital Adjustment Account;

■ Capital Receipts Reserve;

■ Major Repairs Reserve.

All in year movements should be referenced to supporting workings and documents provided as part of the accounts working papers.

7.11 Capital financing requirement

Calculations for the opening and closing capital financing requirement using the methodology described by the Prudential Code (i.e. with reference to the balance sheet) and a reconciliation of the opening and closing CFR to capital financing transactions in the year.


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Section 4



7.12 Minimum Revenue Provision (MRP)

Working papers to support the calculation of the MRP. Working papers should demonstrate compliance with the Authority’s policy and any applicable guidance. If the MRP policy has changes an assessment against legal and accounting requirements.

7.13 Assets financed through PFI

For every new PFI scheme and similar contract (including PPP):■ A working paper setting out the Authority’s assessment to confirm whether the scheme falls within

the scope of IFRIC 12 and is on or off balance sheet. This should be referenced to contract documentation and other relevant supporting evidence.

■ A copy of the PFI model for any new PFI schemes, together with referenced supporting documents (such as the operator financial models) for all inputs into the model, and details of the accounting entries based on the outputs.

A reconciliation of actual payments made under the contract to the original financial model, together with an indication of how significant variations have been dealt with.

7.14 PFI Disclosures

A copy of section 4.3.4 of the Code disclosure requirements referenced to the accounts for each requirement. This should be done for each requirement, including a) to f) in 4.3.4.3 as these are mandatory requirements per SIC 29.

Any supporting working papers to support these notes should be provided.


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Section 4



7.15 Property Plant and Equipment notes

Any working papers not already provided for section 6 above to support the following notes:■ Summary of capital expenditure and fixed asset disposals;■ Commitments under capital contracts;■ Assets held under leases/for leases;■ Assets recognised under a PFI arrangement; ■ Valuation information;■ Information about depreciation methodologies;■ Changes in depreciation methods;■ Intangible fixed assets disclosures;■ Assets held for sale.

7.16 Pooling of housing capital receipts

Working papers to support all entries on the pooling of housing capital receipts return and reconciliation of the claim total to the relating figure in the accounts. If the year end return has not been completed, please provide this information for the quarterly claims, together with a reconciliation to the figures used to calculate the final liability disclosed in the accounts.

7.17 Finance and operating leases

Working papers to support the calculation of payments made for the year and further payments required in future years that reconcile to the lessee disclosure notes.

Working papers for the lessor disclosures, including a breakdown of assets held for use in operating leases with related asset values reconciled to the fixed asset register together with the lease income for each asset.


33



Section 4



7.18 Intangible assets

A justification for all capital expenditure classed as intangible fixed assets (above £10m) to demonstrate that it meets the definition; an explanation of the process for assessing IT expenditure to identify any potential intangible assets.


34



Section 4



8.1 Provisions

A breakdown of provisions disclosed within the accounts, together with:

■ For individually significant provisions (>£10m), details of what the provision relates to, and a working paper setting out how the provision level was determined.

■ An assessment of significant open insurance and other claims against the Authority at year end and provisions in respect of these.

8.2 Contingent Liabilities

Details of all contingent liabilities disclosed in the accounts including: brief description of circumstances giving rise to contingent liability, parties involved other than the Authority, approximate date that the circumstances arose.

A working paper setting out the progress in respect of issues in respect of which contingent liabilities were disclosed in the prior year.

8.3 Insurance fund

A copy of the insurance fund transactions for the year together with a working paper illustrating how insurance fund transactions are accounted for (including insurance premiums, losses incurred and provisions required).

Explanations for any year on year variances in excess of 10 percent for premiums, claims paid out and settlements.

Supporting details for any claims settled in year or outstanding as at 31 March 2017 in excess of £10m.

A copy of the last actuarial valuation of the insurance fund.

KPMG requirementsBalance Sheet – Provisions

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Section 4



9.1 Movement in Reserves Statement and supporting notes

A breakdown of each figure included in the Movement in Reserves Statement with each figure referenced to where else they appear in the statement of accounts (where relevant).

Working papers to support the Usable and Unusable Reserve Notes included in the financial statements.

For the supporting Adjustments between Accounting Basis and Funding Basis under Regulations:

Working papers to support the disclosure where these are not obviously agreeable to the corresponding notes in the financial statements.

9.2 Reserves and balances held by schools

A breakdown of schools reserves and balances by school.

9.3 Cash Flow Statement and supporting notes

Working papers supporting the figures within the cash flow, showing how they have been derived from the general ledger.

Working papers illustrating how the notes to the cash flow are derived from the CIES, Balance Sheet and supporting workings.

KPMG requirementsOther core financial statements

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Section 4



9.1 Movement in Reserves Statement and supporting notes

A breakdown of each figure included in the Movement in Reserves Statement with each figure referenced to where else they appear in the statement of accounts (where relevant).

Working papers to support the Usable and Unusable Reserve Notes included in the financial statements.

For the supporting Adjustments between Accounting Basis and Funding Basis under Regulations:

Working papers to support the disclosure where these are not obviously agreeable to the corresponding notes in the financial statements.

9.2 Reserves and balances held by schools

A breakdown of schools reserves and balances by school.

9.3 Cash Flow Statement and supporting notes

Working papers supporting the figures within the cash flow, showing how they have been derived from the general ledger.

Working papers illustrating how the notes to the cash flow are derived from the CIES, Balance Sheet and supporting workings.

KPMG requirementsOther core financial statements

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Section 4



10.1 Officers’ emoluments

Report from the payroll system reconciling to the note on senior staff remuneration showing all officers with total remuneration greater than £50,000 and a breakdown of each category of Remuneration e.g. Gross pay, employer’s pension contributions, ex gratia payments, termination payments, taxable allowances and P11D benefits.

An explanation for any significant changes in staff numbers within in each band as compared to prior year.

For the Officer’s remuneration note detailing senior employees, payroll prints to support the note disclosure.

10.2 Exit Packages

Working paper to support the disclosure of the number and cost of exit packages to employees agreed during the year, including significant compromise agreements where relevant.

10.3 Members’ allowances

Working papers to confirm the members allowances paid during the year (to include supporting general ledger and payroll prints and relevant Committee reports).

10.4 Related parties disclosures

List of all Members/Chief Officers who have been asked to make Related Party declarations, together with copies of their responses.

Supporting documentation for all significant related party transactions disclosed in the accounts, with a ledger breakdown for each transaction value disclosed.

KPMG requirementsOther Notes to the core financial statements

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Section 4



11.1 Audit trail

Working papers to confirm how the HRA has been derived from the general ledger and other systems as appropriate, including a full audit trail for all entries in the HRA I&E and movement on the HRA Balance Sheet.

11.2 Reconciliations

Copies of the following reconciliations at 31 March 2017 with supporting papers:

■ Rent Debit per financial statements reconciled to Northgate system and general ledger;

■ Rental income per financial statements reconciled to Northgate system and general ledger;

■ Rental debtors and rent receipts in advance reconciled to Northgate system and the general ledger;

■ Housing stock numbers reconciled to Northgate system.

11.3 Overall Analytical review of the HRA

For all financial statement captions and disclosure notes, an analytical review to explain any year on year variances greater than £10m or 5%.

This should include:

■ A breakdown of repairs and maintenance expenditure to show the levels of planned maintenance across projects and responsive repairs across area.

■ A comparison of planned maintenance expenditure to the planned maintenance programme.

■ A comparison of responsive expenditure against prior year, with significant variances explained by movements in stock numbers and average cost per repair.

KPMG requirementsHousing Revenue Account

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Section 4



11.4 HRA income

A breakdown of:

■ rental income (clearly reconciled to the rents – general ledger reconciliation);

■ any other significant sources of income.

A copy of the report to members confirming the rent increase for the year and when this took effect.

11.5 Bad debt provision – HRA rent arrears

Working papers showing the calculation of the bad debt provision for HRA rent arrears.

A comparison of the level of bad debt provision at 31 March 2016 and 31 March 2017, split between former and current tenant arrears.

11.6 Debt Management expenses and depreciation (Item 8)

Breakdowns supporting the calculation of debt management expenses and depreciation.

Supporting documentation which shows that the Item 8 debit has been calculated in accordance with the HRA Manual and correct entries have been made in the HRA I&E.

11.7 HRA Investment income

Breakdowns supporting the calculation of HRA investment income.

11.8 Transfers and Appropriations

A breakdown supporting the calculation of:

■ Contributions to reserves;

■ HRA set aside;

■ Revenue Contributions to Capital.

KPMG requirementsHousing Revenue Account (cont.)

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Section 4



11.9 Major Repairs Allowance

DCLG notification of the Authority’s Major Repairs Allowance.

11.10 Notes to the HRA

Working papers to support the following notes in the accounts and demonstrate that balances agree to supporting systems: (please make links to section 7 where appropriate)

■ a breakdown of housing rent arrears (by category) and provision for doubtful debts;

■ total balance sheet value of land, housing and other property within the Authority’s HRA as at 31 March 2017;

■ vacant possession value of dwellings within the Authority’s HRA;

■ a comparison of voids losses in the accounts to losses reported to members in year;

■ impairment charges for the year 2016/17 in respect of land, housing and other property within the HRA for 2016/17;

■ movement on the Major Repairs Reserve for 2016/17;

■ total capital expenditure on and receipts for land, housing and other property in the HRA for 2016/17;

■ capital funding for capital expenditure in the HRA 2016/17;

■ breakdown of the depreciation charged to the HRA split between dwellings and non-dwellings;

■ confirmation of the method of charging depreciation i.e. using MRA as a proxy or calculation of depreciation. If the MRA is used, confirmation that this is not materially different from a charge based on asset values and lives;

■ dwelling numbers as at 31 March 2017, reconciled to the Northgate system;

■ a breakdown of the HRA surplus, with supporting general ledger prints as appropriate;

■ any other notes to the HRA.

KPMG requirementsHousing Revenue Account (cont.)

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Section 4



12.1 Collection Fund

Working papers to confirm how the Collection Fund has been derived from the general ledger, Council Tax system and NNDR system.

These working papers should clearly show how balances agree back to the general ledger and feeder systems and in particular clearly document the calculation of:

■ Gross arrears

■ Unallocated credits

■ Receipts in advance

■ Outstanding arrears.

12.2 NNDR Multiplier

DCLG confirmation of the NNDR multiplier for 2016/17.

12.3 CTAX Base

Reports as presented to Members to support the Council Tax base disclosed in the notes to the Collection Fund. Detailed working papers confirming the Council Tax base was calculated in-line with the relevant guidance.

12.4 Number of properties

VO reports to confirm:

■ The rateable value of properties in the Borough for NNDR purposes at each quarter end.

■ The number of properties in each Council Tax band at each quarter end.

12.5 NNDR note

A breakdown of balances within the NNDR note to the collection fund.

KPMG requirementsCollection Fund

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Section 4



12.6 Reconciliations

Copies of the following reconciliations at 31 March 2017 with supporting papers:

■ NNDR system to general ledger and VO reports;

■ CTAX to general ledger;

■ CTAX to VO reports;

■ CTAX to housing benefits system;

showing how relevant balances within the accounts have been derived from the reconciliation.

12.7 Precepts

Letters from precepting bodies of the precepts levied on the Collection Fund in 2016/17.

12.8 NNDR returns

A copy of the NNDR1 and NNDR3 return for 2016/17.

A reconciliation showing between the NNDR3 return for the following figures:

■ NNDR payment to pool

■ Gross debit

■ Cost of collection

■ Empty property and reliefs

■ NNDR creditor or debtor.

KPMG requirementsCollection Fund (cont.)

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Section 4



13.1 Audit trail

A set of group accounts, including all statements (Group Income and Expenditure Account, Reconciliation of the Single Entity Surplus/Deficit for the Year to the Group Surplus/Deficit, Group Balance Sheet and Group Cash Flow Statement and notes to the group accounts) together with supporting working papers reconciling figures back to the single entity financial statements and financial statements for each subsidiary, associate and joint venture.

13.2 Method for consolidation

A working paper setting out the method and approach for consolidating each subsidiary, associate and joint venture.

13.3 Financial statements of other group members

A copy of the financial statements for each subsidiary, associate and joint venture consolidated into the Authority’s group accounts.

13.4 Intra group transactions

A working paper detailing adjustments for transactions between group members, including intra-group income/expenditure and intra-group debtors/creditors.

13.5 Agreement of balances with other group entities

A working paper outlining the Authority’s process for agreeing balances with the other group members and supporting documents to evidence the exercise completed.

KPMG requirementsGroup Accounts

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Section 4



14.1 Audit trail

A full audit trail to support the entries in the Fund Account and Net Asset Statement back to the general ledger.

14.2 Top up grant

External confirmation for the top up grant.

14.3 Analytical review

A comparison of contributions receivable and benefits payable between 2015/16 and 2016/17 together with explanations of any movements over 5% with reference to supporting data such as membership.

KPMG requirementsLocal Pension Fund

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Section 4



WGA-1 Consolidation Pack – Gateway Test

The completed Consolidation Pack for 2016/17 together with:

■ the flag that the pack has been uploaded to COINS; and

■ adequate explanations for any error or warning messages.


Evidence that the Management Review checklist, including a review of the evidence supporting the L-Pack has taken place.


A reconciliation of the primary statements in the L-Pack pro-forma to the statutory accounts for each ofthe below:

■ gross income;

■ gross expenditure; and

■ assets and liabilities.

WGA-4 Counterparty Identifier (CPID) information

■ Evidence that all relevant subsidiaries have provided CPID information to feed into the L-Pack; and

■ A variance analysis between 2015/16 CPID information and 2016/17 CPID information with explanations for variances greater than £1 million.

WGA-5 Audit Trail

Where all of the figures are not agreeable to the financial statements, detailed working papers to present a clear audit trail.

KPMG requirementsWhole of Government AccountsWe have issued our Whole of Government Accounts (WGA) requirements based on 2012/13 guidance which was last updated in May 2016 and will communicate any additional items required upon release of the 2016/17 guidance.

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Comp-1

Final Financial Statements A copy of the Authority’s final financial statements reflecting any audit adjustments.These should be accompanied by a clear audit trail between the draft and final financial statements.

Comp-2

Management Representation Letter

An original management representation letter signed by the s151 Officer.

Comp-3

Review of events after the balance sheet date

■ List of updated litigation and claims.

■ Managements final review of Post balance sheet date events.

KPMG requirementsAudit completion requirements



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