Audit Completion Report DRAFT - London Borough of Hounslow... · registration can be viewed at under reference number C001139861. VAT number: 839 8356 73 Mazars LLP –Tower Bridge

Audit Completion Report DRAFTLondon Borough of HounslowYear ending 31 March 2019

CONTENTS

1. Executive summary

2. Significant findings

3. Internal control recommendations

4. Summary of misstatements

5. Value for Money conclusion

Appendix A – Draft management representation letter

Appendix B – Draft auditor’s report

Appendix C – Independence

Our reports are prepared in the context of the ‘Statement of responsibilities of auditors and audited bodies’ and the ‘Appointing Person Terms of Appointment’ issued

by Public Sector Audit Appointments Limited.

Reports and letters prepared by appointed auditors and addressed to the Council are prepared for the sole use of the Council and we take no responsibility to any

member or officer in their individual capacity or to any third party.

Mazars LLP is the UK firm of Mazars, an international advisory and accountancy group. Mazars LLP is registered by the Institute of Chartered Accountants in

England and Wales.

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Mazars LLP

Tower Bridge House

St Katharine’s Way

London

E1W 1DD

Audit and Governance Committee

Hounslow House

Bath Road

Hounslow

TW3 3EB

26 September 2019

Dear Members

Audit Completion Report – Year ended 31 March 2019

We are pleased to present our Audit Completion Report for the year ended 31 March 2019. The purpose of this document is

to summarise our audit conclusions.

The scope of our work, including identified significant audit risks and other areas of management judgement, was outlined in

our Audit Strategy Memorandum which we presented on 20 December 2019. We have reviewed our Audit Strategy

Memorandum and concluded that the original significant audit risks and other areas of management judgement remain

appropriate, albeit, our audit work has been extended on one significant audit risk.

We would like to express our thanks for the assistance of your team during our audit.

If you would like to discuss any matters in more detail then please do not hesitate to contact me on +44 (0)20 7063 4634

Yours faithfully

Lucy Nutley

Mazars LLP

Mazars LLP is the UK firm of Mazars, an integrated international advisory and accountancy organisation. Mazars LLP is a limited liability partnership

registered in England and Wales with registered number OC308299 and with its registered office at Tower Bridge House, St Katharine’s Way, London

E1W 1DD.

We are registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Details about our audit

registration can be viewed at www.auditregister.org.uk under reference number C001139861.

VAT number: 839 8356 73

Mazars LLP – Tower Bridge House, St Katharine’s Way, London, E1W 1DD

Tel: 020 7063 4000 – www.mazars.co.uk

Purpose of this report and principal conclusionsThe Audit Completion Report sets out the findings from our audit of the Council for the year ended 31 March 2019, and forms the basis

for discussion at the Audit and Governance Committee meeting on 26 September 2019.

The detailed scope of our work as your appointed auditor for 2018/19 is set out in the National Audit Office’s (NAO) Code of Audit

Practice. Our responsibilities and powers are derived from the Local Audit and Accountability Act 2014 and, as outlined in our Audit

Strategy Memorandum, our audit has been conducted in accordance with International Standards of Auditing (UK) and means we focus

on audit risks that we have assessed as resulting in a higher risk of material misstatement.

Sections 2 and 5 of this report outline the detailed findings from our work on the financial statements and our conclusion on the Council’s

arrangements to achieve economy, efficiency and effectiveness in its use of resources. Section 2 also includes our conclusions on the

audit risks and areas of management judgement in our Audit Strategy Memorandum, which include:

• Management override of control

• Revenue and expenditure recognition

• Property plant and equipment valuation

• Defined benefit liability valuation

• Private Finance Initiative (PFI)

• Valuation and associated accounting for the Civic Centre and Hounslow House

Status of our workAs we outline on the following page, our work is substantially complete. Subject to the satisfactory completion of the outstanding work,

at the time of issuing this report we have the following conclusions:

The 2014 Act requires us to give an elector, or any representative of the elector, the opportunity to

question us about the accounting records of the Council and to consider any objection made to the

accounts.

1. EXECUTIVE SUMMARY

3

We anticipate issuing an unqualified opinion, without modification, on the financial statements. Our

proposed audit opinion is included in the draft auditor’s report in Appendix B.

We anticipate concluding that the Council had proper arrangements in place to secure economy,

efficiency and effectiveness in its use of resources. Our draft auditor’s report, including proposed

conclusion, is provided in Appendix B.

We anticipate completing our work on your WGA submission, in line with the group instructions issued by

the NAO, shortly after formally signing the financial statements opinion. We anticipate reporting that the

WGA submission is consistent with the audited financial statements shortly thereafter..

Opinion on

the financial

statements

Whole of

Government

Accounts

(WGA)

Value for

Money

conclusion

Wider

powers

Executive summary Significant findingsInternal control

recommendationsSummary of

misstatementsValue for Money

conclusionAppendices

Status of our audit work

We have substantially completed our work on the financial statements and Value for Money conclusion for the year ended 31 March

2019. At the time of preparing this report the following matters remain outstanding:

We will provide the Audit & Governance Committee with an update in relation to these outstanding matters in a follow-up letter, prior to

signing the auditor’s report.

Our audit approach

We provided details of our intended audit approach in our Audit Strategy Memorandum in December 2018. While we have not identified

additional issues that have resulted in changes to our audit approach since we presented our Audit Strategy Memorandum, matters

identified during the course of the audit in respect of the significant risk over the valuation of PPE, have resulted in an extension of

testing completed in this area.

Materiality

We assessed materiality at the planning stage of the audit at £9.8m using a benchmark of 1.5% of Gross Operating Expenditure. Our

assessment of materiality for the final audit, based on the draft unaudited financial statements at 31 May 2019 and qualitative factors is

£8m, using a revised benchmark of 1% of Gross Operating Expenditure. We set our trivial threshold (the level under which individual

errors are not communicated to the Audit & Governance Committee, at £240,000) based on 3% of overall materiality.

Misstatements and internal control recommendations

Section 3 sets out the internal control recommendations that we make, together with an update on any prior year recommendations. That

we have reviewed to assess progress.

Section 4 outlines the misstatements noted as part of our audit as at the time of issuing this report. The net effect of corrected

adjustments is to decrease net assets and reserves in the balance sheet by £28.1m.

1. EXECUTIVE SUMMARY

4





Audit area Description of outstanding matters

Property, Plant and

Equipment Valuation

(significant risk)

We are currently finalising our required audit procedures surrounding the final valuations from the

external valuer, following receipt of the formal valuation report.

Group accountsConfirmation of the accuracy and completeness of the consolidation process and group accounts

following receipt of group reporting information from component auditors.

Closure procedures and

review

Our final reviews and completion work is ongoing, including consideration of post balance sheet

events until the date of sign-off.

Whole of Government

Accounts (WGA)Our work on the WGA return will take place prior to the completion of the financial statement audit.

Overview of our group audit approach

The table below sets out the approach we have taken to auditing the Authority’s group financial statements.

Group materiality

We assessed group materiality at the planning stage of the audit at £9.8m using a benchmark of 1.5% of Gross Operating Expenditure,

equating to the largest element of the group, London Borough of Hounslow. Our assessment of materiality for the final audit, based on

the draft unaudited financial statements at 31 May 2019 and qualitative factors is £8m, using a revised benchmark of 1% of Gross

Operating Expenditure. Again, this equates to the largest element of the group accounts. We set our trivial threshold (the level under

which individual errors are not communicated to the Audit and Governance Committee) at £240k based on 3% of overall materiality.

1. EXECUTIVE SUMMARY (CONTINUED)

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Entity

Nature of

entity

audit

AuditorDescription of audit procedures

undertaken on the component

Change to

audit

approach

London Borough of

Hounslow

NAO Code

auditMazars LLP Full scope audit as described in this report None

Lampton Facilities

Management 360 Ltd

Lampton 360 Ltd

(incorporating the following

100% owned subsidiaries)

• Lampton Recycle 360

Ltd

• Lampton Investment 360

Ltd

• Lampton Greenspace

360 Ltd

• Lampton Development

360 LLP

Statutory

audit

Mazars LLP

Audit work is

performed by

a separate

team

The components have not been identified as

significant components, the overall approach

is:

• send group instructions to the component

auditor setting out our audit requirements;

• review the information provided by the

component auditor;

• Perform analytical procedures on the

component financial statements;

• review the consolidation process; and

• review the consolidation adjustments and

disclosures.

None

2. SIGNIFICANT FINDINGS

Set out below are the significant findings from our audit. These findings include:

• our audit conclusions regarding significant risks and key areas of management judgement outlined in the Audit Strategy

Memorandum;

• our comments in respect of the accounting policies and disclosures that you have adopted in the financial statements. On

page 12 we have concluded whether the financial statements have been prepared in accordance with the financial reporting

framework and commented on any significant accounting policy changes that have been made during the year;

• any further significant matters discussed with management; and

• any significant difficulties we experienced during the audit.

Significant risks and key areas of management judgement

As part of our planning procedures we considered the risks of material misstatement in the Council’s financial statements that required

special audit consideration. Although we report identified significant risks at the planning stage of the audit in our Audit Strategy

Memorandum, our risk assessment is a continuous process and we regularly consider whether new significant risks have arisen and

how we intend to respond to these risks. No new risks have been identified since we issued our Audit Strategy Memorandum.

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Significant risk

Management override

of controls

Description of the risk

Management at various levels within an organisation are in a unique position to perpetrate fraud

because of their ability to manipulate accounting records and prepare fraudulent financial statements

by overriding controls that otherwise appear to be operating effectively. Due to the unpredictable

way in which such override could occur there is a risk of material misstatement due to fraud on all

audits.

How we addressed this risk

We addressed the risk through performing audit procedures, covering a range of areas including (but

not limited to):

• accounting estimates included in the financial statements for evidence of management bias;

• any significant transactions outside the normal course of business; and

• journals and other adjustments recorded in the general ledger in preparing the financial

statements.

Audit conclusion

There have been no significant findings arising to date from our review of areas of potential

management override of controls.





Significant risk

Revenue and

expenditure

recognition


Our audit methodology incorporates this risk as a significant risk at all audits, although based on the

circumstances of each audit, it is rebuttable.

Based on our initial knowledge and planning discussions we have concluded that we can rebut the

presumption of a revenue and expenditure recognition risk for the majority of the Authority’s revenue income

and expenditure. In particular we can rebut the revenue recognition risk for income derived from Council Tax,

Grants and NNDR due to the low inherent risk associated with these amounts.

We are not rebutting the income risk relating to other material income streams within the Council, where the

level of inherent risk is higher.

We consider that the pressure to manage income and expenditure to deliver forecast performance in a

challenging financial environment could increase the risk of fraudulent financial reporting, leading to material

misstatement. Our risk based testing on income will therefore be extended to cover expenditure also.


At the time of drafting our audit strategy, we planned to address this risk by obtaining a detailed

understanding of the Authority’s processes which assure it that revenue and expenditure is recognised in

the correct accounting year. We carried out:

• detailed testing of transactions within the 2018/19 financial statements to confirm they are accounted

for in the correct year;

• testing from payments and receipts around the year-end to provide assurance that there are no material

unrecorded items of income and expenditure in the 2018/19 accounts.

Audit conclusion

There were no significant findings arising from our review of revenue and expenditure recognition.

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2. SIGNIFICANT FINDINGS (CONTINUED)





Significant risk

Property, plant

and equipment

valuation


Initial identified risk

Where a Council’s assets are subject to revaluation, the Code requires that the year end carrying value

should reflect the appropriate fair value as at that date. The Council has adopted a rolling revaluation model

which sees other land and buildings revalued over a five year cycle, which may result in individual assets

not being revalued for four years. This creates a risk that the carrying value of those assets that have not

been revalued in year is materially different from the year end fair value.

In respect of Council Dwellings, these are reviewed using a beacon valuation methodology, which values

Council stock by grouping assets into type and using a nominated beacon asset for each group. The

assessed value is uplifted based on an open market assessment then amended for an adjustment factor

provided by DCLG.

Due to the high degree of estimation uncertainty associated with these valuations, we have determined

there is a significant risk in this area.

Updated risk

During the course of the audit, the following was identified in respect of the valuation of Property, Plant and

Equipment (PPE) (in particular in respect of Land and Buildings and Community Assets):

• Although the council had planned, as per its accounting policy, to obtain detailed valuations for

approximately 20% of its assets during the year in accordance with the 5 year rolling programme, a

number of these revaluations had not been received at the date the draft financial statements were

published. As a result of number of valuations were still to be obtained at year end.

• In line with the accounting policy and Code requirements, the Council should revalue all applicable

assets over the course of a five year period. However, when preparing a disclosure note for the

financial statements, data within the Fixed Asset Register (FAR) indicated a number of these assets

had not been revalued within that timescale. The work required to support the preparation of the note

was not completed until after the deadline for the publication of draft financial statements. Taken with

the point above, £68.5m of assets had not been revalued as intended or in accordance with the policy.

• Further review and discussion of assets within the FAR identified a number of assets where, as a result

of queries over the treatment and analysis of individual assets, there were concerns over the accuracy

and consistency of the recording of data for assets. This included the analysis of valuations across

‘parent and child’ assets, resulting in the possible overstatement of valuations, and older assets

identified on the FAR that could not be evidenced as existing by the Council and were required to be

de-recognised.

The above issues were discussed in detail to consider the possible impact on the financial statements and

the additional work and procedures to be completed by Hounslow to complete an update of PPE valuations

and assess the value of assets affected by the above.

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Significant risk

Property, plant

and equipment

valuation

(continued)


Initial response

At the time of drafting our audit strategy, we planned to address this risk by reviewing the approach adopted

by the Council to assess the risk that assets not subject to valuation at year end are not materially

misstated, and consider the robustness of that approach.

We will also assess the risk of the valuation changing materially in year, considering the movement in

market indices between revaluation dates and the year end, in order to determine whether these indicate

that fair values have moved materially.

In addition, for those assets which have been revalued during the year we will:

• assess the valuer’s qualifications;

• assess the valuer’s objectivity and independence;

• review the methodology used; and

• perform testing of the associated underlying data and assumptions.

Updated response

In response to the additional issues arising from the identified issues with the completion of valuations we

discussed the position with the council and, in response to the analysis of valuations provided have

completed the following additional assessments:

• Review of the assessed and documented position in respect of the £68.5m of assets which had not

been revalued as intended or in accordance with the policy;

• Review of the subsequent analysis of proposals for assets within the above value, as prepared by the

Council, to confirm understanding of the position, the further work to be completed (valuations) to

support recording of values for individual assets and the proposals for revision to the statements;

• Review of revaluation documentation obtained for assets where further valuations were completed, to

confirm the values to be reflected within the financial statements;

• Review of client prepared analysis of community assets and agreement of proposals for amendments

to the values included within the financial statements;

• Additional testing of sample of assets that had been revalued in the five year period to confirm

existence, the reasonableness of the net book value with reference to the most recent external

valuation and clear record keeping;

• Perform complete reconciliation of the value of PPE as disclosed within the revised financial statements

with the details in the updated FAR.

9






Significant risk

Property, plant

and equipment

valuation

(continued)

Audit conclusion

Following completion of the additional work in respect of these assets, as well as the updating of the

financial statements for valuations not included in the draft unaudited statements, a number of amendments

to the financial statements have been agreed with the Council. A summary of the main amendments arising

from the review of revaluations are:

The result of all of the amendments is that, the net book value of PPE has decreased from £2,126.3m to

£2,098.2m, an overall movement of £28.1m, while the value of investment property has increased by

£9.0m. The detailed accounting entries are shown on page 19 and 20 of this report.

The above amendments are in respect of the majority of the issues identified from review of the valuation of

PPE. For a number of assets no additional work has been performed for the 2018/19 financial statements

and will be undertaken in 2019/20. Management’s consideration of these assets is that the potential

revaluation movement on them, is not material. This has therefore been included as as an uncorrected

misstatement (see page 18 of this report).

In addition, at the point of writing, we are considering the work of the valuer to be able to conclude whether

there are issues in respect of this work that we wish to bring to your attention.

In view of the significant amendments arising from entries within the FAR we have raised associated

internal control recommendations on page 14 of this report.

Note that, at the time of drafting the report, our analysis of the adjustments arising and confirmation of the

approach of the valuer are being finalised.

10






Land and

Buildings

HRA

dwellings

AUC Investment

property

Revaluation increases recognised in the revaluation reserve £30.4m

Revaluation decreases recognised in the costs of services £(37.9)m

Reduction in the valuation of council dwellings £(14.6)m

Reclassification of Assets Under Construction £29.1m £(29.1)m

Increases in the value of Investment Properties £9.0m

Significant risk

Defined benefit

liability valuation


The last triennial valuation London Borough of Hounslow pension fund was completed as at 31 March

2016. As an admitted body within the fund, the valuation provides the basis of the associated net pension

liability for the Council as at 31 March 2019.

The valuation of the Council’s net liability includes use of discount rates, inflation rates, mortality rates etc.,

all of which should reflect the profile of the Council’s employees and other appropriate data.

Due to the high degree of estimation uncertainty associated with these valuations, we have determined

there is a significant risk in this area.


At the time of drafting our audit strategy, we planned to address this risk by reviewing the controls that the

Authority has in place over the information sent to the Scheme Actuary (Barnet Waddingham LLP) by the

fund administrators Capita (until August 2018) and West Yorkshire Pension Fund (from September 2018).

We also:

• assessed the skill, competence and experience of the Fund’s actuary;

• challenged the reasonableness of the assumptions used by the actuary as part of the annual IAS 19

valuation;

• carried out a range of substantive procedures on relevant information and cash flows used by the

actuary as part of the annual IAS 19 valuation.

Audit conclusion

The NAO’s consulting actuary (PwC) has reviewed assumptions used by all LGPS actuaries in 2018/19.

Their review identified two matters:

• The impact of GMP equalisation may not be fully included in LGPS annual IAS 19 valuations; and

• The impact of a legal case during the year (known as the McCloud case), concerning potential age

discrimination in relation to transition provisions introduced as part of pension reform measures, has not

been included in any LGPS annual IAS 19 valuations. The legal decision only arose following

publication of the draft financial statements.

In our view, these matters gives rise to at least a constructive obligation, which are required to be

recognised under IAS 19, which could have a potential material impact on the Fund and the Council. The

Council has consulted with its actuary to obtain an assessment of the impact of the McCloud case, as the

impact of GMP had already been assessed within the figures provided. The Actuary has assessed that the

increase in pension liability required to take account of the McCloud judgement is £7.8m. The Council has

updated the amounts and disclosures in the statement of accounts to reflect this additional liability.

Subject to the adjustments arising as a result of the impact of the McCloud case, included as an adjusted

misstatement on page 19, there were no significant findings arising from our review of the defined benefit

liability valuation.

11






Management

judgement

Valuation and

associated

accounting for the

Civic Centre and

Hounslow House

Description of the management judgement

The Council is in the process of transferring its principal location from the current Civic Centre to a new

site (Hounslow House). The transfer of staff and services is scheduled to occur prior to the year end,

although we understand the civic centre site, which is due to be transferred to developers will still be in the

Council’s ownership at 31 March 2019. Therefore judgements will be required to be made in the financial

statements regarding:

• valuation of the Civic Centre, including any dilapidation provisions,

• the valuation of Hounslow House and its inclusion within the financial statements.

How our audit addressed this area of management judgement

At the time of drafting our audit strategy, we planned review the proposed accounting treatment for the Civic

Centre and Hounslow House against applicable accounting standards. We will consider the timetable for

the asset transfer to ensure that the assets, and associated values, are appropriately reflected within the

financial statements.

We will consider the inclusion of Hounslow House within the value of Property, Plant and Equipment at year

end as part of our review of significant capital additions in the period.

Audit conclusion

There were no significant findings arising from our review of the accounting treatment for the Civic Centre

and Hounslow House

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Management

judgement

Private Finance

initiative

Description of the management judgement

The Council entered into a PFI contract in 2012 for the maintenance and updating of highways and street

lighting and the associated infrastructure. The contract is for 25 years and came into effect from January

2013. Payments and assets arising under the contract have been recorded within the Council’s financial

statements.

How our audit addressed this area of management judgement

At the time of drafting our audit strategy, we planned to address this judgement by reviewing in detail the

PFI agreement and the associated financial model in respect of the payments to be made, ensuring the

disclosures within the financial statements are in line with these and the requirements of the Code of

Practice.

Audit conclusion

There were no significant findings arising from our review of the PFI agreement.





Qualitative aspects of the Council’s accounting practices

We have reviewed the Council’s accounting policies and disclosures and concluded they comply with the requirements of the Code of

Practice on Local Authority Accounting (the Code). We have discussed with management a difference in interpretation of the Code

requirements for the disclosure of the Expenditure and Funding Analysis:

• The presentation of the Expenditure and Funding Analysis, which we consider should be included as a note to the financial

statements under the Code requirements, has been presented by the Council at the start of the Main Local Authority Financial

Statements, separate to the notes to the financial statements. Additional narrative has been included to reflect that this is a note

to the financial statements. Management have provided explanation for their decision to show this note separately to the other

notes to the financial statements.

Draft accounts were received from the Council on 31 May 2019, although a number of the required disclosures were missing. Updated

accounts were received on 28 August 2019. Supporting working papers were made available to us from the first day of the audit.

Significant matters discussed with management

In addition to the areas of significant risk identified in the Audit Strategy memorandum, we discussed the following significant matters

with management:

• Group Accounts – the Council has assessed its subsidiaries, associates and joint ventures and, in view of continuing

developments, considers them to be material and has prepared group accounts. We have considered management’s judgement

and are satisfied it is appropriate.

• NDR Appeals Provision – the Council has not made any provision for appeals associated with NHS Trusts claiming charitable

status. We are satisfied , based on the Council’s assessment of the outcome of this case, that this matter does not affect the risk

of material misstatement.

Significant difficulties during the audit

During the course of the audit we have had the full co-operation of management. We would like to express our thanks to management

and officers for their co-operation throughout the audit.

Wider responsibilities

Our powers and responsibilities under the 2014 Act are broad and include the ability to:

• issue a report in the public interest;

• make statutory recommendations that must be considered and responded to publicly;

• apply to the court for a declaration that an item of account is contrary to law; and

• issue an advisory notice under schedule 8 of the 2014 Act.

We have not exercised any of these powers as part of our 2018/19 audit.

The 2014 Act also gives rights to local electors and other parties, such as the right to ask questions of the auditor and the right to make

an objection to an item of account. We have received no questions or objections.

13






The purpose of our audit is to express an opinion on the financial statements. As part of our audit we have considered the internal

controls in place relevant to the preparation of the financial statements. We do this in order to design audit procedures to allow us to

express an opinion on the financial statement and not for the purpose of expressing an opinion on the effectiveness of internal control,

nor to identify any significant deficiencies in their design or operation.

The matters reported are limited to those deficiencies and other control recommendations that we have identified during our normal audit

procedures and that we consider to be of sufficient importance to merit being reported. If we had performed more extensive procedures

on internal control we might have identified more deficiencies to be reported or concluded that some of the reported deficiencies need

not in fact have been reported. Our comments should not be regarded as a comprehensive record of all deficiencies that may exist or

improvements that could be made.

Our findings and recommendations are set out below. We have assigned priority rankings to each of them to reflect the importance that

we consider each poses to your organisation and, hence, our recommendation in terms of the urgency of required action. In summary,

the matters arising fall into the following categories:

Priority ranking Description Number of issues

1 (high) In our view, there is potential for loss, either of data or financial value, as well as

damage to reputation. This may have implications for the achievement of business

strategic objectives. The recommendation should be taken into consideration by

management immediately.

1

2 (medium) In our view, there is a need to strengthen internal control or enhance business

efficiency. The recommendations should be actioned in the near future.

1

3 (low) In our view, internal control should be strengthened in these additional areas when

practicable.

0

14

3. INTERNAL CONTROL RECOMMENDATIONS





Significant deficiencies in internal control – Level 1

Fixed Asset Register review

Description of deficiency

As set out in our response to the significant risk around PPE valuations, a number of matters have arisen from review of the

Council’s Fixed Asset Register (FAR). Review of the details within the FAR has identified a number of issues with the

completeness and accuracy of the data, in particular:

• Inconsistency in the recording of assets and valuations (against parent and child assets)

• Retention of assets which have been disposed off or subject to amalgamation with other assets

• Inappropriate recording of costs and details for individual assets such that the Council was unable to prove existence.

During the audit there have been a significant number of amendments to the data held in the FAR, although there remain assets,

with an immaterial value where the Council have elected to review and correct FAR entries as necessary in 2019/20.

The Council has, as a result of significant changes in the resources available in the finance department, been unable to ensure the

FAR has been completed and accurately updated for all of the valuations identified as being required within the year.

Potential effects

The Council holds a significant value of assets and therefore the records supporting that value should be kept up to date and in

accordance with the Council accounting policy and Code requirements. Failure to do so, increases the risk that there are material

misstatements in the supporting records that are used to prepare the financial statements and associated disclosure notes.

Recommendation

We note that the Council has completed significant additional work prior to the issue of this report, to resolve a number of the

issues arising from the review of data within the FAR and to update the financial statements.

Notwithstanding, we consider that the Council should perform a complete review of the data within the FAR, on a line by line basis,

to ensure the details recorded across the PPE categories are such that.

• all separately identifiable assets are confirmed as existing (and are separately identifiable for the purposes of future valuations)

• all separately identifiable assets have been subject to a detailed external valuation within the last 5 years

• all expenditure on additions has been appropriately recorded against a separately identifiable asset.

Management response

The Council holds PPE data in places for differing purposes, not just the Finance Fixed Asset Register. Therefore, we have a

different view in regards to the potential for material loss however we have already begun to put activity in place with the auditor to

ensure that as we move beyond year 1 of the new audit contract we are clear and can satisfy their requirements.

15

3. INTERNAL CONTROL RECOMMENDATIONS (CONTINUED)





Significant deficiencies in internal control – Level 2

Ongoing Fixed Asset Register review processes

Description of deficiency

The Council has, as a result of further review of the content of the FAR across the period of the audit, identified a number of

subsequent amendments to values that had been included in the draft financial statements. These adjustments include the

reclassification of £29.1m of Assets Under Construction.

Potential effects

The details within the FAR are not subject to a process of ongoing review by the Council, with the process is focused on the year

end. In view of the reduced timescale for the preparation of the financial statements, coupled with limited resources in the finance

team, necessary amendments to the accounts may not be identified in a timely basis and omitted from the financial statements,

causing future material adjustments to be made to the draft accounts.

Recommendation

The Council should seek to improve its existing procedures for the ongoing review and management of the data within the FAR to

allow for regular review of the content as well as the identification of transactions relating to the additions (including Assets Under

Construction), and disposals made to PPE over the course of the year. This will help to ensure entries are not omitted from the

accounts.

Management response

The council will look into additional processes for 2019/20 to identify / capture any assets under construction that become

operational and any disposals made during the year.

16






Follow up of previous internal control points

We set out below an update on internal control points raised in the prior year by the previous auditor.

17






Description of deficiency (per KPMG report)

Valuations and estimates are always complex areas of the accounts. Earlier deadlines means the timing and tolerances applied to

these need to be carefully considered. Historically the information received by the Authority that has been used in the impairment

review has indicated that there has been no indicators that a material change in the value of the Authority’s asset base. In 2017/18

the Authority received a market indexation report which showed that specialised assets valued on a depreciated replacement cost

basis had increased by 9.5% this was reflected in the asset base of the Authority that had been subject to valuation by the valuer.

The residual asset base in this category that wasn’t subject to in year valuation by the valuer was not indexed.

Potential effects

The 2017/18 statement of accounts, and in particular the carrying value of the Council’s assets, has been prepared in accordance

with the Council’s accounting policies, with a large proportion of the fixed assets being subject to a full revaluation or desktop

review during the year to ensure that the amount shown on the balance sheet is not materially misstated. Additional work to

revalue assets not reviewed in 2017/18 would only be expected when this would result in a material change, which is not the case.

The Council’s impairment review policy is aimed at identifying where there is a potential reduction in value due to damage,

obsolescence, or change in market value. This review was undertaken and concluded that no reductions in value needed to be

applied. Any change in market value is likely to be an increase in value and, as stated above, steps had already been taken to

ensure the balance sheet reflected appropriate valuations in accordance with our accounting policies. We will take this into

consideration as part of planning for the 2018/19 close down process.

Recommendation

Given the reduced closedown timeframe the Authority needs to ensure that the information provided to the finance team to allow it

to complete the impairment review is also received in a shorter timeframe, this includes internal information about specific

impairment indicators from the estates team and externally provided information such as the commissioned valuers market report.

This will allow the Authority to continue to prepare robust and timely impairment reviews.

2018/19 update

No further issues have been identified in respect of the impairment of assets, although as noted earlier within the report there have

been further issues identified with the processes surrounding the recording of PPE.

Misstatements

We set out over the following pages the misstatements above the level of trivial threshold of £240,000 that have been identified for

adjustment during the course of the audit, analysing as those either uncorrected or corrected.

Uncorrected misstatements 2018/19

Audit work identified a number of assets where the council did not have recent formal valuations to support the values detailed within the

register. For a number of assets which have not been revalued in the five year period required by the Code and the Council’s

accounting policies, no additional work has been performed to confirm the valuation as at 31 March 2019. Work will be undertaken on

these assets in 2019/20. Management’s estimation of the potential revaluation movement on these assets is £237,000. Management has

decided not to adjust the balance as it considers the amount to be immaterial.

18

4. SUMMARY OF MISSTATEMENTS





19

Comprehensive Income and

Expenditure Statement

Balance Sheet

Dr (£m) Cr (£m) Dr (£m) Cr (£m)

1 Dr: Cost of services (CIES)

Cr: PPE

Dr: Unusable reserves

Cr: Adjustments between accounting and funding basis

(MIRS)

38.1

38.1

38.1

38.1

Adjustments arising as a result of the completion of additional revaluations for a number of assets recorded within the FAR

and the correction of errors identified with overall values recorded (downward revaluations)

2 Dr: Other operating expenditure (CIES)

Cr: PPE



(MIRS)

5.8

5.8

5.8

5.8

Adjustments made to de-recognise those assets and valuations for which an individual asset line is no longer appropriate

within the financial statements.

3 Dr: PPE

Cr: Other operating expenditure (CIES)

Dr: Adjustments between accounting and funding basis

(MIRS)

Cr: Unusable reserves

9.0

9.0

9.0

9.0

Adjustments arising as a result of the completion of further revaluations for investment properties recorded within the

Council financial statements.

4 Dr: ST investments

Cr: Financing and Investment Income (CIES)


(MIRS)


0.5

0.5

0.5

0.5

Being the adjustment to recognise the required revaluation of Short Term investments for the requirements of the financial

instrument disclosures

4. SUMMARY OF MISSTATEMENTS (CONTINUED)

We set out below the misstatements identified for adjustment during the course of the audit, above the level of trivial threshold of

£240k.

The table below outlines the misstatements that have been identified by management and adjusted during the course of the audit.

Adjusted misstatements 2018/19





Disclosure amendments

During our review of the financial statements we have identified some amendments to disclosures. The following were amended by

management.

• Financial instruments: Various revisions and disclosure amendments to ensure the disclosures are appropriate for the type of

financial instruments.

• Pension Fund: Inclusion of additional disclosures omitted from the original draft;

• General: A number of other changes have been made to the financial statements not requiring individual analysis.

20

Comprehensive Income and

Expenditure Statement

Balance Sheet

Dr (£’m) Cr (£’m) Dr (£’m) Cr (£’m)

5 Dr: PPE

Cr: Surplus or deficit on revaluation


(MIRS)


15.8

15.8

15.8

15.8

Adjustments arising as a result of the completion of additional revaluations for a number of assets recorded within the FAR

and the correction of errors identified with overall values recorded (upward revaluations)

6 Dr: PPE – Land and Buildings

Cr: PPE – Assets Under Construction

29.1

29.1

Adjustment made to the value of Assets Under Construction for the identification of additional assets that came into use

during 2018/19.

7 Dr: Trade Creditors

Cr: Provisions

2.5

2.5

Reclassification of NNDR appeals provision

8 Dr: CIES (service costs)

Dr: Other Operating Expenditure

Cr: Long term liabilities (IAS 19 deficit)



(MIRS)

7.8

1.7

9.5

9.5

9.5

The additional IAS 19 liabilities arising from the McCloud judgment being incorporated into the actuarial valuation

Total adjusted misstatements £78.7m £78.7m £110.3m £110.3m

4. SUMMARY OF MISSTATEMENTS (CONTINUED)





Our approach to Value for Money

We are required to form a conclusion as to whether the Council has made proper arrangements for securing economy, efficiency andeffectiveness in its use of resources. The NAO issues guidance to auditors that underpins the work we are required to carry out in orderto form our conclusion, and sets out the criterion and sub-criteria that we are required to consider.

The overall criterion is that, ‘in all significant respects, the Council had proper arrangements to ensure it took properly informed decisionsand deployed resources to achieve planned and sustainable outcomes for taxpayers and local people.’ To assist auditors in reaching aconclusion on this overall criterion, the following sub-criteria are set out by the NAO:

• Informed decision making

• Sustainable resource deployment

• Working with partners and other third parties

Commentary against each of the sub-criteria, and an indication of whether arrangements are in place, is provided below.

21

5. VALUE FOR MONEY CONCLUSION

Sub-criteria Commentary Arrangements in

place?

Informed

decision

making

A Council Constitution, setting out the governance structure of the Council is in place which is

reviewed regularly. The Audit and Governance Committee fulfils the function of an audit

committee. The Audit and Governance Committee has met regularly throughout the year. The

Committee has received the reports of internal and external audit, and challenged the findings

and recommendations as appropriate.

A medium term financial strategy (MTFS) was in place for the year ended 31 March 2019,

covering the period 2018/19 to 2020/21. This was approved by Cabinet and Borough Council

in September 2017. The 2018/19 budget was balanced and linked to the MTFS which

predicted a savings requirement of £7.3m in 2018/19. Corporate savings of £15.9m were

achieved in 2018/19, which in the majority covered departmental overspends of £17.4m,

leaving a £1.5m overspend for the financial year.

During the year there has been regular reporting to Cabinet of financial information. The year-

end revenue position reported is not significantly different to that forecast during the year.

A Treasury Management Strategy was in place for the year ended 31 March 2019. The Audit

and Governance Committee has received regular treasury management reporting during the

financial year. The 2018/19 Treasury Management Strategy Statement was approved by the

Council in February 2018.

The Corporate Risk Register is reported on a regular basis to the Audit and Governance

Committee, with supporting reports identifying additional or changes to mitigating actions from

the preceding report.

Yes





22

5. VALUE FOR MONEY CONCLUSION

Sub-criteria Commentary Arrangements in

place?

Sustainable

resource

deployment

The Council has in prior years implemented a number of savings projects and income

generation strategies in order to recoup the £140m lost from budgets through cuts to

public spending.

A Medium Term Financial Strategy (MTFS) 2018/19– 2020/21 was approved by Borough

Council in September 2017 alongside the 2018/19 budget. While this identified savings

requirements, assumptions regarding potential Council Tax and NNDR income increases

were not included, which then materialised. Therefore, the Council was able to set a

balanced budget for 2018/19 without the need to find the savings initially identified in the

MTFS.

During 2018/19, the MTFS has been refreshed, and in November 2018, Borough Council

approved the refreshed document, which includes a savings requirement of £28.7m over

the years 2019/20 to 2021/22. During the 2019/20 budget setting process, Borough

Council approved a 4.99% increase to Council Tax levels (2.99% being the Adult Social

Care precept, 2% for general increases). This increase on an updated Council Tax base

has meant that the savings requirements of £5.8m for 2019/20 identified in the MTFS have

been met through additional income and a balanced budget has been set.

The Council recognises the need to reduce departmental overspends and to achieve

savings in future years. Savings plans for future years of the MTFS are well progressed,

with Directorates being asked to identify savings to a higher level than the identified gap of

£28.7m, to allow Members a level of flexibility as to where savings are achieved.

We appreciate that at the point of setting the budget and MTFS in November 2018, there

were, and still are, key uncertainties in local authority funding relating to the Government

Comprehensive Spending Review, the Fair Funding Review in Local Government, and the

impact on the Council of changes to the business rates retention scheme. There is no

guarantee that these elements would all have a positive effect on the Council’s funding.

Yes

Working with

partners and

other third

parties

The Council’s Constitution details the arrangements for contracting with third parties. The

Council has written procedures for procuring products and services, which are within its

constitution.

The Health and Wellbeing Board is responsible for the Hounslow Better Care Fund plan.

The Board, made up of representatives from the Council, NHS Harrow CCG, local police

and the voluntary sector, monitors the outcome performance of the plan.

The Council is also a lead member in ‘Hounslow Together’ a Local Strategic Partnership

of public, private and voluntary sector organisations. The Hounslow Together Board are

responsible for championing and driving the Future Borough Strategy which was refreshed

for the period 2018-2035 in June 2018.

Yes





Significant Value for Money risksThe NAO’s guidance requires us to carry out work to identify whether or not a risk to the Value for Money conclusion exists. Risk, in the context of our Value for Money work, is the risk that we come to an incorrect conclusion rather than the risk of the arrangements in place at the Council being inadequate. In our Audit Strategy Memorandum, we reported that we had identified one significant Value for Money risk. The work we carried out in relation to significant risks is outlined below.

Our overall Value for Money conclusionOur draft auditor’s report included in Appendix B states that we intend to issue an unqualified Value for Money conclusion for the 2018/19 financial year.

23

5. VALUE FOR MONEY CONCLUSION (CONTINUED)

Risk Work undertaken Conclusion

Risk heading

The current financial forecast shows

that the Council is forecasting an

overspend of approximately £18m in

2018/19, consisting of recurrent

overspends reported in 2017/18 and

2018/19 savings that are currently

assessed as being unachievable or at

significant risk of delivery. These

amounts have to date been offset by

£2.6m of identified mitigating actions.

The Authority’s Medium Term Financial

Plan for the period to 2021/22, as

presented to Cabinet in early

November 2018, notes the above

position and has identified the need to

make further savings of £28.7m prior to

2021/22 to be able to remain within

forecast funding levels. The 2020/21

budget is expected to include further

proposals to support the delivery of the

overall savings requirement.

We will review the controls put in place by the Authority to

ensure financial resilience, including the development and

implementation of the Medium Term Financial Plan, and that

this has taken into consideration factors such as funding

reductions, salary and general inflation, demand pressures,

etc.

We will specifically review management actions and

mitigations to deliver the budgeted position.

We obtained sufficient

assurance to conclude

arrangements are in place





[To be provided to us on client headed note paper]

Mazars LLP

Tower Bridge House


London

E1W 1DD

[Date]

Dear Lucy

London Borough of Hounslow - audit for year ended 31 March 2019

This representation letter is provided in connection with your audit of the financial statements of London Borough of Hounslow (‘the Council’) for the year

ended 31 March 2019 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view in accordance with the

CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19 (the Code) and applicable law.

I confirm that the following representations are made on the basis of enquiries of management and staff with relevant knowledge and experience (and,

where appropriate, inspection of supporting documentation) sufficient to satisfy ourselves that I can properly make each of the following representations

to you.

My responsibility for the financial statements and accounting information

I believe that I have fulfilled my responsibilities for the true and fair presentation and preparation of the financial statements in accordance with the Code

and applicable law.

My responsibility to provide and disclose relevant information

I have provided you with:

• access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and

other material;

• additional information that you have requested from us for the purpose of the audit; and

• unrestricted access to individuals within the Council you determined it was necessary to contact in order to obtain audit evidence.

I confirm as Executive Director of Finance and Resources that I have taken all the necessary steps to make me aware of any relevant audit information

and to establish that you, as auditors, are aware of this information.

As far as I am aware there is no relevant audit information of which you, as auditors, are unaware.

Accounting records

I confirm that all transactions that have a material effect on the financial statements have been recorded in the accounting records and are reflected in

the financial statements. All other records and related information, including minutes of all Council and committee meetings, have been made available to

you.

Accounting policies

I confirm that I have reviewed the accounting policies applied during the year in accordance with Code and International Accounting Standard 8 and

consider these policies to faithfully represent the effects of transactions, other events or conditions on the Council’s financial position, financial

performance and cash flows.

24

APPENDIX ADRAFT MANAGEMENT REPRESENTATION LETTER

Executive summary Significant findings Summary of misstatements Value for Money conclusion Appendices

Accounting estimates, including those measured at fair value

I confirm that any significant assumptions used by the Council in making accounting estimates are reasonable, including:

• those measured at current or fair value; and

• provision for NNDR Appeals.

• those assets not revalued in the five year revaluation cycle do not have a material impact on the financial statements.

Contingencies

There are no material contingent losses including pending or potential litigation that should be accrued where:

• information presently available indicates that it is probable that an asset has been impaired or a liability had been incurred at the balance sheet date;

and

• the amount of the loss can be reasonably estimated.

There are no material contingent losses that should be disclosed where, although either or both the conditions specified above are not met, there is a

reasonable possibility that a loss, or a loss greater than that accrued, may have been incurred at the balance sheet date.

There are no contingent gains which should be disclosed.

All material matters, including unasserted claims, that may result in litigation against the Council have been brought to your attention. All known actual or

possible litigation and claims whose effects should be considered when preparing the financial statements have been disclosed to you and accounted for

and disclosed in accordance with the Code and applicable law.

Laws and regulations

I confirm that I have disclosed to you all those events of which I am aware which involve known or suspected non-compliance with laws and regulations,

together with the actual or contingent consequences which may arise therefrom.

The Council has complied with all aspects of contractual agreements that would have a material effect on the accounts in the event of non-compliance.

Fraud and error

I acknowledge my responsibility as Executive Director of Finance and Resources for the design, implementation and maintenance of internal control to

prevent and detect fraud and error.

I have disclosed to you:

• all the results of my assessment of the risk that the financial statements may be materially misstated as a result of fraud;

• all knowledge of fraud or suspected fraud affecting the Council involving:

• management and those charged with governance;

• employees who have significant roles in internal control; and

• others where fraud could have a material effect on the financial statements.

I have disclosed to you all information in relation to any allegations of fraud, or suspected fraud, affecting the Council’s financial statements

communicated by employees, former employees, analysts, regulators or others.

Related party transactions

I confirm that all related party relationships, transactions and balances, have been appropriately accounted for and disclosed in accordance with the

requirements of the Code and applicable law.

I have disclosed to you the identity of the Council’s related parties and all related party relationships and transactions of which I am aware.

Impairment review

To the best of my knowledge, there is nothing to indicate that there is a permanent reduction in the recoverable amount of the property, plant and

equipment below their carrying value at the balance sheet date. An impairment review is therefore not considered necessary.

25

APPENDIX ADRAFT MANAGEMENT REPRESENTATION LETTER (CONTINUED)


Future commitments

I am not aware of any plans, intentions or commitments that may materially affect the carrying value or classification of assets and liabilities or give rise

to additional liabilities.

Subsequent events

I confirm all events subsequent to the date of the financial statements and for which the Code and applicable law, require adjustment or disclosure have

been adjusted or disclosed.

Should further material events occur after the date of this letter which may necessitate revision of the figures included in the financial statements or

inclusion of a note thereto, I will advise you accordingly.

Going concern

To the best of my knowledge there is nothing to indicate that the Council will not continue as a going concern in the foreseeable future. The period to

which I have paid particular attention in assessing the appropriateness of the going concern basis is not less than twelve months from the date of

approval of the accounts.

Yours sincerely

Clive Palfreyman

Executive Director of Finance and Resources, Section 151 Officer

26

APPENDIX ADRAFT MANAGEMENT REPRESENTATION LETTER (CONTINUED)


Independent auditor’s report to the members of London Borough of Hounslow

Report on the financial statements

Opinion on the financial statements of London Borough of Hounslow

We have audited the financial statements of London Borough of Hounslow (‘the Council’) for the year ended 31 March 2019, which comprise the

Comprehensive Income and Expenditure Statement, the Movement in Reserves Statement, the Balance Sheet, the Cash Flow Statement and notes to

the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their

preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19.

In our opinion, the financial statements:

• give a true and fair view of the financial position of London Borough of Hounslow as at 31 March 2019 and of its expenditure and income for the year

then ended; and

• have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom

2018/19.

Opinion on the financial statements of London Borough of Hounslow Pension Fund

We have audited the financial statements of London Borough of Hounslow Pension Fund (‘the Pension Fund’) for the year ended 31 March 2019, which

comprise the Fund Account, the Net Assets Statement and notes to the financial statements, including a summary of significant accounting policies. The

financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority

Accounting in the United Kingdom 2018/19.

In our opinion the financial statements:

• give a true and fair view of the financial transactions of London Borough of Hounslow Pension Fund during the year ended 31 March 2019, and the

amount and disposition of the Pension Fund’s assets and liabilities as at 31 March 2019; and

• have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom

2018/19.

Basis for opinions

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those

standards are further described in the Auditor’s responsibilities section of our report. We are independent of the Council and the Pension Fund in

accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as

applicable to public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the

audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the Executive Director of Finance and Resources’ use of the going concern basis of accounting in the preparation of the Council’s and the Pension

Fund’s financial statements is not appropriate; or

• the Executive Director of Finance and Resources has not disclosed in the financial statements any identified material uncertainties that may cast

significant doubt about the Council’s or the Pension Fund’s ability to continue to adopt the going concern basis of accounting for a period of at least

twelve months from the date when the financial statements are authorised for issue.

Other information

The Executive Director of Finance and Resources is responsible for the other information. The other information comprises the information included in

the Statement of Accounts, other than the financial statements and our auditor’s report thereon. Our opinions on the financial statements does not cover

the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

27

APPENDIX BDRAFT AUDITOR’S REPORT


In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other

information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially

misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material

misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that

there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of the Executive Director of Finance and Resources for the financial statements

As explained more fully in the Statement of the Executive Director of Finance and Resources’ Responsibilities, the Executive Director of Finance and

Resources is responsible for the preparation of the Statement of Accounts, which includes the Council’s and Pension Fund’s financial statements, in

accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2018/19, and

for being satisfied that they give a true and fair view. The Executive Director of Finance and Resources is also responsible for such internal control as

the Executive Director of Finance and Resources determines is necessary to enable the preparation of financial statements that are free from material

misstatement, whether due to fraud or error.

The Executive Director of Finance and Resources is required to comply with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the

United Kingdom 2018/19 and prepare the financial statements on a going concern basis, unless the Council is informed of the intention for dissolution

without transfer of services or function to another entity. The Executive Director of Finance and Resources is responsible for assessing each year

whether or not it is appropriate for the Council and the Pension Fund to prepare the accounts on the going concern basis and disclosing, as applicable,

matters related to going concern.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the Council’s and Pension Fund’s financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to

influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at

www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Matters on which we are required to report by exception under the Code of Audit Practice

We are required by the Code of Audit Practice to report to you if:

• we issue a report in the public interest under section 24 of the Local Audit and Accountability Act 2014;

• we make a recommendation under section 24 of the Local Audit and Accountability Act 2014; or

• we exercise any other special powers of the auditor under sections 28, 29 or 31 of the Local Audit and Accountability Act 2014.

We have nothing to report in these respects.

Conclusion on London Borough of Hounslow’s arrangements for securing economy, efficiency and effectiveness in the use of resources

Conclusion

On the basis of our work, having regard to the guidance on the specified criterion issued by the Comptroller and Auditor General in November 2017, we

are satisfied that, in all significant respects, London Borough of Hounslow has put in place proper arrangements to secure economy, efficiency and

effectiveness in its use of resources for the year ended 31 March 2019.

28

APPENDIX BDRAFT AUDITOR’S REPORT (CONTINUED)


http://www.frc.org.uk/auditorsresponsibilities

Basis for conclusion

We have undertaken our review in accordance with the Code of Audit Practice issued by the Comptroller and Auditor General, having regard to the

guidance on the specified criterion issued in November 2017, as to whether the Council had proper arrangements to ensure it took properly informed

decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people. The Comptroller and Auditor General

determined this criterion as that necessary for us to consider in satisfying ourselves whether the Council put in place proper arrangements for securing

economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2019.

We planned our work in accordance with the Code of Audit Practice. Based on our risk assessment, we undertook such work as we considered

necessary to form a view on whether, in all significant respects, the Council had put in place proper arrangements to secure economy, efficiency and

effectiveness in its use of resources.

Responsibilities of the Council

The Council is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure

proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements.

Auditor’s responsibilities for the review of arrangements for securing economy, efficiency and effectiveness in the use of resources

We are required under section 20(1)(c) of the Local Audit and Accountability Act 2014 to satisfy ourselves that the Council has made proper

arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice requires us to report to you our

conclusion relating to proper arrangements. We are not required to consider, nor have we considered, whether all aspects of the Council’s arrangements

for securing economy, efficiency and effectiveness in its use of resources are operating effectively.

Use of the audit report

This report is made solely to the members of London Borough of Hounslow, as a body, in accordance with part 5 of the Local Audit and Accountability

Act 2014 and as set out in paragraph 44 of the Statement of Responsibilities of Auditors and Audited Bodies published by Public Sector Audit

Appointments Limited. Our audit work has been undertaken so that we might state to the members of the Council those matters we are required to state

to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other

than the members of the Council, as a body, for our audit work, for this report, or for the opinions we have formed.

Certificate

Delay in certification of completion of the audit

We certify that we have completed the audit of London Borough of Hounslow in accordance with the requirements of the Local Audit and Accountability

Act 2014 and the Code of Audit Practice.

Lucy Nutley

For and on behalf of Mazars LLP

Tower Bridge House


London

E1W 1DD

[Date]

29

APPENDIX BDRAFT AUDITOR’S REPORT (CONTINUED)


As part of our ongoing risk assessment we monitor our relationships with you to identify any new actual or perceived threats to our

independence within the regulatory or professional requirements governing us as your auditors.

We can confirm that no new threats to independence have been identified since issuing the Audit Strategy Memorandum and therefore

we remain independent.

30

APPENDIX CINDEPENDENCE


Stuart Frith

Senior Manager

Phone: +44 (0)20 7063 4409

Mobile: +44 (0)770 998 2774

Email: [email protected]

CONTACT

Lucy Nutley

Director

Phone: +44(0)20 7063 4634

Mobile: +44(0)738 724 2052

Email: [email protected]

Documents

Audit Completion Report DRAFT - London Borough of Hounslow... · registration can be viewed at under reference number C001139861. VAT number: 839 8356 73 Mazars LLP –Tower Bridge