BOROUGH OF POOLE

AUDIT COMMITTEE

8THAPRIL 2010

AUDIT COMMISSION 2010/11INDICATIVE FEE LETTER

PART OF THE PUBLISHED FORWARD PLAN:YES

STATUS:EXTERNAL INSPECTION REPORT

1Purpose of Report

1.1This covering report accompanies the Audit Commission’s ‘Annual Audit Fee 2010/11’ letter (attached as Appendix A)

1.2The purpose of the Fee Letter is to confirm the audit work that the Audit Commission propose to undertake for the 2010/11 financial year and the corresponding fee.

2Decisions Required

2.1The Audit Committee is asked to:

(a)Note the planned audit fee for 2010/11 financial year and planned fee for grant claim work

(b)Note the separate inspection fee for the Organisational Assessment for the 2010/11 year.

3Background/Information

3.1The Audit Commission has a statutory duty to prescribe scale of fees for the audit of accounts and inspections. The scale audit fees are defined as the fee required by auditors to carry out the work necessary to meet their statutory responsibilities under the Audit Commission Act. The scale fee represents the Commission’s best estimate of the fee required to complete an audit where the audited body has no significant risks and has in place a sound control environment that ensures the auditor is provided with complete and materially accurate financial statements with supporting working papers within agreed timeframes.

3.2The scales of audit fees comprise:

  • A fixed element for different types of audited bodies i.e. Unitary Authorities
  • An element related to the audited body’s planned gross expenditure; and
  • A regional premium for audits in London and the South East
  • The Commission has the power to determine the fee above or below the scale fee dependent on the level of work required at each authority, although it is actively trying to narrow the variation between the scale fee and the amount charged to 20% above and 10% below the scale fee.
  • The total indicative audit fee for 2010/11has risen to £230,000 compared to £218,000 for 2009/10. This £12,000 increase is in fees for the financial statements element of the audit to reflect the costs of additional audit work arising from the introduction of International Reporting Standard (IFRS). The Audit Commission has indicated its intention to offset these increases through a subsidy to cover the ‘one-off’ element of the transition costs to the new IFRS. For Poole this subsidy equals £14,029 (6% of scale fee).
  • Despite the 2010/11 increase the fee for the Borough is still 5.03% below the scale fee. This continued ‘below scale’ position for Poole recognises that it has not been assessed as having significant risks and that reliance can be placed on the work of Internal Audit and the strength of its control environment. It is also worth noting that Poole has the lowest audit fees in its Family Group of comparable authorities.[1]
  • For information the audit fees for the past five years are summarised as follows:

Year / £ / Scale Fee +/-
2010/11 / 230,000 / -5.03%
2009/10 / 218,000 / -7%
2008/09 / 207,999 / -9%
2007/08 / 197,832 / -4%
2006/07 / 178,170 / Scale fees not applied

3.7Certification of Grant Claims and Returns – Audit Commission indicative fees relating to the work on the certification of claims and returns have increased by £2,000 to £32,000 for 2010/11.

3.8Organisational Assessment - The indicative fee for the Organisational Assessment (under the CAA framework) for the 2010/11 financial year is £16,630. This inspection fee is in addition to planned audit fees above and has been set in accordance with the Audit Commission’s work programme and scale of fees for 2010/11.

4Financial Implications

4.1There are no additional financial implications arising directly from this report.

5Legal Implications

5.1There are no direct legal implications arising from this report.

6Risk Management Implications

6.1There are no direct risk management implications arising from this report.

7Equalities Implications

7.1There are no direct equalities implications arising from this report.

8Conclusion

8.1The annual audit fee for 2010/11 is set out in Appendix A and has been agreed with the Chief Finance Officer and the Chief Executive.

Report Author:Rebecca Drummond

Head of Audit & Management Assurance

Responsible Officer:Liz Wilkinson

Chief Finance Officer & Head of Financial Services

Date:22nd March 2010

Appendix ALetter: Annual Audit Fee 2010/11

Page 1

[1] Based on Planned Audit Fees for 2009/10. Information is taken from the Audit Commission website.