Review of 2000/01 external audit fees

Report: 6
Date: 19 March 2001
By: Clerk

Summary

This report seeks authorisation to release a retention of £40,000 held pending consideration of the costs of the 2000/01 audit.

A. Recommendations

1. the Audit Panel is asked to approve release of the £40,000 retention held pending consideration of the costs of the 2000/01 audit.

B. Supporting information

1. At the Panel’s consideration of the 2000/01 external audit plan it was agreed to hold a retention of £40,000 from the total audit fee of £500,000. The Panel were informed that £460,000 was the top of the Audit Commission’s guideline fee for police authority fees for 2000/01. The proposed fee of £500,000 assumed that District Audit would encounter a higher level of problems in the course of the audit.

2. District Audit have written explaining that this assumption has proved correct and their letter is attached at Appendix 1. Included with the letter is a spreadsheet outlining the actual costs which District Audit say they have incurred in delivering the audit. In a number of areas these costs exceed the budget.

3. In view of the evidence provided by District Audit it is now appropriate to release the retention.

C. Financial implications

1. Budget provision of £500,000 has been made in the 2001/02 MPA budget to cover these costs. 

D. Background papers

None.

E. Contact details

Report author: Peter Martin, Treasurer, MPA.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1

Letter - Audit Fees

Our reference 
Your reference 
Date 28 February 2002

Peter Martin
Treasurer
Metropolitan Police Authority
6th Floor, Romney House
Marsham Street
London SW1P 3PY

Dear Peter

Audit Fees

You may recall that the Audit Panel, at its meeting of 8 March 2001, agreed the audit plan and fee of £500,000 subject to the retention of £40,000. The basis for the retention was that £460,000 was the top of the Audit Commission’s guideline fee scale for police authority audit fees for 2000/2001 (the fee consultation paper for 2001/2002 proposed no scale for next years’ audit for the GLA and its functional bodies, given their unique nature).

The proposed fee of £500,000 assumed we would encounter a higher level of problems that at an average police authority in the course of the audit. The poor state of the financial systems was felt to be the most likely difficulty, requiring us to undertake significantly more substantive testing than is usual. This has proved to be largely correct and is reflected by the following:

• there were a number of qualifications and near qualifications to the final accounts
• we were asked by the MPS to expand the scope of the Regular as Clockwork review to cover other issues of concern to them
• difficulties in obtaining information at various points in the audit
• the problems with the BVPIs identified by our Best Value work.

Addressing these issues required the use of senior staff and, in addition, there are also a number of issues unique to this audit, such as the need to do work on certain covert transactions within the MPS’s accounts, which also requires the use of senior staff, given its sensitivity.

I have attached a spreadsheet outlining the actual costs incurred in delivering the audit compared with those budgeted for as outlined in my letter to you of 27 February. You will see that in a number of areas the costs incurred actually exceeded those budgeted. Accordingly I would be grateful if the Panel could now agree to the release of the £40,000 retention. The position on the various outputs from the audit is shown in the attached progress update.

Given that the spreadsheet represents the real cost of delivering the audit, although we are absorbing the costs this time, we regards it as the baseline against which future audit fees should be assessed.

Yours sincerely

Kash Pandya
District Auditor

Met Police 2000/2001 Audit

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