Agenda item

·        To present the Statement of the Accounts for 2016/17.

·        To present the External Auditor’s report on the audit of the Financial Statements.

5.1       The report of the Head of Function (Resources) and Section 151 Officer incorporating the final Statement of Accounts 2016/17 was presented for the Committee’s consideration and acceptance.

The Committee was informed that the draft Statement of Accounts was presented for audit on 28 June, 2017. The detailed audit work is now substantially complete and the Auditor’s report has been issued and a small number of amendments to the draft have been incorporated into the accounts.

The statutory deadline for the completion of the audited accounts 2016/17 has again been met. Improvements identified by the previous year’s audit have been implemented and these improvements have continued. All issues raised throughout the audit have been dealt with promptly and in a satisfactory manner. Details of the main amendments to the draft accounts are covered by the Auditor’s report. All amendments which have been agreed as requiring restatement by Deloitte have been processed and are within the Statement of Accounts. A summary of the significant amendments to the draft Statement is provided in section 3.2 of the report. The Auditors have made 8 recommendations in relation to accounting and payroll control; 6 recommendations in relation to IT and 7 recommendations in relation to Asset Valuation.

5.2       The report of the External Auditor on the audit of the Financial Statements 2016/17 (ISA 260 Report) was presented for the Committee’s consideration.

Mr Ian Howse, Engagement Lead for Financial Audit reported as follows –

•           That the draft financial statements for the year ended 31 March, 2017 were received by the Auditors on 12 June, 2017 and that the audit work thereon is now substantially complete. At the date of issue of the audit of financial statements report, the three matters set out in section 6 of the report were outstanding.

•           Subject to the satisfactory completion of outstanding work, it is the Auditor General’s intention to issue an unqualified audit report on the financial statements once the Authority has provided a Letter of Representation based on that set out in Appendix 1 to the report.

•           As regards significant issues arising from the audit, there is one prior year uncorrected misstatement which has been discussed with Management but remains uncorrected. It was agreed that it did not require restatement as there would be no material impact on the balance sheet in 2016/17. Further details are provided in Appendix 3 to the report.

•           There are misstatements that have been corrected by Management which are drawn to the Committee’s attention due to their relevance to its responsibilities over the financial reporting process. These are set out with explanations in Appendix 3.

•           The Financial Audit Plan provided information regarding the significant audit risks that were identified during the Auditors’ planning process. The table at section 12 of the report sets out the outcome of the Auditors’ audit procedures in respect of those risks. The audit was conducted in line with the Financial Audit Plan.

•           In the course of the audit, consideration is given to a number of matters both qualitative and quantitative relating to the accounts and any significant issues are reported to Committee. There were no issues arising in these areas this year.

•           The Auditors have no concerns about the qualitative aspects of the Council’s accounting practices and financial reporting. The Auditors concluded that accounting policies and estimates are appropriate and financial statement disclosures unbiased, fair and clear.

•           No significant issues were encountered during the audit.

•           There were no significant matters discussed and corresponded upon with Management which require reporting to Committee.

•           There are no other matters significant to the oversight of the financial reporting process that require reporting to Committee.

•           No material weaknesses in internal controls were identified although several areas in which it would be possible to improve control are highlighted.

•           There are no other matters specifically required by auditing standards to be communicated to those charged with governance.

•           The recommendations arising from the financial audit work are set out in Appendix 4 to the report. Management has responded to them and progress on their implementation will be followed up during next year’s audit.

The Committee considered the information presented and made the following points –

•           The Committee noted that the preparation of the accounts process had been timely and that the accounts were presented in accordance with the statutory timescale. The Committee noted that thanks are due to the Finance Service’s staff for their work in ensuring that the completion of accounts deadline was met.

•           The Committee noted that the External Auditors are satisfied with the quality of the Council’s accounting practices and financial statements and that it was the Auditors’ view that the financial statements are fairly presented and that the disclosures made are clear and unbiased.

•           The Committee noted that no major issues arose during the course of the audit.

•           The Committee noted that in the accounts, the Teachers’ Pension Scheme although technically a defined benefit scheme is stated as being unfunded and that the long term liabilities connected with the scheme are not recognised in the Balance Sheet whereas the liabilities arising from the Local Government Pension Scheme are included in the accounts. The Committee also noted that the liabilities associated with unfunded pension schemes are incorporated within some other organisations’ accounts and as it can be a large figure, it sought clarification of whether that should be the case with local authority accounts and the reasons for the difference in treatment. Mr Ian Howse said that the inclusion of pension liabilities in the accounts depend on whether the scheme is a defined benefit scheme or a defined contribution scheme. Much of local governance accounts is about factors that impact on the contribution made by Council tax payers so adjustments are made to the accounts accordingly.  As regards the Local Government pension scheme, the impact on the council tax payer is confined to the cash contribution made by the Council to the fund as an employer – which is a revenue item - which includes the pension deficit reduction plan. All other items in relation to pension liabilities are put into the accounts and then removed as they do not impact on Council Tax setting. With regard to the Teachers’ Pension Scheme, the Council is not able to identify its share of the underlying financial position and performance of the scheme with sufficient reliability for accounting purposes. For the purpose of the accounts it is therefore accounted for as a defined benefit scheme. The Council’s accounts are consistent with other local authorities as regards the treatment of pensions.

•           The Committee sought clarification of aspects of budget performance during the year and whether these are reflected in the accounts as well as the adequacy of the Council’s reserve balances. The Head of Function (Resources) and Section 151 Officer said that the accounts reflect actual expenditure; budget performance monitoring and outturn are reported in another format elsewhere. With regard to balances, the Officer confirmed that the Council’s General Fund balances are currently at a level above that generally recommended i.e. around 5% of net revenue expenditure. However, there is a risk going forwards that those balances may reduce as the Council seeks to address forecasted over expenditure.

It was resolved –

•           To recommend to the Full Council that it confirms acceptance of the 2016/17 Statement of Accounts.

•           To approve the Annual Governance Statement 2016/17 and to refer the document to the Leader of the Council and the Chief Executive for their signatures.

•           To accept the Audit of Financial Statements Report and to note its contents.