Agenda item

To present the following –

·      The report of the Director of Function (Resources)/Section 151 Officer – Statement of the Accounts 2022/23.

·      The report of the Head of Profession (HR) and Transformation – Annual Governance Statement 2022/23

·      The report of External Audit on the audit of the 2022/23 financial statements (ISA 260 report)

·         The report of the Director of Function (Resources)/Section 151 Officer incorporating the Final Statement of the Accounts for 2022/23 following audit was presented for the Committee’s consideration.

The Director of Function (Resources)/Section 151 Officer reported that the statutory deadline for the completion of the audited accounts for the 2022/23 financial year was extended to 31 December, 2023 for all Welsh councils. The Isle of Anglesey County Council’s draft Statement of Accounts 2022/23 was presented to the Council’s external auditors, Audit Wales for audit on 30 June. The detailed audit work has now been substantially completed subject to a final review of the post audit amendments made to the accounts. The financial position of the Council is not expected to change further but should any significant issues arise from the review, then Audit Wales will provide a verbal update to the Full Council and retrospectively to this Committee at a future date.

Audit Wales conducted a thorough review, testing and audit of the financial transactions in relation to 2022/23 and the draft Statement of Accounts. The audit testing identified some changes needed and some errors which the Audit team recommended were amended to ensure that the accounts are materially correct. These are documented in Appendix 3 of Audit Wales’s ISA 260 report as a separate item on the agenda. Aside from those, it is the Auditors’ conclusion that the accounts have been prepared in accordance with legislative requirements and the CIPFA Code of Practice on Local Authority Accounting 2022/23; that they give a true and fair view of the financial position of the Isle of Anglesey County Council as at 31 March 2023 and of its income and expenditure for the year then ended and that it is the Auditors’ intention to issue an unqualified opinion on the 2022/23 accounts.  Some of the changes to the accounts include the following -

·           A reduction of £72k in the amount of the value held in creditors for the value of cash the Council holds on behalf of the Isle of Anglesey Welsh Church Act Fund which has impacted on the Council’s revenue outturn for 2022/23 in increasing the underspend for the year from £1.212m to £1.284m.

·           An amendment to Note 5 in the accounts in relation to events after the reporting period to include information about the two schools affected by RAAC which emerged at the start of the 2023/24 academic year.

·           The treatment in the accounts of the net asset position of the Local Government Pension Scheme. The local government pension scheme remeasurement resulted in a net pension asset rather than a significant net liability as has been the case in previous years as a result of the impact of increased interest rates on the discount factor used by the actuary. This was correctly reported on the balance sheet as nil in line with accounting rules and resulted in a write off of the net pension asset of £19.814m which was included in the other comprehensive income and expenditure line on the Comprehensive Income and Expenditure Statement (CIES). The Auditors highlighted that this value should be shown separately as an exceptional material event which was therefore amended on the CIES.

The Director of Function (Resources)/Section 151 Officer thanked the Accountancy Services Manager and her team for their work in preparing and completing the accounts within timescale and he also thanked Audit Wales for their approach and support in facilitating the audit process.

·         The report of the Head of Profession (HR) and Transformation incorporating the Annual Governance Statement for 2022/23 was presented for the Committee’s consideration and endorsement. The Annual Governance Statement (the draft version of which was presented to the Committee for comment at its 27 July, 2023 meeting) seeks to provide assurance that the Council had in place during 2022/23 appropriate arrangements for conducting its business according to the law and proper standards and for ensuring that public money was safeguarded and properly accounted for and was used economically, efficiently, and effectively. The Annual Governance Statement will form part of the final 2022/23 Statement of the Accounts.

The Head of Profession (HR) and Transformation confirmed that the comments and suggestions made by the Committee when reviewing the draft Annual Governance Statement in July were supported and have been incorporated within the final version.

There were no further comments by the Committee with regard to the Annual Governance Statement for 2022/23.

·         The report of External Audit on the audit of the Financial Statements for 2022/23 (ISA 260 report) was presented for the Committee’s consideration.

Yvonne Thomas, Audit Wales Financial Audit Manager reported on the main findings from the audit of the Council’s accounts for the 2022/23 financial year as follows -–

·         That auditors can never provide complete assurance that accounts are correctly stated and work instead to a level of materiality. This level of materiality is set to try to identify and correct misstatements that might otherwise cause a user of the accounts into being misled. For the 2022/23 audit the level of materiality was set at £2.979m. A lower materiality level was set for related party transactions (for individuals) (£10,000) and for Senior Officer Remuneration (£1,000).

·         That the audit is now substantially complete subject to completion of the final audit procedure steps after which the final ISA 260 report will be issued for submission to Full Council.

·         That it is the Auditor General’s intention to issue an unqualified audit opinion on this year’s accounts once the Council has provided a Letter of Representation based on that set out in Appendix 1 to the report. An unqualified opinion means there are no material concerns about any aspects of the accounts.

·         The proposed audit report is set out in Appendix 2 to the report and confirms the independent auditor’s view that the financial statements give a fair view of the financial position of the Council as at 31 March, 2023 and of its income and expenditure for the year then ended and that they have been properly prepared in accordance with legislative requirements and international accounting standards as interpreted and adapted by the Code of Practice on Local Authority Accounting in the UK 2022/23.

·         There are no misstatements identified in the accounts which remain uncorrected.

·         There were initially misstatements in the accounts that have now been corrected by management. These are set out with explanations in Appendix 3 to the report and relate principally to matters of disclosure and classification.

·         That in the course of the audit, the auditors consider a number of matters relating to the accounts and report on any significant issues arising thereon; there were no such matters to report for this year’s audit.

Yvonne Thomas thanked the Council’s Accountancy Services team for their co-operation and assistance with this year’s audit process.

The Director of Function (Resources)/Section 151 Officer and Audit Wales’s Financial Audit Manager responded to points raised by the Committee in relation to the Statement of the Accounts and Audit of Accounts report as follows –

·      Confirmed that the financial landscape for the Council in 2024/25 and beyond is challenging due to increased costs and because the demand for Council services continues to rise at a greater rate than the rise in funding. Those risks also remain in 2023/24 and must be managed to reduce any overspend for the year to a minimum. Initial work to develop the budget for 2024/25 indicates that the Council’s budget will have to increase by £15m to meet all inflationary and demand pressures and that any shortfall will have to be met by raising Council Tax, reducing services and/or drawing on the Council’s reserves mindful that £3.78m of reserves have already been used to balance the budget in 2023/24. The Director of Function (Resources)/Section 15 Officer referred to councils in England which had run into financial difficulties some of which had effectively declared bankruptcy and he explained the practical implications of having to issue a Section 114 notice and what that meant as regards the day to day running and decision-making for councils in that position.

·      Clarified that the disclosure of information about the RAAC issues in two of the Council’s schools in Note 5 of the accounts as a post balance sheet event although those issues arose in the current financial year, is to provide readers of the accounts with information about an event that has arisen subsequently which might potentially affect the future financial standing of the Council. The remedial work undertaken to date to make safe the roofs of the RAAC affected buildings so that they can continue to operate has entailed significant capital expenditure. In addition the temporary closure of the two schools, the implementation of distance learning arrangements and identifying suitable alternative accommodation have had implications for revenue expenditure. Whilst the RAAC issue does not require any adjustments to be made to the 2022/23 accounts it is highlighted as an event that may impact the Council financially at a future date.

·      Explained the Council’s redundancy and redeployment policies in the context of queries about Note 28 in relation to staff exit costs and vacancies confirming that individuals whose posts are at risk of being made redundant are offered suitable alternative employment where they meet the criteria or they may be redeployed in another post in accordance with HR processes. However if no redeployment opportunity is available the individual will be made redundant. A post that is redundant will not be re-advertised as the funding for the post ceases at that point.

·      Clarified that the statement at page 11 of the ISA 260 which reads “As part of that discussion [i.e. in relation to where fraud might occur in the financial statements] I identified potential for fraud in the posting of unusual journals” links back to one of the financial statement risks identified in the External Audit Plan presented to the Committee in July in relation to management override of controls and the checks that the auditors would undertake as part of their planned response to the risk which include testing the appropriateness of journal entries. No evidence of fraud was identified during the audit.

·      Confirmed that the adjustment made in relation to the Isle of Anglesey Welsh Church Act fund referred to in the Section 151 Officer’s report is not reported by the auditors in the ISA 260 report as it is not of a significant value and is one of several insignificant adjustments made.

·      Confirmed that the accounts are still being reviewed and that any changes including minor errors and/or inconsistencies will be corrected for the Full Council meeting.

It was resolved –

·                To recommend to the County Council that it confirms acceptance of the 2022/23 Final Statement of the Accounts as presented in Appendix 1 to the report of the Director of Function (Resources)/Section 151 Officer.

·                To note that any subsequent changes to the Statement of Accounts will be agreed by the Director of Function (Resources)/Section 151 Officer and reported to the Full Council prior to the formal acceptance of the 2022/23 Statement of Accounts.

·                To approve the Annual Governance Statement that will form part of the 2022/23 Statement of the Accounts.

·                To note External Audit’s ISA 260 Report on the Financial Statements for 2022/23.