Report of the Director of Finance and Commercial Services
Minutes:
7.1 |
The Committee received a report of the Director of Finance and Commercial Services which provided Members with an update on the progress to consider and implement Ernst & Young’s prior year recommendations, following the audit of the Council’s 2021/22 Statement of Accounts.
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7.2 |
The Finance Manager (Ruth Matheson) explained that the Council’s external auditors, Ernst & Young (EY) first presented their 2021/22 Audit Results report in March 2023, then their amended report in September 2023. EY have yet to issue their opinion and whilst the accounts remain open, their 2021/22 Audit Results report is always subject to further change.
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7.3 |
The Audit Results report listed thirty-one observations, both from 2020/21 and 2021/22. Sixteen open observations related to 2021/22 and of the fifteen observations relating to 2020/21, only three remained open at the end of the 2021/22 audit.
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7.4 |
Ruth Matheson explained that the observations identified by EY could be found at Appendix 1 to the report as well as an update as to progress of those observations. Ruth Matheson drew Members attention to the ‘red’ rated observations which were considered a high risk to the Council. She gave an overview of those red rated observations.
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7.5 |
Members of the Committee asked questions and made comments and the following responses were provided: -
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7.6 |
Ruth Matheson explained that IFRS 16 was delayed although it will be live from 1 April 2024 and therefore part of the 2024/25 accounts. The Council’s asset register is with the supplier Civica, which contains a leasing module that is IFRS 16 compliant, with the system currently being upgraded to their cloud based platform.
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7.7 |
The Senior Finance Manager (Clair Sharratt) explained that delays in the audit of one financial year does have an impact on the next financial year end. But that these recommendations from EY were always welcomed as it gave them areas in which they could improve as well as good assurances on the accounts.
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7.8 |
Ruth Matheson confirmed that preparation for IFRS 16 as part of the 24/25 accounts is ongoing and don’t expect any issues for go live.
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7.9 |
Clair Sharratt explained that the majority of the asset valuation process occurs after the year end when indices are available and so it is a tight turnaround. Valuations are based on judgements and views can vary between different valuers. The Council’s internal valuers continue to make improvements for example looking at categorisations and how they can group assets better and working with EY in order to meet their valuers expectations.
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7.10 |
The Director of Finance and Commercial Services (Philip Gregory) added that in relation to the backlog concerns, the Government had been working on this for a while and had issued a statement in February looking at ways to work through this backlog. The Council’s and EY’s ambition is to sign off the 2021/22 Statement of Accounts very shortly and to see what progress can be made on the 2022/23 Statement of Accounts, before EY hand over the audit for 2023/24 to KPMG.
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7.11 |
Ruth Matheson explained that the accounts are based on CIPFA’s guidance for accruals accounting. However, there are instances where estimates are difficult to calculate, and the practice has been to include 12 months of rolling actuals for example March to February for utilities costs.
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7.12 |
The Chair summarised the discussion and raised his concerns around some of the valuation issues and corrections reported by EY.
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7.13 |
The General Counsel referred to addendum report which was circulated to Members prior to the meeting and published on Council meeting webpages.
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7.14 |
The General Counsel explained that CIPFA guidance stated that ‘The AGS must be current at the time it is published’. With the general issues in audit that has led to considerable delays this has led to CIPFA issuing the clarification on this point. The Council has undertaken a review to determine if there were ‘significant governance issues’ that has come to light after the 2021/22 AGS was approved in September 2022 that relate to the period 2021/2022, The review highlighted one further matter to be included. Whilst the original report reflected some issues in relation to people management process, but it was concluded that it did not reflect the position as currently understood around the council’s HR policies need for updating, streamlining and review to ensure they are in line with best practice and meet the needs of a modern workforce and employer. The Committee were asked to approve the revised Annual Governance Statement.
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7.15 |
Following a question from Co-opted Member James Brackley, The General Counsel explained that the issue relating to HR policies was identified through an internal Council review which was why it was not identified as part of the external auditor’s report.
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7.16 |
RESOLVED: The Audit and Standards Committee (1) notes management’s response on progress made to consider and implement Ernst & Young’s prior year recommendations; and (2) approves the revised Annual Governance Statement as set out in Appendix 1 of the addendum.
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Supporting documents: