The Council’s external auditors presented the audit completion report which summarised the findings from the 2018/19 audit.
The external auditor’s work on the financial statements was substantially complete and, subject to satisfactory conclusion of any outstanding work, they would propose issuing an unqualified audit opinion by 30 September 2019. As part of the audit, the internal controls in place relevant to the preparation of the financial statements had been considered, with three recommendations resulting from this work made as follows:
· production of draft accounts and working papers;
· incomplete disclosures for pension fund plan assets;
· investment property valuations.
Further details of these recommendations were outlined in section 4 of the external auditors’ report at Appendix A.
In relation to misstatements in the accounts, there were a number of misstatements identified that were above the threshold level of £53,000, all of which were adjusted for as part of the audit process and had been reflected in the Statement of Accounts. Other thresholds for specific areas were highlighted in the report. Further details of these misstatements were provided in section 5 of the auditors’ report at Appendix A. It was reported that there were no unadjusted misstatements.
The Statement of Accounts included on the agenda for this meeting at item 20 reflected a fully amended version of the document.
It was reported that the Council’s arrangements for securing economy, efficiency and effectiveness in its use of resources were adequate. The external auditors therefore proposed issuing an unqualified opinion on the Council’s value for money arrangements.
As part of presenting this item, the external auditors took the Committee through each page of the report and highlighted any key issues, particularly with regard to:
· the audit approach;
· significant findings;
· internal control recommendations;
· summary of misstatements;
· value for money conclusion.
Councillor Tom Dyer made the point that the external auditor’s report was two months late and therefore took the opportunity, on behalf of the Committee, to thank the City Council’s staff who had worked overtime to ensure that everything could be submitted on time.
With regard to the recommendation regarding investment property valuations, Councillor Dyer asked whether this would create a cost implication for the Council. It was noted that this work would not incur additional cost, but it would incur additional officer time, however, the Property Team had been reviewing in-year valuations already and this should not create an additional burden on the team.
Councillor Jackie Kirk sought some clarity as to the language used in the report, particularly under the production of draft accounts and working papers under section 4 of the report, which stated that ‘although the team managed to prepare a complete set of financial statements by the statutory deadline, which were received on 31 May 2019, these were of a standard that fell below our expectations’. She requested an explanation as to the words ‘fell below our expectations’.
The external auditors explained that the draft accounts received were below the standard that was expected and gave a number of examples such as the accounts not adding up or matching with the balance sheet, changes in processes to supplementary notes not having been made and several issues that they had been made aware of regarding the Statement of Accounts which meant that they were not of good quality. This included a series of problems that the external auditors thought should have been addressed prior to having received the accounts. In addition, a number of things had been identified as part of this audit which had not been picked up in previous audits. Taking all of this into account, the external auditors reported that the additional work required to be undertaken by them as a result of this had contributed to the delay in the completion of the audit.
It was acknowledged by the external auditors that two key members of the Financial Services Team had left the authority at a time which did have a significant impact on everything associated with the closure of the accounts and the production of the Statement of Accounts. The Council’s Chief Finance Officer reported that, from a staffing point of view, turnover was low in the Financial Services Team. It was unfortunate that the Group Accountant and Financial Services Manager had both left the authority at the end of last year, however, a new Financial Services Manager had been appointed who commenced their post in March 2019. The accounts were therefore closed with one key post down and it was accepted that the accounts were not at the quality expected as a result of this. The Chief Finance Officer reported that an action plan was now in place and the quality of accounts should be improved for next year, highlighting that the Council had a good track record in recent years so there was no reason to believe that this situation would occur again.
Discussion ensued on the lack of flexibility due to reduced funding in local government generally. Jane Nellist, Independent Member, suggested given the circumstances that consideration should be given to ensuring that there were no more budget cuts in relation to the Financial Services Team and the Audit Team. It was noted that a review and restructure was currently underway within the Financial Services Team with a view to saving £50,000. The review included introducing career grades in order to close the gap between different posts and increasing opportunities for career progression within the team. This review and restructure had already gone through consultation with staff and would be considered by the City Council and Employee Joint Consultative Committee. It was agreed that the Joint Consultative Committee was the appropriate body to consider this.
It was RESOLVED:
(1) That the financial statements be recommended to Council for approval.
(2) That the draft letter of representation on behalf of the Council be approved, before the external auditors issue an opinion, conclusion and certificate, and that any further amendments to the letter, should any additional issues by raised by the external auditors prior to 30 September 2019 be delegated to the Chief Finance Officer and Chair of the Audit Committee, which any changes reported back to the Audit Committee.
(3) That any further changes that may be required to the Statement of Accounts as identified during the conclusion of the audit, be delegated to the Chief Finance Officer and Chair of the Audit Committee, with any changes reported back to the Audit Committee.