Agenda item

To receive the following reports:

 

·         Statement of Accounts 2019/20

·         Audit Closure Report 2019/20 - BDO

·         Pension Fund Accounts 2019/20

·         Pension Find Audit Closure Report 2019/20 - BDO

·         Statement of Accounts 2020/21

·         Audit Plan Main Accounts 2020/21 - BDO

·         Audit Plan Pension Fund Accounts 2020/21- BDO

 

To receive the following reports:

 

a)    Statement of Accounts 2019/20

 

The following key points were highlighted:

·         The Chair clarified that the Statement of Accounts discussion was about the two year ends for 2019/20 and the 2020/21. David Eagles (BDO) would be commenting on the 2019/20 Statement of Accounts only. Lisa Blake and Francesca Palmer, who were absent through illness were dealing with the 2020/21 Statement of Accounts and plan. There were some issues with the 2019/20 Statement of Accounts which will have an impact on the accounts themselves and the plan.

A separate meeting would be held on 10 November 2021 to discuss the 2020/21 Statement of Accounts with appropriate support from the BDO.

·         Officers advised that they would be happy to address the Statement of Accounts 20/21 but not the BDO part.

·         The Executive Director Resources clarified that the changes to the Statement of Accounts are detailed at paragraph 11 (page 238) of the report from the version shared with members at the April 21 meeting. These changes mainly related to assets as set out in paragraph 11 (page 238of the report). In addition, there had been a more recent query relating to IWE Pension Reserve as detailed at paragraph 12 (page 238) of the report.

·         At present, there was nothing outstanding from the Council over to BDO other than the IWE query but BDO were at the stage of testing the information the Council had sent them and the technical review.

·         The Executive Director Resources continued to expect an unqualified set of accounts once the audit process was complete. The report recommends approval with minor changes only.

 

b)   Audit Closure Report 2019/20 – BDO

 

The following key points were highlighted:

·         BDO recognised the journey that the Council were on in terms of the transition of the quality of the accounts.

·         The level of issues that BDO had found in terms of Asset Register transfer had been significant.

·         At the end of the audit process, from the Council and BDO reviews is a good and robust starting point which should produce a clean set of accounts with far less effort.

·         The first issue, the old SAP register, required a lot of manual intervention to produce a set of accounts. Requirement of an Asset Register that can generate information quickly, efficiently and effectively within data policy.

·         The second issue, in terms of the approach to valuations and the sheer volume of beacon indicators that had been used for the HRA (Housing Revenue). Which has gone from very few beacons to gradually increasing largely this year. This had involved a lot of officer time to get through a significant amount of work for the valuers to get through.

·         There are a few key issues still outstanding in terms of further work on valuations with some additional samples raised for values and settling process. Some further issues on groups where cash flow amendments have been proposed and made. BDO were checking that this had been done correctly.

·         The last issue related to pensions for one of the subsidiaries which may or may not result in further amendments to the accounts.

·         The field work process was now coming to the end, however, this was still subject to David Eagles (BDO) final review of the work and also subject to BDO’s quality reviewers report aswell. This should be reported to members at the 10 November 2021 committee meeting.

 

Cllr comments/remarks

 

·         Councillors noted that there were several deficiencies on several pages which was a concern.  Councillors sought clarification on the significance of the deficiencies and whether the BDO was happy with the ones that had been identified.  Officer explained that the deficiencies point had been dealt with and that issues raised focused on the quality of statements, accounts and valuers.

·         The Executive Director Resources advised that there were 19 out of 34 adjusted differences and that most relate to assets and it is the asset register that caused most problems and there will be changes and adjustments happening.  The Executive Director Resources further advised that there will always be audit adjustments and that whilst the number of them is higher than she would like it is inevitable.

·         Officers advised that his review is pending completion of the work.  In November they will address it then.  They are on a journey regarding the quality of the accounts and the level of issues found was significant and that at the end of the process they will have robust reports, and this will provide a good starting point. 

·         Officers advised that they are still subject to the final review of work and that they have tried to keep the review in process and that this should be clear by the meeting on 10 November 2021.

·         Councillors referred to page 16 of the report entitled “Preparation of Financial Statements” where it states that the Council did not produce an interim set of month 9 financial statements.  Concern was raised given the effectiveness of the review.  Officers advised that at the audit of the 20/21 accounts they will see then whether they have been effective.

·         Councillors raised concerns regarding the valuation of sites purchased.  Panel were advised that an asset clarification paper would be provided and that this had been commissioned and reviewed.  The status of the development needs to be according to code and not necessarily to market value.

·         Panel were invited to look at the approach of the accounts to see whether these account processes were correct.  They will be discussed further at the meeting in November. 

 

 

 

c)    Pension Fund Accounts 2019/20

 

The following key points were highlighted:

·         The Executive Director Resources set out the Pension Fund Accounts 2019/20.

·         This was a similar report that was presented to Members back in April 2021 and advised that the audit for pension is now complete. The changes were set out at paragraph 11 of the report.

·         There was a typing error at paragraph 14 C (page 345 of the report) which increased assets by £1 billion which was incorrect.

 

Cllr comments/remarks

·         Councillors expressed concern regarding the management costs regarding the pension fund and the investment income.  Officers advised that in respect of pension funds you need to look at the bigger picture as the fund will go up and down.  Officers further advised that the position now is different to that in March 2020 and that the markets have since recovered and this is a similar situation for the Council’s main accounts.

 

 

d)   Pension Fund Audit Closure Report 2019/20 – BDO

 

The following key points were highlighted:

·           The report highlights the position as at 30 March 2020 when the country was in the 1^st lockdown. Markets had changed massively but had now since recovered. BDO would be referring to the Covid situation in their opinion and to the material uncertainties relating to property and valuations. Similar issues will be required for the Council’s main accounts aswell.

·           The key amendments were primarily due to timing issues:

a.    Significant valuation re-count – there were issues relating to discount rates used and issued for a valuation which was outstanding at the end of February 2020.

b.    Valuation of investments issues with an £80M difference between the end of February and the end of March 2020.

 

Cllr comments/remarks

 

·           Councillors felt that the report was uncomfortable reading and not a glowing report.

·           BDO confirmed that the 2019/20 accounts would be finished soon and that members could approve the 2020/21 accounts subject to any material adjustments and final reviews by BDO.

·           The Executive Director Resources clarified that the team had produced a 2019/20 set of accounts based on the latest agreed position before the additional testing had taken place. If there are any changes to this then the team will have to reproduce another set of 2019/20 accounts’ that will then affect the 2020/21 accounts.

Finance had provided everything it could, and the result is dependent on this next set of testing.

·                Councillors advised that they felt more comfortable discussing the 20/21 accounts at the 10 November 21 meeting.  Enquiries were made as to whether it would be achievable by 10 November 21.  Officers advised that if any issues arise, they will communicate these to the Panel.

·      The Chair advised that it was not unusual for a committee to approve the accounts pending final audit and any material adjustments would be reported back to the committee. It was not uncommon for a Committee to delegate minor amendments, not material by size or nature. BDO to provide comments back to the committee at the 10 November 2021 meeting.

 

The report was noted and to be reviewed at the 10 November 2021 Committee meeting.

 

 

e)    Statement of Accounts 2020/21

 

 The following key points were highlighted:

·           The following correction was noted o the report; proposal no.4 (page 437) of the report should read ‘a formal briefing provided to the Committee’. An extra meeting of the GPC has now been scheduled for the 10 November 202.

·           The report provides an update on the draft Statement of Accounts for 2020/21. Officers were now re-drafting the 2020/21 accounts to take account of the opening position of the 2019/20 Statement of Accounts as recorded in the report.

·           The report details changes being made to the 2019/20 Statement of Accounts as detailed at paragraph 9 (page 438) of the report.

·           Other changes are detailed at paragraphs 11 & 12 (page 438) of the report which evidenced different quality reviews officers were doing.

·           Paragraph 13 (page 438) of the report sets out a change to the Council’s Collection Fund that will be reflected in the 2020/21 Statement of Accounts. This is in response to a Commission review by London Councils and the Society of London Treasurers.

·           Paragraph 14 (page 439) of the report details the changes made to the 2020/21 Statement of Accounts.

·           BDO attend audit Tuesdays with officers at the Council talking regularly about the 20/21 accounts and to resolve audit processes. The Executive Director Resources has fortnightly meetings with Lisa Bake (BDO) throughout the year and all were ready for the start of the 20/21 audit.

·           CIPFA had reported that only 9% of audits across the country have completed the 20/21 audit by the September 21 deadline.

·           The finance team were working on the 19/20, 20/21 and the 21/22 Statement of Accounts to ensure the required quality which is very challenging for the team.

·           A Chief Accountant had now been recruited with a start date in January 2022.

·           The Executive Director Resources had also set up a Financial Improvement Board to drive through some of the systematic changes. The finance team had been restructured with the ongoing recruitment for 2 Finance Directors.

·           The Chair advised that the 20/21 accounts and plan will change and therefore the committee’s review will change. He proposed that the report be re-presented with updated paperwork for the statement of accounts at the 10 November 2021 meeting. The Executive Director Resources advised that this was dependent on the audit outcome and if further changes are to be made which would lead to a reproduction of the 19/20 accounts again.

·           In response to a member enquiry regarding the 19/20 and 20/21 accounts and how officers would be able to break the vicious circle they were in, The Executive Director Resources advised that the 20/21 accounts are in a better position than the 19/20 accounts were and was an improving position. The team had consistence because the same staff were processing both 19/20 and 20/21 accounts including a Chief Accountant and 2 Finance Director Posts.

·           The 10 November 2021 meeting may have to move by a couple of weeks to provide an agreed set of accounts for members to review.

 

 

 

 

f)     Audit Plan Main Accounts 2020/21 – BDO

 

·         To be discussed at the meeting on 10 November 2021.

 

 

g)   Audit Plan Pension Fund Accounts 2020/21 - BDO

 

·         To be discussed at the meeting on 10 November 2021.