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To authorise the Chairman to sign the minutes of the meeting of the Audit and Standards Committee held on the 24 June 2019 as a correct record of the proceedings.
The Chairman was authorised to sign the Minutes of the meeting of the Audit and Standards Committee held on 24 June 2019 as a correct record of the proceedings.
Apologies for Absence
Apologies for absence had been received from Councillors L.M. Langlands, Mrs E.M. Kirby-Green and Malcolm Johnston, Executive Director.
The Chairman welcomed Trevor Greenlee from Grant Thornton to the meeting, who proceeded to summarise the External Auditors’ Audit Completion Report for the year ended 31 March 2019.
Grant Thornton had been unable to conclude the audit due to resource constraints. In line with the Accounts and Audit Regulations, the following notice had been placed on the website with the latest accounts:
“As at 31 July our auditor, Grant Thornton, has been unable to conclude the audit. This is due to resource constraints resulting from a peak period of work during June and July when all local government accounts are audited. Grant Thornton has confirmed that it takes full responsibility for this. The Council is continuing to work closely with the audit team as they complete their work. In line with the Accounts and Audit Regulations 2015, the Council has published a set of draft accounts. The Council will publish a final set of accounts as soon as the audit is concluded and the Audit Report issued.”
Members raised concerns that the Council’s legal obligation to publish the 2018/19 Statement of Accounts by 31 July 2019 had not been met and it was agreed that a letter be submitted to the relevant regulatory body by the Chairman of the Audit and Standards Committee and the Assistant Director Resources.
Audit Scope and Objectives
Grant Thornton had substantially completed their audit procedures in accordance with the planned scope and objectives, subject to the completion of outstanding work as detailed in the report.
At the time there were no issues or errors to report. The accounts and working papers were of a high standard. The migration of the enterprise resource planning system was successful even though in Grant Thornton’s experience this area was of high risk. There were no unadjusted errors.
Adjustments to the accounts
When the IAS 19 report on pensions was commissioned, the actuaries were only able to provide an estimate of the asset values as at the 31 March 2019 of £91.9m. At that time a report was also commissioned showing the actual values of the assets which was made available late June after the statutory deadline for publishing the accounts. The report showed the actual asset values were £89.1m. As the difference was £3m and was a material difference, the accounts were adjusted.
Judgement on a recent legal challenge by the Government against a ruling by the Court of Appeal in December 2018 that provisions in some public sector pension schemes were discriminatory on the basis of age (the ‘McCloud’ judgement), was likely to give rise to additional pension scheme liabilities for the Council. After the draft accounts had been published, the McCloud judgement was decided in court and the contingent liability that the Council had made at 31 May became a provision and the accounts were adjusted appropriately.
There were no unadjusted misstatements to report. A few presentational changes had been made to the financial statements as a result of the audit.
No additional significant audit risks were ... view the full minutes text for item AS19/14.
In accordance with the Accounts and Audit Regulations 2003, the Council’s accounts were required to be approved by the Council, or its delegated Committee, each year. The report of the Executive Directors discussed the main issues affecting the Council’s Statement of Accounts and provided a full commentary on the core financial statements. A draft copy of the full Statement of Accounts had been circulated to Members by email on 29 July 2019 and made available in hard copy format at the meeting. A final Statement of Accounts was to be circulated to all Committee Members once the audit had been completed.
At the time of writing the report, the Council’s external auditors, Grant Thornton, had largely completed their work on the accounts for 2018/19. Grant Thornton’s report was discussed earlier in the meeting. The published accounts included a Narrative Report and the Annual Governance Statement approved by the Committee at its meeting on 25 March (Minute AS18/38 refers). The Code of Practice had required no major changes in the presentation of the accounts; however, the Council restructured its departments in 2018/19 so the presentation of the accounts for 2017/18 has been re-stated for comparative purposes.
The Corporate Transformation Finance Manager led Members through the Statement of Accounts and drew out the salient points.
Rother District Council published the accounts on time to a high standard and the pension adjustment made was a recommendation of management not external audit.
It was noted that overall, the balance sheet showed that the financial position of the Authority remained sound with an adequate amount of reserves in place to meet short term needs. The Pensions Fund liability of £25m was a long term financial assessment of a possible shortfall based on its current performance and therefore no immediate action was required. The net worth of the Council had increased by £2.4m and the useable cash resources of the Council had increased by £1.620m.
The Movement in Reserves statement showed the movement in the year on the different reserves held by the authority (analysed into ‘useable’ and ‘unusable’). The surplus of £0.735m on the provision of services line showed the true economic cost of providing the authority’s services.
On behalf of the Committee, the Chairman thanked the Corporate Transformation Finance Manager and her team for their sound financial management of the Council, and Trevor Greenlee and the team of auditors from Grant Thornton for their work on the Council’s accounts.
1) the Chairman be authorised to approve the Council’s 2018/19 Statement of Accounts and sign the letter of acceptance;
2) the Chairman be granted delegated authority, in consultation with the Assistant Director Resources, to re-sign the accounts if any subsequent amendments were required, when the audit was completed; and
3) the Chairman to call an extra-ordinary meeting of the Committee if required after finalisation of the accounts.
Cabinet had approved the Council’s 2019/20 Investment Strategy in February of this year; this required regular reports to be presented to the Audit and Standards Committee on the Council’s treasury management activities. Investment activity was also reported to Members through the monthly Members’ Bulletin. In managing its treasury management activities, the Council followed the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management (revised 2017).
The report provided an update on a number of areas as follows:
• The Council’s treasury advisors, Link Asset Services, had provided their view on the current economic climate and their outlook for the remainder of 2019/20, which was appended to the report.
• The Council made its own investments through the use of call and deposit accounts with major financial UK institutions. The Council had also invested £5 million in the Churches, Charities, Local Authorities’ (CCLA) Property Investment Fund. A further £3 million was invested in the HERMES Property Investment Fund.
• The Council held £25,366,860 of investments at 31 May 2019. The total income from investments was estimated at £85,270 compared to a profiled budget of £85,000; the average rate of return was 1.67%.
• During 2018/19, the Council maintained an under-borrowed position. This meant that the capital borrowing need, (the Capital Financing Requirement), was not fully funded with loan debt, as cash supporting the Council’s reserves, balances and cash flow was used as an interim measure. This strategy was prudent as investment returns were low and minimising counterparty risk on placing investments also needed to be considered.
• The Council’s treasury management debt and investment position was organised by the treasury management service in order to ensure adequate liquidity for revenue and capital activities, security for investments and to manage risks within all treasury management activities. Procedures and controls to achieve these objectives were well established both through Member reporting, detailed in the summary, and through officer activity detailed in the Council’s Treasury Management Practices.
• The Council had invested in regeneration of Rother through its Property Investment Strategy and the expected income from these non-Treasury Investments was provided within the report.
• Current property investments provided a net rental income of £970,000 per annum, a net income of £1,331,308 to date.
The Council’s current treasury management and investment strategies remained robust in managing the Council’s cash funds. The economic outlook remained difficult for a net investor such as the Council and supported the Council’s financial strategy to reduce reliance on investment returns.
RESOLVED: That the report be noted.
Consideration was given to the Work Programme which contained details of the reports to be considered by the Audit and Standards Committee for the remainder of the 2019/20 municipal year.
RESOLVED: That the Work Programme at Appendix A be approved.