Agenda item

The Director of Finance submits a report providing an opportunity for the committee to consider the Council’s Draft Annual Statement of Accounts and Annual Governance Statement for 2022-23 before they are brought back to committee for formal approval.

The report also provides an update on the progress of the external audits for 2020-21 and 2021-22.

The committee will be invited to note the contents and make any comments on the report.

The Chief Accountant introduced the report and provided an overview of the report on the Draft Statutory Statement of Accounts and the Annual Governance Statement 2022/23 and provided a brief update on the External Audit of the 2021/22 accounts.

As part of the discussions, it was noted that:

·         The Local Enterprise Partnership was effectively a separate body and did not impact any direct funding to the authority. Although the future was uncertain currently, there was guidance anticipated to plan the transition arrangements and options going forward, this could be updated on in the future.

·         The two voluntary controlled schools referenced that were not owned by the council have to be included in the accounts as the authority controls the assets.

·         Surplus assets such as potential development sites were capital assets and if sold could only fund capital expenditure and could not be used to solve any revenue budget issues.

·         Reports to the Pension Committee for which the Council had representation on, would address any liability to pensions from any divestment from fossil fuels, these impacts were currently unknown.

·         The fall in government grants was related to the Covid support grants and a report on this went to Council figures in the accounts were best estimates and should remain the same.

·         The position with the claim by Biffa and the impacts on the accounts was currently unknown and was a contingent liability in the accounts currently.

·         Investment limits were approved by Council in the Treasury Strategy, which sets out all limits in line with risk factors. The controls of treasury investments is something that could be considered by the Committee.

·         The increase in the value of the museum asset was not able to be disclosed in the meeting due to insurance purposes, but Members of the Committee could request this information outside of the meeting.

Members of the Commission raised concerns on the pension deficit which was 0 and could not be quantified and requested Officers to further elaborate on this matter. It was noted that these varied year on year but in simplistic terms assets had stayed flat, but the liability for future pensions provisions had changed, as it was effectively discounted using interest rates in terms of liability and as those interest rates have increased, it is estimated that the future liability had dropped and these estimates would be challenged by auditors.

The External Auditor introduced the report and noted that the full audit plan was not yet being issued and this was primarily down to an updated auditing standard which included a lot more documentation to be completed. Most of what was presented to the Committee would be included as part of the audit plan and was a good reflection overall. The document Informing an Audit Risk Assessment underpins the plan.

Members of the Committee noted that they were happy with what was being reported in the accounts which were consistent with their what they have previously been presented with in their roles in the Council.

Members of the Committee requested that the skills shortages and alternatively qualified practitioners in Childrens Services be recommended to come to scrutiny to consider what the implications of this would be to the authority. The Director of Finance noted that Overview Select Committee had requested a report on the Workforce Planning across the entire authority and this would be covered as part of the report to the OSC.

In summary it was noted that Members of the Committee would be required to approve publishing the reports on an audited set of accounts following the audit process carried out by the External Auditors for an independent audit of the accounts.

The external Auditor drew Members attention to the significant risk of the audit and noted that there were some risks that were presumed which couldn’t be rebutted and this would be addressed in the plan. There was a discretion on the revenue income streams where there was a presumed risk of fraud or manipulated accounts, but as most income was generated through council tax, business rates or grant incomes and the risks around these could be rebutted as the risk of material fraud was low. The two big significant risks were around valuations of land and buildings as they were complex estimates and secondly, the pension liability.

It was noted that IT control deficiencies had been identified last year and these would be looked into, and the progress made following the identified risks would be addressed as part of the audit work. Members of the Committee were also informed of the revised auditing standards, which required auditors to look into IT systems which linked into the accounts and impacted on the statement of accounts not all IT systems and any issues would be reported to the Committee.

In further discussions it was noted that the final External Audit Annual Report 2021/22 (the Value for Money report) were close to being finalised and no significant weaknesses of that work have been identified at this point, this would be delivered to the Committee as soon as they were available.

Members of the Commission queried the current debates in government around the AI Regulations and Workers Rights Bill and whether any new threats had been identified or AI used. It was suggested that as a firm the external auditors were investigating how AI could be utilised internally to drive more efficient auditing, but it was still a new area, and a lot of learning would be required before it could be used. The Director of Finance noted that cyber security was on our risk register and it was suggested that this could be a potential item for consideration by the Committee and that the Head of IT could be invited to the Committee.

RESOLVED:

      That the report be noted