Agenda item

The Director of Finance and the External Auditor present a report providing a progress update on the 2021/22 Statement of Accounts and the external audit.

Members will be asked to note the contents of the report and make any comments to the Director of Finance and the External Auditor.

The Director of Finance submitted a report providing a progress update on the 2021/22 Statement of Accounts.

The Chief Accountant introduced the report reminding members that the 2020/21 statement of accounts was approved at the September 2021 meeting however as reported since a national accounting issue concerning the valuation of infrastructure assets continued to delay closure of those accounts. Members were advised that an adjustment to the accounts maybe required.  However national guidance was awaited.

In relation to the 2021/22 accounts delay this also related to the national accounting issue but also some additional items in relation to asset and pension valuations.

Members were assured that none of the accounting issues identified affected the money the Council has to run its services.

The External Auditor presented an update on the progress of the external audit and the work delivered noting that the interim audit findings report was written at a point in time and when concluded it would be presented as a final audit report.

In regards to the Value for Money work undertaken by the external auditors, members noted that an audit letter explaining the reasons for delay was presented at the last meeting and it was expected the final audit report would be available for consideration at the meeting in March, this was in line with meeting the National Audit Office’s revised deadline.

The External Auditor noted as part of their audit work any risks or significant weakness in the Council’s arrangements for securing economy, efficiency, and effectiveness of its use of resources were considered. It was noted that 4 significant risks had been identified (set out in interim report) and that had not changed during the course of the audit and work was underway in that regard.

The external auditor confirmed that any technical adjustments referred to on the accounts would not affect the money available to the Council to spend on services.

Members enquired whether there had been a recent revaluation of assets of the pension fund in the context of possible impact of recent economic events and how much of the local pension fund was exposed to government bonds and how that might affect pension fund ability to reach its liabilities. The external auditor advised that they did not have access to that information, however timing of valuations was based on estimations and there was a time lag issue which was the nature of estimations.

There was a brief discussion about the Annual Governance Statement as a recommendation was included in the interim audit findings report. It was noted that whilst the Council does meet the requirements for the Annual Governance statement, in light of issues in the sector it would be beneficial for it to be reviewed and consideration given to including additional information. The City Barrister and Head of Standards assured members that the issue of governance and good governance was important to the Council and cited recent failures in local government elsewhere noting this Council had done a lot of work around governance which was seen as a definite priority.

The Director of Finance reminded members that the Annual Governance Statement came to committee in July 2022 for members to comment on before approving a final version. It was advised that any comments could still be fed into the draft before the final version was presented at the March 2023 meeting.

Members noted that throughout the interim findings report it referred to “queries yet to be answered” and it was clarified that the audit continued to be underway with some outstanding queries yet to be resolved which were listed in the report. The final audit report would be clearer and references to things outstanding would be removed.

Members were informed that the complexity of accounts was increasing along with scrutiny of audit. Assumptions and judgements were a softer area, needing professional judgement and more nuance. The audit also went beyond the finance team into areas where there was more expertise and working through the process took time. It was reiterated that there were no key concerns, but it took time to get through the process.

The Director of Finance confirmed that the whole audit process was resource intensive especially compared to 5-6 years ago and a lot of officer time was spent on this.

Members suggested it would be helpful to have a timetable/timeline from the external auditors to understand the process better in future. The external auditor advised in relation to the current deadline, that 30 November was the date given for audited published accounts but clearly that would not be met, and Leicester would not be the only council in that position. In terms of current position, the aim was to sign off the accounts in January that meant completing audit work in December. 

The Chair thanked officers and the external auditors for their update.

RESOLVED:

                        That the contents of the report be noted.