Agenda item

The Chairman made reference to the late circulation of the Statement of Accounts.

Consideration was given to a report which summarised the findings of the External Auditor on the audit of the 2011/12 Statement of Accounts and the Value for Money audit.

Deloitte reported that, subject to completion of some minor procedures, an unmodified opinion would be given and the Statement of Accounts would be given a ‘true and fair’ view. In addition an unqualified conclusion would be issued on the Council’s arrangements for securing value for money.

Deloitte reported that the audit process for 2011/12 was efficient and rigorous and commenced a little earlier than in previous years and was carried out by auditors familiar to Hillingdon which required less officer input and time.

Reference was made to the following significant audit risks:

Revaluation of properties – The auditors considered the process undertaken for the valuation of assets which included community halls, allotments and farms, assets which had changed status through being completed in the year or had been deemed surplus to requirements or planned for sale. It was concluded that the process undertaken was reasonable.

Valuation of the pension liability – Assumptions used to calculate the liability relating to the Hillingdon Pension Fund fell within a reasonable range.

Recognition of capital and revenue grant income – This had identified some instances where the grant recognition criteria had not been correctly applied. The adjustment had resulted in a reclassification of income and expenditure but had no net impact on the net cost of services.

Completeness of bad debt provision for sundry debt – Testing had concluded that overall the level of provision for this balance was reasonable.

Housing Revenue Account Self Financing settlement payment- This was identified as a risk because of the size of the settlement (£192m) and the fact that it was a one-off transaction. There were no issues noted from testing.

Recording of capital spend – Inconsistencies were identified in the treatment of capital and revenue spend, particularly with respect to Council dwellings. Management did not consider adjustments to be material but had agreed to adopt a consistent treatment going forward.

Accounting for schools – This related to schools changing status, particularly those changing to Academies, and the appropriate accounting treatment of removing fixed assets relating to community schools from the Council’s accounts. No issues arose from testing.

Management override of key controls – No significant issues were identified but whilst management judgements were considered reasonable on an individual basis, taken together they were at the more prudent end of a range considered to be acceptable.

Discussion took place on the fees the Council paid for External Auditors and the Committee was informed that the Audit Commission set the scale fee for the external audit of the Council.  For 2012/13, fees to local authorities would drop by 40% and, in addition to the fee paid by the Council; the external auditor would receive an amount from the Audit Commission.

Reference was made to the Value for Money conclusions in relation to Capital budgeting and forecasting and Members were informed that this could be improved by using more timely information, ensuring fewer delays and reviewing the process for the Council’s Capital Budget.

The Committee then considered the Statement of Accounts for the year ended 31 March and the following points were discussed:

• Reference was made to the comprehensive income and expenditure statement and it was noted that the Council would have made a surplus of around £8m if it had not made a one-off payment to Central Government as settlement on the introduction of the HRA self-financing regime
• It was noted that a good indicator of the Council having a good system of internal controls in place was ending the year with an under spend and close to budget
• Heritage Assets – These included Mayoral Regalia and the statue ‘Anticipation’ which was situated outside Uxbridge Station. These had been included on the balance sheet. In terms of insurance these items were insured through the Council’s general insurance scheme as they did not hold specific valuations 
• Income and Expenditure Statement – Non-Distributed costs of £1.1m. Last year was a surplus due to the transition from Retail Prices Index to Consumer Prices Index
• Reference was made to Icelandic Impairments and the Deputy Director of Finance reported that the Council was being cautious on the expected recovery estimates because of the present economic uncertainties with the Eurozone, foreign currency exchange rates risk and fluctuating asset values
• Notes to Main Financial Statement – Exit Packages. It was noted that the number of Exit packages for this year had been 162 compared to 64 of last year
• Notes to Main Financial Statements – Liquidity Risk – The profile of the Council’s debt had altered and been adjusted as a result of HRA self-financing
• Pension Fund Accounts - Notes to Main Financial Statement –A new column (with significant unobservable inputs) was contained in the valuation of financial instruments carried at fair value table.

The Deputy Chief Executive and Corporate Director for Central Services attended the meeting to present the Annual Governance Statement (AGS) which was included in the Statement of Accounts. Points discussed and raised included:

• The Code of Conduct was included in the AGS
• Review of Effectiveness, paragraph 4.1, reference was made to the comment of “a comprehensive annual programme of scrutiny and review by the Policy Overview and Scrutiny Committees and the Audit Committee.”
• Reference was made to the role of the Section 151 Officer and his position in the structure of the organisation. The Deputy Chief Executive and Corporate Director for Central Services reported that the Section 151 Officer was part of the Corporate Management Team of the Council and held separate meetings with the Chief Executive
• Significant Governance Issues – The Head of Audit reported that in relation to the weaknesses that had been identified in the monitoring and control of some construction projects, specialist auditors were undertaking an investigation into this area, looking at the processes and procedures robustly, with a view to improved procedures being in place by next April           

The Deputy Chief Executive and Corporate Director for Central Services informed the Committee that the Council had implemented a range of improvement actions as part of its overall continuous improvement programme, to strengthen governance arrangements and control systems. In all the five areas where governance issues had been identified, proposals were in place to address these issues which would further strengthen the governance arrangements of the Authority.

 RESOLVED -    

1.        That the Committee considered and approved the Statement of Accounts for 2011/12.

2.   That the Auditors findings and adjustments as outlined in Appendix 1 to the report be noted.

 3.   That officers be congratulated for presenting an excellent Statement of Accounts.