Agenda item

Consideration was given to a report which summarised the findings of the External Auditor on the audit of the 2010/11 Statement of Accounts and the Value for Money audit.

Deloitte reported that an unmodified opinion would be given and the Statement of Accounts would be given a ‘true and fair’ view. Members were informed that these were the first set of accounts which had been prepared since the adoption of IFRS.

The Committee was informed of two issues which had been raised by members of the public in relation to the Statement of Accounts. A Member of Parliament had written to the Audit Commission regarding the Council’s spend on the High Speed 2 Rail link campaign. This was not a formal objection and Deloitte was satisfied that it would not impact on the Accounts.

In addition a member of the public had expressed concern regarding the procurement process within the Council. Deloitte reported that it was expected to issue an unmodified opinion on the financial statements and the value for money conclusion but they expected state in the completion section that an issue was outstanding and was being investigated.

Members were informed that electors of the Borough, had the opportunity to raise an objection up to the date of the signing of the accounts and external auditors had 9 months to investigate this. At this stage it was unknown whether this concern was from an elector of the Borough and whether the concern constituted a formal objection. If confirmation was received that it was an objection, the guidance regarding objections would be followed and Deloitte would issue their completion statement once the matter was resolved.

Pension Liability –This was identified as a risk because it was substantial and its calculation was sensitive to comparatively small changes in assumptions made about future changes in  salary, mortality etc. The move from the use of the Retail Price Index to the Consumer Price Index as the principal measure of inflation had resulted in a past service gain being recognised in the comprehensive income and expenditure statement of £95m.

Property valuations – Deloitte proposed a judgemental misstatement of £4.1m which was due to the difference between inflationary build costs and the finance cost used by the Council.   

Bad debt provisions – This was in relation to the provision of sundry debt.

Recognition of revenue grant income – The timing for the recognition of grant income would depend on the scheme rules for each grant – No material issues had been found.

Presumed risk of management override of key controls – Work focused on the testing of manual journals, significant accounting estimates and any unusual transactions, including those with related parties. No issues had been identified.

IFRS transition risk-  There had been no issues.

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

• The Chairman noted that he had reviewed the draft accounts in June prior to audit
• Revaluation losses on Local Authority Housing Stock of £196.7m as a result of a changes in valuation techniques set by Central Government
• Accounting policies – IFRS had impacted on this but there had also been some refinements of policies which were not IFRS based
• Main Financial Statements – considerable fluctuations in expenditure in relation to Education and Children’s Services, Local Authority Housing, Non-Distributed costs. This was due to impairments, accounting policy changes and minor movements in business
• Icelandic Impairments – The Deputy Director of Finance reported that the total impairment was expected to be £2.5m
• Inventories – Client Services Work in Progress – This column included Section 278 Agreement works. This column would disappear next year
• Assets held for sale – The Council held almost £7m of non-current assets which were available for immediate disposal. This consisted of two assets, an old allotment site and a piece of land. In relation to “Other movements”, the  Corporate Accounting Manager would send details of this to Councillor Jarjussey
• Insurance – The contract for the provision of insurance cover was re-tendered in 2010/11 where the Council benefited from reduced premiums by increasing the level of excess.  It was noted that an incident should be treated as one claim without multiple excesses
• Acquired and Discontinued operations – Reference was made to assets and liabilities of Hillingdon Homes which were transferred back to the Council and which were now included in the accounts
• External Audit costs – The slight reduction in the total External Audit costs for 2010/11 was noted
• Officer Emoluments – Reference was made to the high earnings of some school employees and Members noted that school employee salaries were a matter for the particular schools’ Governing Body
• Events after the Balance Sheet date – It was noted that there were a number of Council schools which were expecting Academy status and these schools would not form part of the Council’s accounts in the future
• Pension Fund Accounts. It was noted that the Pensions Committee had approved the Pension Fund Accounts at its meeting held on 20 September 2011
• Annual Governance Statement – Particular reference was made to weaknesses which had been identified in the monitoring and control of some construction projects and some sub-systems were not being regularly reconciled to the main Oracle creditors system.  These were detailed within the Internal Audit progress report

Members expressed their appreciation at the efforts made by both Deloitte and Finance officers on the production of the accounts and the good joint working which had taken place. Deloitte confirmed that the Council’s Finance team had been well prepared for IFRS, and that the process had been handled smoothly.     

RESOLVED -    

1.  That approval be given to the Statement of Accounts for 2010/11 and the Auditors findings and adjustments as outlined in Appendix 1 to the report be noted.