The Committee considered the report of the Head of Finance and Customer Services concerning the audit of the Statement of Accounts for 2011/12.  It was noted that:-

·  The audit had identified the need to make a number of adjustments to the un-audited Statement of Accounts.  These were mainly technical accounting adjustments to ensure compliance with the Code of Practice on Local Authority Accounting and with one possible exception they had no impact on the revenue and capital resources of the Council or decisions made on the allocation of resources since the end of the last financial year.

·  The most significant amendments to the Accounts related to the downward revaluation of the Maidstone Leisure Centre; the valuation of Museum artefacts; Provisions to the Accounts (a decision was required as to whether potential asbestos related insurance claims should be treated as a Contingent Liability or a Provision to the Accounts); and the annual revaluation of investment properties (the valuation report from the Council’s External Valuer was awaited).

·  Subject to the satisfactory resolution of the outstanding issues in relation to Provisions and the revaluation of investment properties, the External Auditor intended to issue an unqualified opinion on the Statement of Accounts by the end of September 2012.

·  The External Auditor had made a number of specific recommendations to address the factors he had identified as being contributory to the identified adjustments.  Responsibility for ensuring that the Council’s website was updated with the most recent versions of major Council policy documents and other publications (recommendation 7) had been reassigned to the Head of Finance and Customer Services.  The recommendations had been accepted by the Officers and would be acted upon as a priority to reduce the number of adjustments required in future years and to make improvements in other areas that were considered in the course of the audit.

The Committee asked a number of questions of the Officers and the representatives of the Audit Commission concerning the reasons for the problems being experienced in relation to the annual revaluation of investment properties and the action being taken to avoid the situation occurring in future years; the treatment in the Accounts of the downward revaluation of the Maidstone Leisure Centre as a prior period adjustment; the way in which the depreciation of revaluation gains was shown in the Accounts; the scale of the work required to prepare a robust inventory of Museum artefacts together with an indication of value and ownership; the

reason for the delay in reaching a view as to whether a Provision to the Accounts or a Contingency Liability was required in respect of possible asbestos related insurance claims and the resource implications; the reasons for the External Auditor’s comments regarding the overall quality of the draft Accounts and the action being taken to restructure the Finance Team, improve resilience and retention of staff and ensure that the Team has an up to date knowledge of developments in financial reporting arrangements (improvements are necessary if the Council is to avoid the possibility of incurring additional audit fees in future years); and the relationship between the Audit and Overview and Scrutiny functions.

The Director of Regeneration and Communities assured Members that a review was being undertaken of the reasons for the problems being experienced in relation to the revaluation of investment properties to ensure that future revaluations carried out by the Council’s External Valuer are reliable, complete and provided within an acceptable timescale.

The results would be reported back to the Audit Committee as the Committee responsible for the adequacy and robustness of the Accounts.  In the meantime, the priority was to obtain the information required from the External Valuer to enable the External Auditor to conclude his opinion.

RESOLVED:

1.  That the Audit Commission’s Annual Governance Report 2011/12, set out in draft form as Appendix A to the report of the Head of Finance and Customer Services, be approved and that, in approving the report, the Committee notes the adjustments to the Statement of Accounts, approves the Letter of Representation to the Audit Commission, welcomes the proposed action plan, and will monitor progress in implementing the recommendations.

2.  That subject to the satisfactory resolution of the outstanding issues in relation to Provisions and the revaluation of investment properties, the Statement of Accounts 2011/12, as set out in Appendix B to the report of the Head of Finance and Customer Services, be approved.

3.  That a copy of the valuation report from the Council’s External Valuer should be circulated to all Members of the Audit Committee when it becomes available together with the final audited Statement of Accounts.

4.  That the outcome of the review which is being undertaken of the problems in relation to the annual revaluation of investment properties to ensure that the situation is not repeated in future years should be reported to the Audit Committee as the Committee responsible for the adequacy and robustness of the Accounts.

5.  That arrangements be made for the Chairman and Vice-Chairman of the Committee to meet with the Chairman and Vice-Chairman of the Corporate Services Overview and Scrutiny Committee to discuss how the Committees relate to each other and the development of complementary work programmes to avoid duplication.