The Committee considered the report of the Head of Finance and Customer Services concerning the audit of the Statement of Accounts for 2010/11.  It was noted that:-

·  The External Auditor intended to issue an unqualified opinion on the 2010/11 financial statements.  He was satisfied that the Council’s 2010/11 accounts had been prepared to a reasonable standard, that the quality of the supporting working papers was good and that the Council had dealt successfully with the challenges posed by the first year implementation of International Financial Reporting Standards.  He also intended to issue an unqualified conclusion stating that in 2010/11 the Council had proper arrangements in place to secure economy, efficiency and effectiveness in its use of resources.

·  The audit did, however, identify a number of significant errors in the un-audited Statement of Accounts.  These related mainly to capital accounting entries, the contingent assets note and the disclosure of a material pensions figure.  These had no impact on the general fund balance or any other financial resources available to the Council.  As a result the External Auditor had made two specific recommendations to address the factors he had identified as being contributory to the identified errors.  These had been accepted by the Officers and would be acted upon as a priority to avoid a repeat of such errors in the future.

The Committee asked a number of questions of the Officers and the representatives of the Audit Commission relating to, inter alia, the accounting treatment in respect of the three significant capital projects being undertaken by the Council, including the extension to Maidstone Museum, and the robustness of the capital management process; the adequacy of revenue reserves as a percentage of revenue expenditure (11.7%) to meet contingencies and provide financial stability; the basis for estimating pension assets and liabilities; the reasons for slippage in both revenue and capital expenditure resulting in an increase in investments held with banks and building societies; the reasons for some major variances in original and actual estimates across the portfolios; and the position with regard to Growth Point funding.

Having considered the replies to its questions, the Committee:-

RESOLVED:

1.  That the Audit Commission’s Annual Governance Report 2010/11, 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 2010/11, approves the Letter of Representation to the Audit Commission and agrees the response to the proposed action plan to address the recommendations made.

2.  That the Statement of Accounts 2010/11, as set out in Appendix B to the report of the Head of Finance and Customer Services, be approved.