Your Councillors


Agenda item

Accounts 2019/20

Minutes:

The Senior Finance Manager (Client) introduced his report setting out the findings of the External Auditor’s work on the 2019/20 financial statements audit and value for money conclusion.

 

It was noted that:

 

·  Due to the impact of the COVID-19 pandemic on local authorities, the Government amended the deadlines for the publication and approval of the accounts.  The date for publication was amended from 31 May 2020 to 31 August 2020 and the date for formal approval was amended from 31 July 2020 to 30 November 2020.  However, the decision was taken to try and complete the exercise as close to the original deadline as possible to enable a greater focus on the upcoming budget cycle which would be challenging given the financial pressures that the Council now needed to address.

 

·  The headline messages from the Statement of Accounts could be summarised as follows:

 

There had been a significant increase in the value of Property, Plant and Equipment held on the Balance Sheet following the acquisition of the Lockmeadow Entertainment Complex.  This was also reflected in the increase of unusable reserves.

 

In relation to this acquisition, the Council entered into a borrowing position during 2019/20 which was reflected in short term borrowing of £11m shown on the Balance Sheet.

 

Short term creditors had increased by £10m which reflected an increase in S106 monies received from developers that would be passed onto other organisations, primarily Kent County Council and the NHS, and an increase in the amounts payable to central government under the Collection Fund arrangements for Business Rates.

 

·  In terms of the audit itself, the work was substantially complete but there was still some uncertainty around the pension fund actuarial position which needed to be resolved and this could lead to some changes to the accounts.  If these changes were substantial it might be necessary to report the accounts back to the Committee in September.

 

Ms Tina James of Grant Thornton, the External Auditor, advised the Committee that:

 

·  When the Audit Findings Report was drafted there were some outstanding matters.  The items that had still to be cleared included completion of PPE valuation testing; receipt of assurance from the Kent Pension Fund auditor and clearance of queries relating to movements in the liability in 2019/20; internal review procedures; and review of the final set of financial statements.  Some of the larger items were taking more time to complete due to the challenges arising from remote access working arrangements. 

 

·  The External Auditor’s Audit Planning Report included reference to the work required on the group accounts which the Council was intending to prepare for the first time.  Due to the challenges presented by the new ways of working under the COVID-19 restrictions, the Council had decided not to prepare group accounts in 2019/20 on the grounds of materiality.

 

In response to questions, the Officers and Mr Paul Dossett of Grant Thornton, the External Auditor, explained that:

 

·  The Council was required to revalue all of its properties at least once every five years, but the exercise was carried out every two years for the higher value properties.  The insurance values were updated at the same time.

 

·  The Emphasis of Matter paragraph was not a qualification but highlighted PPE valuation uncertainties for both the Council property and its share of assets included in the IAS 19 Pension Fund actuarial position.

 

·  With regard to the use of going concern assumptions in the preparation and presentation of the financial statements, the Council had produced some very detailed cash flow forecasts and was able to demonstrate how it would be able to deal with any gaps in those forecasts in terms of its capacity to take out loans.  The Council being a public body had quite wide powers to borrow money from the Public Works Loan Board and other Councils.  This meant that it was in a relatively strong position to be a going concern from a cash point of view.

 

·  With regard to the valuation of the Pension Fund net liability, the actuarial firms which provided services to the Local Government Pension Scheme were also subject to a detailed assessment by PwC which was contracted by the National Audit Office to do that work.  PwC provided a detailed analysis of those particular actuaries and their competence to do the work and then provided External Auditors with a series of detailed questions.  This was a very complex and technical area but in broad terms the External Auditor had confidence in the technical competence of the actuary who carried out the Authority’s Pension Fund valuation whilst recognising the complications and implications arising from the COVID-19 emergency and recent judgements for example in relation to the McCloud case.  Work in this area was still ongoing and an update would be provided at the next meeting.

 

·  In addition to the provision made for costs relating to known planning appeals (£261k), an Earmarked Reserve had been created as a contingency for the potential costs of future planning appeals.

 

·  A comment would be included in the notes to the Statement of Accounts to the effect that the increase in the Chief Executive’s salary related to her Returning Officer’s pay rather than a general pay increase.

 

·  In June, the impact of COVID-19 on 2020/21 was assessed and the net impact was forecast to be £6,450k in increased expenditure and reductions in income after taking into account the support already provided by central government.  This was a best guess and more optimistic/pessimistic scenarios were being modelled as part of the Council’s long term and medium term financial planning and would appear in the more detailed strategic revenue projections.  The figure referred to was that reported to central government which had not asked for other scenarios to be provided.

 

RESOLVED:

 

1.  That the External Auditor’s Audit Findings Report, attached as Appendix 1 to the report of the Senior Finance Manager (Client), be noted.

 

2.  That the audited Statement of Accounts, attached as Appendix 2 to the report of the Senior Finance Manager (Client), be approved.

 

3.  That the Letter of Representation, attached as Appendix 3 to the report of the Senior Finance Manager (Client), be approved.

 

Supporting documents: