Agendas, Meetings and Minutes - Agenda item

Agenda item

Final Accounts 2016/17 - Lessons Learned Report (Agenda item 5)

Minutes:

The Committee considered the External Audit 2016/17 – Lessons Learned Report. The details were set out in the report.

 

Sue Alexander, the Interim Chief Financial Officer provided a detailed overview of the issues set out in the report. Further to the report, she confirmed that Jenni Morris – Finance Manager, Reporting Planning and Projects, an experienced member of Finance team, would be the designated Finance Manager responsible for the project plan and single point of contact with External Audit.

 

In the ensuing debate, the following principal points were raised:

 

·         The findings of the review were a terrible indictment on the events that lead up to the closure of the Accounts. Elementary mistakes had been made which had cost the Council financially and in terms of its reputation and good record in closing the Accounts on time

·         The review showed that the Finance Leadership Team had not received adequate progress updates on the audit of the Accounts. People had been assigned to the work with insufficient training and supervision. The question needed to be asked as to why experienced staff had been transferred to bail out a failing contract. Why were the issues at Liberata prioritised over the audit of the Accounts – was this a result of political pressure? How could the Committee be assured in the future that should a similar situation occur in another service area, finance staff would not be transferred?

·         Sue Alexander, the Interim Chief Financial Officer commented that it was important that the report was very straight-forward about what went wrong with the process for the closure of the Accounts. The responsibility for closing the Accounts on time rested with the Section 151 Officer, not the Executive. There was a lack of ownership by the Finance Leadership Team who had not received regular updates. It was possible that the previous good track record of the Council in closing the Accounts ahead of schedule had created a degree of complacency but this was not an excuse. In relation to the difficulties experienced by Liberata, it had been agreed between the finance and HR leadership teams that it would be appropriate to second a number of experienced members of the finance team to resolve the issues being experienced. In hindsight the final accounts team was inexperienced and their work was not properly assured

·         There was no explanation in the report of the reasoning for the prioritisation of the work on the HR/payroll/finance system over the audit of the Accounts. Sue Alexander acknowledged that that it was a difficult decision to decide where to prioritise resources and the decision was taken for experienced staff to be taken away from closure of accounts work. However irrespective of the secondment of staff, it should have been anticipated from the outset that extra resources would be needed to facilitate the closure of the Accounts and the new system implementation

·         The analysis of what went wrong was a very thorough, honest and candid piece of work which provided a clear set of actions. The conclusions also reflected the observations by the external auditor. This was a one-off situation and a huge wake-up call for the organisation to improve things going forward

·         Why was action not taken earlier in the process when issues had been drawn to the attention of the Council by the external auditor? Sue Alexander responded that an opportunity had been missed as early as May 2017 when the external auditor had highlighted a large number of errors in the draft Accounts. At that stage, there was sufficient time to address their concerns during the summer months but this was not done

·         John Gregory on behalf of Grant Thornton, the external auditor commented that the report was thorough, acknowledging the difficulties that took place and provided helpful actions. The action plan was very demanding and the Council was also faced with added pressure of producing next year's Accounts using the new ledger for the first time and within a compressed timescale. It was therefore important to carefully monitor the progress going forward. A number of issues had been raised in the interim audit in March/April particularly the Council's approach to a number of key judgements for example the value of the EfW Plant. These issues were not addressed in time for the next Committee meeting in May and from that point on the Council was playing catch-up. Helen Lillington from Grant Thornton added that interim testing had not also been finalised at that point and this had been drawn to the attention of officers

·         The Chairman thanked Sue Alexander for her full, frank and honest report which had got to the nub of the issues and had a close synergy with the Annual Audit Letter from the external auditor. The report was damning in that it highlighted a catalogue of errors in the production of the Accounts. He would wish to see the Strategic Leadership Team and the Cabinet Member with Responsibility for Finance take ownership of the process. Quality assurance had been highlighted as a major issue not just in terms of the quality of the financial data but also the narrative for the Accounts. A dry run of the Accounts process would take place in January 2018 and it was important that the Chairman and Vice-Chairman were fully updated. Progress would then be reported to the next Committee meeting. Staffing had been highlighted as a weakness particularly as a result of the secondment of staff to the Liberata project. It was vital that the right quality staff were in place going forward. If staff were taken off the final accounts then the Committee should be informed.        

 

RESOLVED: that

 

a)    The report be noted; and

 

b)    The Committee receives an update report at its meeting on 16 March 2018.

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