Agenda item

The Chairman welcomed to the meeting John Gregory, Engagement Lead, and Helen Lillington, Manager, from Grant Thornton, the Council's external auditors. 

In introducing the report, Michael Hudson referred to two additional papers which had been circulated to the Committee, setting out adjustments made to the draft accounts since their publication with the agenda.  He also paid tribute to all involved in preparing the accounts who had worked tirelessly to meet the deadlines.  Whilst he was disappointed that the accounts were not able to be signed off at this meeting, this was not unusual and the deadline for sign-off was 31 July.

Michael highlighted that the main outstanding item related to the valuation of assets and a change in assessment a number of years previously, when market valuation was changed to replacement cost.  This had led to the valuation of a number of smaller properties increasing significantly and the implications of this needed to be tested.  The working paper on this issue had been prepared for Grant Thornton but was not available for this meeting.  He was nonetheless optimistic that the accounts would be available on time and would be unqualified.

John Gregory from Grant Thornton reported that County Council officers had shown commitment to finalising the accounts whilst dealing with challenging circumstances, including the early statutory deadline.  The report circulated to the Committee showed the situation at a point in time and almost all the outstanding issues referred to on page 30 of the agenda had since been resolved.

John highlighted 3 main issues:

·       The Council's ability to extract the right information from its finance system – this had led to some additional testing of information

·       The patchy quality of working papers – the external auditors had tried to be ruthless in rejecting unfit information

·       The values of assets which had not been revalued during the year - as referred to by Michael Hudson a change in the methodology for valuation of properties had led to potential uncertainty about values.  More work was being done on this issue.

Michael Hudson acknowledged that a standard format for working papers had not been followed consistently in all cases and whilst some were excellent others fell short of what was required.  Council officers were now able to show what good quality looked like and teams were working together so that these should be better for next year.

In considering the report the following were the principal points raised:

·       In response to a query about the implications on workload of difficulties in extracting information from the finance system, Michael Hudson reported that the Council had changed its financial system last year after 12 years with its previous system.  Differences between the two in the operation of the general ledger had caused difficulties.  However, finance officers now understood report generation more clearly and these would be run on a monthly basis in order to be better prepared for the audit in 2019.  Jenni Morris, Finance Manager, reported that most of the additional work was caused by the new system drawing on data from the date it had been switched on, rather than from the last financial year. Any items being taken out as part of the accounts process had to be reconciled.

·       A member queried whether the revaluation had an effect on the polices of the Council or on the final balance in the accounts.  Michael Hudson responded that the income and expenditure had not been affected by the changes. 

·       With reference to the External Auditors' view about risk to value for money relating to Children's Services (despite the Council making progress in this area there was evidence of weaknesses in proper arrangements for Children's Services) a member asked whether Grant Thornton's approach differed from other audit organisations.  John Gregory responded that he was not aware that it did.

·       The External Auditors were also proposing an 'except for' VFM conclusion relating to commissioning.  Members sought assurance from officers that lessons learned were being disseminated and questioned the external auditors about the nature of the risks, as the statement in the audit findings report appeared to refer to risks other than financial.  John Gregory acknowledged that the high level risks identified in the VFM report included highlighting whether the Council was facing up to reputational risks as a result of events during the year.  In terms of commissioning, this was a political decision for the Council but should be implemented properly.  Michael Hudson accepted there were lessons to be learned from commissioning and he and the Director (Commercial and Commissioning) were considering next steps in this regard.  There was now a sound audit base which would be used to inform future commissioning projects.

RESOLVED     

a)     That the Chief Financial Officer be granted delegated authority in consultation with the Chairman of the Committee to make any residual comments on the Accounts as appropriate following the conclusion of any outstanding external audit work, and

b)    The Chief Financial Officer be authorised to sign the letters of representation on behalf of the County Council.