Agenda item

To consider KPMG’s Governance Report and the audited Statement of Accounts for 2016-2017.

The Committee considered KPMG’s Governance Report and the audited Statement of Accounts for 2016-2017.

Mr Redmond, Chief Accountant, summarised the key aspects of the Statement of Accounts and advised that they had been prepared in accordance with the relevant legislation and CIPFA standards. He noted that it had been a challenging budget to deliver with a budget savings target of £25.1m on the back of delivering £93.8m over the previous five years. Mr Redmond explained that there had been an overspend of £2.5 million, mostly due to overspending in Children’s Services as a result of increases in the numbers of Looked After Children and the costs and complexity of placements.

The Committee was advised that the statutory deadline for approval of the final accounts would be changing from 30 September to 31 July in 2018. Mr Redmond informed Members that as a preparatory exercise, the accounts had been drafted by 31 May this year. Mr Redmond also informed the Committee that the Public Sector Audit Appointments Limited had appointed Deloitte as the External Auditor for the Council from 1 April 2018.

The Committee raised questions in relation to the income shortfalls within the Places directorate. Mr Redmond advised that in regards to Print Services, it had to compete with the private sector and that in relation to the Illuminations income target, collection methods were being reconsidered as they had been too over-reliant on generosity of visitors and local business for contributions. It was also noted that the income targets had been challenging.

Members raised questions in relation to the overspend in Children’s Social Care and it was reported that the increase in numbers of Looked After Children represented a national trend, but that the new Director of Children’s Services had established plans to respond to the demand, which had resulted in a plateau in the numbers over recent months and should result in an eventual reduction. The Committee was also advised that a recent recommendation of the Executive had been to lobby Government for more funding to cope with the mounting demand and new burdens presenting in Children’s Services.

The Committee noted that the actuarial valuation of the Council’s pension scheme liabilities and pension reserve shown on the balance sheet had increased by £72.8m during the year. Mr Redmond explained that the changes had been as a result of a revaluation of the pension fund and changes to financial assumptions, for instance how long people were expected to live.

Concerns were raised over comments in the Statement of Accounts that the current economic climate made it uncertain that the Council would be able to sustain its current spending on repairs and maintenance. Mr Redmond assured Members that buildings were still maintained but the level of resource that could be invested in maintenance was subject to budgetary pressures.

The Committee also raised concerns relating to the level of reserves and questioned whether the current level was sufficient for the year ahead. Mr Redmond advised that the Executive had recently recommended that the reserve levels be increased and that there were significant levels of earmarked reserves, which could be reviewed if required.

Mr Leviston, Manager, KPMG presented the External Auditor’s Report to those Charged with Governance and commented that the financial reports had been of a high quality and thanked Council officers for their help and co-operation throughout the audit process. He reported that it was expected that an unqualified audit opinion would be issued on the Authority’s 2016/2017 financial statements.

The Committee was advised that there had been two areas that had been considered significant audit risks by the External Auditor, those being ‘changes in the pension liability due to Local Government Pension Scheme Triennial Valuation’ and ‘Valuation of property plant and equipment’.

Mr Leviston explained that the second part to the report contained the Value for Money conclusion. Mr Leviston advised that there had been two Value for Money risks identified in relation to financial resilience and Children’s Services, but that the External Auditor had concluded that the Authority had made proper arrangements to ensure that it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people.

Mr Leviston also informed the Committee that the External Auditor’s work had identified a small number of issues, although none of which were considered to be a high priority. Members noted the management response from the Authority to the identification of those issues and raised questions in relation to housing system allocations, for which the management response had been not to accept the risks identified. Mr Leviston advised that the issue would be considered when conducting the next audit to ascertain the reasons for the difference of opinion.

Members queried whether the External Auditor’s Report to those Charged with Governance would be prepared next year in line with the revised statutory deadlines for approval of the final accounts. Mr Leviston advised that work had been undertaken already to prepare for the change and that the report could have been produced in time for the revised deadline this year had it have been required.

The Committee agreed:

1) To note the External Auditor’s Report to those charged with Governance (ISA 260) for 2016/2017.

2) To approve the audited Statement of Accounts for 2016-2017.