Agenda item

To consider Deloitte’s Governance Report and the audited Statement of Accounts for 2018/2019.

The Committee considered Deloitte’s Governance Report and the audited Statement of Accounts for 2018/2019. Mr Thompson assured members that the finance department had been working tirelessly to ensure the deadline of 31 July 2019 would be met.

The Committee reviewed and considered the accounts, with questions of clarification being answered by the Director of Resources. Members queried the risk of the Council being over exposed in terms of its short and long-term borrowing, with Mr Neil Jack, Chief Executive explaining that any potential changes to interest rates were closely monitored and that loan terms could be changed should it be considered prudent to do so at any time.

Members noted the increase of 17 per cent to capital spending and questioned whether any delayed projects generated the risk of funding losses. Mr Thompson assured members that the funding streams and associated deadlines were being closely monitored in order to mitigate any such risks.

Mr Paul Thomson, Risk Advisory Partner at Deloitte informed the Committee that an outstanding area of work preventing the external auditors from concluding their work with the accounts at this stage was the potential financial impact of the McCloud ruling in relation to public sector pensions. The Committee heard that the Council had obtained an updated actuarial report to allow them to adjust the pension liability for the impact of the McCloud case and that the adjustment had been included in the latest version of the financial statements. The result was an increase in the net pension liability by £3.5 million. Deloitte’s internal pension specialists were in the process of reviewing the updated report prior to final agreement of the accounts.

Mr Thomson highlighted a further significant risk in relation to the 2018 Ofsted inspection of Children’s Services. Following this inspection Children’s Services had been given an overall rating in the January 2019 report of ‘Inadequate’. Deloitte had therefore identified a significant Value for Money (VfM) risk over the delivery of the improvements required as a result of the Ofsted report. Mr Thomson stressed that Deloitte had identified progress made towards delivering the actions required to address the Ofsted findings and that the Council had also dedicated significant attention, time and investment to this matter going forward into 2019/2020. Deloitte planned to issue an except for qualification to the VfM conclusion in relation to the Council’s arrangements to plan, organise and develop the workforce to effectively deliver strategic priorities and regarding effective working with partners to deliver strategic priorities, specifically in Children's' Services. Members requested that a statement be included to reflect the work and progress of the Council since the Ofsted inspection findings, which Mr Thomson agreed to include.

A final key area identified by Mr Thomson was that of the Council’s Housing Revenue Account (HRA).  As part of Deloitte’s responsibilities as the appointed auditor to the Council they had been requested to undertake a review of Blackpool Council’s accounting treatment in relation to its HRA and specifically the statutory ring-fence for the years ended 31 March 2017 and 31 March 2018. The most significant finding was connected to the external auditor’s work on areas of expenditure where they had identified two transactions between Blackpool Coastal Housing (BCH) and the Council, where BCH had made a payment to the Council from its accumulated reserves. Whilst management had obtained legal advice on BCH’s ability to make such payments and subsequently did not consider the transactions to be breaching the statutory ring-fence, Mr Thomson expressed concern that payments from BCH to the Council could be perceived as an inequitable allocation of resources between council tenants and the wide population represented by the Council. As a result, Deloitte had recommended that the Council did not repeat such transactions but reviewed the management fee paid to BCH to alleviate reserves being built up by BCH. The Director of Resources acknowledged Deloitte’s concerns in relation to the HRA and assured members that there was no expectation of such a transfer reoccurring, with a Task and Finish group having been established specifically to monitor the issue.

The Committee agreed to approve the Statement of Accounts for 2018/2019 subject to no material changes resulting from the outstanding work still to be completed. Should any material change become apparent, the Committee would defer the agreement of the accounts to the next meeting of the Audit Committee on 12 September 2019.

[Councillor Mrs Callow left the meeting during consideration of this item.]