Final Statement of Accounts
To receive a report on the above titled item.
Terry Neaves, Interim S151 officer, introduced the report that set out RBWM’s Audited Statement of Accounts for 2018/19 along with the External Auditors report on their audit, the ISA260.
The Panel were informed that the work was not entirely complete, with work still being done on the Berkshire Pension Fund but RBWM was in the same position as every Berkshire local authority. He explained that it had to be considered whether the accounts reflected the true position of RBWM and that the work of the auditors needed to make sure that it was a fair representation. Most of the issues the auditors had identified had been corrected, but some small things had not been corrected because they did not change the overall picture. Terry Neaves passed on his thanks to Ruth Watkins and her finance team, as well as the auditors who were present at the meeting; Jonathan Gooding, Aron Kleiman and David McConnell.
Jonathan Gooding, Deloitte, informed members that the audit was nearly complete and they did not anticipate anything else to come up. They had only made adjustments that were large, with two material adjustments being identified in the Pension Fund. It was noted materially the Pension Fund was set at over £21.5 million whilst for the council it was £6 million.
Aron Kleiman, also from Deloitte, explained that they had highlighted areas which had been updated since the July 2019 Panel meeting. Valuation of property assets had now been completed and he explained that Deloitte had their own property experts who had analysed the value of the assets at RBWM. After corrections were made, the value was not misstated. However, there were improvements that could be made going forward. The Depreciated Replacement Cost method of valuation only applied to assets rarely sold or traded, for example schools. Only one item, Riverside Primary, was valued in 2018/19 and findings discovered that the valuation should reflect Modern Equivalent Asset considerations and that valuations should be on an ‘Instant build’ basis.
In terms of Pensions, there were no further adjustments. They had identified significant risks in the conclusion but were satisfied that the appropriate arrangements were in place.
Councillor Jones queried the historical outstanding debt and asked what impact it had. She was informed that this was not a material adjustment so the accounts could be signed and that finance were reviewing this debt.
The Chairman asked when a report would be expected to come back to the Panel. Terry Neaves said that it would be by the end of the financial year, around March.
Councillor Jones commented that weaknesses picked out by the auditors on budget monitoring, the Capital programme and the Medium Term Financial Plan had been raised at previous O&S meetings. She believed that the Panel needed to improve and that more was needed to be done to ensure that comments and concerns were passed on to Cabinet.
Councillor Rayner, Deputy Leader of the Council, told Councillor Jones that they were currently in the process of creating a Member survey to gain feedback on scrutiny and address some of the issues that she had just raised. Terry Neaves explained that the AGS showed that issues needed to be addressed, they wanted to make financial assessments stable and ensure that things were more transparent moving forward.
Councillor Sharpe agreed that it was important to be more transparent but said that the council was in a situation where the information was historical. He asked if the methodology was different to what had been done in the past.
Jonathan Gooding explained that he could not comment on previous audits and how they were conducted, but for Deloitte quality was the number one priority. They had been challenging in their methodology and approach, which is why the audit process had taken longer than expected.
The Chairman asked if all Berkshire authorities received the same Berkshire Pension Fund report. Jonathan Gooding explained that it was slightly different because RBWM was the administering authority of the Berkshire Pension Fund and therefore it formed part of the RBWM statement of accounts, whereas for the other authorities it did not.
Councillor Werner questioned the CIPFA findings into finance and the auditor’s report, particularly where it was reported that Members had been disrupting the process and circumventing the framework. In response, Terry Neaves said that while the CIPFA report had already been considered by the Panel, the final report was still in draft. The final report would be brought to the Panel once it had been completed.
David McConnell gave Members an overview of the Pension Report which was part of the audit. He explained that there were no issues of note to report and that they had reviewed accounting estimates for any manipulation or bias that could result in material misstatements. The valuation of the longevity edge was regarded as a significant risk, with the fund holding a liability of £63.5 million. However, the morality tables were not in line with those used in the current valuation of the overall Fund’s liability. Using the updated morality table resulted in an adjustment of £40.3 million.
Talking about the valuation of the private equity portfolio, David McConnell said that it was difficult to provide information in a timely manner but the recommendation was that the fund was comfortable.
Councillor Da Costa commented that a higher level of training for Berkshire Pension Fund Panel Members was needed.
Councillor Jones followed up on this by asking what should Members of the Panel be challenging. Terry Neaves said that one of the key requirements was that the accounts were audited effectively.
RESOLVED UNANIMOUSLY; That the Overview and Scrutiny Panel notes the report and;
i) Approves the audited accounts and authorises the Chairman to sign them subject to there being an unqualified judgement on the Pension Fund and no material changes to the accounts.