To receive an update on the 2020/21 accounts.

Jonathan Gooding said that the 2020/21 accounts were in the process of being completed. The audit plan was in the agenda pack for both the statement of accounts and the pension fund, which set out the scope and timing of the work. Three significant audit risks had been identified. One was around properties being valued incorrectly, another was around expenditure which had been capitalised when it should not have been, and the final risk was around management override of controls. For the pension fund, override management of controls had also been identified as a significant risk, as well as the longevity swap not being appropriately valued. For these audit risk areas, Deloitte planned to test the controls. There was a change with consideration to value for money, as the requirements were now broader. There would also be a change in reporting, with an annual audit report produced in addition to the ISA260. The deadline for this report would be three months after the opinion was issued on the statement of accounts.

Andrew Hill asked when and how the period of inspection on the accounts was publicised by RBWM. He said that of the three risks Jonathan Gooding had mentioned, he asked for clarification that the first two were specific to RBWM where as the third risk was a general risk amongst most local authorities. Andrew Hill also asked for clarification on if Deloitte meant the RBWM Property Company or property owned by the council when it was mentioned in the report. Andrew Hill asked if Deloitte had already identified capitalisation of expenditure as a risk in the 2020/21 audit.

Jonathan Gooding said that significant risks were not the only thing that the auditors looked at. There was a set of presumed risks which Deloitte had to presume for all audits it undertook, including the risk of management override of controls. Another risk was revenue recognition, but Deloitte was keeping this under review to see if there were any changes. This was a similar position to most other local authorities. The property valuation and expenditure was taken from Deloitte’s understanding of the authority but they had not seen any evidence of fraud. Property valuations were a significant risk but this was very common. Deloitte was in the process of determining their judgement and valuation of property.

Andrew Vallance added that the accounts were summarised on the RBWM website.

Councillor L Jones commented on their being a requirement for councils to provide value for money. She asked what would be looked at as part of the audit to determine if the council was getting value for money.

Jonathan Gooding explained that previous audit guidance required a risk assessment to be performed. Certain documents needed to be reviewed to see if there were any significant risks identified in these areas. The arrangements in place were documented, which formed part of the risk assessment. The primary base of reporting on the accounts was the annual report, which would include more extensive detail and commentary.

Councillor L Jones asked if assumptions made last year would be used this year and how much did the auditors consider forward decision making.

Jonathan Gooding said that it was considered to an extent, areas that were focused on included financial sustainability, governance and information based on performance. Deloitte started the process by asking officers at the authority what their arrangements were and then sought evidence to support those arrangements.

Councillor Sharpe said that there had been some issues identified in the 2019/20 accounts and asked when issues would be identified for the 2020/21 accounts.

Jonathan Gooding said that recommendations had been identified and made to the local authority last year. The objections made to the accounts would need to be completed before the audit could be finished. The 2020/21 audit was happening at the same time, with completion possible in a minimum of five weeks.

Councillor Bond asked about property valuations and said that it had been mentioned that there was the potential temptation to capitalise revenue. He said that if the value of the property was different this would change the assets on the balance sheet but not the liquid assets. He mentioned the actuarial evaluation in the pension fund.

Jonathan Gooding said that the revenue expenditure could be capitalised, there was no incentive to capitalise the property valuation. There was an actuarial evaluation in the pension fund liability. Jonathan Gooding said he would check this and correct it if required.

Councillor Baldwin asked for clarification on whether the wording “bribery basis of reporting” was used by Jonathan Gooding.

Jonathan Gooding confirmed that Councillor Baldwin had misheard, he had said the “primary basis of reporting”.