To receive and sign off the accounts.

Andrew Vallance, Head of Finance, introduced the item and outlined the Statement of Accounts 2019/20.

Jonathan Gooding, Deloitte, said that the pension fund audit had been completed in May. The adjustments made had been summarised, including updates to the accounting on joint ventures, classification of expenditure, reserve movements and asset valuations. The accounts had been delayed due to the number of objections which had been received, six of the objections had been accepted. There were some issues with the quality of the financial statements which had been received, while there were also new issues in the industry which were a factor, for example on infrastructure assets. Once final issues had been concluded, Jonathan Gooding anticipated that an unqualified opinion would be issued on the accounts. Part of the opinion would have an empathise on material uncertainty in the property valuation. In respect of value for money and use of resources, three exceptions had been identified on a range of weakness on financial planning, reporting and governance. The report covered the areas of significant audit risk, including capital expenditure and property valuations.

Benjamin Sheriff, Deloitte, said that comments had been against the misstatements in the accounts. There were three technical areas on the pension fund accounts which had been corrected. Gross cost depreciation on infrastructure assets came out of the infrastructure asset national issue which had been discussed previously.

A registered public speaker, Mr Andrew Hill, addressed the Committee. Mr Hill said that the report had been in production for over two years, yet the report had only been published one day before the Committee meeting. Section 100 of the Local Government Act 1972 stated that documentation had to be available for five clear days before any meeting. This was to allow Members and the public to digest the information in good time. Mr Hill felt it was disappointing that he therefore had only one day to consider and read the report. He commented on Braywick Leisure Centre, there was a £6.4 million misstatement in 2018. However, in 2019 there were no further misstatements and the investigation was then closed. Mr Hill made reference to the Part II confidential leak to the local media about the land value of the St Cloud Way site. Mr Hill believed that Deloitte had missed something important, objections from the public had asked Deloitte to investigate this but they declined to do so. The first objections on this had been raised in 2020 by CIPFA, Mr Hill suggested that the Committee should advise Deloitte to review the Braywick deal as part of this audit.

Councillor Story asked about the property valuation report which had been received from Lambert Hampton Smith.

Jonathan Gooding explained that the control recommendation around the property valuation report was around evidencing officers review of that report. The methodology of values by officers was reviewed, in this case the evidence was not sufficient. In 2018/19, this control weakness had been identified and the follow up had occurred in the 2019/20 accounts.

Adele Taylor, Executive Director of Resources, added that it involved any transactions going forward. A control weakness had been identified and officers had changed how things were done in future, transactions would have the correct documentary evidence.

The Chairman asked if this was similar across other councils, that property valuations were done at the current point in time.

Adele Taylor said that property valuers were changed and the current property valuers knew the standards going forward.

Councillor Story asked what the key messages were since the property values report had been produced.

Jonathan Gooding said that Deloitte tested the valuation included in the accounts in March 2020, real estate specialists had been involved in testing the methodology and assumptions and whether these were in accordance with accounting requirements.

Adele Taylor added that this was the position in 2020, a revaluation occurred later that year. The valuation for March 2021 and March 2022 were part of the draft accounts which were available to view on the council’s website. However, these were unaudited accounts. Deloitte did a significant amount of work to test assumptions which officers had made.

Councillor Bond commented on the process for raising objections, the government introduced the process when the audit commission was abolished. He expected to see more detail on the objections which had been received and the response from Deloitte. Councillor Bond suggested that the government should review the system as he felt it was not working effectively.

Councillor Knowles noted the management controls and asked if they were concluded on the current audit, rather than moving forward as an issue for future years.

Adele Taylor said that some management controls were ongoing as they needed to be tested in the accounts for 2020/21 and 2021/22. These would be picked up in these audits. Other areas were ongoing as they would happen again, but officers had put the controls in place to deal with them. Deloitte would test management controls in these audits and ensure that evidence was in place.

RESOLVED UNANIMOUSLY: That the Audit and Governance Committee noted the report and:

i)             Delegated responsibility to the Executive Director of Resources to agree a final version of the Letter of Representation and sign it.

ii)            Approved the audited Statement of Accounts and authorised the Chairman and the Executive Director of Resources to sign them.

iii)           Approved the management responses to the matters raised in the External Auditors’ report.