Agenda item

The Accounts and Audit Regulations 2015 required that from the 2017/18 financial year, that each local authority prepare and publish its approved draft and audited accounts by the 31 May and 31 July respectively.  This change had a significant impact on both Havering and its auditors to ensure the accounts were completed within the required timescales.  It was explained that the Council had prepared well for these changes, preparing a good set of draft accounts and supporting working papers in advance of the deadline of 31 May.  Council staff had promptly responded to the queries raised by the Auditors during the course of the audit.

The auditor had prepared two ISA 260 reports, one relating to the audit of the Council, and the other the Pension Fund. The two reports detailed the auditor’s findings from their review of the 2017/18 financial accounts.  External audit confirmed that they intended, subject to completion of the outstanding work listed in their report, to give an unqualified opinion on the financial statement for the Council and Pension Fund, and an unqualified Value for Money conclusion for the Council.

Within their ISA 260 report for the Council, the auditors highlighted two adjusted audit difference, and one unadjusted audit difference.

The unadjusted audit amendment was in relation to difference in valuation of one of the council’s Leisure centres between Wilks Head and Eve and the auditors own valuers. This difference was identified as part of the auditor’s work on the Council’s 2016/17 financial statements, but in the absence of any change to the value of this asset, the auditor felt the difference identified in the prior year remained.  Members confirmed that as the difference was not material, they were satisfied that the accounts were not amended to correct this. 

The adjusted audit differences related to a change in the value of the pension fund liability arising from a change in the value of net assets between 31 December 2017 and 31 March 2018, and a reduction in the payables balance. An amendment was also to be made to reflect Councillor Gillian Ford and Councillor Damian White’s membership of the Havering Theatre Trust for the period 2017-18.

The auditor’s also noted that during 2017/18 the Council’s external valuer had revised their approach to the valuation of land.  This had led to a significant increase in the value of the land associated with all assets valued on a DRC (Depreciated Replacement Cost) basis, particularly Schools. The auditors noted that they had engaged valuation experts from within their firm to support their work in the valuation of these assets, and had considered whether the change arose from a change in the basis of the estimate, or as a result of an error in the prior year valuation.   The auditor’s noted that they were satisfied this was a change in accounting estimate, and as such no restatement of the prior year financial statements was required. 

Members discussed the valuation of land and buildings, in particular specialist assets such as  schools who are able to convert  to academy status and transfer the asset for nil value. Members sought clarification on the relevance of their inclusion in the financial statements as the land and buildings were not readily marketable.  It was explained that the inclusion was in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom.  Members requested that their concerns be raised with the Chartered Institute of Public Finance & Accountancy (CIPFA).

Members sought clarification in regards to the wording of the letter or representation as it was thought too much reliance was placed on the audit chair to give assurance. It was discussed that the letter stated was to “the best of their knowledge” One member expressed concern over the wording and advised the Chair not to sign the letter. 

Members requested that trend data for Revenue Outturn be provided in the Statement of Accounts for 2018/19, to ensure transparency.

Clarification was sought on the reason for the deficit from Romford Market, this was due to a 40% short fall in Romford Market rent against budget, which was usually off set by other commercial income.

Resolved: That

a)    The contents of the report and the Statement of Accounts, alongside the Report to those charged with governance and the verbal updates by the External Auditor, following their examination of the Council’s accounts, were considered.

b)   The deadline for publication of the audited accounts by the 31 July 2018, be noted.

c)    The amendments to the accounting policies arising from the audit of the accounts set out at paragraph set out at paragraph 2 of the Report.

d)   The Statement of Accounts for the financial year ended 31 March 2018, be approved.

e)    Any subsequent amendments to the Statement of Accounts that may be necessary as a result of audit completion procedures, be delegated to the Chair of the Committee, in consultation with the Chief Operating Officer and Statutory Chief Finance Officer.

f)     The Letter of Representation be signed, subject to an acknowledgement in the minutes that the letter is correct to the best of the committees knowledge given the information that has been provided.