Agenda item

To receive the attached report.

We have received an update on progress with the closure of the 2013/14 accounts. A number of key issues needed to be addressed. These were:

a)    Public Health Transfer

Public Health services in Havering had moved to the Council in April 2013. 2013/14 would be the first year of reporting with Public Health. A new Service Expenditure Analysis (SEA) for Public Health had been added to the Service Reporting Code of Practice (SeRCOP).

b)    Council Tax Benefit System reform

The Welfare Reform Act 2012 had abolished the National Council Tax Benefit scheme from April 2013 and the Local Government Finance Bill enabled Local Authorities to design their own local council tax support schemes. The accounting disclosures needed to be updated in order to reflect these changed arrangements.

c)    Localisation of Business Rates

The Local Government Finance Act 2012 introduced a business rates retention scheme that enabled local authorities to retain a proportion of the business rates generated in their area. The new arrangements for the retention of business rates came into effect on 1 April 2013. At the same time, business rate collection had been brought in house following the termination of the contract with Barking and Dagenham. There were potential risks of managing these new arrangements at closedown and staff involved in the process needed to be aware of the revision in reporting requirements.

d)    One Oracle Project

The likely date for the implementation of One Oracle (OO) was April 2014. Key staff involved in the closedown programme would also be required to carry out key elements of the OO implementation programme.  This gave rise to a significant risk of resources being diverted from both the closure and audit of accounts in order to support OO implementation and provide training on Oracle Projects. The Closedown programme had little scope for slippage and was driven by statutory closedown and publication requirements

e)    One Source

The One Source project set to be implemented in April 2014 might put an additional drain on staff time involved in the closure process.

f)     Pension Fund Local Infrastructure Procedures

It was anticipated that the Council would make a one off investment in the Pension Fund which must be made by 31 March 2014 in order to meet the requirements of the external actuary. In order to facilitate this arrangement, the Pension Fund had created a Local Infrastructure portfolio and approved the associated governance arrangements. However, qualifying schemes would need to be identified and formally approved prior to year end.

g)    Infrastructure Assets

Infrastructure assets included roads, highways, bridges and street furniture. These assets were currently recorded on the Balance Sheet on a Depreciated Historic Cost (DHC) basis. CIPFA’s code of practice on Transport Infrastructure Assets included a requirement to record such assets on a Depreciated Replacement Cost (DRC) basis. In order to comply with the code it would be necessary to identify all such assets, with appropriate measurements and then establish the cost of replacing these assets at current prices. Valuations would need to be updated regularly in order to ensure compliance with The Code.

The implementation of Infrastructure accounting had been delayed by DCLG and it was proposed that it be introduced in 2015/16 with a dry run in 2014/15. However, there would be a need to disclose comparative data in respect of the 2014/15 accounts and a re-stated Balance Sheet as at 31 March 2013 within the 2015/16 published accounts. Officers had begun the process of collecting the necessary valuation data and were working towards the achievement of these deadlines

The Whole of Government Accounts (WGA) return included a requirement to record infrastructure assets on a Depreciated Replacement Cost (DRC) basis in 2012/13 (albeit in a more summarised format). The 2013/14 return was expected to require additional disclosures. However, the collection of data for these purposes would assist in developing the data requirements for the statutory accounts.

h)   Audit and Publication

Despite the pressure on resources from servicing One Oracle, One Source and other initiatives, The Authority needed to ensure that it meets the statutory deadlines for closedown. Failure to do so would result in additional audit scrutiny, additional cost, and an adverse effect on The Authority’s reputation.

In view of these additional pressures it was essential that the timetable was strictly adhered to. Steps would also be taken to encourage staff to complete closedown tasks earlier than timetabled or to carry out preparatory work in advance of year end.

Last year the external auditors raised a number of matters. Progress against these matters was as follows:

·         Treatment for construction and transfer of academies

The Auditor’s had proposed an alternative approach than that adopted by the Authority with regard to the treatment of expenditure incurred in building the Draper’s Academy. However, it had been agreed that there was a lack of clarity in relation to the correct accounting treatment and it had been noted that the treatment of Academy Schools was subject to on-going consideration by CIPFA/LASAAC. As the two approaches were not materially different the Auditor’s were not minded to challenge the Authority’s approach. No similar transactions were expected to arise in 2013/14.

·         Judgements and Accounting Estimates - Valuation of Property, Plant, Equipment (PPE) and Investment Properties

The Auditor’s considered that the assumptions used by the Council’s external valuers WH&E, to value PPE to be too simplistic. They had recommended that the approach for the 2013/14 accounts be discussed and an approach agreed between their internal valuers, WH&E and the Council’s internal property team. These discussions were on-going and would inform the 2013/14 valuation process.

·         Payroll Reconciliation

During the 2012/13 financial year the Authority had been unable to complete the payroll reconciliations for the year end in a timely manner. The Auditor’s had recommended that the payroll reconciliation should be reconciled jointly by the payroll and finance teams. ISS management had discussed with the Auditors the format of the reconciliations and had agreed a revised format to be put in place for 2013/14. The automation of the payroll reconciliation report was still in development, therefore, ISS was still reliant on Business Systems resources to produce adhoc reports. 

Officers advised that the One Oracle suite did not include a system generated report to resolve this issue so it would continue to be a manual process

We have noted the report.