Agenda item

Officers provided an update on progress on the closure of accounts for 2015/16. Officers had explained that this year we had new auditors and whilst the audit coverage would be similar, the new auditors Ernst & Young would need to form their own opinion over the council’s procedures and there might be detail changes in the work undertaken.

The priority for the closure programme was to ensure that all key activities had been captured in the timetable, and the roles and responsibilities had been identified and understood.

The report had identified a number of key issues, which had included:

·         The change of external auditors with Ernst & Young taking over from PricewaterhouseCoopers with effect from April 2015. Ernst & Young would need to form their own opinion on Havering’s systems and processes, and would not be able to rely on work carried out in previous years.

Ernst & Young would also be auditing Newham’s accounts: this could give scope for harmonising processes across the two authorities (particularly once Newham was on-board with One Oracle), but this potential was mitigated in the short term by Ernst & Young having a separate team at Newham.

·         As previously advised by officers the statutory deadline for having the draft accounts available for audit was being brought forward from 30^th June to 31^st may with effect from 2017/18, and the deadline for the completion of the audit and publication of the accounts was being brought forward from 30^th September to 31^st July. This would create challenges for both the Council and the external auditors.

In order to speed up the year-end closedown process, it would be necessary to estimate the end position. This might apply to a number of activities but would certainly include requesting data earlier from external parties relating to:

o   The valuation of Assets including Property, Plant and Equipment, on infrastructure assets, to determine for example impairment charges;

o   The valuation of year end pension liabilities from the Pension Fund actuaries.

Use of these techniques would enable major year-end processes to be started prior to year end: and could bring a heightened risk of material misstatement needing to be addressed during the audit.

·         Officers had confirmed that from 2016/17 local authorities would be required to include Highways Infrastructure on their balance sheets at net replacement cost, as opposed to the depreciated balance of previous years. This would have a major impact on the value of net assets for all authorities, but would have no impact on usable resources or the council tax requirement.

Infrastructure assets had now been valued on the required basis and the related data had been used to provide the Government with the information required in the Whole of Government Accounts. However, there was still a significant amount of work to be done to establish the correct accounting entries in restating the 2015/16 balance sheet to give the 2016/17 opening balances.

·         The implementation of Service Reviews would impact on responsibilities for specific parts of the accounts, with staff needing to become familiarised with new roles, procedures and systems. The sharing of functions would also impact on the audit coverage, with activity relating to Havering needing to be covered at Newham, and vice versa; the consequences of harmonising audit coverage were being followed up with the new auditors, Ernst & Young.

Significant areas affected for 2015/16 included the Collection Fund, with Council Tax being administered at Havering and Business Rates being administered at Newham. The Collection Fund impacted on all the prime statements in the accounts and any delay in this data being available would impact on finalisation of the accounts.

·         Supporting the April 2016 on-boarding of Newham to One Oracle would potentially necessitate the support of staff pivotal to the successful closure of accounts. Reconciliations needed to be completed by 15 April, and diversion of resources could increase the risk of:

o   error or misstatement in Havering’s accounts;

o   audit issues being identified, increasing workload in responding to the auditors; and

o   compromising achievement of the earlier closedown timetable, resulting in earlier closedown not being embedded for 2016/17.

Managers were aware of the accounts timetable and were managing the competing demands by, for example, ensuring reconciliations were completed in a timely manner.

The Committee had noted the report.