Prior to presentation of the report, Mr. N. Preece, Grant Thornton referred Members to a recent article which had been in both the national and local press which had referred to the Grant Thornton being put into “special measures” by its regulator. He explained that there had been significant interest in such matters following recent high profile business collapses and accounting scandals, which had resulted in the regulatory taking much more interest in commercial audits. The latest FCA annual report had reported on its findings within a large number of audit firms, not just Grant Thornton, each having areas which required improvement. The findings had related to commercial audits, although there were implications for the public sector, including areas such as pensions, property and plant where a more robust audit should be carried out.
Councillor K. Van der Plank questioned the target figure of 90% which had been highlighted in the report and where Grant Thornton was in relation to this. Mr. Preece confirmed that Grant Thornton was at 50%, but that this did not mean that they did not meet the FCA standard, or that the findings were not safe. However, it was acknowledged that there was room for improvement and appropriate actions were being taken.
In respect of being in “special measures” Mr. Preece assured Members that this was a miss-reporting by the press and that this phrase was not used by the FCA. He also confirmed to Members that Grant Thornton had an office in Birmingham and were both a national and international firm.
In respect of the Audit Findings Report 2018/19 Mr. Preece reported that it was predominantly good news. The highlighted the following areas in more detail:
· Officers had built on the work carried out in the previous year and the accounts had been ready by the end of May and on target to be signed off by 31st July as expected. This deadline had been brought forward by two months, so this had been an intense time for all concerned.
· An unqualified opinion and unqualified Value for Money conclusion had been achieved, with no significant changes other than pension fund deficit which was following a Public Sector legal case, which impacted on all local authorities.
· An updated report from the Pensions Actuary had brought relatively large changes, although these were relatively minor in the bigger picture.
· The preparation had not been without its challenges and these were highlighted in the key messages at page 7 of the agenda pack, with recommendations to address these detailed in Appendix A of the report.
· The significant risks which had been reported earlier in the year were discussed, including the management override of controls.
Members asked for clarification on a number of areas including:
· Some reconciliation work taking longer than planned and requiring officers to run a number of different reports – Mr. Preece advised that the systems used were quite old and no longer fit for purpose. It was anticipated that this would be addressed in future years by the investment in the new Enterprise Finance System, which Members had recently authorised. The Executive Director, Finance and Resources confirmed that the Team were committed to ensuring that the fixed assets register would be the first area of the new system to be completed and that appropriate training would be provided to ensure that this was done correctly from the outset.
· Extra time that had been taken to ensure the accounts were completed and the reasoning behind the need for this. The Executive Director Finance and Resources explained that there was a number of reason for this including the current system and the need to do many things manually and a training need, which had been addressed.
· Members discussed the cash flow and short term borrowing figures on the balance sheet in some detail and Mr. Preece explained how this worked and that it was common practice amongst local authorities throughout the year, due to the nature of its business.
The Financial Services Manager together with Mr. Preece took Members through the detail around the Treasury Management Strategy and long term liabilities, in particular the pension fund. Changes were reported on an ad hoc basic because of the way the pension fund worked, and that the long term date was over a number of years. Members also discussed the assets and valuations of land and buildings and it was confirmed that these were carried out on cyclical basis with valuations being checked appropriately.
The Action Plan and response from Officers was highlighted at page 26 together with details of the extra work required to form a conclusion on the valuation of other land and buildings and to resolve the very high number of questions raised, inadequate explanations to those questions and the number of amendments required to the settlement of the Accounts.
It was confirmed that, as Council had delegated the approval of the accounts to the Audit, Standards and Governance Committee, at its meeting on 24th July, recommendation 2.2 no longer applied.
RESOLVED that the Audit Findings Report 2018/19 as attached at appendix 1 of the report be noted.