Agenda item

To inform the Committee of the result of the external audit of the council’s 2018/19 Statement of Accounts, to receive the external auditor’s Audit Findings Report and to approve the council’s letter of representation from the Executive Director of Resources. 

Annexes: (to follow)

1.    2018/19 Statement of Accounts

2.    2018/19 Audit Findings Report

3.    Executive Director of Resources’ letter of representation.

An amended cover report with additional information and the annexes waspublished in the supplementary agenda on 25 July 2019.

Witnesses:

Anna D’Alessandro, Director of Corporate Finance

Tom Beake, Grant Thornton

Ciaran McLaughlin, Grant Thornton

Leigh Whitehouse, Executive Director of Resources

Craig Tucker, Principal Accountant – Finance

Key points raised during the discussion:

1. The Director of Corporate Finance introduced the report which was on track for publication by its statutory deadline of 31 July 2019 and summarised the key findings. The Council’s financial resilience must be understood with consideration of auditor prudence after the financial crises of Northamptonshire County Council and Carillion.
2. Grant Thornton informed the Committee that a detailed summary of the Audit Findings Report for Surrey County Council could be found in Annex 2 of the report, the key points of the report were summarised:

·         That concerning the financial statements the anticipated audit report would be unmodified with adjustments having no impact on the Council’s usable reserves.

·         One additional audit adjustment since the publication of the report was provided to the Committee on a non-trivial misstatement to the valuation of land and buildings specifically on the Property, Plant and Equipment (PPE) opening balance. An erroneous interpretation of valuer guidance given in 2013/14 had now been adjusted.  

3. A Member praised the comprehensive report but remarked that on the valuation of pension fund net liability, the Council should adopt the Local Government Association’s (LGA) advice that pension auto-enrolment should apply to councillors as they are “workers”.
4. Members stated that the conclusions on Children’s Services were similar to last year’s and queried present reforms to improve the service. The representative from Grant Thornton reported that since Ofsted’s May 2018 follow-up report, the service would be continued to be monitored over 2019/20. With one out of the three areas of audit opinion remaining adverse, on permanence planning by social workers and the progress tracking of these plans by managers.
5. The Executive Director of Resources reported that the adverse opinion on Children’s Services VfM was not unreasonable as outliers had been highlighted. The next step would be to receive Ofsted’s next opinion on the level of sustainability of the Services’ financial position.
6. The Director of Corporate Finance stated that the savings achieved in 2018/19 meant the avoidance of drawing from the reserves which were budgeted to be £21.3 million. However, the level of savings required to produce a balanced budget in 2019/20 continued to be significant at £82 million.
7. In response to Member questions it was reported that:

a)    The Executive Director of Resources explained that the Eco Park PFI was a finance lease liability under an integrated services charge. This was calculated in part on the tonnages of waste sent for disposal and the VfM cost of a reduced unitary payment would be approximately £2 million a month for an operational facility.

b)    Grant Thornton informed the Committee that the actuarial calculation from the Government changes and court rulings from the impact of the McCloud and GMP equalisation on the Council’s financial position may amount to a possible increase in pension liabilities of £22 million.

c)    The Principal Accountant – Finance summarised Surrey County Council’s expenditure figures. That the position on pages 10/11 showed an under spend of £0.5 million in the Council’s revenue outturn position in 2018/19, whilst page 18 showed the full service costs in respect of the £82.2 million deficit in 2018/19 in the Council’s Comprehensive Income & Expenditure Statement (CIES). The Director of Corporate Finance and the Principal Accountant agreed that they would provide greater detail to the Committee on the matter.

Actions/ further information to be provided:

1. A9/19 - The Principal Accountant – Finance and the Director of Corporate Finance agreed that they would provide a Briefing Note to reconcile pages 10/11 and page 18 of the report.

RESOLVED:

That the Committee:

1. Approved the 2018/19 Statement of Accounts, for publication on the council’s website and in a limited number of hard copies (agreed at 100 copies).
2. Considered the contents of the 2018/19 Audit Findings Report.
3. Agreed the officer response to recommendations of the external auditor.
4. Noted the Executive Director of Resources’ letter of representation.
5. Determined that no issues in the Audit Findings Report should be referred to the Cabinet.
6. Noted the revised Annual Governance Statement, as approved by Cabinet on 17 July.