Agenda item

Report of the Director of Finance and Assurance.

The Committee received a report of the Director of Finance and Assurance, setting out the audited Statement of Accounts for 2019-20 which were subject to the issue of the audit opinion.  The Committee also received appendix 3 for the reasons set out in the supplemental agenda.

The Chair welcomed Lucy Nutley (Director) from Mazars LLP, the Council’s external auditor who had prepared detailed reports on matters arising from the audit of the Statement of Accounts and the Pension Fund Annual Report.

Lucy Nutley referred to the Executive Summary on page 202 of the agenda and outlined the key messages, including that Mazars LLP anticipated issuing an unqualified opinion on the financial statements.  An Emphasis of Matter paragraph would be included within the auditor’s report with respect to the material valuation uncertainties regarding land and building valuations and pension fund property investments, which the Council intended to disclose in the financial statements.  In due course, communication would be sent to the Chair of the Committee and it was expected that the external auditor would be in a position to issue an unqualified opinion with no financial adjustments considered necessary.

Members’ attention was also drawn to page 205 of the agenda and Lucy Nutley identified the risks which were considered to be significant – management override of controls, revenue recognition, property plant and equipment valuation, and defined benefit liability valuation  – which had required special audit consideration.  She also explained why materiality had been applied on the Pension Fund Valuation and she expected that a majority of local authorities would be in a similar position.

Lucy Nutley referred to the approach taken to Value for Money, details of which were set out at pages 213 onwards of the agenda. Mazars intended to issue an unqualified Value for Money conclusion on the financial year 2019?20.  She added that financial sustainability for 2020-21 would be key but, in common with all local authorities, Harrow Council would be refreshing its Medium Term Financial Strategy (MTFS).

Lucy Nutley also referred to page 228 of the agenda and reiterated that Mazars LLP intended on issuing an unqualified opinion on the Pension Fund financial statements although it would include an Emphasis of Matter with respect to valuation uncertainty of property investments that the Pension Fund intended to disclose in the financial statements, as set out on page 232 of the agenda.  She referred to the risks identified at pages 231 and 232 of the agenda – management override of controls and valuation of unquoted investments.

Members asked questions on both the Statement of Accounts and the Pension Fund. Lucy Nutley informed Members that Mazars LLP were required to report to the Committee on the issue of ‘going concern’ and whether this was appropriate or not.  Mazars LLP had also carried out its own risk assessment which was not related to the Council’s corporate risk assessment.  She added that in respect of the question on whether the Council could be seen to be able to operate as a 'going concern', more work would be undertaken as a result of the pandemic and changes in the auditing standards.  She had discussed the issues with the Director of Finance.  She added that all local authorities had the facility to borrow money from the Public Works Loans Board (PWLB) if required.  She had checked on the Council’s bad debts and the collection of Council Tax and, whilst more work was required by Mazars in these areas, she remained confident that the Council would be able to operate as a ‘going concern’.  All aspects would be reviewed before the accounts were signed off by the external auditor.  Any good practice amongst local authorities was normally shared by the Councils and auditors. 

The Committee was assured that Mazars LLP would consider if there was a need for disclosing a post balance sheet event in relation to any risks on asset valuation and investments which may fluctuate.  Lucy Nutley added that the Council had reserves that it could draw on, including from the General Fund.  The Director of Finance added that £10m was available from the General Fund Reserves and that another £10m was available from previously earmarked reserves.  The monies would be called on should there be a need to balance the budget.  The Director of Finance undertook to provide the relevant information on reserves to Members, including information represented on the balance sheet.

In response to an additional question from a Member, Lucy Nutley informed Members that the Council had planned its borrowing and there had been no indication of any breaches of any policies.  She undertook to provide further information in relation to a question on pension liability and whether there had been a gain.  She assured Members that the accounts had been well prepared and no management weaknesses in processes had been identified but that any such matters would be brought to the attention of the Committee if required.  A Member thought this to be unusual given the impact of the pandemic to the economy.

Lucy Nutley responded to additional questions on the Pension Fund and the triannual valuation which she stated had been done as at 31 March 2019 and reported on later in March 2020.  She explained that in completing the valuation, the actuaries follow a code of practice developed and published by the National Audit Office (NAO) and Price Waterhouse Coopers (PWC).  The actuary provided assurances to the auditor that they had applied the code reasonably in making their assumptions.

RESOLVED:  That, having considered the draft Audit Completion Reports of the External Auditor on matters arising from the audit of the Statement of Accounts 2019-20 and the Pension Fund Annual Report 2019-20,

(1).         the audited Statement of Accounts 2019-20 be approved and the Chair be authorised to sign the accounts;

(2).         the Pension Fund Annual Report 2019-20 be noted;

(3).         the Director of Finance and Assurance, following consultation with the Chair, be authorised to make any final amendments to the Statement of Accounts 2019-20 and Pension Fund Annual Report 2019-20 arising from the external audit prior to the signing by the auditor;

(4).         the Summary Statement of Accounts 2019-20 be noted.