Agenda item

The Head of Corporate Finance gave a presentation on the structure of the 2016/17 accounts and future changes. A copy of his PowerPoint slides is attached as an appendix to these minutes.

The Head of Audit West presented the Annual Governance Statement 2016/17 (agenda pages 192-201), which forms part of the Annual Statement of Accounts. The financial challenge (pages 200-201) would remain the significant governance issue for the Council.

Mr Morris and Mr Henderson presented the audit findings report for the Council. There were no significant issues arising from the audit and an unqualified opinion had been given. All papers were up to a reasonable standard. He commended officers for achieving this on the new accelerated timetable for producing the accounts. The audit could not be formally concluded and an audit certificate issued until work necessary to issue the Whole of Government Accounts Component Assurance statement for the Authority for the year ended 31 March 2017 had been completed and until the final version of the Pension Fund Annual Report had been reviewed, as mentioned below.

In reply to a question from a Member about continuing financial pressures, the Divisional Director – Business Support replied that a budget monitoring report and a new medium-term financial strategy looking five years ahead would be presented to the Cabinet in October. It was certain that the financial challenge would not lessen any time soon.

The Chair asked whether it was normal for third parties not to respond to requests from the external auditors (issue 5 on agenda page 37 “confirmation requests from third parties”). Mr Morris replied that difficulties with some third parties had year. Responses had been chased up, but some had still not responded in time, so alternative procedures had been undertaken to achieve assurance as stated in commentary to that item. Mr Henderson said that the third parties who had been slow to respond included other local authorities.

The Chair asked whether the forthcoming changes to data protection regulations would affect the external auditor’s access to information. Mr Morris said they would be compliant, as they had robust confidentiality protection in place on all their systems and he did not envisage that there would be any impact on their audits.

The Chair asked about progress with action 2 on agenda page 52 (review of number of administrative staff and maintenance of separation of duty principles. The Divisional Director – Business Support said this action required consultation with the relevant managers. She noted that implementation of this was not required until November. She said she would check the position and report back.

Mr Morris presented the audit findings for the Avon Pension Fund. He drew attention to the finding that employee contribution banding rates were being incorrectly applied in one organisation. The Pension Fund Annual Report is not required to be published until 1^st December. The external auditors had been provided with the draft report and had found no material inconsistencies between it and the audited financial statements. However, the external auditors were unable to certify completion of the audit until a review of the final version of the Annual Report has been completed. One instance had been found of an employee of a small organisation in the Fund whose contribution rate had remained unchanged since 2012, despite new bands and rates being introduced from April 2014. Additional testing of contributions calculations had been carried out across the larger employers in the Fund, and no further occurrences had been identified.

The Chair asked about the difference between Level 1, 2 and 3 investments. Mr Morris replied that Level 1 investments were those traded in an open market, Level 2 investments were those that could be traded but were not publicly quoted, including property and Level 3 investments were those not readily tradable in a market, such as shares in a private company. Some funds were mixed, so it was necessary to examine the separate baskets of investment in the fund and value it by combing the prices of the separate baskets.

Mr Morris drew attention to the Letters of Representation for the Council and the Avon Pension Fund (agenda pages 207-13) and invited the Committee to approve them.

A Member proposed that the Committee should thank officers for their hard work in producing a set of accounts in which the auditors had found only a few inaccuracies. This was agreed unanimously.

RESOLVED:

1. to note the issues contained within the Audit Findings Reports for the Council and the Avon Pension Fund;

2. to approve the audited Statement of Accounts, including the Annual Governance Statement and Letter of Representations for Bath and North East Somerset Council and the Avon Pension Fund for 2016/17.