Agenda item

Peter Barber (Grant Thornton Engagement Lead) introduced the report.  He explained that appendices 1 and 2 were the main conclusions of the statutory audit.  The deadline had been extended this year due to the extra challenges due to Covid-19 and working remotely, it was now 30^th November 2020.  The challenges included: an increased number of audit input and queries, including consolidating the Council’s wholly owned housing company into the Council’s financial statement which increased the workload and absence due to sickness within the external audit team.

The external audit team remained committed to the extended deadline.  If it was not possible to meet the deadline Grant Thornton would share a narrative to put on the Council’s website to explain the situation.

Peter Barber thanked the Council officers involved for their support through the process.

Peter Barber stated his opinion on the key issues in the statement of accounts as follows:

·  The materiality level of £6.7m for the financial statements is set out on Page 25 of the report.

·  The key message was that there were no material errors in the draft accounts.

·  There had been some changes made to disclosure notes.

·  Good progress had been made on the outstanding issues to be resolved and some had been completed.

·  He was confident that the Council had proper arrangements in place.

·  Page 28, BANES had a large property portfolio, as regards investment properties it was noted that there was material uncertainty surrounding the year end valuations due to the impacts of Covid 19, however that was expected across all local authorities.

·  Other Property plant and equipment was valued at £227 million and this was this had also been impacted by Covid-19 and the disclosure of the material uncertainty on the valuation was acknowledged, again this was seen across local authority clients.

·  Pension liabilities, a new disclosure note was added highlighting that there was also material uncertainty associated with Council’s pension net liability in respect of the valuation of the Pension Funds property investments.

·  A correction was required to the Financial Instruments note to reflect Group balances totalling £15m in scope of IFRS 9 which were not included in the draft accounts.  This was identified after the draft audit findings report had been published and the draft accounts have subsequently been updated.

·  It was concurred that the Council was a going concern with a focus on financial liquidity with sufficient access to funds.

Peter Barber stated as regards value for money the key findings were as follows (page 45):

·  A good track record of delivering financial targets was recognised with a £120,000 underspend on the budget achieved in 2019/20.

·  Government grant funding in relation to Covid-19was received and the release of contingency relating to SEND increased the reserves at the end of 2019-20.

·  There was financial pressure in respect of the commercial estate due to retail income.

·  In Children Services there was an overspend due to high need placements but Adult Services were on budget.

·  This was offset by savings in other directorates.

·  The report recorded the achievement of 76% of target savings, the main slippage was in contract management.

·  Training budgets had been centralised but there was variable effectiveness in the associated savings being met.

·  The savings plans were realistic.

·  Reserves and Balances were considered to be accurate and £50 million was a healthy level, though there were still increasing pressures.

·  For 2020-2021 the budget had been increased in Children and Adult Services to reflect demand pressures.

·  Cabinet in July 2020 had approved a financial recovery plan with savings identified in response to Covid pressures impacting the Council’s budget position in 2020/21.

·  There was now more clarity on the level of support from government with two thirds of the loss on sales, fees and charges covered by Central Government. This enabled the removal of previously proposed staffing savings from the financial recovery plans.

In conclusion the medium-term financial plan was up-to-date and had been approved last month.  Using reserves was an option to mitigate some pressures.  The 2019-2020 budget was well-managed but there were significant challenges ahead.

Questions followed:

·  In answer to a question from Councillor Andy Furse about fraud during the pandemic, Peter Barber explained that this would affect the 2020-2021 accounts when the money received would be checked for how it had been spent.

·  In respect of the medium-term level of reserves and the current economy from John Barker (Independent Member), Peter Barber stated that the medium-term financial strategy reflected what was known at that point in time.  Any significant new information that would materially impact the strategy would be updated accordingly.

·  In answer to a question from Councillor Lucy Hodge about PWLB loans and the City Regional Deal, Sophie Morgan-Bower (Grant Thornton) explained that the work was in progress on the loans and the critical judgement in respect of the City Region Deal amount was small and was around the disclosure.

·  Councillor Colin Blackburn asked about the group loans and Peter Barber responded that there was consolidation to avoid double-accounting as the ADL accounts were audited as well and work was in progress on this area.

In respect of the Avon Pension Fund Peter Barber stated that his responsibility was limited to his opinion.  In respect of the higher materiality level of £44 million, the focus was on gaining assurance on the valuation of the investment assets.  There were no material errors or uncertainties.  There was more scrutiny of the Level 2/3 assets which are harder to value and involve greater degree of estimation and there was also more detailed testing on derivative valuations.

In relation to matters discussed with management of the Pension Fund the disclosure and material uncertainty re UK property funds would be reflected in the Pension Fund.

Peter Barber commented that there was excellent cooperation with Council Finance and Pension Officers.

He noted that the Committee had sight of the management “Informing the audit risk assessment” documents and it was agreed that they were comfortable with them.

Jeff Wring reminded members that revised recommendations had been circulated prior to the meeting in light of the supplementary findings circulated from the external auditors and that the audit was not yet finalised. 

On a motion from Councillor Brian Simmons, seconded by Colin Blackburn, it was

RESOLVED (unanimously) that

1)  The issues contained within the Audit Findings Report for the Council and Avon Pension Fund (circulated later) be noted;

2)  The audited Statement of Accounts, including the Letters of Representation for both Bath and North East Somerset Council and the Avon Pension Fund for 2019/20 be approved, subject to, any amendments necessary upon quantification of the impact of any issues arising from the ongoing work by the external auditors;

3)  The Chair of the Corporate Audit Committee and the Chief Finance Officer make arrangements to sign the Statement of Accounts for 2019/20 as representing a “true and fair view” of the financial position as at 31^st March 2020, following any amendments necessary upon quantification of the impact of any issues arising from ongoing work by the external auditors;

4)  If there was any concern before the accounts were signed-off, if necessary, the Chair would email the Committee; and

5)  Council Finance and Pension Officers be thanked for their work to get the accounts to this stage.