Issue - meetings

Report by the Chief Finance Officer.

17.1     The Committee considered a report by the Chief Finance Officer (CFO) which provided an update on changes to the 2018/19 Statement of Accounts after approval by the Governance Committee on 16 July 2019.  Darren Wells of external auditors Grant Thornton was also present to assist the Committee.

17.2     The Chief Finance Officer and Darren Wells set out that the issue was not exclusive to East Sussex.  The CFO informed the Committee that an IAS19 actuarial statement from the Council’s actuaries Hymans Robertson was obtained in March 2019 to enable the Statement of Accounts to be prepared.  Mr Wells confirmed that a revised statement was requested in July, which highlighted a material difference, of around £48m, in the projected pension liabilities.  Grant Thornton considered that the revised figure should be reflected in the Statement of Accounts - Income and Expenditure Account and Balance Sheet.  As a result the Council’s completed accounts, together with audit opinion, were not available for publication on 31 July.  Mr Wells confirmed that the external auditors were satisfied with the revised accounts.

17.3     The Committee asked questions about the impact on the Council’s finances and the revenue account.  The CFO and Mr Wells assured the Committee that there was no impact on the Council’s bottom line, and that this was a requirement of accounting standards. 

17.4     Councillor Fox, a member of the Committee and Chair of the Pension Fund, provided clarification of the workings of the Pension Fund in assessing long term liabilities and the level of coverage of those liabilities by way of returns on its portfolio.  He and the CFO confirmed that the Fund had a funding level greater than 90%, and was awaiting its triennial revaluation next year, which would produce a further estimate of future liabilities.  The CFO highlighted that each estimate was a snapshot of the position at a given time, and that the estimated position might never materialise. 

17.5     The Committee considered the issue of the streamlining of local authority accounts.  They bore in mind the requirement to open the books to the public on 31 May, and to provide a status report to the public on 31 July.  They also considered that this was the first year of a new relationship of the finance team and external auditors and the impact of those deadlines.  The CFO confirmed that all parties involved would reflect on the lessons to be learned.

17.6     The Committee RESOLVED to note the report and verbal update on the status of the 2018/19 Statement of Accounts. 

Report by Chief Finance Officer

15.1     The Committee considered a report by the Chief Finance Officer regarding the Grant Thornton report on the audit opinion on the 2018/19 Statement of Accounts. The Chief Finance Officer reported that an amendment to the report was required as follows: On page 34 of the agenda pack, the second paragraph under the heading ‘Financial governance - savings plans’ contains the following sentence ’The temporary shortfall in year was compensated by £7.3m of additional one-off savings and the use of £1.6m of reserves’. This should be replaced by the following ‘The temporary shortfall in year was compensated by £7.3m of one-off funding and the use of £1.6m of reserves’.

15.2The Committee RESOLVED to –

1)            note the Independent Auditor’s (GT) Report to those charged with governance on ESCC Accounts and the Value for Money conclusion report, including the amendment referred to above;

2)            authorise the Chief Finance Officer to sign the formal Letter of Representation to GT UK LLP; and

3)            approve the 2018/19 Statement of Accounts for publication.

Report by the Chief Finance Officer.

8.1       Marcus Ward from Grant Thornton, the Council’s External Auditors, introduced report. The key findings from the audit are outlined in the Audit Findings report. The Auditors propose to issue an unqualified audit opinion on the Council’s accounts and Value for Money (VFM) statement. There are no adjustments that affect bottom line and there are two management recommendations that are detailed in the report. It is evident from the audit of the accounts that the Council has its finances under control.

Audit Findings - Other Issues and Key judgements and estimates

8.2       Other findings reported on as part of the audit include:

• The McCloud Judgement is likely to have an impact on pension liabilities and should be accounted for as part of Pension Fund liabilities, but does not have a material impact on the accounts. The Auditors are comfortable with position management have taken on this and it will be dealt with as part of the triennial pension fund valuation.
• Valuation of Property, Plant and Equipment. The audit has examined this and the valuation of investment properties to check how they have been valued. The Auditors do not foresee there being any material issues in respect of these valuations.
• Net Pension Liability. The audit has examined the assumptions used for the valuation of the Pension Fund liability and the Auditors conclude that they are fair and accurate. They are therefore comfortable with the valuation and the valuation of the ‘difficult to value’ investments.
• Going Concern. It is evident that Council has its finances under control in relation to the ‘Going Concern’ judgement contained in the audit.

Value for Money (VFM)

8.3       This is the part of the audit where the Auditors examine the financial sustainability of the Council. The Auditors are satisfied that the Council has got the processes and procedures in place for the key risks, the Medium Term Financial Plan (MTFP) and the key assumptions that underlie this. The Auditors have highlighted some of their work in this area in the report, which took an in depth look at the Council’s financial planning arrangements.

8.4       In terms of reserves, ESCC is in a good financial position in relation to other local authorities as illustrated by the graph on page 17 of the Audit Findings report, which shows the level of reserves held as a percentage of net revenue expenditure. The Value for Money assessment focused on two specific areas: Joint Working with Health and Brexit. The report finds arrangements for work with NHS on social care are proactive in moving issues forward. In terms of Brexit, what the Council has put in place seems a reasonable and sensible analysis of the potential scenarios.

8.5       The Auditors have no issues to report in terms of fraud or other issues. Overall they reflected that these are a good set of accounts, with only a small number of presentational changes required to the draft accounts made public on 31 May 2019. Grant Thornton confirmed their independence as auditors.

Action Plan

8.6  ...  view the full minutes text for item 8