Agenda item
Statement of accounts 2010/11 and Annual governance reports
At its meeting on 22 September 2011 the Committee approved the statement of accounts for publication. It also considered the draft Annual Governance Reports produced by the Audit Commission and the Council’s Annual Governance Statement. Following the completion of the audit of the accounts this report presents the final versions of the reports for the Committee. An action plan to address the recommendations raised by the Audit Commission is also set out in the final Annual Governance Report.
Minutes:
Clive Heaphy (Director of Finance and Corporate Services) introduced the item and confirmed that the Audit Commission had issued an unqualified audit opinion of the accounts, a key achievement for the council. It had been anticipated that the year would be particularly challenging due to the migration of financial information from multiple disparate systems into a single Oracle system, fundamental structural changes and the transition of accounting statements to comply with International Financial Reporting Standards (IFRS). These changes had contributed to the accounts being submitted after the 30 September 2011 deadline and a number of lessons had been learnt during the process. Clive Heaphy thanked the Audit Commission for their work and their cooperation with the Council and with Finance staff.
Andrea White (District Auditor, Audit Commission) then presented the Audit Commission report. She confirmed that Members had the finalised report before them following the submission of the interim report to the committee on 22 September. Starting with financial statements, Andrea White referred to the key messages in the report which included some significant weaknesses in internal control, the identification of five material errors and a further 26 non material errors. However, the accounts were given an unqualified audit opinion as all material errors had been amended. Andrea White emphasised the need to ensure that the weaknesses identified were rectified for the next year and subsequent years and she acknowledged that the year had been especially challenging for the council.
The committee then discussed the financial statements aspect of the Audit Commission report. The Chair sought further comments in respect of the statement of accounts for 2010/11 being submitted after the deadline and he acknowledged that 28 other local authorities had also done so. With regard to the Action Plan, he enquired how the recommendations would be owned, implemented and monitored. In respect of recommendations 7-10 in the Action Plan, he commented that as the underlying causes to the issues that had been raised had now been removed, he sought confirmation that it should be relatively straightforward to implement these recommendations. With regard to the ‘trading’ that had previously existed between the council departments, the Chair sought confirmation that his had now been completely extinguished. Turning to IFRS, the Chair sought reassurance that staff would receive sufficient training to undertake this.
Councillor Ashraf acknowledged the importance in achieving an unqualified audit opinion in respect of the accounts. In respect of the weaknesses identified concerning internal controls, he commented on the role that fundamental structural changes and staff reductions had played and sought further views with regard to centralising of finances. Councillor Ashraf asked what changes had been made in the way reconciliation would be undertaken. He also sought more information on staff training and development in respect of IFRS and new ways of working.
In reply to the issues raised, Andrea White confirmed that the council had been publically named as one of the local authorities that had published their audited statement of accounts after the 30 September deadline. With regard to the changes to structure, she commented that there would be significant pressure on the Central Finance Team and that it was important that the Team received the necessary support to fulfil its functions. The Audit Commission could also play a role in providing staff training and some workshops were due to be held in January 2012. Presentations by the Audit Commission on accounting were also available to council staff.
Clive Heaphy advised Members that the council’s financial systems had previously been highly decentralised which contributed to a number of errors being made. However, fundamental changes had since been made to provide financial management on one platform and the change to IFRS was needed for the challenges that the council now faced. It was essential that the Action Plan was delivered to ensure the improvements needed. Audit tasks had also been previously carried out by individual service areas, however this too had now been centralised and was undertaken on a monthly basis. Clive Heaphy stressed the importance of the role in project planning and officers would be given target deadlines in advance, which if not met, would be addressed immediately. He confirmed that the appropriate workshops would be given to provide staff with the necessary skills. Clive Heaphy advised that it was possible that an external organisation would be appointed to undertake a critical evaluation on a monthly basis.
Mick Bowden (Deputy Director – Finance, Finance and Corporate Services) then responded to questions concerning the Action Plan. Turning to recommendations 8, 9 and 10 first, he explained that a significant piece of work had been undertaken with regard to centralising financial systems and there had been a number of residuals outstanding in respect of the ‘migrated balance’. However, the preparatory work had finished and recommendation 8, for example, would be achieved by 19 December. Recommendation 9 would involve a time consuming process involving system reconciliation. However as of 14 December, only £7 arrears remained and the recommendation would be swiftly implemented. Members noted that all trading between service areas had ceased and ledger journals were solely used now. Recommendation 7 would also involve monthly checks and would be reported to the council’s Strategic Finance Group. Reconciliation was now undertaken in a completely different way, with two of the council’s three bank accounts fully automated, however the largest one remained partially automated for now. It was noted that most bank accounts now operate under the Oracle accounting system and the remainder are being brought on board. Mick Bowden advised that a lot of the changes were being done in parallel and the starting point for these would be 1 April 2012, with a review of the 2011/12 accounts commencing early in the new financial year and initial feedback would be provided at the next meeting.
The committee agreed to monitor progress on how the recommendations of the Action Plan were being implemented over the next three meetings.
Members noted that there were no significant issues outstanding with regard to the Audit Commission’s report on the Brent Pension Fund.
In reply to a query from the Chair concerning the Annual Governance Statement, Clive Heaphy advised that there had been some minor amendments with regard to some teachers’ pay.
RESOLVED:-
(i) that the final Annual Governance Reports from the Audit Commission and the council’s Action Plan be noted;
(ii) that the final Annual Governance Statement be noted; and
(iii) that progress on how the recommendations of the council’s Action Plan are being implemented be monitored over the next three meetings.
Supporting documents:
- 5- 2011-12-15 - statement of accounts AGR, item 4. PDF 67 KB
- 5a- BRENT AGR 2010-11 appendix 1, item 4. PDF 693 KB
- 5b- LB BRENT PENSION AGR 2010 appendix 2-11, item 4. PDF 613 KB
- 5c- Annual Governance Statement 2010-11 appendix 3, item 4. PDF 304 KB