Agenda item

To receive the Council’s annual statement of accounts, as well as a report highlighting the key issues raised by the Council’s external auditors Grant Thornton. 

Ben Ainsworth, Head of Finance, introduced a report on the Council’s annual statement of accounts. The Committee was then invited to raise questions on the report, which focused on a number of key areas as highlighted below:

·         In response to a question from the Committee, it was noted that there would be an impairment in the next financial year. This would effect the value of the Council’s properties but would have no impact on the Council’s usable reserves. Moreover, a change of this size would likely not affect the Council’s overall borrowing power.

·         It was noted that although the valuations of the Council’s properties had been lower this year, it was not expected to have a negative effect on its credibility in the market when borrowing. When the Council’s balance sheet was considered, it was in a relatively strong position. Generally, local authorities would borrow from the Public Works Loan Board (PWLB) which was likely to always be available and in terms of private borrowing, the sector was looked at favourably. The generation of cash via borrowing, as well as social value, was a selling point for lending to local authorities.

Sophia Brown, Senior Audit Manager at Grant Thornton, introduced a report highlighting the key issues raised by the Council’s external auditors Grant Thornton. The Committee was then invited to raise questions on the report, which focused on a number of key areas as highlighted below:

·         In response to a question from the Committee, it was noted that specific works on the Council’s housing stock may not be something the external auditors would ordinarily look at during the audit. However, it would be covered as part of the wider additions review and any assurance work undertaken on the overall valuation of the dwellings.

·         It was noted that the external auditors had used an external valuer who had broadly concurred with the Council’s own valuations. The Committee suggested that more detail on what the external valuer had said and how they had come to their conclusions be included in future external audits.

·         It was noted that the Council was unable to reconcile non-HRA expenditure charged to the CIES and the non-HRA housing benefit expenditure recorded in the Northgate system. The external auditors had recommended the Council fully reconciled its housing benefit expenditure per the Northgate system to housing benefit expenditure recorded in the general ledger on a regular basis.

·         In response to a question from the Committee, it was noted that the level of materiality for senior officers’ remuneration and related party transactions was set at £830,000 in line with the level of triviality in the main audit because the external auditors wanted to have a lower level of precision for detecting errors. If any errors were detected at that level, it would be considered a material finding. The triviality level would be 5% and any irregularities would be reported to the Committee.

·         The Committee noted that COVID-19 had a significant impact on the normal operations of the Council. While the Council had been relatively financially stable beforehand, it was now entering a period of uncertainty which would have a significant impact on resources. 

·         In response to a question regarding the governance processes in place to ensure the Council would effectively deal with the financial impact of COVID-19, the Committee was assured that members had been regularly provided with information on where the Council’s finances lie and the wider implications this may have going forward. The planning process had begun for next year’s budget and was due to go to Cabinet in the winter and, as usual, would be reported to the Committee beforehand.

·         It was also noted that a value for money conclusion would no longer be required by the external auditors in the audit of the Council’s next financial statement. They would now be required to provide a separate comprehensive report, which would give a detailed commentary of the Council’s value for money arrangements.

·         The Committee was assured that all preparatory work to ensure the Council was ready to implement IFRS 16 requirements had been undertaken, and it did not expect any material impact to the Council’s balance sheet.

·         It was noted that the Council was in a relatively strong financial position considering its level of reserves. However, it was recognised that spending these reserves now would only lead to financial difficulty in the future and, as such, the Council needed to continue to run a tight ship. The strategy of strong reserves and the delivery of a balanced budget should continue.

RavinderJassar, Head of Finance, and Paul Dossett, Public Services Partner at Grant Thornton, introduced Brent Pension Fund’s external audit report, in response to which there were no further comments or questions.

The Chair then thanked Grant Thornton and officer team for the reports and clarifications provided.

Resolved

1.    To note the key issues and recommendations highlighted in the reports.

2.    To note the corrected audit differences.

3.    To support the recommendation to the Audit & Standards Committee, as set out in the report, to approve the statement of accounts.

4.    To support the recommendation to the Audit & Standards Committee, as set out in the report, to approve the letters of recommendation for both the Council’s external audit and Brent Pension Fund’s external audit subject to the final wording being agreed between officers.

5.    To receive an update on the progress of internal control points at the appropriate later meeting of the Committee.