Agenda item

To consider the attached report (FPM-008-2017/18) and appendices.

The Assistant Director (Accountancy) presented a report regarding the Annual Governance Report. The International Standard on Auditing 260 required the External Auditor to report to those charged with governance on certain matters before they gave an opinion on the Statutory Statements of Accounts. The audit of the Council’s Statutory Statement of Accounts for 2017/18 would be presented to the Audit and Governance Committee on 30 July 2018.

The audit report highlighted the key findings of the financial statements of the Council for the year ending 31 March 2018, and had only been received today as the audit was still ongoing and had been tabled for information.

The Assistant Director (Accountancy) advised the Cabinet Committee that the key findings were;

(a)          That no additional significant audit risks had been identified during the course of the external audit procedures subsequent to the Audit Plan on 19 January 2018;

(b)          That the final materiality was £2,000,000, which had not required reassessment;

(c)          That there were no significant changes to the planned audit approach nor were any restrictions placed on the audit;

(d)          That the audit identified the following material misstatements:

• Upon transfer of the Langston Road Retail Park from Assets Under Construction to Investment Properties, the Revaluation Reserve balance was not removed via the Capital Adjustment Account. The revaluation reserve was therefore overstated by £6.503 million and this had been adjusted in the revised financial statements;

• The St John’s Road site was classified as an asset held for sale within current assets at £6.139 million in the draft financial statements. However, planning permission had not yet been granted on the site and therefore the site should have been classified as a surplus asset within non-current assets. Surplus assets were consequently understated by £6.139m and this had been adjusted in the revised financial statements; and

• The Essex Pension Fund actuary reissued its IAS19 actuarial valuation report in June 2018 following publication of the Council’s draft financial statements as there had been a significant movement in the estimate used in the actuarial calculation and the actual fund value at the year end of £111 million. The impact for the Council was that the pension scheme liability had increased by £2.859 million to £74.860 million and this had been adjusted in the revised financial statements.

(e)          That there had been no unadjusted audit differences;

(f)           That the audit identified no significant deficiencies in internal controls;

(g)          That following the receipt of the draft accounts, the Pension Actuary had  issued an updated IAS19 report and the audit was in progress;

(h)          That a number of presentational changes had been made to the draft financial statements as a result of the audit;

(i)            That management reported at the end of the year a General Fund balance of £6.7 million, which was an improved position compared to the opening balance of £0.5 million predominantly due to a change in accounting treatment. Management were planning for reserves to be 37% of the Council’s net funding requirement by 2021/22 with the minimum requirement being set by Members at 25%;

(j)            That the Council had healthy levels of reserves when compared to the minimum requirement and a strong asset base. The impact of the Transformation Programme and the commercial strategy the Council had adopted on its finances were appropriate to continue to deliver the strategies;

(k)          That subject to the successful resolution of outstanding matters, it had been anticipated that a  unmodified opinion on the financial statements for the year ended 31 March 2018 would be issued;

(l)            That there were no exceptions to report in relation to the consistency of the Annual Governance Statement with the financial statements; and

(m)         The Council was below the audit threshold for a full assurance review of the Whole Government Accounts return and no other powers or duties under the Local Audit and Accountability Act 2014 had been exercised.

Resolved:

That the External Auditor’s Annual Governance Report be noted.

Reason for Decision:

To ensure that Members were informed of any significant issues arising from the audit of the Statutory Statement of Accounts.

Other Options Considered and Rejected:

The report was for noting, no specific actions were proposed.