Transcript

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Good evening, everyone, and thank you for making this extra meeting of the Auden governance meeting to discuss the 22/23 accounts. Just to go through the standard drill, the meeting will be webcast live to the Internet. So for those of you who do not wish to be recorded or filmed, you will need to leave the chamber. I'm sorry, Steve's lost, I think. For members, officers and others speaking at the meeting, it is important that the microphones are used, so viewers on the webcast and others in the room may hear you. Would anyone with a mobile phone please switch it to silent mode as they can be distracting? I would like to remind members that although we all have strong opinions on matter under consideration, it is important to treat members, officers and public speakers with respect. Thank you. Can we have apologies for absent, please? Thank you, Chair. We have no apologies. Any declarations of interest? I would like to become Director of Opportunity. Any others? Councillor Lockwood? Yes. The same Director of Opportunity. Thank you. Director Opportunity. Thank you. Okay. That is good. When you have three items on the agenda, we are going to the important one, the meeting and the statement of the current is 22-23 and the audit findings. Quite a lot of pages to read, but hopefully we have got lots of questions and comments to ask the team here tonight. So can I ask all of you to introduce the report? Thank you. Thank you, Chair, and good evening everyone. I am Ola Ola, Deputy Deputy Secretary of the Sectional OA5 on Officer. The report on the front of you is the 22-23 statement of the current audit. I think we have previously attended your meeting where we present, where we have provided you with an update. Where we are today is that the audit is nearing completion, is 99.9% completed. And it is not unusual that during the publication of the paper that you have got at the moment and having this meeting today, the audit is still ongoing at the background and there are one or two issues that need to address, and I will come back to that later. I have got the Estana Auditor switch, us today, who I will call on to provide a comment in terms of the ISO 260 report. And the good news is that the auditors as emphasized and make it clear that there will be issuing an unqualified audit opinion relating to 22-23 accounts, which I think is good news. And we know the statement of account itself, which you have got to copy, is a very, very major report. There is a lot in there. What we have done with the cover of the report is to provide you with an eye light, to bring us significant areas which we think you need to be aware of. We started by looking at the narrative report. Narrative report is where we try to break down all the technical language, not using any juggle, just using simple language in terms of what do the reports are about, what is revenue, what is capital, what is our out on, and how is the result looking at. Following that, you've got what we call a co-financial statement, and those are the areas which are very, very technical in nature. That is where we look at the movement and results statement, we look at the comprehensive income and the expenditure statement, our balance sheet, our cash flow, and all the accounting policies. As you'll be aware, this document is guided, is controlled by regulatory accounting of, I will say IFRS, which is international financial reporting standard. So, it's set, and we have to comply with all the accounting code. However, as a result of the audit, there have been few findings which we need to bring, which we need to highlight, and that has been covered on that section four. These are the areas that the auditors during the audit, which you've picked up, and they are more or less recommending and improvement going forward. Again, I will say this is not unusual, with every audit, there will be areas, there will be amendment, there will be adjustments that will sit down with the external auditors and agree what we want to do with those areas. On that section four as well, we manage to touch on the areas where we've actually made some adjustments, and that includes the valuation of land, again, just to make life easier with that. Every year, all the council assets need to be revalued, and as a result of the evaluation, you might have a property that's actually what 10 million last year, this year, it might be 8 million. Effectively, you have 2 million requirements, and that changes need to be reflected in our account. So, 4.3 of those, within that stable, highlights all areas, all those areas, where we're saying changes are required. We've been agreeing with the auditors and all those changes as we go through. To finish off section four, what we've done as well is to bring to light an extract from the comprehensive income and expenditure account, the extract of those areas, that's where you look at previous years and this year, if anything has changed significantly, what are they? Some of them, when you look at asset and operation, is to do with impairment of asset or capital financing here and there, but it tends to be with depreciation, impairment, anything to do with our fixed asset. There is a big one in there, which is mainly to do with our financial assumptions, when you look at our net divinal ability, relating to pensions. Section five of the report is to do with letter of representations, and I think I'm good to come back and deal with that in a minute. Section six is about informing the auditor's assessment, and on that note, we call on our auditors to go through our report, and I'm happy to take questions after. Thank you. I think if I draw your attention to page 16 of the packets, literally the contents page of my audit findings report, so this is the report that I brought to committee in March. At the bottom, it says, just note that the updates of this report are in blue text, it's very obvious what has changed since the last version of this report, and as you go through the report, which I will take as read, you'll be able to see where we have now finalized some of our conclusions, extra findings that we've made since March, are all in Appendix D in blue, so you can see those new findings from the report I brought in March. I think what is key is on page 17 of the pack, the headlines, so in that opening paragraph, we've summarised the key adjustments that have been made, that impact on the core statements, but also a flag that ultimately there is no impact to the bottom line, to the Council's usable, general fund reserves. Some of those bullet points where we have work outstanding are now resolved, but as Ona said, at this point in time, we do have a few things that we're still bottoming out that might result in further adjustments to the accounts that you see before you. I will stop there for any questions on the report. Any questions? Can you remember all that? Thank you. First of all, it's a pretty comprehensive report, but I did try and wade my way through some of it. I'm a little concerned that it's still three months late from being signed off. Is there any financial penalty to the Council, as there would be for another business because of this? Thank you. I can confirm that there is no penalties or any financial implication for being late, and I just want to assure you, as well, that the issue of account closures across every authority in the country, there is a huge backlash. However, what the government has done recently is that they've made it a requirement that the 2223 account has to be signed off by September, September 2024, and what we've done is to actually say we will do better than that, and making sure that by May, the Council account for 2223 will be signed off. Thank you. Can I just come back on another thing? I saw on the review about the waterfall impairment and the mount field, things like mount field where the power supply took a lot longer, so it's still being sorted out now. It should have been done two years ago, really. That wasn't originally seen as a big budgetary concern. But now it's obviously caused quite a lot. Is that affecting these accounts or will that be next year's accounts? Thank you. And your comments in terms of photo pool and impairment, I'm not going to say it's a budgetary concern. Where we have here is not looking at the budget, but it's looking at the actual at the end of the year, and similar to what I said earlier, at the end of each financial year, we need to revalue all those assets, and as a result of revaluing them, there might be impairment. I don't want to say depreciation, there might be impairment. That impairment needs to be reflected within this statement of account, and because this is financial reporting, financial reporting is about complying with an account and regulation in terms of how we make that report. It's slightly different to financial management. We are going to talk about budget setting, budget monitoring. So some of the information that you will have within our country and safe income and expenditure accounts will be put in monetary terms, something that is money, real money, and something that is just an accounting entry, because something like an impairment is a technical accounting entry. The valuation of this building might be down this year, in two years time, it might go out, and we need to reflect that within the account. Thank you. I think it's probably a question for Sophia. It says, The audit field work is substantially complete. Could you give us a flavor of what's left to do, and given that we're going to meet the deadline for May, rather than September, is that still on track for that earlier deadline? Yes, thank you. In terms of field work, we do a lot of testing, all of that testing is complete. What we're trying to bottom out now are just some final technical issues that will result in disclosure changes, so I'm not concerned that any of the changes will impact on the main statements or the council's bottom line. It's looking at the disclosures and reclassifying some things between different lines in those notes, making sure that things are right. Sometimes that might mean that the finance team has to go back and look at the prior year, because the prior year comparatives also have to be stated in that manner. It's not a quick fix, so if the audit team identifies something, we have a lot of discussion with the finance team so that we both understand the issue, we're on the same page, and then the finance team has to go away and look at the adjustment, and the adjustment can be quite complex. It can affect different notes in the accounts, and as I said, sometimes it affects the prior year as well, so we're just working through all of that at the moment. I am confident that we will get that done by the end of May, and that's the target that my team is working to with your finance team. Any other questions? Councillor butchher. Thanks, Chair. All of you very helpfully set out in 4.2, financing the external audits as some of the issues raised by the auditors and then the management response alongside. So I suppose the general question is how do we track this, how do we hear back about this to be sure that the management response is adequately dealing with the issues raised by the auditors. Thank you, Councillor butchher. Thank you for observations. My thinking is that what we need to do in terms of all those external audit findings is to put a tracker together, and with that tracker, we'll be able to come to your official meeting and provide you with an update in terms of what we've done, where we are, what is working progress and what has been completed. Hopefully by doing that, you'll be able to monitor the progress of some of all these audit findings. I mean, some of them is to do a track balance mapping, which is something that we are already working on, the general authorization, I think is a quick win for us, something we can put the process in place to be able to address that, the data and creditors, hopefully balances. I think it's something that we can address as well as quickly as possible. We are planning to have a new system in place, and what's that new financial management system in place, that will actually support our process and allow us to promote all this around us as quickly as we can. Thank you. So that track you're talking about, or is that for our next meeting, that that can be in place? If members decided to see that our next meeting, I think it's something that we're looking to and see how far, if only to provide you with an update. My expectation is that by next meeting, the account will be signed off, and we are currently working on 20-34 account. Some of this is to be reserved for 20-34, anyway, so we'll be able to come back to you with an update. Thank you. And just on the general authorization, is the solution to this a kind of procedure one, a rules one, or is it a technical solution, so someone, a general entry can't be made unless an authorizer inputs something, or how does the segregation of duties and so on? How does that actually work in practice? Thank you. And what I would say is that it's a normal accounting practice to have segregation in terms of how you authorize your journal, if a finance officer or an officer can receive your journal, they are not allowed to authorize it, and there has been a situation where in one of the situations where a non-monetri journal has been raised by an officer and it has been approved by an officer, which is not allowed, which is something that think has been picked up. Our coordinate system allowed that to happen. Going forward, the system should not allow you to be able to do that. So you can just technically all of that someone's trying to do it, and they can't do it until they're right, I can't get an option, shall I? Okay, what can normally happen is you can have a, what's called a system control, an IT control that prevents it from happening, so what we'll be doing is we'll be looking at the system configuration to make sure that actually it does automatically prevent that from happening, so that's the system control, we'll make sure it's in place, and if the system has a limitation where we can't implement that control, we'll look at then process improvement to avoid situation occurring, but the first port of call will be the technical config review of the system and see if we can implement the system control. Any other questions? Answer a lot, good. Thank you, Chair. What a tremendous amount of work's gone into this amazing effort by officers and the auditors to get all this, bring all this together. I noticed the first pass of the accounts provided by the council didn't balance, is that normal and did that cause any kind of delay, and then I read in blue somewhere, this is a mistake on my part, I didn't write down where it was, but it's in there somewhere that there was a hold up of waiting for some information, somewhere along the lines, I just, it's not more criticism, it means it's just, my question is, did the process go smoothly, not withstand in the odd hiccups that you get all the time, or are there some lessons to be learned for the next cycle? Thank you, Councillor Lockwood. Again, I think accounting conventional wise is that your debt is and credit needs to balance, so imbalances within any account is not allowed. However, looking at the issues that's with your stress, that was the result of the trial balance mapping, and that is what has resulted in that something not balancing, and those are the issues that have been picked up by the auditors, and auditors has provided a new template that we need to complete, however, that template is slightly different to what we've used before. Now that we are aware of that, going forward, we're going to put necessary measures, control and system in place to make sure that that does not repeat itself, but accounting conventional is that your debt needs to be equal to your credit, so it's not a balance, it's not a balance, thank you. Any more questions to this stage? Councillor Gullfry? Just a general observation really, because we've heard some of it already. A lot of the report when we first started reading, when I first started reading, we talked about the reasons for delays from both sides of my things have been done and what we're going to do to correct them, that's a shame. It has prevented us looking forward a bit, not having that at this stage, however, my opinion is it's better to delay it and get it right than to rush it and miss a few things, so I'm happy with that and what I'm hearing is that the procedures you'll put in place will help us going forward so we don't have those delays, because I'm balanced the report for March last year, 2022-23, the Council doesn't look as though it was in a bad position, we just need to have that information in firm so that we can keep it in that shape going forward and know what to do. So it's really just an observation that I'm glad to be correct in those things and I'm glad we waited to get it right. Thank you. Thank you. Thank you. That's a very helpful contribution. All that you want to continue to go through, that was me. Okay, thank you. What I need to add to the discussion is that the report in front of you tonight, you have got four recommendations. The first one is to note the Gran Johnson Audit Finder Report, which is the ISO 60. The second one is to approve the update estimate of account. The third one is to note the Estana Auditor's letter of representation and the fourth one is to note the auditor's report on the council audit risk. However, in between publishing this report and where we are today, like I said earlier, the audit is still ongoing behind this scene. 99.9% of the audit has been completed. We will be getting an unqualified audit opinion. However, the auditors has carried out what we can call an hot review. I'm sure Sylvia would be able to shed more on that. What that odd review has done then is that they have picked up some technical accounting areas which relates to one or two areas within our disclosure notes. We need a bit of updating or a change to them. We had a meeting, ideally, our thinking is to come to this meeting approved and signed everything off, but when we had our meeting this morning and the auditors came up yesterday when I was off, so we need to actually revisit some of this recommendation because we need to get it right and those discussion notes needs to be right. Before going through in terms of solution, I'm going to call on Sophia to cover the audit review when it happens and the implications. Thank you. What all refers to as the hot review is the technical review of the financial statements. It was triggered when the original draft set of accounts didn't balance because the hot review would look at the technical review or look at the accounts and identify areas that we need to go into more depth. We cleared the majority of those points that I am not permitted to issue my opinion until the hot review and the financial review is satisfied. We were going through the final processes of clearing that this week, last week, sorry. I was explaining to Ola. We are a bit delayed on that because where we had our window to complete this audit originally in March, my team and the rest of the firm is now heavily into NHS accounts audits, so the technical review team very much need to focus on that work and that's their priority, so they haven't been able to look at clearing this audit's technical review until this week. When they looked at it, they raised one more point and this is the point that we're going into in depth now with the finance team, but I am not permitted to issue the opinion until the technical review is cleared, so it's a bit of timing, but as Ola and Jonathan have said, it's something where we want to make sure it's right so that going forwards we're starting on the right footing for the 23 24 financial statements. Realistically, then all we can do is note the report because the report's not ready to be agreed, disagreed or anything, so it's a shame that this could have actually been delayed until after then that I'm happy to propose that we note the report because that's all we can do I think. So just to follow Sophia's comment there, so the suggestions for tonight is that the recommendation number two, which is to approve, would not be possible tonight, however that recommendation can be changed in terms of another recommendation. The order recommendation is going to be delegating the approval of the account, so the Section 1-5-4 officer in consultation and in conjunction with the share of the committee to sign the account, the final account and the letter of rep following the completion of the outstanding item that has just come to light. I think again, what I've just said is normal in an accounting world, I mean for me personally I think I've been doing this for a while, so it's not unusual to delegate the sign enough of the audited account to the Section 1-5-4 officer in consultation with the share of the committee. So what we are proposing is to replace both recommendation 2 and recommendation 3 with another recommendation which this committee needs to approve and I think we've got a copy to complete this copy, that's a copy, then take a copy for myself. I'd like to bring Sophia back in to give some assurance to the committee that what her team are looking at does not materially impact in the understanding or that the statements are misrepresented, if I could ask it to hopefully support that. Thank you Lydia. Yes, so I am confident I've looked at the issues that we are dealing with and there will be no impact in terms of the core financial statements or the bottom line of the accounts or the general fund reserves, this is disclosure, this is looking to make sure that things are properly allocated and classified, what I would say is be happy with the report in front of you that explains the changes to date, if you've got any questions on some of those adjustments then ask them now of your finance team. I think that when the audit is finished what I will be doing is updating the audit findings report for a final time so maybe another colour of text to show you what is different and again that will be circulated I believe so you can ask any further questions but the adjustments that I'm expecting will not change the reader's view of the financial statements as they are now, it's just further detail and further classification within disclosures. Thank you. And just I guess this builds on what Ola was saying, how common in your experience is this eventuality? Thank you Councillor. Very common so typically most audit committees that I go to will have a set of financial statements in front of them that are up to date as to that point but then the authority delegated to the section 151 as Ola has described in conjunction with consulting with the chair to explain if any further changes, if any further changes should arise, it is quite typical because an audit is never finished until the auditor is satisfied that we've looked at everything, we have all the answers, all the adjustments have been made so this is quite normal. Councillor Wemble? Somebody is certainly not qualified to really comment on any of this, is it okay to ask our independent member who's an accountant what his opinion is for guidance or anything? Would you like to comment, share your wisdom? Yeah I mean it is usual to have adjustments but I would say it's unusual to have it at such a late stage, really this meeting perhaps should have been postponed, this is especially called meeting as far as I'm aware, specifically to approve the documents and yet we aren't able to do so. What you're saying, Sophia, I think is that there's no number changes in the accounts, it's all disclosure, so narrative, description in the notes, but could impact on prior year, so possibly restated I think, I'm unsure. So no changes to the core financial statements but within the disclosures there will be changes so for instance if it was short-term debtors and long-term debtors classification there might be a difference in between those, but to the core financial statements no. We have been working, I mean I do want to say thank you to your finance team, especially Jonathan, Danny, Victoria because they've been working tirelessly on this while they've also had to be starting to look at the financial statements for 23, 24, I think that we've got to a point where we wanted to close this down in April but because we've drifted past that point, your team's got other responsibilities, my team is, I'm trying to pull my team back from their current jobs to finish this. We are a bit stretch which is why we've got to where we are and for instance there are things that we just need to bottom out and be happy with, so that only came to light yesterday I would say and we had meetings today to try and figure out what was the best way forward. I think that the suggestion now is a better suggestion than to have another meeting where you will come to approve the accounts, so as I said I think be happy that you've questioned the changes that you see before you and if any further adjustments come with the final set of accounts and my final report again have that opportunity to ask questions, it will be done I think in a virtual setting but rather than a face-to-face meeting yes. That and thank you Cher again in terms of the new recommendation that has been circulated I'm going to read it for me. What we are suggesting is that the auditing governance committee approve that delegation is given to the interim director of governance and finance in bracket sexual welfare phone officer in conjunction with the share of the auditing governance committee to approve in bracket following the completion of the audit to approve the following items the letter of representation for the statement of account 2223 the final auditing statement of account 2223. Can I ask for a short recess so we can get together and talk with through as the committee. I think that's what we need now, all individuals I think it would be good if it's going in the next door. Happy to do that. And see where we are and how we feel, is everything happy with that. Are we happy with the increase, okay, five minutes, ten minutes. So we had a constructive conversation and chat amongst ourselves and the consensus is that the committee would like to come back when the conference and whenever it's left to do is finished, completed and have another meeting. We don't feel comfortable in delegating it and so I'm happy to get another meeting in the diary and do it, make sure they're done properly and face to face. So hopefully we can find a date that will suit everyone here. Okay, shall we continue with the questions we had, any outstanding questions? I think Councillor Butch I had some. Yes, it was just a question about reserve, it's not a question for now but to hear back it was about the climate change reserve and wanting to understand the detail behind the movements out of that reserve and I wonder if at some point we could have a report on just what's been spent and on what. Thanks, Anna. Chair, we would just need you to have a proposal in a seconder for the recommendations with regards to coming back for another meeting. Councillor Campbell, would you like to propose another meeting? Happy to propose. A seconder please, Councillor Godfrey. Thank you. Agreed. Any Councillors, thank you. Should we still go through the documents in front of us or leave that? Right, standing questions for tonight, or will you not leave at all yet? And then just to check, the other recommendations that we're noting, are we going to cover that off? We cover that off then in the subsequent meetings I read. So, I think it's 0.4, it's worth you just noting that management's responses, if there is anything in those responses that you wanted to ask management about or query, then now is the time to do it, thank you. Any questions from the committee on that? No. So, do we propose then, noting, so can I ask the committee to note, gran, thought, and questions, final 2023, audit findings, report ISA260, that we've got in front of us. Happy to propose. Seconder, Councillor Wang, thank you. That's unanimous, thank you. The meeting's closed, thank you everyone, I'm sorry to add another meeting to your diaries, but I think it's probably the best and we've been happy with that. But thank you all for your work so far.