The Director of Corporate Services introduced the report which provided an update to the Committee on the audit of the Statement of Accounts.

The External Auditor presented his report, advising the Committee  that the additional property valuation work required was ongoing and due to complete in October.  Therefore the External Auditor was not in a position to sign off the Statement of Accounts.  However, all other outstanding audit work had been completed, subject to some final processes, and the Value for Money work had demonstrated that the Council had all the proper arrangements in place.  The fees incurred to date had been included in the report, however further fees would be incurred through the auditing of the additional valuation work required and those would be included in the report to the next meeting.

The Committee expressed its disappointment that, despite the undertaking given at the last meeting, the work had still not completed.  It was felt that the staff resource issues over the summer period should have been anticipated and planned for accordingly.  Clarification was sought on what  had prompted the change in methodology used for the property valuations and whether there needed to be better communication between the External Auditors and the Council.  The Committee was concerned that the Council was in the bottom 10% of the Country in respect of signing off its final accounts and lessons learnt from the process should be brought to the next meeting for the Committee’s consideration.

The External Auditor advised the Committee that the auditing of the valuation of property, plant and equipment (PPE) had been a focus of the regulator of external audit, the Financial Reporting Council, for the last few years. As a result, external auditors had been providing more challenge to management on how they had determined the asset figures in the accounts.  The External Auditor stated that a number of other local authorities had experienced issues with the valuation of PPE and this contributed to those authorities not having audited accounts by 31 July.

The Director of Corporate Services advised that the issues with the Council’s valuation figures had been raised after the initial work had been completed, on schedule.  There was not currently the specialist  expertise within the Council to carry out the new detailed methodology and therefore the District Valuer was asked to assist the Council’s officers.  Although this would not impact on the Council’s overall bottom line, it was acknowledged that it was not a good position to be in and therefore a lessons learnt paper would be reported to the next meeting for the Committee’s consideration.

The Assistant Director of Sustainable Communities advised the Committee that the valuation team, which he had overall responsibility for, was regulated by the Royal Institute of Chartered Surveyors.  A mistake had initially been identified in the original calculations, in part due to a methodology used referred to as Depreciated Replacement Costs.   There had been a change in figures input in 2015/16 resulting from a change in build costs which had impacted on the Council’s figures, resulting in an undervaluation as the methodology used had effectively discounted the build costs.  Once the mistake had been identified, the auditors had requested clarification and further information, which had resulted in the valuation exercise being re-run and hence the delay in the timetable. 

The Committee expressed concern over the cost for the additional work required by the External Auditors and the lack of clarity over what the final cost would be.  In response, the External Auditor advised that the final cost would depend on the extent of the valuation work received from the Council.  However, he assured the Committee that the audit work had been paused until the external valuation work had been completed and received by them, at which point the audit would resume.

RESOLVED

1.    That the progress made on auditing the Statement of Accounts, including the Group Accounts and the Pension Fund Accounts subject to any further comments from the External Auditor be noted.

2.    That EY’s Audit Progress report which includes their Value For Money assessment (attached at appendix 1 to the Committee report) be noted.

3.    That subject to confirmation of it being in accordance with the Committee’s Terms of Reference and the Scheme of Delegation set out in the Constitution, authority be delegated to the Director of Corporate Services to agree the final accounts after consultation with the Chair and incorporating comments of the Committee, to avoid further delay.

4.    Subject to the investigations as part of recommendation 3 above, that the Final Accounts be reported to the next meeting of the Committee for agreement, or an earlier one if required.