Agenda and minutes

Audit Committee - Tuesday, 18th May, 2021 7.00 pm

Venue: New Council Chamber - Town Hall, Reigate. View directions

Contact: Democratic Services (01737 276182)  Email: Democratic@reigate-banstead.gov.uk

Note: Meetings will take place in accordance with Government guidance. Members of the Committee will assemble at the Town Hall, Reigate. Members of the public should attend remotely, at the link provided. 

Media

Items
No. Item

36.

Apologies for Absence and Substitutions

To receive any apologies for absence and notification of substitutes in accordance with the Constitution.

Additional documents:

Minutes:

Apologies for absence had been received from Councillor J King.

37.

Declaration of Interest

To receive any declarations of interest.

Additional documents:

Minutes:

There were no declarations of interest.

38.

Minutes pdf icon PDF 231 KB

To confirm as a correct record the Minutes of the previous meeting.

Additional documents:

Minutes:

The minutes from the meeting held on 11 March 2021 were approved.

39.

Final Annual Governance Statement 2019/20 pdf icon PDF 171 KB

To endorse the Council’s Annual Governance Statement in order to confirm its inclusion in the 2019/20 Statement of Accounts.

Additional documents:

Minutes:

The Interim Head of Finance introduced the Final Annual Governance Statement 2019/20 and explained that a draft had previously been considered by this Committee and by the Overview and Scrutiny Committee, whose feedback had been taken into account.

 

Approval of the document was sought in order to confirm its formal incorporation within the Statement of Accounts 2019/20.

 

The Committee was reminded that this report considered governance arrangements relating to the year prior to the formation of this Committee and for that reason, the Overview and Scrutiny Committee had taken responsibility for reviewing it.

 

RESOLVED that the Annual Governance Statement at Annex 1 be endorsed.

40.

Report from the External Auditor on the Statement of Accounts 2019/20 pdf icon PDF 231 KB

To consider the report from the External Auditor on the Statement of Accounts 2019/20.

Additional documents:

Minutes:

The ISA 260 report from the Council’s external auditors (Deloitte LLP) summarised the conclusions and significant issues arising from their audit of the 2019/20 Annual Financial Report.

 

Ben Sheriff (Director), Deloitte, introduced the report and stated that the audit was complete subject to receipt of the signed Representation Letter and final confirmations. They had not identified any significant uncorrected adjustments or disclosure deficiencies. Adjustments had been agreed in respect of the presentation of Marketfield Way assets and these had been addressed satisfactorily.

 

The Committee was reminded that year end for 2019/20 occurred immediately after the start of the first Covid-19 pandemic lockdown and this had created significant uncertainty, some of which was reflected in the audit opinion. In respect of property values at 31 March 2020, the valuer had reported ‘material uncertainty’ and there were increased levels of uncertainty within areas such as pension assets. Nevertheless, the overall the opinion was clean and there were no issues relating to value for money.

 

The rest of the report set out the areas that Deloitte had considered in more detail, these included:

·         Covid-19 and its impact on the audit

·         Significant risks

·         Defined benefit pension scheme

·         Property asset re-classification

 

Further detail was requested regarding Deloitte’s reporting of a difference of £400,000 in the value of some assets in the valuation report and the fixed asset register. It was explained that the Council had a large number of individual assets and the valuer had undertaken work to value them for the accounts. However, their reported values were not completely aligned with the Council’s records resulting in a small discrepancy between the two sets of records. This was considered a limited risk; however, a recommendation had been made that “management should put in place a second review of all valuation entries, including allocation by asset prior to being posted into system.”

 

A question was asked regarding the Council’s share of the liability in the Surrey Pension Funds and whether this was being managed appropriately. The reasons for the deficit were explained, including the impacts of the McCloud and Goodwin legal case judgements. The overall deficit shown on the balance sheet would always be a financial challenge as the pension entitlement of employees and pensioners was significant, but this was the same for all Local Authorities.

 

The Council had the ability to reduce its net liability by paying additional contributions to the pension scheme and it had some input into the Fund’s investment decisions, but these were complex matters of judgement. It was explained that the underlying asset and liabilities number were subject to market movements and the position at 31 March 2020 showed significant adverse impacts due to stock market movements in response to the pandemic. This coupled with interest rates being low, meant that the liability at March 2020 was greater. Asset prices were now a lot higher as there had been a recovery in many markets so by March 2021 some of this adverse movement may have been recovered. The primary areas  ...  view the full minutes text for item 40.

41.

Statement of Accounts 2019/20 pdf icon PDF 391 KB

To approve the Statement of Accounts for 2019/20.

Additional documents:

Minutes:

The Interim Head of Finance presented the Statement of Accounts which required approval by the Committee. There had been some minor typographical amendments up until the afternoon of the meeting and it was confirmed that the Chair would be signing the most up to date version. There had been no material changes to the report.

 

Following a briefing received by members regarding the Statement of Accounts, a number of questions had been submitted to the Interim Head of Finance in advance of the Audit Committee. A presentation in response to the questions was given and the following summarises the key points:

 

Question 1. Investment Properties: Re-Classification in 2019/20

 

A total of £49.5m was reclassified from investments properties to other land and buildings.

 

Assets reclassified from Investment Property to Property Plant & Equipment (PPE). Their book values are shown below.

 

      Marketfield Way properties (£11.9m)

      Merstham Regeneration (£8.8m)

      Warwick Quadrant (£6.6m)

      Travelodge (£5.2m)

      Linden House (£2.7m)

      Madeira Walk, Sandpit (£2.2m)

      Town Hall (£2.0m);

      Reading Arch Road Properties (£1.5m)

      Park Farm (£1.0m)

      New Pond Farm (£0.7m)

      Holly Lane Farm (£0.5m); and

      Old Town Hall (£0.5m)

 

This followed a fundamental review of the reasons for holding the assets:

 

·         Investment Property – solely for purpose of generating income.

·         PPE – support delivery of broader corporate and service delivery objectives.

 

This was consistent with the CIPFA Code of Practice for Local Authority Accounting.

 

An extract from the Balance Sheet was shared to explain [agenda pack page 104].

 

Question 2. Marketfield Way Assets

 

It was appropriate to reduce the value of the portfolio of assets at Marketfield Way (Impairment of Marketfield Way Assets). This was a key area of change within the audited accounts compared to the original draft.

·         Head Lease on 18-44 High Street, the Pay & Display car park and some smaller property leases on the site.

·         Historic value in the accounts was £5.2m.

 

Work commenced on site in spring 2020

·         the properties were demolished, and the car park was under the footprint of the new development.

 

Significant new assets were being created as a result of development and this would create new assets in 2020/21 accounts.

·         at 31 March 2020 the project was at the demolition and preparatory works stage.

·         this resulted in a net ‘disposal’ in the Accounts.

 

Question 3. Comprehensive Income and Expenditure Statement (CIES) Movements 2018/19 to 2019/20

 

The Comprehensive Income and Expenditure Statement (CIES) reported a movement from a surplus on provision of services of £3.494m in 2018/19 to a surplus of £1.034m in 2019/20. The main reasons for this movement were:

 

·         Increase in Community Infrastructure Levy (CIL) receipts.

 

Offset by:

·         Property revaluations (Marketfield Way asset write-offs).

·         Increased depreciation charges.

·         This Council’s share of prior years’ Collection Fund deficits.

 

Reserve movements 2018/19 to 2019/20 were also referred to. The main reasons for the Usable Reserves increasing from £54.3m to £63.6m were:

 

·         Increase of £9.3m to reflect Community Infrastructure Levy (CIL) receipts during the year.

 

The main reasons for Unusable  ...  view the full minutes text for item 41.

42.

Any Other Urgent Business

To consider any item(s) which, in the opinion of the Chair, should be considered as a matter of urgency – Local Government Act 1972, Section 100b (4)(b).

 

Note: Urgent business must be submitted in writing but may be supplemented by an oral report.

Additional documents:

Minutes:

There were no items of urgent business.