Agenda item

To note the final report from the external auditors (ISA 260) on the 2018/19 audit and the published version of the Statement of Accounts.

The final report from the External Auditors on the 2018/19 Financial Accounts (ISA 260 Report) was considered by the Committee.

The Portfolio Holder for Finance, Councillor T. Schofield, gave an overview of the final report from External Auditors, Deloitte, and their conclusions. It was a challenging and thorough audit but overall the Council received an unqualified audit opinion. The approved statement of accounts, including Deloitte’s audit opinion was published on the statutory publication deadline of 30 September 2019. As this was Deloitte’s first year as Reigate and Banstead Borough Council’s external auditors, it invariably brought new perspectives on the Council’s approach to preparing accounts and the auditors had set out some areas for development on valuation of property assets and drafting the Statement of Accounts. An action plan for the 2019/20 accounts has been drawn up to address these points.

Members had a number of questions and comments in the discussion that followed:

·       Audit completion – Members noted that the accounts had been published on the statutory deadline day for signing off the accounts which they felt did not leave time to consider the final report fully. It was identified that it took significant time to work through many of the new auditors’ questions, for example, regarding information from third party suppliers on asset valuations. Challenges for Deloitte included working to new audit specifications at a time of a shortfall in experienced public sector auditors. It was reported that Reigate and Banstead was in a better position than many other local authorities in Surrey.

Members asked for assurances that there would be more time built into the reporting process for the 2019/20 Statement of Accounts.

·       Balances on Trust Funds – the Council acts as a trustee for a number of Trust Funds of specific areas of land and other facilities for use by the public such as Reigate Baths Trust which were earning interest. Members asked for a written answer about the background of each fund to understand any restrictions on how the capital could be used for the benefit of residents.

·       Pension deficit – it was noted that the net pension liability administered by Surrey Pension Scheme had increased from £71.1m at 31 March 2018 to £79.2m at 31 March 2019. This was in line with the slight increase in discount rates, movements in asset values and impact of the McCloud legal judgement.

·       Short Term Borrowing – there was a short term borrowing requirement of £12m at the end of the financial year. This was in line with the treasury management strategy and was fully repaid in early 2019/20. Members asked for a written answer on the interest rate that was paid on the loan.

·       Valuation of property assets – Members noted that the auditors identified a number of errors in the valuations of property assets which had been amended. These corrected misstatements were included in the audit adjustments in the ISA260 report. Members asked what changes would be made to learn from this next year.

The Head of Finance and Assets explained that Deloitte’s work had required amendments to asset records that dated back over several years and which had not been raised during previous audits. A review of all assets at this level of depth is now being undertaken to ensure that their accounting treatment is correct and the supporting processes and procedures are being updated for this coming year end.

·       Gains and Losses – Members asked for more information on the expected credit loss provision in loans to trading companies (Gains and losses recognised in the Income and Expenditure Account and Movement in Reserves Statement of 2018/19) and on the group accounts for Pathway for Care  Ltd. A written response would be provided.

The Chair noted that a new set of auditors added value to the process. It was positive that auditors did not find any significant value for money risks in their report and the Council’s use of resources were reported positively. However, as the Deloitte report had identified some medium priority items (amber priorities) on internal control and risk management, it was agreed to ask for a progress report in these areas at the Committee’s January meeting.

RESOLVED that:

(i) the final report from the External Auditors on the 2018/19 Financial Accounts (ISA 260 Report) be noted.

(ii) the published version of the Statement of Accounts 2018/19 be noted.

(iii) an update progress report on the Statement of Accounts 2019/20 was requested for the Committee’s meeting in January.