Agenda item

The Committee received a cover report setting out the process for agreeing the Annual Statement of Accounts, which was included in the agenda pack at pages 11-16. The Committee also received an audit completion report from the external auditors, BDO, which was Appendix 2 of the report and was included in the second dispatch agenda pack at pages 3-46. The Committee further received Haringey’s draft Statement of Accounts for 2017/18 which was Appendix 3 of the report and was included in the second dispatch agenda pack at pages 47-189.

BDO introduced the audit completion report for the year ended 31 March 2018. In summary, it was noted that no significant audit risks were identified during the course of the audit procedures subsequent to the Audit Plan dated 8^th March 2018. BDO also advised that they had not identified any material misstatements.

The following points were raised in discussion of the report and the accompanying appendices:

1. The Committee were advised that BDO had some concerns in relation to journals >£50k and a lack of system (SAP) enforced segregation of authorisation.
2. The auditors advised that on Council Dwellings, the Valuer had incorrectly applied a blanket 5% uplift to the previous valuation rather than undertake a full revaluation of 20% of beacon properties as per their agreed methodology.  In response to a query, BDO advised that for 17/18 the uplift appeared reasonable however, by not applying the full revaluation to beacon properties each year there was a risk longer term of a fractional drift in the accuracy of valuations on a year-to-year basis. The Chief Finance Officer acknowledged that he was working with the valuer to address this issue.
3. In response to concerns raised in the report, officers acknowledged that some changes would be made to the processes and controls around the updating of the fixed asset register during the year.
4. The auditors advised that in relation to the audit area of pension liability assumptions, the actuary’s IAS 19 report which uses estimates for the final 2 months of the year, had under-estimated the growth on fund value by c. £12m.  The Committee was advised by BDO that this was not a material concern and that this would correct itself in the next financial year (2018/19).  In response to a question, BDO advised that Haringey’s share of the £12m understatement was around £9m.
5. The Committee sought assurances around the implications of transferring commercial properties from the HRA to the General Fund. In response, the Committee was advised that any debt associated with these properties transferred from the HRA to the General Fund, and therefore the Council would be improving the headroom in the HRA borrowing cap as interest rates in the HRA would reduce. This was a revenue neutral measure overall as the Council was simply transferring funds from one area of the balance sheet to another.
6. The auditors highlighted an improving position in relation to the collection of Council Tax arrears and suggested that the Council may have been too prudent in calculating it’s bad debt provision in this area. The Chief Finance Officer agreed to review the provision percentages applied and consider the impact of improved recoverability in relation to the estimate of future write-offs of uncollectable debt. (Action: Jon Warlow).
7. In response to a question about how well the Council was recovering the overpayment of housing benefit, the auditors advised that there were no material concerns in relation to this but that further work needed to be undertaken to improve recovery of overpayments. The Committee suggested that the strategy should be to stop overpayments at source rather than having to go through a recovery process. In response, officers acknowledged these concerns.
8. The auditors highlighted concerns with the Minimum Revenue Provision charge to the General Fund. The Committee was advised that since 1 April 2016 the Council had adopted an annuity curve methodology rather than a straight line charge when it came to repaying the costs of financial borrowing and that this had saved the authority around £10m this year. Whilst the total sum eventually paid is the same, the concern was that the costs would have to be paid at a later date, and the Council was effectively gambling on an improved financial outlook in the future to offset these costs. The Chief Finance Officer agreed that he would continue to monitor the Minimum Revenue Provision charge going forwards. The Committee noted that this was something that a number of other local authorities had adopted.
9. The auditors advised that there had been a significant improvement in the Council’s overall financial outturn position following a refresh of the MTFS. In response to a question, the Committee was advised that there had been significant budget re-alignments in the demand led services which had had a positive impact on the improved overall outturn position.
10.  The Committee noted that the final version of the audit report would be issued on 31^st July and this would include the management response to the audit recommendations. Officers agreed to circulate this to the Committee when it was available. (Action: Frances Palopoli).

RESOLVED

1. That the Committee considered the contents of the cover report, as well as any further oral updates given at the meeting by BDOLLP.

2. That the Committee approved the draft Statement of Accounts 2017/18, as set out in Appendix three of the second agenda pack, subject to any final changes required by the conclusion of the audit being delegated to the Chief Financial Officer in consultation with theChair.

3. That the Committee gave the Chair of the Committee and Chief Finance Officer (S151 Officer) authority to sign the letter of representation to the Auditor.

4. That the Committee noted the Audit Findings Report of the auditors, BDO LLP, as set out Appendix two of the second agenda pack; and, having heard the verbal management response to BDO LLP’s Audit Findings Report, the committee agreed the management response subject to any final changes required by the conclusion of the audit being delegated to the Chief Financial Officer in consultation with theChair.

5. That the Committee noted that a copy of the final Audit Completion Report, containing final management responses, would be sent round to Committee members after the meeting.