Agenda item

The Committee received the Statement of Accounts for 2018/19 and a short cover report as set out on the agenda pack at pages 31-160. The Committee also received the BDO external audit report at appendix 1 of the report, which was set out in the addendum agenda pack. The report was introduced by Thomas Skeen, Head of Pensions, Treasury and Chief Accountant. Jon Warlow, Director Finance was also in attendance. Lee Lloyd-Thomas and Simiso Ngidi were also present on behalf of the Council’s external auditors BDO. The following was noted in discussion of the 2018/19 Statement of Accounts:

a.    Officers set out that the compiling of the Annual Statement of Accounts had been brought forward last year to 31^st July, which was an especially challenging timescale. The auditor advised that it was possible to meet these timescales, provided that there were no significant issues that arose.

b.    The Committee was advised that the accounts needed be adjusted to take account of the McCloud pension ruling, which was a recent court case that was found against the government and related to the ten-year window in which employees had guaranteed protection between a shortfall in final salary versus career average pensions. The ruling found the window to be age discriminatory and that the protection should be offered to all persons in receipt of public sector pensions. The Committee was advised that this resulted in a £6m liability for the Council and a £7m liability to the Pension Fund for the wider group (including HfH and Alexandra Palace).

c.    The auditor advised that an additional pension liability from the Lloyds ruling did not need to be reflected in the final accounts. In relation to errors found in Property, Plant and Equipment, officers advised that BDO were doing further work to correct a significant error in the valuation of Highgate School as the square footage of the building had been incorrectly calculated, which resulted in a miscalculation of around £9m.

d.    Officers advised that there was a reasonable possibility that the 31^st July submission deadline would not be met, but assured the Committee that there was no particular impact on the Council for missing it and that many other authorities would also miss this deadline. The report requested delegated authority for the Chair and Section 151 Officer to agree any final changes to the report prior to its submission. Officers advised that they would bring an update report to the Committee meeting in September. (Action: Thomas Skeen).

e.    BDO advised that the final audit report would be published along with the Final Statement of Accounts. The Committee was advised that the role of the auditor was to determine whether the accounts were materially true and fair. BDO advised that definition of materiality was that they were within 1.5% of the total spend of the group, which equated to around £16m. The McCloud pensions ruling took the Council up to the threshold and it was therefore necessary to amend the accounts as a result.

f.     In relation to the Highgate school issue, BDO highlighted the need to maintain an accurate data set and that getting the data from the valuer had been an issue. BDO also drew the Committee’s attention to the fact that some of the Council’s collection rates were getting better.

g.    The Committee was advised that overall, the auditor felt that the Council had a good grip on its savings plans and that the overspend of £8m was manageable in the short term, given the Council’s reserve position. BDO acknowledged that there was slippage in the savings plans but suggested that the Council was in a better position than many other authorities and that there was no immediate risk of effective bankruptcy, as per Northamptonshire County Council.

h.    In response to questions about possible late publication of the report and a request for further information on the reasons behind this, BDO advised that the government had squeezed the audit timetable down to around 2 months. BDO suggested that there was only a limited number of auditors working within local government and around 400 local authorities that needed to be audited, all working to the same timeframe. In this context, it was noted that Haringey had a balance sheet of around £1.5 billion as well as billions in pensions liability and that this was an inherently time consuming undertaking.

i.      The Committee enquired as to what the collective response should be, as local authorities, and how could the Council respond. In response, officers advised that at a regional level, this was likely to be something taken forward by London Council’s. The Head of Pensions, Treasury and Chief Accountant agreed to consider the issue further, to undertake a holistic review of the problem and to report back in September or a future meeting once the audit had been concluded (Action: Thomas Skeen).

j.      The Director of Finance advised that he shared the Committee’s concerns and acknowledged that the statutory timetable did not work, particularly as it now coincided with the audit timetable for the health sector as well. The Director of Finance reiterated that a number of authorities would fail to meet this deadline and speculated that perhaps this could be catalyst for a change of approach by the government. The Director of Finance set out that the authority had made every effort to submit its annual accounts accurately and on time. The Director of Finance highlighted that the audit report had highlighted less misstatements than in last year’s report and he suggested that this should reflect positively on the quality of work by officers.

k.    In response to a question around the agreed level of materiality, BDO advised that the audit report was drafted on an assumption that management would not correct every issue that was highlighted and that the rate had improved in recent years.

l.      In response to a question around changes to the government’s valuation cycle, BDO advised that a valuation was undertaken to identify a drift in the value of the accounts. This was undertaken every three years. The Committee were advised that the government were pushing to recalibrate this to a four-year cycle to match its own and that discussions were continuing, but that the primary motivation seemed to be for the government to make savings.

m.  The Committee highlighted non-collection of receivables and questioned the £17.3m identified for PCNs. Members sought clarification about whether there was scope or increasing revenue through better debt collection arrangements in this area. In response, it was noted that unpaid parking tickets had to be kept in the system for a long time until they could be written off and that the figure of £17.3m did not represent unpaid tickets in 2018/19. In response to further questions, the Committee was advised that Haringey’s position was in line with other local authorities on this issue.

n.    The Committee sought further reassurance around the Council’s reserve position. In response, the Committee noted that the Council increased its reserve position last year from £84m to £90m. In the context of a circa £8m overspend, the Council was therefore not in a position whereby it would run out of money in the short term. BDO assured the Committee that the Council was in relatively good position overall.

o.    BDO set out that the role of the auditor was to make a determination about unlawful or unreasonable decisions, it was not their role to comment on policy and that Members were ultimately accountable to their electorate in this regard.

p.    In regards to value for money considerations, BDO advised that the audit process was less focused on this than it had been previously, due to cuts to the National Audit Office.

q.    In response on a question around outstanding actions, BDO advised that they anticipated having all of the relevant information within two to three weeks and were waiting for a response from Highgate school as well as Alexandra Palace’s auditors to sign off their accounts.

r.     In response to an enquiry about the role of the auditor in reviewing the council’s Annual Governance Statement, BDO advised that their role was limited to making a judgement about whether it contained any material inconsistencies and that they were happy with the Annual Governance Statement on that basis.

RESOLVED

     I.        That the Committee considered the contents of the report and the further oral updates given at the meeting by BDO LLP.

    II.        That the Committee approved the Statement of Accounts 2018/19, subject to any final changes required by the conclusion of the audit, being delegated to the Chief Financial Officer in consultation with the Chair.

  III.        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.

  IV.        That the Committee noted the Audit Findings Report of the auditors, BDO LLP, and approved the management responses in the BDO LLP action plan contained within that report.