Minutes for Audit Committee meeting, Sep 22 2009, 5.00PM official page

Before consideration was given to the report the Chairman explained to Members the reason the report was late in being distributed. Gus Miah thanked both Members and officers of the Council for their understanding.

 

Consideration was given to a report which summarised the findings of the External Auditor on the audit of the 2008/9 Statement of Accounts and the Council’s arrangements for securing economy, efficiency and effectiveness in its use of resources.

 

Since the approval of the accounts on 29 June 2009, a number of amendments had been identified by both the Corporate Accountancy Team and Audit and the financial statements had been amended to reflect these changes.

 

Gus Miah from Deloitte attended the meeting and introduced the report to Members. The following risks and judgemental areas were addressed:

 

• Oracle system update
• Fraud and corruption and the potential for increased occurrence as a result of the economic downturn
• Bad Debt Provision: During an economic downturn there was a greater risk that debt recovery would fall
• A reduction in the value of the asset base to reflect the economic downturn and
• Impairment of investments held in Icelandic Banks

 

In relation to other risks in relation to the Council’s Use of Resources Assessment and Value for Money reference was made to the cost reduction programme. The Council had set and achieved a £11.3m cost reduction programme in 2008/9 and forecast a programme of £10.9m for 2009/10, in addition to a further £1m in year savings programme.

 

It was identified that the Council was under pressure with regard to its expenditure on Asylum Seekers and this had been taken into consideration when reviewing the accounting entries and arrangements to manage these pressures. The Head of Accountancy Services provided Members with the history to the Asylum Seeker Funding and said there was a £2.239m expenditure gap which the Council had claimed for through a Special Representations Bid. The Director of Finance & Resources confirmed in the Management Representation Letter, his opinion that the bid would be successful. Members concurred with this.

 

In 2008/9 the Council had a successful year in managing its finances. The accounts recognised a £68m deficit in the year, but this was primarily due to impairments to the carrying value of fixed assets, caused by the economic downturn in property prices.

 

Regarding the Council’s financial performance and standing, the Council had had a successful year increasing balances from £12.6m to £16.9m.

 

Members were updated on the audit status and informed that only a few Internal Review processes remained outstanding. Subject to the satisfactory completion of these, it was anticipated that an unqualified opinion would be issued.

 

The Annual Corporate Governance Statement (AGS) was being updated to reflect the latest findings following the Council’s internal certification process, and subject to this review, the AGS would be signed off.

 

The Value for Money conclusion was that based on the review, the Council would be issued with an unqualified value for money conclusion. 

 

Members were provided with details of materiality and identified misstatements (differences in judgement) which were as follows:

 

• Imported Food Unit - the Council provided a service to check imported food at Heathrow airport and surpluses had been built up which the Council recognised should not be classified as a creditor, but that further work would be undertaken next year to determine the correct classification
• Council Tax Bad Debt provision – Deloitte expressed their opinion that the Council had underestimated the bad debt, based on their experience with local authorities, whereas the management view was that as the Council was more proactive in the recovery of Council Tax, the current provision was sufficient. However, the Council had agreed to review the provision for next year’s accounts.
• Non Domestic Rates Bad Debt Provision – Deloitte's view was that Non Domestic Rates bad debt provision would increase due to the current economic climate and so they proposed that an adjustment should be made to increase the provision. Experience in Hillingdon was that the recession had little impact on collection rates in the previous year and management had concluded that there was no reason to revise the provision.

 

   Resolved –

 

1.  That the adjustments, both recorded and unadjusted as detailed in the report be noted.   

 

1. That the internal control recommendations as detailed in the report be noted.

 

3.  That the progress made and actions being taken to continue to improve the quality and accuracy of the information contained within the accounts and to address the matters raised in the report be noted.

The Senior Finance Manager for Corporate Finance reported that the Representation Letter would be amended to delete references to the Audit Committee.

 

Regulations required that this Committee, as the body charged with the governance of the Council’s accounts, received this report.

 

Members were informed the only outstanding item was in relation to investment valuation.

 

Resolved -  

1. That the Auditor’s findings and the actions recommended to improve the quality and accuracy of the information contained within the report and the accounts be noted.

Members were reminded that an interim report was considered by this Committee at its meeting in June 2009.

 

Guy Miah from Deloitte reported that overall it was considered the Council had achieved a strong level 2 performance overall, with a clear path visible to achieve a level 3 in the future.

 

With regard to financial governance and leadership of the Council, the Committee noted the comment in the report; “The audit committee receives and considers both internal and external reports relating to financial management and governance. It monitors progress made against recommendations, and there is evidence of senior managers being challenged on areas where further progress could be made”.

 

Discussion took place on section 3.2.2 Understanding costs and achieving efficiencies – key features, and the comment regarding benchmark information indicated that further efficiencies could be made by the Council. In relation to children’s and adult social care, the Council’s costs were in the upper quartile when compared to the Council’s nearest neighbours. The Chairman commented that their costs may rise in future years, and this level of preventative spend may reduce costs.

 

Members noted the comment in section 4.4.1 Risk Management and internal control, that “The Audit Committee provides robust challenge and has an independent chair with a financial management background”.  

 

The Committee expressed their thanks to Deloitte for the manner in which they had conducted the audit.

 

Resolved-

1.  That the information contained in the report be noted.

The CIPFA Code of Practice on Treasury Management in Public Services recommended the creation and maintenance of Treasury Management Practices. These provided information on the responsibilities, decision making and reporting arrangements in place for the treasury management function. In line with the increased scrutiny of Treasury Management processes, and the role of this Committee in approving the Annual Treasury Management Strategy, it was appropriate for this Committee to review Treasury Management Practices.

 

Reference was made to training manual which was being arranged by Arlingclose, the Council’s Treasury Management consultants. This would be followed up once available.

 

Resolved-

1.  That the information contained in the report be noted.

Members were informed that from 2010/11, Local Authorities’ Statement of Accounts would be required to be prepared under an IFRS based Code of Practice on Local Authority Accounting. With this Committee being charged with governance of the authority’s Statement of Accounts, details of the project plan to implement the transition would be reported to the Audit Committee.

 

One of the initial tasks following completion of the audit of the 2008/09 accounts, would be to restate the 2008/09 balance sheet. 

 

Resolved-

1.