Agenda item

Purpose: To provide Members with the final copy of the Council's Financial Statements.

The Committee considered a report (Agenda Item 10) from KPMG which provided their opinion on the Council’s Financial Statements, the Council’s Value for Money and proposed recommendations.

The Committee would then be asked, following consideration of KPMG’s opinion, to approve the Financial Statements for 2016/17 and formally close the accounts.

Ian Pennington presented the ISA260 KPMG report. He explained that in summary, West Berkshire Council’s Statement of Accounts, including information provided on use of resources and value for money, provided a sound position for the 2016/17 financial year. Mr Pennington confirmed the KPMG opinion that West Berkshire Council had a clean audit report. This was a good news story for West Berkshire.

Mr Pennington then highlighted the following specific points:

·         Pension liability was highlighted as a significant audit risk. However, this was a national issue due to the Local Government Pension Scheme (LGPS) Triennial Valuation system. KPMG had reviewed the processes in place and reviewed the position of the actuary, and found the calculations to be acceptable and in line with the view of the Berkshire Pension Fund.

·         Pension Fund assets could improve a local authority’s net budget position. However, consideration needed to be given to potential discounts as these varied based on interest rates. The level of liability was an additional factor to consider.

·         Fraud risk of revenue recognition was not considered an issue for local authorities.

·         KPMG had no issues to report on the management override of financial controls.

·         Two areas of audit focus had been identified. Firstly, the changes introduced in the 2016/17 Local Government Accounting Code had been adhered to. Secondly, in terms of assuring the fair value of PPE (Property Plant Equipment), the issue highlighted in relation to asset valuations had been corrected. This error was due to assets not owned by the Council being incorrectly included in the valuation figures. Pre-audit, PPE was reported as £432.1m, post-audit and the correction to asset valuations, this figure reduced to £427.5m. However, subject to adjustments being made, this change had no effect on the Council’s General Fund. Recommendations were included in the report for the Council to review its valuations and the processes used to ensure accuracy.

·         Mr Pennington confirmed that any investment properties purchased by the Council would form part of the PPE. He also confirmed that the Council’s stance on valuations was more conservative than that of the valuer and KPMG were supportive of that.

·         Turning to the key judgements made in the report, provisions had moved from £350k to £153k, but this was not considered a material change. A material change would be in the region of £5m, when considering the Council’s overall budget.

·         The judgement on the Council’s reserves was considered by KPMG to be optimistic. The balance on General Fund reserves of £6.3m was largely unchanged from 2015/16 but as this was close to the minimum safe limit set by the S151 Officer it was considered optimistic.

·         The Council had good accounting processes in place.

·         The accounts had been finalised within an accelerated timeframe and this put the Council in a good position to meet the new 2017/18 deadline. Despite this shortened timeframe, the Council had produced a good set of draft accounts. The documentation would benefit from being proof read prior to publication.

Jane Langford queried whether the increase of judicial reviews gave cause for concern in seeking to maintain safe levels of reserves. Councillor Graham Bridgman commented that it was the outcome of judicial reviews, rather than the reviews themselves, which could create a cost to the Council, i.e. a task introduced or reintroduced which would need to be budgeted for.

Councillor Quentin Webb pointed out that the page numbers provided on the contents page of the KPMG report needed correcting.

Within the financial statements document, Councillor Webb referred to the section on ‘doubtful receivables’ and the need to determine an appropriate provision for debts not likely to be collectable. This provision was to increase and Councillor Webb queried if this was a result of the financial climate and whether this was a trend experienced in other areas. Andy Walker confirmed that an increase in this provision was proposed due to the age of some debts. Mr Pennington confirmed that this was a ‘blip’ he had observed in other local authorities. He went on to give the view that it was sensible to take this cautious approach for the provision based on the more historic debt.

Mr Pennington did however feel there were more active ways of debt recovery that the Council could employ. Councillor Bridgman confirmed that the debt provision was discussed as part of financial challenge review work and actions identified from this were being implemented which included recovery. Andy Walker added that different tools for debt recovery were being explored.

An amendment was noted on page 99 of the financial statements to clarify the reference made to the Council Tax Base.

Councillor Jeff Beck returned to the KPMG document and specifically the need for management representations. This section of the report noted that the Council was required to present a signed copy of the management representations document to KPMG before it could formally issue its audit opinion and Councillor Beck queried if this had been provided. Mr Pennington advised that this did not form part of these papers. He explained that this was a standard management requirement which confirmed that the necessary procedures had been followed, i.e. in relation to the Council’s financial standing and to confirm the legality of the Council’s transactions. Mr Pennington confirmed that the Council had followed the procedures as required. If there were matters of concern then the Council would have needed to provide more detailed representations.

In order to complete the representations process, Mr Pennington would forward the template to Andy Walker for completion. Andy Walker agreed that he would then issue the draft document to Committee Members via e-mail for comments before it was signed off and returned to KPMG.

Councillor James Cole proposed that, following consideration of KPMG’s report and subject to the completion of the management representations template, West Berkshire Council’s Financial Statements for 2016/17 be approved. This was seconded by Councillor Bridgman.

Councillor Beck took the opportunity to thank the Council Officers involved in producing the documentation and KPMG for their assistance.

RESOLVED that following consideration of KPMG’s report, West Berkshire Council’s Financial Statements for 2016/17 be approved, subject to the completion of management representations and the amendment of any typographical or other minor errors.