Agenda item

Purpose: This report provides Members with the draft Auditor’s Annual Report and Year-End Report to the Governance Committee, both documents prepared by KPMG following their external review of the Council’s 2023/2024 Draft Statement of Accounts. 

The Committee considered a report (Agenda Item 5) concerning the Audit Findings for West Berkshire Council - Financial Year Ended 31 March 2024.

The Senior Financial Controller (Interim) introduced the report and highlighted that the recommendation presented to the Committee was to delegate the signing of the 2023/24 Statement of Accounts to the Service Director (Finance, Property and Procurement) (S151 Officer), in consultation with the Chairman of the Governance Committee. He also confirmed that the deadline for their approval was by the end of February 2025.

The representative from KPMG, Jonathan Brown, discussed both of their reports before the Committee; the annual auditors report, which was intended for publication on the Council’s website, and the audit findings report, which was discussed by Members of the Committee. He informed Members that work had been done on the 2023/24 Statements but that, as per the Backstop on local government accounts agreed by Central Government, these Accounts would contain a disclaimer of opinion. However, he assured the Committee that KPMG were still on track to get the Council back to having unqualified opinions.

The Council’s payroll system and investment property valuations were identified as the two large outstanding areas left for the audit. The representative from KPMG noted that the reasons for the delay included the Council changing payroll systems and that the Council had procured a new valuer who was taking time responding to KPMG’s questions. Both the representative from KPMG and the Section S151 Officer emphasised that the Council’s central finance team and KPMG had been working very positively together, and that, as no further delays were expected, the audit was on track for completion by the Backstop date.

In terms of Value for Money, the representative from KPMG indicated that their final reporting on this highlighted the precarious financial position of the Council given the low levels of reserves – something that had been previously identified.

A question was raised about the wording of the audit findings executive summary, and if the language used may indicate that the Council was at fault for needing the Backstop and a disclaimer of opinion. Members noted that at the Governance Committee meeting on 19 November 2024, the Letters of Representation for 2021/22 and 2022/23 were signed off with the agreement that the no-fault nature of the Backstop be included, as well as indicating in the 2022/23 letter that the previous external auditor had not commenced any work on that audit. In response to the question about wording, the Section S151 Officer indicated that they would work on the final phrasing before it was published, but that the wording before the Committee would be the standard wording used by KPMG for Backstopped audits. The Chairman agreed that that they should look to apply similar wording as was used in the approved Letters of Representation in order to ensure the public better understood the reasons behind the disclaimed audit. 

Members asked about the projected £2.5-£3m revenue increase as a result of five hundred houses being developed, which was indicated in the Financial Sustainability Risk section of the report on page 42 of the agenda, and if this was premature given the new Local Plan not yet being adopted. The representative from KPMG clarified that this was a projection and so had not been included in the accounts. This was something they had highlighted in the report so that it could be used for future budget plans. He also confirmed to the Committee that he would look to provide more detail about the timetable of when the additional revenue derived from housing might be gained as well as what form this payment would be in – be it through Community Infrastructure Levy or Council Tax.

In response to a point about the Council not meeting its savings targets and what improvement opportunities could be suggested as a result of this, the representative from KPMG mentioned that the Council had not always increased Council Tax by as much as it could have, which would contribute to alleviating financial pressures, and also that other authorities in similar positions had a centralised savings team which could drive cost reductions.

On a question about the presumption of a fraud risk to the Accounts, Members noted that this was a standard auditing assumption for public sector audits as management could be in a position to override financial controls. Having examined the accounts, KPMG confirmed to the Committee that they did not find any evidence of management overriding controls.

Members discussed the position of the Berkshire Pension Fund and were assured by KPMG that they were satisfied with their underlying assets and key assumptions. It was also noted that the next Pension Fund report was due to be published within the next few months.

Overall, as the Committee were satisfied with the report, they agreed to approve the recommendations. The representative from KPMG indicated that they would provide the Council with a finalised update before it was signed off.

RESOLVED: That delegated authority to sign the 2023/2024 Statement of Accounts be assigned to the Council’s Service Director (Finance, Property and Procurement) (S151 Officer), in consultation with the Chairman of the Governance Committee, once the Council’s appointed external auditor KPMG provides a formal opinion on the 2023/2024 Statement of Accounts. This approval is subject to the communication from KPMG that there had been no material changes to the draft audit opinion.