Agenda item

The Committee received an update report on the Buckinghamshire Council Statement of Accounts 2020/2021 which provided Members with information on the work the external auditors were undertaking to progress delivering their responsibilities.

Mr Richard Ambrose, Service Director for Corporate Finance and Section 151 Officer and Mr Iain Murray, Grant Thornton attended to present the update. The report noted that upon receiving the latest version of the financial statements, there were a number of issues identified, including:

• Missing primary statements such as group cash flows and comparative figures for the group’s balance sheet,
• Inconsistencies between the word formatted statements and the notes forming part thereof,
• A lack of schedule which reconciles the movements from the first version of draft financial statements and the latest version.

A number of queries had been raised in respect of group accounts and the external auditors were waiting for management’s assessment of the components for potential consolidation. The external auditors had also encountered significant difficulties with the bank reconciliation process and there were a number of areas which were now with the Council for ratification. It was understood that the impact of the actions management had proposed would result in changes to loans, debtors and creditors disclosed in the financial statements and may result in the need for additional audit testing in those areas.

There were 90 sample items for which the external auditors were awaiting evidence, these related to a number of areas of the financial statements. There were also general queries raised in the areas of Grant income; Housing Benefits Expenditure; Capital commitments; Leases; Financial Instruments; Derecognition of Schools; and Expenditure and Funding Analysis (EFA) and pooled budget notes.

Further to the above, which were specific to the Council’s audit, there was a sector wide matter causing further delay to Local Authority audits. The CIPFA Code of Practice on Local Authority Accounting prescribed the accounting treatment and disclosure requirements for infrastructure assets. The Code required infrastructure to be reported in the Balance Sheet of depreciated historical cost, that was historic cost less accumulated depreciation and impairment. The Code also required a reconciliation of gross carrying amounts and accumulated depreciation and impairment from the beginning to the end of the reporting period. These requirements of the Code derived from IAS 16 Property, Plant and Equipment. There was a concern that audited bodies were not able to apply the full requirements of the Code, in particular derecognition of parts of assets where the subsequent expenditure on them was capitalised. This issue was currently being considered by CIPFA via an Urgent Task and Finish Group with an outcome anticipated in June 2022.

During the discussion, issues raised included:

• The significant reason for the issues noted above related to the challenges of amalgamating the five separate legacy councils accounts. This large task had been made further difficult by staffing vacancies and ongoing staffing changes. Many of the staff from legacy authorities had since left the employment of the Council which resulted in reduced corporate memory and affected the time it took to resolve the outstanding queries. Grant Thornton, whilst previously the external auditor for the former County Council, had not worked with the District Councils previously so also had limited corporate memory to support with certain queries. Throughout the process there had continually been staff turnover, which had caused delays with new staff attempting to understand the processes previous staff had followed.
• The audit would be paused temporarily for around six to seven weeks to allow the Council officer team to re-visit the statements and take a ‘first principles’ approach around the opening balance sheet position to ensure that all transactions were mapped correctly and the accounts notes reconciled appropriately.
• Members expressed their concern and frustration at the delay, whilst acknowledging the challenges in getting the accounts finalised and spoke of their concerns around the impact the ongoing delay may have on the subsequent year’s accounts audit.
• Members heard that the issues identified were mainly confined to the balance sheet and classifications. The Committee received reassurance that the bottom line position provided around the overall financial position (including reserve levels) and the recently approved MTFP were still accurate.
• Resourcing was a constant challenge and was recognised as an issue both locally and nationally, with a shortage of technical accounting staff. Interim staff had been employed, although this in itself had caused issues with those new in post having to gain an understanding of why previous staff had completed areas of the accounts in certain ways. The Committee were in agreement that the Chairman, on behalf of the Audit and Governance Committee, should write to the Cabinet Member for Finance, Resources, Property and Assets to express its concern at the recruitment issues and to highlight the urgency required to address the issue. The Section 151 Officer advised that he had regularly been updating the Cabinet Member on the situation. There was also emphasis placed on promoting ‘grow your own’ staff, although this would not solve the immediate issues.
• In comparison with other local authorities, at the end of March 2022, only 52% of local authorities had signed their statements of accounts off. Those yet to be signed off would now be delayed whilst CIPFA conclude their findings on the national infrastructure assets issue.
• The importance of completing the 2020/21 audit before commencing the 2021/22 audit was highlighted, although discussions would be held with the external auditor to discuss whether there was any scope to audit certain aspects of the 2021/22 accounts prior to the issues with the 2020/21 accounts being resolved.
• In terms of the timescales involved, it was hoped that responses on queries would be provided to the external auditor over the next few weeks and there would then be a period for the external auditors to continue their work. This could be completed in time for the 28 July meeting of this Committee; however, the 27 September meeting appeared to be a more realistic date to set for the presentation of the final accounts. The outcome of the national infrastructure assets issue could also affect these dates. The Committee requested that if the accounts were not signed off by the time of the July meeting, an update should be included on the agenda.
• The external audit plan for 2021/22, would also likely be presented to the September meeting at the earliest, as the completion of the 2020/21 accounts significantly informed the risk assessment of the future audits. 
• It was clarified that the housing benefit queries related to the work around the testing done for the purposes of the financial statements rather than the work undertaken on the subsidy return to DWP, which was how the Council was reimbursed for housing benefit claims. Since the report was produced, there had been progress made on resolving the housing benefit related queries.
• The Committee was advised that the previous County Council system had been used for producing the accounts, so therefore mapping issues experienced with the other legacy Councils were not an issue in previous years. There were no outstanding audit queries on Adult Social Care or Childrens Services and the corporate memory remained to respond to issues raised around leases and liabilities which were the responsibility of the former County Council.
• As a note for future updates, Members recommended including years where dates were referred to within reports and the full wording used prior to including acronyms to provide clarity and aid understanding. 

RESOLVED –

1. That the report be noted.
2. That the Chairman, on behalf of the Audit & Governance Committee write to the Cabinet Member for Finance, Resources, Property and Assets to raise concerns around the ongoing delays to the 2020/21 Statement of Accounts and the recruitment and retention of technical accounting staff, highlighting the need for this to be addressed as a priority.