Agenda item

This report gives a brief review of the Council’s annual Statement of Accounts and the Council’s Pension Fund Accounts for 2011/12. It also provides an overview of the recommendations arising from the audit of the accounts prior to the publication of the Audit Commission’s formal opinion on those accounts. The Audit Commission’s Annual Governance Reports 2011/12 are attached as appendices, along with the Statement of Accounts for approval.

HiteshJolapara, Bi-Borough Director for Finance, introduced the report, which set out the accounts for the 2011-12 year. He said that the accounts had been given a clean bill of health by the auditor, with no issues found on the Pension Fund accounts. He drew attention to some of the major changes that had taken effect during the year, including the inclusion of heritage assets and the repayment of £197 million of Housing Revenue Account debt.

Julian McGowan, Audit Manager, Audit Commission, said that the Auditor would be able to issue an unqualified opinion with no outstanding objections. He said that the process of the audit had gone very well with the accounts presented in good time and queries responded to quickly. He said that the accounts could be approved and that the recommendations made in the audit had received a positive response.

Eugenie White asked about the difference between the accounts as stated on page55 and on page 81. Christopher Harris, Head of Corporate Accountancy and Capital, said that the table on page 81 showed the balance sheet under International Financial Reporting Standards (IFRS). He said that this meant that impairments that were shown as due in their entirety, the Council’s Pension Fund debt for instance.

Councillor Murphy asked, given the financial risks identified, whether the reserves were high enough. Jane West, Executive Director of Finance and Corporate Governance, said that it was her view that balances would need to be added to rather than reduced, but that they were already considerably higher than when she took the post.

Councillor Ginn asked Mr McGowan how the Council’s performance compared to other boroughs. Mr McGowan said that it had been an easier process than the previous year had been, due to IRFS being better established. He said that, in his experience, the Council was among the top 10 percent in London for responsiveness and the quantity of adjustments required.

Councillor Murphy asked about the disposal of finance leases. Mr Harris explained that one related to the freehold for the Novotel in King Street, which had been sold during the year. He said that the other one related to the Metro building nearby, which while listed for disposal, was the subject of a complex legal position, making negotiation necessary and a timetable for that disposal uncertain. Officers agreed to send the Committee a briefing on the position of the site.

Councillor Murphy asked why, given the pay freeze for staff employed by the Council, senior staff had continued to receive pay rises. Ms West said that the rises had been contractual, and related to performance related pay; she said that all staff entitled to a contractual increase had received one, but that 92% were already at the top of their pay band. She confirmed that bonuses paid were pensionable.

The Chairman asked whether there was a breakdown of the £26 million in savings. Ms West said that the pay scales for senior officers and the breakdown of savings had been reported to full Council, and officers would circulate details.

The Chairman said that the degree of overspend was noteworthy, and wondered if it reflected issues with budgeting. Mr Jolapara said that managers, given the overall environment, had incentive to make savings early, and that there was no culture of spending to budget within the organisation. Councillor Ginn said that, if business objectives were met, underspend had to be considered a success.

Eugenie White asked about the issues with short term debtors identified in the auditor’s report. Mr Harris said that there could be good reason for debts to remain on the Council’s books, past the point at which they would normally be written off, giving the example of charges on property. He said that the report had identified that the Council needed to improve its record keeping however.

RESOLVED THAT

(i) That the content of the Auditor’s Annual Governance Reports, which state that the accounts will receive an unqualified opinion, are free from material misstatements, that the Council has an adequate internal control environment and has made proper arrangements to secure economy, efficiency and effectiveness in the use of resources, be noted, and;

(ii) That the Council’s response to the Annual Governance Reports (AGR) be noted, and;

(iii) That the management representation letter (as included with the AGR) be approved, and;

(iv) That the Statement of Accounts for 2011/12 be approved.