Agenda item

This report presents the Council’s Statement of Accounts, including the Pension Fund, for 2017/18.

Hitesh Jolapara (Strategic Director of Finance & Governance) presented the report on the Council’s Statement of Accounts, including the Pension Fund Accounts, and Annual Governance Statement for 2017/18 and the external auditor’s (KPMG) draft opinion on the accounts. It was noted that the External Audit Report and the Council’s Management Representations Letter were contained in a supplementary agenda and an addendum was tabled which set out minor adjustments to the accounts and had been agreed with the auditor.

Jennifer Townsend (KPMG, the Council’s external auditor) informed the Committee that, subject to a small number of queries and procedures being satisfactorily resolved, they intended to issue an unqualified audit opinion on the Authority’s financial statements and the Pension Fund’s financial statements. She then took the Committee through the report noting the following points:

·         Four prior-year recommendations had been identified that required further action by management. One new low-priority recommendation had been made as a result of the 2017/18 work. The recommendations (in Appendix 1 of the report) related to the completion of schools’ year-end bank reconciliations.

·         Under key audit risks there were no significant issues raised. She highlighted the managed services contract as an area of significant improvement. In the past it had been a risk area but local controls had mitigated this.

·         There was one Pension Fund risk around hard to value investments.

·         The Council had achieved the highest assurance possible around Value for Money work with no significant concerns.

Councillor Matt Thorley asked how the Council arrived at valuations for items on the Council’s asset register and how the auditor verified them. Emily Hill (Assistant Director for Corporate Finance) said the Council used an independent valuer (Wilks Head & Eve's) and had an in-house valuer who reviewed their work. Jennifer Townsend said the auditor looked at the information provided to the valuer then ‘sense checked’ the valuations against that data. They also had their own surveyors who provided analysis. The auditor also assessed the valuers as experts – did they have the requisite experience and credentials etc.The Council valued material assets every year and had a five-year rolling valuation programme to value assets not captured by this process. The auditor also looked at any additions and disposals.

Councillor Alex Karmel questioned why, when property prices had fallen over the past year, had the total valuation of land and buildings risen from £1.746bn in 2017 to £1.77bn in 2018. Emily Hill noted that the figures included additions of £54m and depreciation of £36m.

Councillor Matt Thorley asked what type of assets the ‘hard to value’ Pension Fund investments referred to earlier were – and how much of the fund was made up of them. Jennifer Townsend said she would have to take advice on exactly what type of assets they were but the Pension Fund’s investments were categorised into levels 1, 2, and 3 (3 being the harder to price category). Seven percent of the total were categorised as level 3.

Councillor Alex Karmel asked if the controls imposed in the wake of the Hazell v Hammersmith and Fulham LBC [1992] credit swaps case applied to this area. Officers said they would look at this outside of the meeting.

The Chair, Councillor Iain Cassidy asked again if officers could give examples of the types of investments that made up the seven percent ‘hard to value’ assets. Phil Triggs (Director of Treasury and Pensions) said they related to the private equity portfolio. The investments were part of a new higher risk strategy – which meant the returns would not be certain until all of the distributions were received in 15 to 20 years’ time. 

The Chair asked why there was such a large differential between capital expenditure (page 28 - 29 of the pack). Emily Hill explained that as they were capital figures they could vary hugely based on one large capital scheme. Large variations were expected. Hitesh Jolapara added that a full breakdown of these figures could be provided to provide reassurance to the Committee if requested. 

Councillor Alex Karmel asked for an indication of the total size of the Council’s current debt – and what the average interest rate on the debt was. Chris Harris said the General Fund PWLB debt stood at approximately £40m and the average cost of the debt was 4.89 percent (much of the debt was taken on a number of years ago when interest rates were higher). Officers said they could provide a briefing note on this area if requested.

RESOLVED

NOTE: The Committee noted the tabled errata (attached as Appendix 1 to the minutes) and the appendices in the supplementary agenda.

1.    The Committee noted the content of the auditor’s ‘Report to those Charged with Governance’ (ISA260), including the auditor’s findings, recommendations and the Council’s response to those recommendations.

2.    The Committee approved the 2017/18 Annual Governance Statement which is included in the Statement of Accounts (Appendix 1 of the report).

3.    The Committee approved the 2017/18 management representation letter (Appendix 3 of the report).

4.    The Committee approved the Statement of Accounts for 2017/18, including the Pension Fund Accounts (Appendix 1 of the report).

5.    The Committee approved the Pension Fund Annual Report 2017/18 (Appendix 4 of the report).

NOTE: Councillor Matt Thorley left the meeting at 7:48pm