Agenda item

This report presents the London Borough of Hammersmith and Fulham’s 2018/19 Statement of Accounts, including the Pension Fund Accounts and Annual Governance Statement for approval.

Hitesh Jolapara, Strategic Director of Finance and Governance, introduced the report that presented the Council’s 2018/19 Statement of Accounts, including the Pension Fund Accounts and Annual Governance Statement for approval.

He noted that the accounts had been closed on two systems as the Council had migrated its finance systems from BT Agresso to the Hampshire SAP system.

Andrew Smith, External Auditor from Grant Thornton, attended to talk through the accounts and answer questions from the Committee. He highlighted the following points:

·         Grant Thornton anticipated issuing an unqualified audit opinion and an unqualified ‘value for money’ opinion which was very positive for the Council.

·         No significant risks were found during the audit.

·         The transition of data from BT Agresso to Hampshire SAP was complete and there were no issues to report.

·         There were no significant issues related to the Pension Fund’s investments.

There was a significant finding around the Dedicated Schools Grant and the cumulative overspend of £13.6m as of 31 March 2019. The auditor had asked officers to change how this was presented in the accounts so it didn’t show as a negative reserve.

Following benchmarking looking at reserve levels, H&F was found to be below average as result of the Council using reserves to fund services. The auditor recommended rebuilding reserve levels over time.

Andrew Smith drew the Committee’s attention to the action plan and recommendations on page 182 of the agenda pack and noted that Grant Thornton would be bringing a proposal back to address the actions, that may incur additional fees.

[Councillor Alex Karmel entered the meeting]

Councillor Caleb-Landy noted that there had recently been stories in the press about Grant Thornton being fined by the Financial Reporting Council over audits of other organisations. He asked for the auditor to provide reassurance over the robustness of their audits for the Council.

Andrew Smith informed members that, to provide reassurance, the auditor had introduced an additional independent layer of review before they reached their conclusion. He added that every firm had been put under the spotlight. Audit fees had come down significantly over the past ten years, but the Financial Reporting Council had raised the bar for audits.

Andrew Smith noted that Grant Thornton had agreed an action plan with the Financial Reporting Council to address their concerns and they were content with the plan. They had also commissioned an independent firm to review their audit practice.

Councillor Caleb-Landy asked if the auditors had gone into primary material to make sure they lined up with the accounts. Andrew Smith said that the audit involved a sample going back to source evidence – e.g. looking at invoices from third-parties and checking the related cash transactions.

Hitesh Jolapara noted that on the ground there were Council finance teams supporting the audit process and the auditors had weekly check-ins with his team. He had noticed more enquiries and more detailed enquiries from the auditors than in previous years.

Councillor PJ Murphy asked if the reserve level benchmarking referred to page 176 of the pack were absolute levels – or did they take into account the relative size of the Council. Andrew Smith said they were absolute levels but he believed the reserve levels would still be below average taking into account the relative size of the authority. Councillor Murphy said this was something he would like the Finance Policy and Accountability Committee to look at.

ACTION: David Abbott

Councillor PJ Murphy welcomed the information on the gender distribution of the workforce but asked that it be broken down further in future reports. He wanted to see the distribution by department and seniority. Hitesh Jolapara said that information could be added – the supporting information was there to do it.

ACTION: Hitesh Jolapara

RESOLVED

1.    The Committee noted the content of the external auditor’s ‘Audit Findings Report’ (ISA260), including the auditor’s findings, recommendations and the Council’s response to those recommendations (Appendix 2)

2.    The Committee approved the 2018/19 Annual Governance Statement which is included in the Statement of Accounts (Appendix 1).

3.    The Committee approved the 2018/19 management representation letter (Appendix 3).

4.    The Committee approved the Statement of Accounts for 2018/19, including the Pension Fund Accounts (Appendix 1).

5.    The Committee approved the Pension Fund Annual Report 2018/19 (Appendix 4).

6.    The Committee noted that the accounts remained ‘unaudited’ until final sign-off by the external auditor and delegated to the Chair of the Audit, Pensions and Standard’s Committee, in consultation with the Strategic Director, Finance and Governance, the authority to approve any further adjustments required as part of the completion of audit work.

Government Consultation on Pension Fund Valuation Period

Councillor PJ Murphy asked officers for an update on the Government’s consultation on moving from a triennial valuation to a quadrennial valuation for the pension fund.

Phil Triggs explained that the Government wanted to move to a quadrennial valuation period to align the Local Government Pensions Scheme with other public sector pension schemes. However, officers felt four years was too long as contribution rates quickly became out of date and funding levels could change quickly. Officers anticipate a four year period would mean Councils having to do an interim valuation after two years which would increase costs. Councillors agreed with officers – three years was the right balance.

The Committee recommended that valuation period should remain as three years.