Agenda item

This report presents the London Borough of Hammersmith & Fulham’s 2021/22 Statement of Accounts, including the Pension Fund Accounts and Annual Governance Statement for approval.

Sukvinder Kalsi (Strategic Director of Finance) introduced the 2021/22 Statement of Accounts (SOAs) of the London Borough of Hammersmith & Fulham (LBHF), including the Pension Fund Accounts and Annual Governance Statement for approval.

Andy Conlan (Audit Senior Manager, Grant Thornton (GT)) briefed the Committee onthe timeline and progress of the audits of the various accounts in 2020/21 and 2021/22 and noted the 2021/22 audit was substantially completed more efficiently with the Council’s current Finance team. He then elaborated on the details of a main item remaining outstanding in the 2021/22 audit, i.e., the requirement for an updated triennial actuarial valuation of the net pension fund liability which was calculated by all local governments every three years. He further highlighted the adjustments and disclosure changes identified during the audit which were fewer than those found in the previous audit in 2020/21. The 2021/22 audit also made positive progress in the implementation of prior year recommendations. 

Andy Conlon anticipated that after he and Paul Dossett (Key Audit Partner, GT) completed the detailed audit review, they would be able to give an unqualified  opinion to the LBHF’s 2021/22 SOAs, including the Pension Fund Accounts.  The Committee noted that the External Auditor had completed the field work for the Value for Money Auditor’s report for both 2020/21 and 2021/22 which, together with the signed SOAs, would be laid before the Full Council in November 2023.

Members noted that the accounts were subject to changes until they were formally signed and in the event of any further changes, it was requested that these be approved by the Chair of the Committee, in consultation with the Director of Finance and any significant changes would be notified to Committee (page 14, para. 4).  In response to Councillor Florian Chevoppe-Verdier’s concern about the procedures involved, the Chair said that he would consult the Committee on significant changes before he signed the accounts. 

ACTION: The Chair/Sukvinder Kalsi

Councillor Adrian Pascu-Tulbure asked about potential solutions to the issues that the External Auditor had in obtaining suitable analyses and populations of debtors and creditors and the need for more resources to complete the required testing (page 359). Andy Conlan clarified that whilst this was an issue identified in the 2020/21 audit findings, the Council’s responses in this area were much improved for the 2021/22 process with no problems encountered.   Chris Harris (Head of Finance) added that it was caused by the legacy balances brought forward in debtors and creditors listings provided to audit and the management had undertaken housekeeping exercise to review legacy balances which would be carried out regularly going forward.

Councillor Chevoppe-Verdier remarked that while the External Auditor had identified risk associated with Aviva Infrastructure in the Pension Fund Annual Report 2021/22, the Pension Fund Committee had already taken action to replace it. Separately, he appreciated the Council’s ability to deliver an underspend against the budget despite the increasing cost pressures due to the cost-of-living crisis, high inflation and interest rates. 

Echoing his appreciation, Councillor Rowan Ree (Cabinet Member for Finance and Reform) commended the hard work and contributions of the officers, in particular those in Finance and Pension teams, in finalising the 2021/22 SOA report.  Andy Conlan added that the External Auditor had worked well with both teams in areas such as sample testing and creditor/debtor listings which were carried out in a timely and efficient manner. 

Referring to the Government’s new proposed backstop publication dates for prior year accounts which remained open, Councillor Ree asked about the impact, if any, on the LBHF’s 2022/23 audit. Andy Conlan remarked that GT was looking forward to completing the LBHF’s 2022/23 and 2023/24 audits, having been appointed by the Public Sector Audit Appointments (PSAA) to undertake LBHF’s audits for the next five-year period from 2023/24. He said that audit fees in the market were going up, enabling investments in the local government audit sector to strengthen and expedite the audit process more efficiently. GT planned to commence the 2022/23 audit in October with the field work done by December 2023. It was expected that the 2022/23 audit report would be signed off before the end of the financial year, i.e. March 2024, provided that no major issues remained unresolved in the process.

The Chair noted with concern that some contractors’ performance was below targets for Key Performance Indicators (KPIs) in some areas (page 140).  In response, Nicola Ellis (Strategic Director Chief Operating Officer, Corporate Services) highlighted that there was a significant improvement in housing repairs work and constant dialogues with the relevant contractors on their performance to meet the KPIs would continue.

The Chair asked for the reason(s) for delivering the 2021/22 audit faster and better than the last one. Andy Conlan advised that for 2020/21, the pandemic and changes to working from home had disrupted the audit work as it usually took place on site, with face-to-face meetings held between the External Auditor and LBHF’s Finance team. Besides, there had been a prolonged shortage of trained auditors in the public sector and a lot of turnovers in the local governments’ finance teams.  The combined effect had contributed to the substantial delays in the delivery of the local governments’ audit findings for 2019/20 and 2020/21. Andy Conlan highlighted that with the adaptation to the current hybrid working, and the strengthening of GT’s Audit team and LBHF’s Finance team, GT was hence able to complete the 2021/22 audit more efficiently and effectively.

In reply to the Chair’s question about the transfer of information between the External Auditor and LBHF, Andy Conlan noted that a digital Audit system called In-flow had been in place for many years and information/files transferred electronically upon audit requests would be uploaded to the system.  He further advised that In-flow was enhanced about a year ago which had enabled them to work remotely and bring further efficiency.  

RESOLVED

That the Committee:

1. approved the 2021/22 Annual Governance Statement which is included in the Statement of Accounts (Appendix 1).

2. approved the Statement of Accounts for 2021/22, including the Pension Fund Accounts (Appendix 1).

3. 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).

4. approved the 2021/22 management representation letters (Appendices 3 and 4).

5. approved the Pension Fund Annual Report 2021/22 (Appendix 5).

6. noted that the accounts remain ‘unaudited’ until final sign-off by the external auditor.

7. delegated authority to the Chair of the Audit Committee, in consultation with the Director of Finance to approve any further adjustments to Appendices 1, 2, 3, 4 and 5 which may be required as part of the completion of the audit work.

8. noted the supplementary updates on the conclusion of the audit of the 2020/21 accounts and publication of the draft 2022/23 accounts and associated appendices.