Report of the External Auditor (EY) and Head of Finance Shared Services to follow

The committee received a report of the Interim Head of Finance Shared Services and the external auditor, EY, providing councillors with the opportunity to question the external auditor and ask about the Statement of Accounts for 2017/18.

The Chair agreed that this item should be brought forward at the meeting.

The Interim Head of Finance Shared Services informed the committee that there had been major changes to the Statement of Accounts this year.  In addition the deadline for the final report had been brought forward by two months.  The major changes included a material impact on the pension account, prior year adjustments for 2016/17 and amendments to the current year, 2017/18.  The group accounts also had an impact.  The audited accounts for Watford Health Campus could not be signed off by 31 July.  The council had been advised this afternoon by PWC via EY that they would not be available until 7 August.  This meant that the council’s external auditor, EY, could not sign off Watford’s accounts until after this time.

In response to a question about potential penalties if the accounts were not finalised by 31 July, councillors were advised that previously local authorities were ‘named and shamed’.  However, as the deadline had been brought forward by two months, the council was unlikely to be on its own.  This year had been a learning experience for officers about future preparations.

The Chair explained that he had understood the council was on track to sign off the accounts by the end of July.  However, this was prior to the information that had come to light earlier in the day.

Andrew Brittain from EY stated that Watford was not in a unique situation.  The faster closing time had been a significant change for the council and auditors.  He added that in previous years the accounts for Watford Health Campus had not been significant, but this had changed and they were now more complex.  This had led to the delay by the auditors (PWC) for this section of the accounts.

Following a question about pension fund valuations, Mr Brittain explained the process and how an exercise had been carried out in January to estimate the value of the assets, however, this year this had significantly changed at the end of March. 

James Bundy from EY informed the committee about the third significant change.  It was explained that it was important to ensure items had been recorded in the correct place.

Mr Bundy advised the committee about the two uncorrected adjustments which were above the reporting threshold.  These were shown in the auditor’s draft report.  Mr Brittain added that an explanation would be provided in the council’s letter of representation as to why these adjustments had not been corrected.  Mr Brittain highlighted aspects of the draft report and explained the timetable.  It was noted that the Housing Benefits grant claim would not be completed until the end of November which was the deadline.  He advised that the committee would be provided with the auditor’s findings.

The Chair noted the recommendations and advised councillors that if there were any significant changes to the Statement of Accounts he may need to call an extra meeting at short notice.

RESOLVED –

1.      that the external auditor’s ‘Audit Results Report’ be noted.

2.      that the clarification provided by the officers and the auditors to the committee about the processes involved in the production of the annual Statement of Accounts for 2017/18 be noted.

3.      that approval of the Statement of Accounts for 2017/18 and the letter of management representation be delegated to the Audit Committee Chair and the Director of Finance, subsequent to the completion of the audit.