Agenda item

To receive the Wokingham Borough Council Audit Committee - Audit Progress report.

The Committee received the Wokingham Borough Council – Audit Progress Report.

During the discussion of this item, the following points were made:

·         The delay from Deloitte had impacted on the completion of the audit.  Deloitte would go back to complete the audit on the Pension Fund in early December.  It was possible that the February Audit Committee would need to be moved later in the month as a result.

·         There were two areas where Covid had particularly impacted on the audit process;

Ø  Valuations – where the valuers for the Council had included a material uncertainty that was linked to Covid 19 within their valuation report.  That particularly impacted those properties that were either valued at fair value or at a market value.  Ernst & Young had taken the approach that where there were assets that were valued at fair or market value and were material, there was a need to make use of the valuation specialists.  This team had been particularly under pressure.

Ø  Going concern and disclosures around that – to ensure that disclosures around going concern stated the basis for preparation for the change in auditing standards that were coming in for 2022.  This year was currently a bridging period.

·         Working remotely and in different ways had been a challenge. 

·         With regards to the audit, two split visits had been carried out to date.   Some work had been carried out in August and also in September/early October.  Ernst & Young were due to visit again in the week beginning 30 November and had had a meeting with the Finance team regarding progress.

·         Councillor Burgess sought further information on the valuation process.  Helen Thompson explained that the material uncertainty clause was a cover for the valuers to be clear that whatever value they placed in their reports, may be impacted by Covid.  Whilst it was a general caveat that had been included, it was most applicable to those properties valued at either fair value or market value.  A sample of assets would be selected to carry out a more detailed review.  Ernst & Young had been required to use specialists for this work due to the level of uncertainty.  The valuers would come to a potential range for an asset, and if the value that the Council’s valuer had concluded fell within that range based on the same data, there was not an issue.

·         Councillor Burgess questioned whether there had been discussions on going concern, and what key issues might be for going concern.  She was informed that the going concerns assessment needed to cover a period of 12 months from the date of the signing of the Statement of Accounts so management had not yet been asked to undertake detailed assessments for areas of going concern.

·         Councillor Gee asked what was meant by REFCUS and was informed that it was revenue expenditure funded from capital under statute.  The Head of Finance explained that in certain limited circumstances capital money could be used to fund revenue expenditure.  Councillor Gee asked whether this had been implemented this year.  Helen Thompson indicated that she would report back once the audit work had been completed.

·         With regards to going concern, Councillor Gee asked that if councils were unable to go bust, why whether the Council was a going concern, was considered.  Helen Thompson referred to councils with significant exposure to particular commercial investment (e.g. Luton Council owned Luton Airport) and the fact that they would need to consider whether they had resources to continue to hold the asset.  Councils could have going concern due to exposure to challenging circumstances or because they had run out of reserves.  Croydon Council had issued a S114 notice and were now only going to deliver statutory services.  Going concern was one of the auditing standards.  The Head of Finance reminded Members that there were consequences to Councils that issued S114 notices.

RESOLVED:  That the Wokingham Borough Council – Audit Progress Report be noted.