To consider the Wokingham Borough Council Audit Results Report Year ended 31 March 2020.
Members received the Wokingham Borough Council Audit Results report year ended 31 March 2020.
During the discussion of this item the following points were made:
· Helen Thompson, Ernst & Young, commented that the audit was largely completed in the less complex areas. However, work remained outstanding on 4 areas; valuations, pension fund disclosures, Group accounts (consolidation) and going concern.
· Ernst & Young had already identified with Officers, changes that would need to be made to the Statement of Accounts. These had not been included in the results report or amended at this stage as there was likely to be further changes, particularly around the work of valuations on property, plant and equipment. All changes would be consolidated into one for ease.
· With regards to valuations, it was an area of focus for reviewers of audit quality, and work in this area had increased significantly over time. Ernst & Young had asked its valuation specialists to review 11 assets. There remained open queries on 4 of these assets, which may or may not have a wider impact on the asset portfolio. For the assets (operational land and buildings) revalued as at 31 March, a number of queries had been identified leading to a review of the source evidence that was being used for the assumptions that were then used in a valuation. The internal valuer had updated the source evidence. In addition, with regards to assets that had been revalued in prior years, evidence had been sought on processes used.
· Helen Thompson commented that she welcomed the Council’s approach of updating the valuation approach in the future, such as employing an external valuer to provide support to the internal valuation team, and also to review the cycle for valuations.
· With regards to the assurances from the pensions funds auditor, the report had been received from Deloitte in January. However, this had been issued prior to the completion of the audit and several review queries remained outstanding.
· With regards to Group Accounting, the work of the component auditors had been reviewed and no issues had been identified. However, the accounting policies particularly around property, plant and equipment differed between the Council and its subsidiaries. Work was being undertaken to realign the policies and to restate the figures.
· With regards to Going Concern, it had been an area of focus this year because of the pandemic and significant changes to income and expenditure streams. Updated Management Disclosures would be included in the final Statement of Accounts.
· Ernst & Young were producing a plan which would be agreed with the Finance team and the Valuations team.
· Councillor Burgess asked what the impact would be on income expenditure and the balance sheet. Helen Thompson stated that based on amendments that had been collated to date, there were adjustments that would have an impact but that they would largely net off against each other. There would be no impact on the bottom line. In terms of whether the asset value would go up or down it was difficult to say until queries had been worked through.
· Councillor Burgess went on to question what had caused the large credit to the income and expenditure statement for revaluations this year. In addition, she questioned whether the Assistant Director Finance supported a different means of valuing those assets valued on a rolling basis. The Chief Accountant indicated that Note 23 of the accounts, a breakdown of the revaluation reserve, showed how valuations had changed. The main driver for the net £64million credit to the income and expenditure account was due to an upward revaluation of assets of £79 million and a downward revaluation of £15million. The valuation process going forwards would be looked at.
· Councillor Ross commented it was disappointing that the pension fund was again an issue. With regards to valuations, he asked whether it became more difficult to get accurate valuation figures some time after the valuation period. Helen Thompson emphasised that pensions was not the only delay in the audit. With regards to valuations, the type of points considered were the assumptions used when making the valuations. There could also be differences in assumptions used by valuers.
· Councillor Gee questioned why the valuation of playing fields at £1million per acre had been removed from the updated report. Helen Thompson responded that some detail had been removed whilst an ongoing query was resolved. Councillor Gee questioned whether the £1million related to a development value rather than a current use value. It was explained that it related to reprovision and what the Council would have to pay to replace it. In a developed Borough such as Wokingham the higher end of the scale was more likely.
· Councillor Gee asked if it was likely that it would be almost impossible to value future liabilities, as interest rates continued to decrease.
· Councillor Gee stated that in the context of internal control, she felt that the Committee’s reporting line to Council had been overlooked.
· In response to a query from Councillor Shepherd-DuBey it was clarified that the values of properties were looked at on a regular basis. Certain categories were also valued on a yearly basis.
· Councillor Burgess asked about the stress testing carried out around going concern and how comfortable the Council was looking 12 months ahead, taking that stress testing into account. The Assistant Director Finance stated that all local authorities should be deemed a going concern because they were backed by Central Government.
· Councillor Burgess referred to the recommendation that senior management review the capacity of the Finance team. The Assistant Director Finance indicated that he had put forwards a revised structure for finance. Councillor Gee asked for a report at the next Committee meeting on what action had been taken and staffing levels. The Assistant Director Finance indicated that during the pandemic many staff around the Council had been redeployed to help with the Council’s response. He suggested that the size of the Finance team going forwards be confirmed prior to a report being produced.
· Councillor Burgess questioned when the Committee would receive the survey on the effectiveness of the Audit Committee, to identify strength and weaknesses of the Committee and training requirements. The Assistant Director Governance indicated that the survey was being produced.
1) The draft Wokingham Borough Council Audit Results Report Year ended 31 March 2020, be noted.
2) The final report be considered at an extraordinary meeting of the Audit Committee on 22 March 2021 7pm.