Agenda item

To receive the Wokingham Borough Council Audit Committee - Audit progress update - Infrastructure Assets.

The Committee considered an update on the infrastructure assets issue.

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

·       Helen Thompson indicated that the report detailed the accounting requirements under the CIPFA code, an overview of the position at Wokingham, options to move forward and possible implications of doing so, and an example of how the audit report might look if the limitation of scope route was undertaken.

·       Councillor Gee stated that when an asset was not fully depreciated and had a positive net book value at the year end, but had been replaced or decommissioned, the error would also impact the balance sheet where asset values would be overstated.  However, this would not affect the reported overall financial position of the Council.  She questioned how the Council’s overall financial position was not affected.  Helen Thompson stated that it was not because all the entries were reversed out via the Movement in Reserve Statement.  It did impact the gross book value and gross accumulated depreciation and worked its way through and reversed back out.  Only in very limited circumstances would it make a difference to reported income and expenditure.

·       In response to a question from Councillor Gee, the Assistant Director Finance clarified that information sent showed different accounting entries.  It was difficult to calculate the value of an asset such as a road.  Working to a ‘real’ value would require a significant amount of resources.

·       Councillor Smith noted that two Councils audited by Ernst & Young had taken Option 2 (The Council accepts a modification of the audit opinion and includes appropriate disclosure at Note 24 of the 2020/21 Statement of Accounts (and elsewhere as required).  He questioned how many Councils had taken Option 1 (The Council waits until CIPFA has updated its proposed adaption to the Code of Practice; or for DLUHC to prepare a statutory instrument) or had not yet made a decision.  Helen Thompson indicated that those who had accepted the second option had done so in relation to a 2019 audit and the other for a 2021 audit.  The others were in discussion.  Whilst many had at first lent towards the limitation of scope route in order to close their accounts, the November deadline for the accounts and the indication from CIPFA as to when information may be available, meant that many were now preferring to wait. 

·       Since the report had been written, the timescale for a potential statutory instrument, had slipped.

·       There was no guarantee that a solution from CIPFA would fully resolve the issue.

·       Councillor Davies requested a summary of where the assets were stated in the accounts.

·       In response to a question from Councillor Maher, the Assistant Director Finance confirmed that the Council was being constantly updated and CIPFA had listened to local authorities’ concerns.

·       Mike Drake questioned whether the profit loss on the disposable of fixed assets went below the surplus or deficit for the year through reserves.  Helen Thompson confirmed this was the case except for assets held for sale and investment properties.

·       With regards to the audit qualification for the year, Mike Drake expressed surprise that the ongoing points raised by CIPFA had not been referenced.  This suggested inadequate accounting records.  Helen Thompson stated that it was technically accurate and that the audit report was written on behalf of EY.  However, should management wish to disclose any additional context to these points raised by CIPFA and any additional information regarding the Council’s state of infrastructure records, this should be done in an additional narrative to the financial statements. 

·       In response to a question from Councillor Gee, Helen Thompson emphasised that it was important not to conflate the infrastructure and property portfolio.

·       The Assistant Director Finance indicated that it was likely that a decision would need to be taken in November.

RESOLVED:  That the Infrastructure Assets update be noted.