To receive the report of the Chief Finance Officer on Grant Thornton’s audit of the 2020/21 accounts as they near completion and an update report on their findings.
The report of the Chief Finance Officer presented the final audited 2020/21 Statement of Accounts and also an updated report from Grant Thornton on their findings.
In attendance for this item were:
· Head of Finance
· Deputy Chief Officer Financial Services
· Representatives from Grant Thorntons – External Auditors
The Committee were provided with the following information:
· The accounts were original presented in draft form in July 2021.This is the revised version taking into account any points raised or changes in circumstances since then.
· A revised version had been to Committee in February 2022, where a small number of adjustments had already been identified, these were summarised in the covering report in relation to the Collection Fund position, property valuations and pensions.
· In early 2022 it came to light there were some national issues in relation to the accounting for infrastructure assets and this had prevented any further sign off of local authority accounts until resolved. This was resolved in December 2022 with the issue of new regulations and changes to the accounting code. The only changes to the Leeds accounts had been to make additional narrative discloses and a slight change to one of the disclosure tables.
· Members were advised of another issue. As part of the 2021/22 closedown a number of valuations were outsourced to the District Valuers Service. One of the valuations of Leeds Arena has resulted in a significantly different outcome to our previous valuation. The District Valuer advised that in the post covid period a depreciation replacement cost valuation was more appropriate than the income-based valuation which had previously been used. This also affected the valuation for the 2020/21 accounts. The District Valuer was asked to revalue the Leeds Arena for 2020/21, which resulted in a significant increase of the Leeds Arena by £59.4m. It was noted that this is a technical issue of how much the asset is valued in terms of the Council’s balance sheet and did not affect spendable reserves or the market value of the asset.
· In light of the valuation on the Leeds Arena, valuations on other entertainment venues were also requested. It was the view of the District Valuer that a depreciation cost replacement valuation would have been more appropriate in previous years as these are not leased out on commercial terms. Therefore, changes have been made as if these assets have always been valued on a depreciation replacement cost valuation.
· The Committee noted that as a result there was an additional statement which was a revised opening balance as at 1st April 2019.
· The Management Letter was attached as an appendix. This is the letter Grant Thornton ask the Council to provide prior to giving their opinion on the accounts. Members were asked to give approval for the Chair to sign the letter.
Grant Thornton provided the following information on their opinion of the accounts:
· An updated ISA260 report for 2020/21 had been included as supplementary information, which highlighted in blue text the changes from the previous version submitted in February 2022. It was noted that most of the changes were on the Executive Summary.
· Grant Thornton acknowledged that Committee had already heard about the changes to valuations of assets and noted there were changes to the Council’s share of the pensions fund liability.
· It was recognised that the value and adjustments was quite significant in 2020/21, although they do not impact on the usable reserves of the Council.
· From the perspective of the external auditors there was a requirement to try and reduce the level of amendment and changes that are made to the audit in future years. It was acknowledged that Management had taken on board the comments made last year and in finalising this years’ audit. Therefore, the external auditors were assured that additional layers of control had been put in place.
· The audit of 2021/22 was currently ongoing, and it was the aim to conclude the work and testing by end of April and to report to the Committee at its June meeting. Grant Thornton highlighted one key issue for them was the existing financial ledger, it had been noted that it was the aim to have a new ledger in place by April 2024. It was the view that this would assist the accounts and audit process and business management.
In response to questions from Members the Committee were provided with the following information:
· Acknowledgment that good use of capital receipts had been utilised by this council and other councils. However, this option was now moving away and it was set out in the Medium Term Financial Strategy to make the revenue budget more resilient and sustainable that the Council was making the move away from using capital receipts to fund recurring spend. It was noted there is detailed information in relation to this issue contained within the budget report to Executive Board.
· It was noted that depreciation cost valuation was commonly used for entertainment venues by many councils.
· During the audit it had been found that there had been a breach of independence requirements, by Grant Thornton providing taxation advice for a Leeds school. However, this has been addressed and new procedures have been put in place to ensure openness and transparency
· The audit for 2021/22 has now commenced with the aim to conclude in April 2023 and report to the Committee in June 2023. This would include a follow-up on the recommendations made for 2020/21. It was recognised there was a need to get back to the annual cycle for accounts.
· It was confirmed that amendments to pension liabilities and PFI disclosure notes did not affect the Council’s spendable reserves. It had been noted that the report had made reference to adjustments being made to pensions liability and private finance initiatives. The Committee were advised that these did not affect the Council’s resources.
a) To receive the audit report of the Council’s external auditors on the
2020/21 accounts and to note that there are expected to be no unadjusted audit differences to the accounts.
b) To consider the updated 2020/21 Statement of Accounts, and to approve these as the Council’s final audited accounts for the year. The Committee is further asked to authorise the Chair to acknowledge this approval on behalf of the Committee by signing the appropriate section within the Statement of Responsibilities on page 1 of the accounts.
c) On the basis of the assurances received, the Chair is to sign the management representation letter on behalf of the Corporate Governance and Audit Committee.