Report of: Financial Accounting Manager

Recommendation:

To receive a verbal update on the Statement of Accounts 2020-21.

Bill Lewis, Financial Accounting Manager provided a verbal update on the Statement of Accounts audit process. He explained that the conditions for a number of Government grants received by the Council in 2020 were mostly poor, non-existent or incomplete. This was problematic due to different accounting treatment depending on whether grants were principal or agent. Principal meant the Council could decide how the money was spent and this was accounted for in revenue. Agent meant that spend was predefined and was accounted for on the balance sheet.

The Financial Accounting Manager said that the external auditor had undertaken a national review of the grants to develop a consistent accounting methodology for its clients. The Council had worked with the external auditor in relation to its grants, which resulted in a £43m adjustment to come out of the income and expenditure statement into the balance sheet. This changed materiality by approximately 20% of its original value and increased the required sample size by over 100. The Council and external auditor were currently working through the additional audits, which were expected to be completed in the next few weeks.

The Committee was assured that there was no overall impact on the Council’s revenue position in the Accounts, but the process of reviewing and reallocating the grants had generated a lot of work. Adrian Balmer, External Auditor (EY) advised that the same issue was replicated in a large number of other local authorities and meant that many councils’ 2020-21 Accounts were not yet certified.

In response to questions, the External Auditor confirmed that there was still a delay with the consolidation of company accounts with the Council accounts for group accounts purposes, but the delay related to the Government grants had made it less prominent. It was added that better alignment of audit timings between EY and Mazars was being explored.

The Committee reconfirmed its decision taken on 20 October 2021 to authorise the Chair to sign the Accounts on behalf of the Committee ahead of the next meeting, as it agreed there were no net material changes.

The Head of Financial Services added that he would look at setting some training up for the Committee.

The Committee resolved to:

1.    Note the verbal update on the Statement of Accounts audit process.

2.    Authorise the Chair of the Committee to sign the Accounts, as it agreed there were no net material changes.

Report of: the Head of Financial Services        [report and Statement of Accounts to follow]

Purpose of report: to submit the Council’s Statement of Accounts and Letter of Representation for approval and authorisation.

The Statement of Accounts and supporting documentation are attached as a separate supplement.

Recommendations: that the Committee:

1.        approve the audited 2020/21 Statement of Accounts as certified by the Head of Financial Services, and authorise the Chair of the Committee to sign the Accounts; and

2.        approve the Letter of Representation to enable the opinion to be issued.

The Committee considered the report of the Head of Financial Services submitting the Council’s Statement of Accounts and Letter of Representation for approval and authorisation.

The Committee agreed that once the final audit opinion was issued and the Statement of Accounts finalised, the Chair and other committee members would meet informally with the Head of Financial Services and the Financial Accounting Manager to consider the Statement before the Chair signed these.

The Committee noted that the Statement presented was subject to final minor changes required following completion of the external audit.  The Committee also noted that only a small number of local authorities’ accounts were fully audited by 30^th September.

The Committee commended the Financial Accounting Manager and his team for their work on the statements so far.

The Committee resolved to:

1.         Approve the audited 2020/21 Statement of Accounts as agreed by the Head of Financial Services, and authorise the Chair of the Committee to sign the Accounts after any emerging non-material changes were included;

2.         Approve the Letter of Representation, and authorise the Chair of the Committee to sign this, and date on date of signing, to enable the opinion to be issued.

3.         Request the Head of Financial Services to set up a meeting with members of the Audit and Governance Committee, once the audit opinion from Ernst and Young had been agreed to enable time for committee to scrutinise the statement of accounts in more detail

Report of: the external auditor EY

Purpose of report: to inform the Committee of outcome of the audit of the accounts.

Recommendation: to discuss and note the report.

The Committee considered the report of the external auditor EY informing the Committee of outcome of the audit of the accounts to date.

The external auditors, Adrian Balmer and Maria Grindley, reported that their audit was still incomplete. Remaining matters were set out in Appendix B of their report. On the group accounts, they were seeking further information to assure themselves of the veracity of the audits of the Council’s companies Oxford City Housing Ltd and Oxford Direct Services Ltd. Work on OxWED was complete. Some audit work relating to the Covid-related grants; valuation of assets; and a number of points of clarification were still incomplete. They informed the committee that all work would be completed and the audit concluded by the end of October. As set out in the report, there was one uncorrected misstatement and no adjustments above the materiality threshold.

The Head of Financial Services, Nigel Kennedy, and the Financial Accounting Manager, Bill Lewis, informed the Committee:

·         The Council had processed 18 different government Covid-related grants (totalling £52m to be disbursed or to compensate for revenue loss/ extra costs) with different rules, often poor documentation and guidance, and short timeframes. These proved challenging to administer and to audit. Claims against revenue loss from sales fees and charges to the end of June 2021 were due to be submitted shortly. After the grant and compensation schemes ended the government may choose to audit selected councils although details of this are as yet unknown.

·         The ‘whole of government accounts’ is prepared by HM Treasury from standard forms sent by and returned to the government. There is a delay in the release of the standard forms by HM Treasury, however the committee was assured that once received, the forms would be sent back in good time.

·         The Council could not fail as a ‘going concern’ because its functions would continue and any changes would require primary legislation to enact. The ‘going concern’ assessment undertaken by auditors is focussed on resilience rather than the standard assessment used for companies.  There are sufficient reserves to provide resilience, however there are known pressures and the success of the council’s companies affected the overall position.

The Committee noted the report and the points made in the discussion, and agreed to note the incomplete audit when they consider the Statement of Accounts.