Agenda item

That the accounts be received and that the issues arising from the preparation and audit of the statement of accounts set out in sections 2.3 to 2.9 of the report be noted in order to ensure that the findings are taken into account by Cabinet when making decisions and that any recommendations made by the external auditors are addressed.

The Lead Member for Financial Oversight & Council Assets introduced a report that presented the audited Statement of Accounts for 2018/19.

The accounts had been considered by the Audit & Corporate Governance Committee on 22^nd February 2023 at which it had been agreed that they be recommended to Council on 9th March 2023.  However, given the significant issues in the preparation of the accounts and the audit, it was considered appropriate that the Cabinet also receive them and ensure the findings were taken into account and recommendations from the external auditors addressed.

The context and key issues were summarised.  The accounts for 2018/19 should have been prepared by 31^st May 2019 but due to the deficiencies in basic record keeping and working papers five drafts were produced through to May 2021 when the new finance team joined the Council.  At that point it was recognised that those accounts were still not fit for purpose and they were extensive reviewed resulting in 50 changes affecting 100% of the figures and 80% of disclosure notes.  The key changes were set out including land and buildings incorrectly valued, MRP not charged in line with regulations, staff costs incorrectly capitalised and inadequate provisions for bad debts.  The net value of the balance sheet had been reduced by over 40%.

The key deficiencies identified included inadequate accounting records; ineffective systems of internal control, risk management and governance; and a grossly inaccurate Annual Governance Statement.  These issues had resulted in the external auditor, Grant Thornton, had indicated that it was highly likely that the audit opinion for 2018/19 would be a disclaimer of opinion.  This was thought to be a unique opinion issued to a local authority and the Cabinet noted that it was likely to be repeated in 2019/20 and 2020/21 due to the same deficiencies in the Council’s accounting records during that period.

The timetable for the production of accounts for 2019/20, 2020/21, 2021/22 and 2022/23 was explained, with the accounts for the current year of 2022/23 expected to be prepared by 31^st December 2023.

(Councillor Pantelic joined the meeting)

The Cabinet fully recognised the financial and accounting failures during that period that led to the significant delay in the accounts and the audit opinion.  The approval of the accounts and the work that had been done by the new finance team on process improvements, as detailed in the series of Financial Action Plan updates in the past 18 months, would now provide a sounder financial base from which the Council could now move forward.  The Executive Director emphasised the scale of work that the Council still faced and stated it was likely to take around five years to embed the necessary changes and reach financial stability.

Lead Members asked about the key risks to sustaining the progress that had been made, including the imminent departure of the interim finance team.  Assurance was provided that the new finance structure was in place and posts were being filled.  A handover process to the new Executive Director Finance & Commercial had already begun.

At the conclusion of the discussion the Cabinet formally received the report, recognised the deficiencies identified and affirmed its commitment to continue to deliver the improvements set out in the Financial Action Plan and address any issues raised by the external auditor.

Resolved –

(a)  That the accounts be received; and

(b)  That the issues arising from the preparation and audit of the statement of accounts set out in sections 2.3 to 2.9 of the report be noted in order to ensure that the findings were taken into account by Cabinet when making decisions; and

(c)  That any recommendations made by the external auditors be addressed.