Agenda item

Consideration was given to a report which set out the Council’s unaudited Statement of Accounts for the 2022/23 financial year and highlighted the overall financial position for the year, a summary accounts closure timetable and information on performance, including improvements achieved in accuracy and quality. The Committee also received the External Auditors, Grant Thornton’s report, Informing the Audit Risk Assessment 2022/23, as part of their risk assessment procedures where the auditor was required to make inquiries of the Committee under auditing standards and contributed towards the effective communication between City of Doncaster Council’s external auditors and the Audit Committee, as ‘those charged with governance’.

The Assistant Director of Finance in presenting the report, wished to place on record her thanks to the Finance Team for their achievements in the production of the Statement of Accounts in such challenging timescales.

In noting the Councils budget deficit, Dr Green asked whether the Council had a Strategy in place to build upCouncil reserves and how this related to the Medium-Term Financial Plan. The Assistant Director of Finance outlined the current outturn forecast position and explained that there had been an overspend on the Council’s general revenue budget, however, the outturn position had since been reduced in the last quarter to £3m compared to a £7.8m overspend forecast at the quarterly reporting period for quarter 3. She outlined the actions that had been taken by the Council to reduce the overspend, which included the receipt of one-off income received by the Council and action taken by management to reduce the financial burden. Members were advised that whilst a balanced budget for 2023/24 had been agreed by full Council in February, she highlighted the further budgetary challenges faced by the Council including, the national pay award which was higher than what had been earmarked in the budget. It was noted that the Council had plans to replace the earmarked reserves and continued to look at ways to make savings.  She emphasised the need for the Council to have a budget that was sustainable and not offsetting ongoing pressures by using reserves and highlighted the budgetary challenges nationally.

In response to a question from the Vice-Chair, it was clarified that the reason the Council’s pension scheme had moved from being a liability to an asset was due to the strong financial performance of the pension fund, which has considerably increased the value of the pension scheme and was showing in the draft accounts as an asset and was based on the Actuary’s assumptions. However, it was highlighted that future valuation of the Pension Fund could see it revert back to a liability, depending on the performance of the fund. It was reported that further information from the actuary regarding the asset valuations and assumptions to the pension fund that had been shared with Members prior to the meeting, would be included in future reports.

The Director, Grant Thornton explained that this was a unique situation in terms of his time as an external auditor carrying out public sector audits where the pension fund has become an asset on local authority accounts. It was noted that Doncaster’s draft accounts currently showed the pension fund valuation on its balance sheet as an asset value of £30m, however, some local authorities (under the ISA 19) had recognised and shown their pension fund asset in a prudent way by recording the asset as a zero value on the balance sheet. The Director, Grant Thornton stated that presently there was no definitive national view or guidance from auditors and financial regulatory bodies, CIPFA and the FCA on how pension fund assets should be treated in the accounts and that discussions were currently taking place regarding how pension fund assets should be treated and whether either option as referred to above was appropriate. The Assistant Director of Finance advised that she was working with Grant Thornton in terms of whether an adjustment was needed to be made to the accounts and explained that due to having to meet the accounting deadline of 31st May, a judgement had to be made based on the information at that time. Grant Thornton would be reviewing the situation over the coming months and the Committee would be kept fully apprised of developments.

Members welcomed the decrease in the pension liability resulting in a pension asset, although raised some concern as to whether the pension fund should have been shown on the Council’s accounts as a zero on the balance sheet. However, the Director, Grant Thornton reaffirmed that as this was an unusual situation and that as of 31st May 2023 when the draft accounts had been produced there was no judgement made by the financial regulatory bodies or national guidance available to local authorities as how the pension fund becoming an asset should be recorded in the accounts, therefore the Council had presented the pension fund asset whilst other Councils had not.  He emphasised that the different options presented in the treatment of the valuation of the pension fund by the Council and other local authorities was not incorrectly recorded and that when a decision was made with regard to this matter at the end of the year, it may be that either option were acceptable. He provided assurances that if the national outcome differed to that of Doncaster’s treatment of the pension fund liability in the accounts, their audit opinion would not be critical in relation to how the pension fund had been presented or reflect negatively in the ISA 260 report when the accounts when the accounts would be signed off and presented to the Committee in November. The Assistant Director of Finance advised that due to Officers having to meet the accounting deadline of 31st May, based on the advice given by the Actuary at that time was to continue with the current pension contributions. The pensions situation would be reviewed in two years and advice would be sought from the Actuary as to the contributions required. The Director, Grant Thornton informed Members that the Council meeting the deadline was a significant achievement and that that only 30% of local authorities had met the statutory deadline.

The Assistant Director of Finance drew Members’ attention to the report and advised that Grant Thornton were due to present their findings on the draft accounts to the Committee on 2nd November 2023.  However, due to staff reductions and difficulty in recruiting an auditor with the necessary skills to undertake the audit, Grant Thornton had requested that the meeting be rescheduled to 23rd November 2023.

Following questions from the Chair, the Director of Grant Thornton reassured the Committee that he was confident that the ISA 260 report, setting out the audit findings would be presented to the Audit Committee on 23rd November and that he and his team would make every effort and were committed to signing off the audit opinion of the accounts by 30th November. However, he highlighted that due to the significant work pressures on the team to deliver audits across the South Yorkshire region, there was the potential risk that their audit opinion may not be available until December. He further advised that it was anticipated that the Value for Money report would be shared with the Council’s management team before Christmas and then subsequently presented to the Audit Committee in the new year. The Director of Grant Thornton confirmed that the Council’s Finance team would be informed of progress in completing their audit work.

Further to questions from the Chair, the Financial Planning and Control Manager advised that he did not anticipate any changes to the figures relating to the Council’s land and buildings and infrastructure assets and pointed out that the valuations would be reassessed as part of the ongoing auditing process and if at that point they become material the accounts adjustments would be made. The Director of Grant Thornton advised that any audit adjustments arising from the accounts would be included in the ISA 260 report, however he pointed out that based on the outcome of previous audits, the Council’s useable reserves would not be affected, unless the valuations related to fixed assets and the pension fund.

In response to questions from the Chair, the Director Grant Thornton confirmed that he was satisfied with the Council’s arrangements for completion of the accounts which had been produced within the deadline. He added that in terms of his client base, Doncaster was one of the strongest performing local authorities and to date no adjustments had been required to the accounts.

To conclude, the Chair on behalf of the Audit Committee gave recognition and thanks to the Assistant Director of Finance, the Financial Planning and Control Manager and the Finance Team for their efforts in continually meeting the deadline for completion of the Statement of Accounts.

RESOLVED that:-

(1)      the 2022/23 Unaudited Statement of Accounts be noted;

(2)       it be noted that the Committee was satisfied with the responses in the ‘Informing the audit risk assessment for City of Doncaster Council 2022/23’ report and

(3)       that the Audit Committee meeting scheduled to be held on 2nd November 2023 be rescheduled to 23rd November 2023.