Agenda item

To submit the statutory financial statements for 2014/15.

 

a)         To submit the revised statutory financial statements by the Head of Finance for the Committee’s approval (copy herewith – white paper)

 

b)(i)     To submit the formal “ISA 260” report to “those charged with governance”  by the Wales Audit Office on the 2014/15 Statement of Accounts for Gwynedd Council                     (copy herewith – grey paper)

 

b)(ii)    To authorise the Committee Chairman and the Head of Finance to sign the “letter of representation” on behalf of the Audit Committee, which is charged with governance in relation to approving the statutory financial statements for Gwynedd Council (copy enclosed as Appendix 1 to the Wales Audit Office report in (b)(i) above)

 

c)(i)     To submit the formal “ISA 260” report to “those charged with governance” by the Wales Audit Office on the 2014/15 Statement of Accounts for the Pension Fund                 (copy herewith – lilac paper)   

           

c)(ii)    To authorise the Committee Chairman and the Head of Finance to sign the “letter of representation” on behalf of the Audit Committee, which is charged with governance in relation to approving the statutory financial statements for the Pension Fund (copy enclosed as Appendix 1 to the Wales Audit Office report in (c)(i) above)

i)       Statement of the Accounts

           

         The Head of Finance Department submitted the revised statutory financial statements for approval by the committee. He noted that Appendix 3 in the reports that followed by the Wales Audit Office (WAO) noted the main changes in the accounts since the pre-audit version had been submitted to the Committee meeting of 16 July.

 

ii)      Report of the Appointed Auditor on the Audit of Financial Statements

                                   

a)      The Council’s Accounts

         In accordance with the Annual Audit procedure, namely the Appointed Auditor’s report for those charged with governance, the report of the WAO was submitted. The Engagement Leader and Local Manager, WAO, were present to submit the information.

 

         It was noted that WAO was responsible for undertaking an audit on behalf of the Auditor General and for reporting whether it was of the view that the reports presented the financial position of the Council accurately and fairly at the end of every year. It was reported that the Appointed Auditor intended to issue an unqualified audit report on Gwynedd Council’s accounts for 2014/15.

 

         The WAO representatives noted the following main points:

·         That there would be a delay before the accounts were certified as a member of the public had expressed an objection to the accounts relating to the expenditure of the Trunk Road Agency. Consequently, WAO could not formally conclude its audit responsibilities or issue the certificate of audit closure until the matter had been addressed.                                                                                          

·         In the context of misstatements not corrected, WAO had identified an overstatement of £825,000 in the provisions, namely:

Ø  A provision of £490,000 to cover the future loss of Council tax as a result of householders with properties that were not fully occupied throughout the year transferring over to the National Non-Domestic Rate.

Ø  A provision of £335,000 to contribute towards the existing pension deficit.    Whilst there was a past obligation in relation to these costs, it was not appropriate to have a provision in the accounts as the liability was already reflected in the accounts through the International Accounting Standard 19 –   Employee Benefits (IAS19) entries.

·       Although it was appreciated that it was prudent to set aside these funds in budgetary terms, they did not comply with the definition of ‘provisions’ from a technical accounting perspective and it would be more appropriate for these sums to be set aside in earmarked reserves.

 

In response to the above observations, the Head of Finance Department noted the following:

·         That he was not of the opinion that the objection made by a member of the public was directly related to the accounts for 2014/15.

·         In relation to the overstatements, these were two technical accounting matters. Two funds had been set aside prudently; however, the auditor suggested that they should not be treated as provisions. It was noted that there were grounds to consider the money set aside as either provisions or as funds; however, the procedure would be re-considered by 2015/16.

 

In response to a member’s observations regarding the provision relating to Council Tax, the Head of Finance Department confirmed that a Scrutiny Investigation was in the pipeline on the subject of Holiday Homes and Taxes.

 

In response to a member’s question, it was noted that the accounting method of presumptions and the historical pension deficit had changed, with a specific sum rather than a percentage of salary given as a contribution. It was reported that the number of jobs had not reduced as much as had been anticipated in 2014-15, and thus there had been more money allocated; however, due to the financial climate a reduction was anticipated in the number of jobs in the subsequent years, therefore it was prudent to set aside the relevant provision.

 

b)      Gwynedd Pension Fund Accounts

 

The Local Manager for the Wales Audit Office reported that the Council was responsible for preparing financial statements to present the financial position of the Gwynedd Pension Fund as at 31 March 2015.

 

It was noted that WAO was responsible for undertaking an audit and for reporting whether it was of the view that the reports presented accurately and fairly the financial position of the Pension Fund at the end of the year.

 

She notified the Committee that the Appointed Auditor intended to issue an unqualified audit opinion on the accounts of the Gwynedd Pension Fund for 2014/15.

 

The following main points were made by the Local Manager for the Wales Audit Office:

·         In the context of uncorrected misstatements, that WAO had identified that death benefits and other lump sums had been understated by £119,000 with two payments relating to the 2014/15 financial year having been accounted for in 2015/16. She added that it was a minor issue; however, it was WAO's duty to draw attention to the matter.

·         That the Pension Fund had not updated its Written Statement of Investment Principles (SIP) in accordance with the three-yearly timetable.

·         Although the Council’s accounts and the Pension Fund accounts were dealt with in separate reports, only one certificate would be issued. She noted that the Auditor General could not release the certificate until enquiries arising from an objection raised by a member of the public had been formally completed.

 

In response to the above observations, the Head of Finance Department noted the following:

·         That the understatement was a relatively small amount considering the £1,400,000,000 value of the Pension Fund; therefore, it was not considered that this needed to be corrected.

·         The Pensions Committee would review the Statement of Investment Principles and a consultation would be undertaken in 2015/16.

 

The Engagement Leader, Wales Audit Office expressed his gratitude for the many years of collaboration in terms of auditing the accounts considering that WAO’s responsibility for auditing them was coming to an end He added that the quality of the accounts had facilitated the audits over the years.

 

The Chairman and Head of Finance Department expressed their appreciation of the WAO auditors’ work over the years.

 

It was explained that the Auditor General had decided to allocate the work of auditing the accounts to Deloitte. It was noted that the Council had no technical objection to the change but that it had emphasised to the Auditor General that that the company would have to cope with the fact that Welsh was the internal administration language of the Council.

 

A member noted that a letter should be sent to the Auditor General to express gratitude for the work and cooperation of WAO officers over the years in relation to auditing the accounts.

 

RESOLVED:

(i)     that the Audit Committee, with the power delegated by the Council to be “those charged with governance” in relation to approving the statutory financial statements and the relevant audit, approves the amended statutory financial statements, accepts the related reports by the Wales Audit Office, and authorises the Head of Finance Department and Chairman of the Committee to sign the letters of representation and to submit them to the Appointed Auditor of the Wales Audit Office.

(ii)    that a letter should be sent to the Auditor General to express gratitude for the work and cooperation of WAO officers over the years in relation to auditing the accounts.