Agenda item

(a)       That the final version of the Statement of Accounts 2012/13 be recommended to County Council, noting that the Committee support the management decision not to adjust the uncorrected understatement of £899K;

(b)       That the reports from the Wales Audit Office be noted;

(c)        That the Letter of Representation - Flintshire County Council and Letter of Representation - Clwyd Pension Fund be recommended to County Council; and

(d)       That the Committee note the reassurance for further work to be undertaken on asset management.

The Head of Finance introduced the Statement of Accounts for 2012/13, together with the Wales Audit Office (WAO) reports in connection with the audit of the financial statements and Letters of Representation for Flintshire County Council and Clwyd Pension Fund.

Since the draft version of the accounts had been presented to the Committee in July 2013, drop-in sessions were arranged for all Members in September 2013 to answer any queries from Members.  There was a statutory duty for the accounts to be considered and approved before the end of the month deadline, during which time the audit officially continued for post balance sheet events and the like, but had now been substantially completed.  The Head of Finance said that in collating the accounts in a prescribed format from across an organisation such as this, it was inevitable that issues would be raised.  It was also important to remember that the document related to the accounting treatment and classification of assets and liabilities within the accounts.  She advised that the final accounts included changes agreed by WAO during the course of the audit and that these had been discussed with officers with appropriate actions put in place to amend processes where necessary.  The liquidation of AD Waste which had been finalised over the last fortnight had resulted in complex accounting entries being made to bring the assets and liabilities from that company fully into Flintshire’s balance sheet in line with accounting policies.  She thanked the officer team for their work in preparing the accounts within the deadline and invited WAO colleagues to present their findings.

Audit of Financial Statements Report for Flintshire County Council 2012/13

Mr. J. Herniman of WAO spoke of the complex task and time dedicated to producing local government accounts, including some areas requiring technical discussion on the treatment of issues within the accounts and inevitable adjustments which were normal practice.  He advised of the intention to issue an unqualified (clean) opinion on the financial statements.  Whilst reporting on the corrected misstatements identified, which had been agreed with management, he advised that the issue with balancing entries in the accounts had been resolved.

Mr. P. Williams asked why the prior period adjustment of £12.752m on non current assets had not been recognised previously.  Mr. Herniman explained that this had been identified through a sample check in the audit where the issue had been incorrectly treated in the accounts for 2011/12 and 2012/13.  Mr. Williams referred to the £13.8m adjustment for non-enhancing capital expenditure and the impact on depreciation which would require regular review of assets to ensure there was no repeat.

The Chief Executive advised Members on the outcome of the final liquidation of the assets and liabilities of AD Waste which had fallen late in the accounting period due to the legal process.  The changes were a reflection of fact on liquidation and had not occurred due to any new decision by the Council on the close of the company; liquidation was simply a closing legal process.

Mr. Herniman explained that although it was recognised that a reasonable estimate had been made for the provision of equal pay liability in the accounts, the Council had opted not to provide for pension contributions within this, following legal advice.  He explained that some authorities chose to do this and advised that the Appointed Auditor was content that no further action was needed until such time as any future court decisions arose on this issue.  In response to legal advice sought by Councillor G.S. Banks, the Democracy & Governance Manager said that whilst opinions differed on this subject, the Council had followed advice from its legal advisors.  The Chief Executive said that a Council meeting was being held at the end of October 2013 on a proposed Single Status agreement.  The Council would also be advised on an Equal Pay Strategy at that meeting.

Audit of Financial Statements Report for Clwyd Pension Fund 2012/13

Mr. Herniman reported that an unqualified opinion would be issued on the financial statements and commented on the diverse portfolio of the Clwyd Pension Fund including £262m of unquoted investment funds which relied on valuations with a degree of uncertainty.  He went on to refer to an understatement in the value of investments of £899K where management had taken the decision not to make an adjustment and requested that the Committee take a view on this and possibly include in the recommendation to Council.  He expressed his thanks to the Finance team and officers who had assisted with the audit.

In response to the reference to resources within the Pensions department, the Head of Finance reported on the recent full-time appointment of a senior officer to strengthen the team and the recruitment of less senior positions.  On the uncorrected misstatement, she spoke of the size and diversity of the Clwyd Pension Fund portfolio and the involvement of the Panel during consideration of the accounts at the draft stage.  An ongoing timing issue meant that the latest investment value information would always be received after the financial year following collation of the final accounts and was not considered to be material to overall values.  A balance was therefore needed on considering the amount of accounting adjustment required against the impact on officer time in finalising the accounts within the deadline.

The Chair agreed with the management decision on this issue as it was an understatement rather than an overstatement.  Mr. Williams agreed but spoke of his concerns about the availability of resources in the department.  The Chair echoed this view and commented on the impact of the inevitable scaling down of resources in local government, particularly in Finance areas.

The Chief Executive reminded the Committee that the Clwyd Pension Fund was ringfenced and acted on behalf of other outside bodies, adding that the temporary capacity issue had now been addressed.  In summarising both reports, he welcomed the unqualified opinions issued and the positive relationship between the Council and WAO.

Members welcomed the report, noting no major issues had been raised by WAO and asked that their gratitude be extended to those involved in producing the accounts within the timescale.  Ms. A. Hughes of WAO offered her thanks to the Finance team who had worked constructively with the auditors.

Following earlier discussion, the Chief Executive gave assurances that further work would be undertaken on the assets portfolio.

In response to a request from Councillor I.B. Roberts, the Chair agreed to speak on behalf of the Committee at the full Council meeting later in the day where the accounts were to be submitted for adoption.  On being put to the vote, the resolutions were unanimously supported by the Committee.

RESOLVED:

(a)       That the final version of the Statement of Accounts 2012/13 be recommended to County Council, noting that the Committee support the management decision not to adjust the uncorrected understatement of £899K;

(b)       That the reports from the Wales Audit Office be noted;

(c)        That the Letter of Representation - Flintshire County Council and Letter of Representation - Clwyd Pension Fund be recommended to County Council; and

(d)       That the Committee note the reassurance for further work to be undertaken on asset management.