To update the committee on the external audit findings for 2014-15.

The director of resources introduced the findings from Grant Thornton. The report was positive, and reflected the information that had been reported throughout the year.

The accounts reflected compliance with regulations and focus on the balance sheet, giving the committee opportunity to consider issues such as the pension deficit, asset base and collections fund rather than budgetary issues.

Representatives from Grant Thornton gave an overview of their findings from the executive summary. Few issues were found with the accounts and officers were commended for their work in producing good accounts. A key issue related to school assets, which are generally complicated for councils and assumptions needed to be made with regard to what needed to be shown on the balance sheet.

In terms of value for money conclusion, it was reported that three of the eight authorities audited in the area by Grant Thornton were qualified. Herefordshire was unqualified and rated green on all areas of financial performance. A surplus was reported in 2014-15, and future challenges were recognised.

Officers were thanked and congratulated for assisting with reporting and for modernising the process which was slicker. Any issues were in one area as a one-off in relation to school assets, and guidance had been given on improving some processes.

The council had a more robust medium term financial plan. Adult spending was now under control and it was noted that this was unusual for councils.

The chairman welcomed the positive comments and thanks to officers were noted.

A member welcomed the higher reserve figures for the year and asked how Herefordshire compared with other councils with regard to schools reserves. It was confirmed that school reserves were probably slightly over average in comparison with others, noting that there were restrictions on powers in controlling school funds. Schools were monitored and it was clear what work was required in managing this issue. There were variations between schools and changes such as inflationary increases and salaries would put pressure on schools, and so support would be offered. It was noted that reserves were finite. 

A member commended officers for this report.  In answer to his question regarding what was considered to be of concern, it was explained that some judgements had to be made regarding the valuation of assets. It was noted that advice from CIPFA was not clear regarding the inclusion of assets with regard to voluntary aided and voluntary controlled schools. It was noted further that judgements were required with regard to non-domestic rates (NNDR) for GP surgeries. Pension funds were also coming under pressure.  Auditors formed conclusions on whether the assumptions were reliable with the advice from the actuary. 

Officers were congratulated by a member on the more robust process. She pointed out issues around deficit and risk management and asked for more information on the impact of reductions in staff numbers on the pension fund.  It was clarified that there was budgetary provision in the accounts to manage the pension fund deficit which is reviewed annually. In answer to her further question regarding the management of reserves, explanation was given that reserves had been too low but this had been addressed and although they were at a safe level, they required monitoring to ensure they were sufficient and used appropriately.  Auditors confirmed that there was reasonable confidence regarding reserves but it was noted that some reserves were kept for risk mitigation such as with regard to NNDR appeals from GP surgeries where there was some degree of uncertainty regarding required funds. 

The member noted that the mix of services implied a continued increase in reserves in line with increasing difficulty in managing responsibility. She commented that the report takes account of underspend, noting that if current spending plans were realised there would have been an over spend in 2015/16 of £1.2m.

The director of resources gave assurance that there would be more robust estimates for children’s safeguarding in view of there being comparatively higher spending in 2016/17.

The member noted that the medium term financial strategy included the generation of £60m from the sale of assets based on their valuation, noting that care was needed to get best value and reduce risk for council. In answer to her question regarding earlier settlement of the pension deficit, it was confirmed that this would be recommended should there be an appropriate opportunity. 

A member asked if there were any material bearings on the accounts that should be brought to the committee’s attention. It was confirmed that that the balance sheet was prepared with as much up to date information as possible and any issues raised in the letter of representation. However, it was positive in terms of reduced risks and there was nothing material to draw attention to.

RESOLVED

That the content of the external audit findings report be noted.