Agenda item

The Chair commented that a cover note was needed to state what was expected of the Audit committee.

The Committee was shown a presentation by the Senior Finance Business Partner.

Main points:

On the 6^th of June 2019 the draft accounts were presented to the Audit Committee and the accounts went on display for the public from the 26^th of June to the 23^rd July 2019.

The intention was to issue an unqualified audit report on the financial statements.

There were two uncorrected misstatements:

1.         Actuaries have had a look at the impact on the pension fund and there was an understatement of pension liability by £2.562m arising from the McCloud Judgement. 

2.         Accounting treatment of loan modifications under IFRS 9

There was an increase in ear marked reserves and both of these issues were technical in nature and non-cash.

1.         For 2018/19 the final date on which the accounts had to be signed and dated was brought forward from the 30^th June to 15^th June with an audited statement completed by the 15^th September. This will be the same for 2019/20.

2.         From 2020/2021 the draft statement of accounts would need to be completed by the 31^st May to be signed by 31^st July. This year the Statement of Accounts were signed by the Head of Finance on the 7^th June so within the deadline however improvements needed to be made.

The Letter of Representation was to be signed by the Chair and Head of Finance to authorise this and the Audit Committee was to authorise the Chair and the Head of Finance to sign the Statement of Accounts.

The published accounts would be on the website on the 15^th September 2019.

Questions:

·                A Member asked a question regarding pension provisions and whether the pension liability was rising and whether it affected Newport Transport Limited and the Education Achievement Service (EAS).

It was explained that the EAS wouldn’t be part of this and that it would have its own deficit as this was not part of Newport Council’s. In relation to EAS, the percentages that Newport City Council receives we do not put EAS as part of our joint account, it was the same in nature and would not affect the accounts. EAS were their own body in terms of pension evaluation.

In relation to contingent liabilities it was explained that the Council acted as a guarantor and the liability had not arisen. The Chair commented that this was not quite correct, and the event had been determined by the Supreme Court and if it was a provision then it could be argued and if you knew what the value was providing, then a contingent could be made.

There was a difference of interpretation in the materiality perspective. The Chair also commented on the accounts and the recorded £2.4 million underspend.

The Assistant Head of Finance commented that this would be reversed out through the pension reserve with no impact on the general fund and that IFRS also had not made an impact, so it was not processed. 

The Assistant Head of Finance also commented that in relation to the McCloud Judgement, the material nature was a big part and that if it had been material more would have been asked from the actuaries. It was commented that the Gwent authorities were asked what they were doing, and it was all still going through the UK government and it was not known at this stage whether it would be funded or not and WAO had said that it was a provision. 

It was also stated by the Assistant Head of Finance that when the actuaries were asked, they had not been very forthcoming in providing a significant cost as to whether we spend a lot of money or do we adjust for one year. The Chair commented that they felt this was not what was written in the report.

The Chair explained that materiality was about £4.5 million and that in the past materiality was used as a gage so what was said was what was written in the accounts.  The Chair recommended that the wording needed to be changed but that they were happy to go with what was being said but that it could have been made a lot clearer that the underspend was not affected. 

·                A Member commented that the Gwent Drainage Board was still being referred to in the accounts on page 99 and that this needed to be updated.

The Chair also commented on page 32 regarding Provisions in relation to the last paragraph that there was still a provision even if the Council had no control over it and if there was an uncertainty as to whether things would happen, if it was 70% likely then you would provide for it.

The Chair commented on page 139 of the accounts and wondered what 179f was under ‘Estimated Exposure to Non-payment March 2019’ and it was confirmed that it was a typo.

·                A Member queried pages 62/64; item 3.50 and as to whether they were repeated on both pages and the Chair confirmed that they looked like the same item. The Head of Finance commented that this was an outstanding issue from the previous year, and therefore it was the same issue. The Chair requested that it could be made clearer.

It was noted that the financial statements could change after they were signed off and that they can be altered by the time they get on the website and that it was the responsibility of Newport City Council for anything published on the website. 

·                A Member asked what the Newport City Council group was. This was confirmed to be the Newport Transport Group and there were certain criteria present which allowed a company to be in the group accounts or absent from them.

It was discussed that about 3 years ago that the Newport Transport Group was to be included into the group of accounts and the Chair mentioned that maybe this could be brought up again as to how group entities were treated and how companies were treated in different ways. The Chair requested that this item could be reviewed in the draft stage in February 2020.  

·                A Member asked how contribution worked. It was discussed how a contribution to Norse was normal expenditure, the Council received their accounts and profit share. City Services dealt with it as well as the finance business partners in this area. It was a normal standard income line.

Agreed:

The Audit Committee agreed for the accounts to be signed off by the Chair and the Head of Finance. 

The Statement of Accounts were signed by the Chair and the Head of Finance.