The report of the Head of Finance, Governance and Assurance (S151 Officer) is to follow.

Contact: James Walton Tel: (01743) 258915

126.1  The Committee received the report of the Director of Finance, Governance and Assurance (Section 151 Officer) which presented Members with the final audited outturn position for the financial year 2019/20 and detailed any amendments made to the draft Statement of Accounts during the audit process. The Director of Finance, Governance and Assurance (Section 151 Officer) took Members through the covering report and Appendices.  He explained that Appendix 3 was the Audit Findings Report which the Engagement Lead would take Members through. 

126.2  He reported that the draft Audited Statement of Accounts had been seen by the Audit Committee at its meeting on 31 July 2020 and that the revised Statement of Accounts was attached at Appendix 1.  This was largely unchanged from the draft but where there had been changes, these were set out in table 1 on page 3 of the covering report. The report then identified what each of the amendments were and included a summary of the reasoning for that change.  None of those changes were particularly concerning.

126.3  The Director of Finance, Governance and Assurance (Section 151 Officer) then drew attention to the Annual Governance Statement set out in Appendix 2 of the report which was unchanged from the document seen in July.  At the end of the meeting, the set of accounts along with the letter of representation would be signed off.   The Engagement Lead then took Members through the Audit Findings report and explained where they were in relation to the audit which was substantially complete with a few small areas outstanding.

126.4  In relation to the overall status of the audit, the Engagement Lead was proposing to include an emphasis of matter on the valuation of land and buildings.  Also, there were a couple of outstanding issues, namely the shopping centre’s valuation and the impact of the pension fund valuations in the accounts and how those needed to be reported.  These were minor issues of wording only, for which the Director of Finance, Governance and Assurance (Section 151 Officer) had delegated authority to approve.  In terms of the Group accounts, these had been done and the Engagement Lead intended to issue his opinion by Friday of the following week.

126.5  The External Audit Manager took Members through the Audit Findings report including the financial statements and arrangements for value for money.  In relation to the audit, she reported that Covid in particular had had a significant impact however it was felt that remote working had been a success and they had been able to obtain evidence to support the statements although it had taken significantly longer than anticipated, especially where there had been queries.  However, they were now in a position to give their opinion within the next week.

126.6  The External Audit Manager highlighted those areas that needed to be worked through including information received from an external valuer in relation to the shopping centres, and receipt of relevant assurances in relation to the Pension Fund.  She confirmed that levels of materiality had not changed and remained at £8.7m and that no significant issues had been raised in relation to significant risks or to managements’ assessment of going concern for the authority.  She reported that there were no unadjusted mis statements. 

126.7  In response to a query, the External Audit Manager confirmed that the complexity of the Council’s underlying financial systems highlighted by remote working was not unique to Shropshire.  She elaborated on these complexities and explained that the reason the audit took longer was that assurances were needed throughout every step of the process to ensure all information was genuine and had been extracted from the financial ledger. 

126.8  A query was raised in relation to pages 21-22 of the Statement of Accounts 2019-2020 which referred to an anticipated budgetary pressure of just under £36m and that although Government funding of £17.918m had been received, this left a shortfall still to be funded of £17.8m.  However, it had previously been hoped to receive somewhere in the region of £32m from the Government.  In order to respond, the Engagement Lead referred to the Value for Money section of his report and explained that as well as the financial statements, they were required, under the Code of Audit Practice, to give a view on the authority’s arrangements for achieving value for money and this was done by focussing on particular risks.  This year however they had only focussed on one key risk, which was financial sustainability.  He explained that in reaching his opinion, two key aspects had been considered, one was the outcome of the 2019/20 financial year and the other was the impact of Covid on financial planning and the impact it was having on the 2021 financial year. 

126.9  The Engagement Lead confirmed that he was proposing to issue an unqualified value for money conclusion however, he was recommending that the use of non-recurrent measures to balance the annual budget was not sustainable for the authority and that the Council needed to deliver identified savings and to develop further schemes to support its financial position going forward.

126.11The Engagement Lead then discussed the Council’s financial strategy. He explained that the Council had originally received around £18m in funding from the Government.  Now however it had received something in excess of £20-£22m with a further £5m loss of income money available.  However, the Council still faced a significant financial challenge.  The funding gap in 2021/22 was anticipated to be £30m plus with a similar gap for 2022/23.  Although there was a planned use of reserves, the scope to use these reserves was diminishing.  External Audit felt that the Council had responded well to the Covid challenge but they were clear that the Council still faced a major financial challenge in next two years. 

126.12The Engagement lead thanked the Finance team for their support and assistance in getting the audit complete which was very much appreciated.

126.13The Director of Finance, Governance and Assurance (Section 151 Officer) emphasised some of the points made by the Engagement Lead in terms of where the Council was in the current year and the overarching unsustainability of the long term budget, the funding mechanism and the delay to the fair funding formula which had been put back another year.  This had led to the Council relying on one-off funding for this and now next year.  Also, the spending review later in the year was only going to cover one year rather than the usual three.  There was therefore more certainty in the short term around setting the budget for next year, however this removed the ability to plan in the long term. 

126.14It was requested that Members get sight of the final wording once approved by the Director of Finance, Governance and Assurance (Section 151 Officer) and the Vice Chairman.

126.15RESOLVED:

A.     That the 2019/20 Statement of Accounts be approved and that the Vice Chairman of the Audit Committee signs them (in accordance with the requirements of the Accounts and Audit Regulations 2015).

B.     That the Director of Finance, Governance and Assurance (Section 151 Officer) be authorised to make any minor adjustments to the Statement of Accounts prior to publication on the Council’s website.

C.     That the Director of Finance, Governance and Assurance (Section 151 Officer) and the Vice Chairman of the Audit Committee sign the letter of representation in relation to the financial statements on behalf of the Council and send to the External Auditor.