Mr Kevin Bartle, Interim Divisional Director for Finance, Procurement and Audit presented the progress report in relation to the external audit of the Council’s Statement of Accounts 2018/19.

The order of business was changed to take this item first on the agenda, to allow Deloitte, the external auditors, to also comment upon the accounts.

Mr Bartle stated officers within his team were taking matters very seriously and were working tirelessly in order to assist with queries arising from the audit of accounts, with the external auditors Deloitte. He said the original intention had been to bring the accounts to an extraordinary meeting of the Committee planned for the end of September, however with significant audit matters outstanding this meeting had to be cancelled.

Mr Bartle said the report detailed the issues outstanding and said until the significant issues had been resolved, Deloitte were not in a position to sign off the accounts. Mr Bartle expressed regret the issues were taking longer than expected to resolve however he hoped to bring a further report and the revised Statement of Accounts to the Audit Committee’s January 2020 meeting, although he emphasised this could not be guaranteed.

Mr Bartle said the exercise to resolve queries was resource intensive and there were significant areas of challenge. Mr Bartle referred Members to the information tables at paragraphs 3.2 to 3.8 which provided a detailed breakdown of the significant issues outstanding. Mr Bartle provided an explanation concerning each sub-heading and updated Members in relation to the current position.

·         In relation to the valuation of property assets, Mr Bartle said Deloitte were not content with the methodology used by the external valuers and changes would therefore needed to be made to the value of assets on the balance sheet.

·         In respect to the Capital expenditure, no outstanding queries were identified other than an under-accrual of expenditure of £3.4m.

·         Queries in relation to Pension Liabilities and lump-sum payment to Pension Fund were more of a technicality than a substantive error. There was an inconsistency of treatment and an adjustment may need to be made to this year’s accounts.

·         Collection Fund Related items – Mr Bartle explained work was required to establish why a number of previous year entries had been made, which now appear to be erroneous. Mr Bartle said the entries should properly have gone through the Collection Fund but instead were treated as general fund balances. As such this anomaly will be corrected and then be reflected in the revised accounts. 

·         In regard to the low level of provision against Business Rate appeals query, Mr Bartle said the range of appeals provisions across London Boroughs ranged from 2% to 6%, however Tower Hamlets provision had been set at 0.2%. This is clearly too low with the consensus being we should be in the range of 2 - 6%. It is being proposed the rate should be increased to 2% with the expectation this should increase over subsequent years to achieve a 4% level.

·         In respect to paragraph 3.7, Mr Bartle said the suggestions put forward by Deloitte had been incorporated in the next version of the accounts.

·         In reference to paragraph 3.8, Mr Bartle informed Members extensive work had been done to look at leaseholder accruals. Work was also being undertaken on bad debt provision as well as grants accounting.

The Chair invited Mr Jonathan Gooding from Deloitte to comment upon Mr Bartle’s report and assessment of the current position relating to the financial accounts.

Mr Gooding said he concurred with the assessment Mr Bartle had made and said whilst there were still issues that needed to be resolved, significant progress had been made since the last meeting of the Audit Committee. Mr Gooding said his team would continue to work with the Council to ensure the Accounts could be presented to the Committee at its next meeting.

The Chair, Councillor Val Whitehead then invited Councillor Candida Ronald, Cabinet Member for Resources and the Voluntary Sector, to comment on the Accounts. Councillor Ronald said that she had been in regular meetings with Mr Neville Murton, Corporate Director for Resources and with Mr Kevin Bartle looking in great detail at the issues and how these can be mitigated. Councillor Ronald said she understood the concern of the Audit Committee but was confident the issues would be worked through and a set of accounts would be presented to the Committee at its next meeting.

Mr Bartle answered a number of detailed questions from Members relating to the significant items outstanding. In response to the answers provided Members noted the following:

·         Some members expressed their concern regarding the delayed submission of the accounts and the reputational damage to the Council. Others were more positive stating it was good these issues had come to light and the Council was working towards putting them right.

·         Councillor Candida Ronald added this was a serious matter and used the analogy of peeling an onion, in terms of the issues found. She said this would have a knock-on effect on budget setting and outturn however it was better for the Council to uncover these issues and thoroughly work through them to close the accounts for 2018/19. Councillor Ronald stated a lessons learnt exercise would be carried out to establish what went wrong.

The Chair, Councillor Val Whitehead thanked everyone involved in resolving the issues with the accounts and said she hoped the accounts would be ready for the next meeting as promised.

The Committee RESOLVED to:

1.    Note the progress made on the points raised by Deloitte in their report to the Committee on 23^rd July 2019; and

2.    Note the emerging matters since that last report.