Mr Kevin Bartle, Interim Corporate Director for Resources and Section 151 officer, and Ms Marion Kelly, Programme Director for the Finance Improvement Team presented an update in relation to the Accounts and the Improvement Plan.

Mr Bartle stated a significant milestone had been reached with the publication of the draft 2018/19 and 2019/20 accounts, which had been restated and published on the Council’s website. Mr Bartle explained that although the plan was to present these to the Committee at this meeting, due to the significant queries that had to be resolved the accounts had only been published today and required the external auditors Deloitte’s opinion before they could be brought to the Committee. Mr Bartle said there was a possibility of holding an extraordinary committee meeting in late December or January 2022, to give the external auditors time to undertake their work. He said this had been recognised by the Chair, as the next scheduled meeting after the December meeting was not until March 2022.

In relation to the 2016/17 and 2017/18 accounts, Mr Bartle said the Finance Team had worked with KPMG about the issuing of the final certificates. He said KMPG had agreed to begin work on the incomplete set of statements and the plan was to achieve this by the end of the calendar year, although this depended on the progress KPMG were to make.

Referring to the 2020/21 accounts, Mr Bartle said a letter from Deloitte was appended with the report which had been circulated to the members. Mr Bartle said the statutory deadline had been missed but they were now on track to complete the accounts by late November 2021. He said whilst this was disappointing, he hoped these could be presented to the committee, along with the other sets of accounts at the extraordinary meeting. 

Mr Bartle said one of three interim Chief accountants had left the Council however they were actively recruiting additional resource to help manage the 2021/22 accounts. Mr Bartle said due to the delay with the 2020/21 accounts, these were likely to be audited by Deloitte between January and March 2022, when they ought to be preparing for the 2021/22 accounts. Mr Bartle said he hoped there would not be seven years of accounts open and wanted to reassure members the previous sets of accounts would be presented to them at the extraordinary meeting.

In response to comments and questions from Members the following was noted:

• Councillor Perry said it was reassuring to hear the progress being made but asked what the views of Deloitte were in relation to the current position.
• Mr Jonathan Gooding and Mr Angus Fish, from Deloitte were present for the meeting and as such Mr Gooding responded to the question. He said officers had been working hard and diligently to resolve the various queries that had been raised and whilst progress had been slow, a large volume of queries had been dealt with. Mr Gooding said in recent weeks the repreparation of the previous year’s accounts and receipt of the 2019/20 accounts was positive. He said Deloitte were experiencing some staffing issues with two partners off sick, but he hoped the independent quality checks of their work would not be impacted on. Mr Gooding stated that 91% of local authorities had not met the statutory deadline for the 2020/21 accounts and 70 local authorities had accounts outstanding from the previous years. Mr Gooding said whilst the issues experienced by others were not to the same extent as LBTH, the publication of accounts was a sector wide problem.
• Councillor Miah commented that he was pleased the accounts had been published and said the Council needed to be mindful that the accounts could be qualified if the external auditors were not satisfied with them. Mr Bartle responded saying the 2018/19 and 2019/20 accounts had been restated and he believed everything had been done to ensure these were correct. However, it was for KPMG and Deloitte to decide if their opinion is a qualified or unqualified opinion.
• Councillor Edgar commented he had noted the comments made at 3.9 of the report and said he agreed there should be a separate extraordinary meeting of the Committee, to discuss the statement of accounts.

The Chair thanked Mr Bartle for his update in relation to the Accounts.

The Committee then heard from Ms Marion Kelly, Programme Director for the Finance Improvement Team. Ms Kelly provided a detail update in relation to the Finance Improvement Plan. She said of the sixty actions within the Improvement Plan, 41 had been completed, with 12 actions shown as being on track in green and 6 actions being on amber. Ms Kelly said one action was not currently being progressed within the timescales and this was shown as purple.

Ms Kelly referred to the amber actions listed at paragraph 3.17 onwards and said the work on corporate recharges had been delayed due to a key resource leaving unexpectedly. She said finding a replacement was difficult, but efforts were being made to address this target plus realign the council’s budget and workstreams. Ms Kelly said the work to realign the budget was complex and wide ranging however significant elements of work had been completed. In reference to paragraph 3.24, Ms Kelly said they had been unable to progress work with payroll reconciliations as they needed someone with the right experience and expertise. Notwithstanding this, an interim would be taking forward the work shortly. Ms Kelly said there was an internal audit report on the agenda to discuss this later.

Referring to the remaining amber rated actions, Ms Kelly said there were two sets of plans to look at reconciliations and feeder systems, but these had not been reviewed largely due to capacity and delays in the accounts. Ms Kelly said the newly appointed Director for Finance, Mr Nisar Visram would be looking at this over the last quarter of the year and will prepare the work required to meet the IFRS16 standard which relates to the way in which leases are accounted for. She said this work will now begin in November 2021.

Lastly, Ms Kelly referred to paragraph 3.33 and said the decision as to if the current accounting systems should be replaced by an Enterprise Resource Planning (ERP) system had not been completed in accordance with the timeline. She said a report to the Corporate Leadership Team (CLT) would be presented at the end of October, with the Council also considering if an independent review – a health check of the Agresso system would add value to the review. Ms Kelly said this would be reported back to the Committee.

In response to comments and questions from members the following was noted:

• The Chair on behalf of the Committee, expressed her thanks to Mr Bartle and his team for the extraordinary work they had undertaken to rectify the previous years accounts and said she hoped the changes in procedures, as part of the Improvement Plan would lead to better management of the accounts process in future years.
• Councillor Edgar said he noted the action taken relating to budget holder training, paragraph 3.15 and said it was vital for training to be provided to budget holders. He said this related to paragraph 3.38 and the CIPFA recommendation relating to Budget management. Councillor Edgar said it was important that officers were equipped to undertake their duties using accounting systems that helped them. He said he also noted the comment made at paragraph 3.33 in relation to the ERP system. He said Officers and Councillors needed to think long and hard about if such a system would be beneficial to implement given the time it would take to introduce such a change. He said he looked forward to seeing the evaluation once the review had been completed.

The Audit Committee RESOLVED to:

1.    Note that the Accounts for 2018-19 and 2019-20 had been restated and that, additionally, work had commenced to obtain the outstanding Audit Certificates for 2016-17 and 2017-18;

2.    Note the Audit Committee’s receipt of the formal notice from the external auditors, Deloitte, that their Annual Report for 2020-21 is delayed; and

3.    Note the progress against the actions set out in the Finance Improvement Plan (IP).