Agenda item

Report of the Head of Finance

The Head of Finance introduced the report to members, drawing their attention to the recommendations on page 91 of the agenda which would need to be addressed prior to the preparation of the accounts for 2015/16. 

The External Auditor presented the report to Members, drawing their attention to the headline messages which were summarised in the report.  He advised that he proposed to issue an unqualified opinion on the accounts by the end of September.  He highlighted the adjustments which were to be made to the accounts, most of which were presentational in nature, and the three key risks to the delivery of the audit which had been identified, two of which were standard risks in all external audits.  The third risk identified was in respect of the valuation and privatisation of fixed assets. 

The External Auditor stated that adequate support arrangements were in place in respect of the accounts.  He added that officers had acted upon previous recommendations in respect of the quality of the papers, however there was still some room for improving this further.  He explained that a short piece of work was also needed in respect of the whole of government accounts submission, however this fundamentally could not be completed until it was clear that the requisite adjustments had been made to the accounts as set out on page 85 of the agenda, most of which were misclassification issues with no impact on the financial outturn position of the council.  He highlighted one misclassification issue which had been listed as an asset, when in fact it was a liability; however this would have no impact upon the outturn position.  He advised that there were other adjustments to be made which were purely presentational an nothing of significance.  He highlighted the recommendations on page 91 of the agenda and the indicative timetable, which officers were in agreement with.  He stated that the recommendations would be monitored throughout the year to ensure that progress was being made.

Councillor T Neilson asked if there was any internal target completion date in respect of the three recommendations to ensure these were followed through.  The Head of Finance advised that these recommendations would need to be acted upon before work was started on the accounts next year, and his target date would be the end of February.

In respect of the statement to be presented to government, Councillor F Fenning asked if there was any risk that the government might seek to claw back a surplus balance where a surplus was in place for more than 2 years.  The Head of Finance explained that when the Revenue Budget was agreed by Cabinet and Council in February, an underspend of £1 million was projected.  He advised that a level of reserves had been agreed taking into account of the risks facing the council in terms of income.  He added that Council and Cabinet were happy to naturally allow the £1 million to be added to the reserves at year end, so that the reserves would rise to £2.24 million, which was considered prudent.  He explained that when the accounts were closed, it was found that there was an additional £600,000 underspend, and therefore there would be an extra £600,000 in the reserves.  Cabinet had agreed that this would be spent on special projects in the short term.  He advised that there was currently nothing in law in respect of holding excessive reserves, however he was mindful that this might not always be the case.  He explained that any funds in excess were earmarked and a reason was provided for holding the money.

Councillor F Fenning felt that stating that the funds were to be used for special projects was rather vague, and asked if they needed to be specified.  The Head of Finance advised that there was no requirement to be specific, and referring to the Cabinet report, there was so much work to be done that it was hard to see how the money would not be spent.

It was moved by Councillor R Adams, by seconded by Councillor T Neilson and

RESOLVED THAT:

a)   The contents of the external auditor’s report attached at Appendix A be noted.

b)   The letter of representation attached at Appendix B be approved.

c)         The external auditor’s recommendations and management comments set out in Appendix 1 to their report be noted.