Audit Panel - Wednesday, 4th November 2020 at 7:00pm - Lewisham Council Webcasting

Audit Panel
Wednesday, 4th November 2020 at 7:00pm 









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1 Declarations of Interest
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2 Minutes
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4 Response to Grant Thornton's Audit Findings Reports
4 Response to Grant Thornton's Audit Findings Reports
5 Exclusion of Press and Public
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  1. Webcast Finished

the first meeting of the Audit Panel please could everyone make sure that your microphone is muted several you're not stirred by background noise and put your mobile phone on silent before business starts I would like to make clear what procedures office evening this is a formal virtual public meeting please do not speak over each other and Richard shudder with courtesy and respect at all times
as Chair I would invite you to speak at the appropriate times if a Member wishes to ask a question please indicate do that using the chap function rather than be hands up function any person who speaking is going to be permitted to finish what they say without interruption but if I ask you to stop please do so I will be allowing Members to our who are asking questions and those around him them to engage in discussion and fire points when Bear appropriate but please don't abusers' I'm I want to have a back and forth frank discussion between officers and members but don't take that for granted Members should keep their cameras on at all times if possible whilst other participant should only have Mourne where taking part in the meeting if a Member is loses their internet connection we will be pausing the meeting whilst be pre try to re-establish VAT
I have received apologies for absence from Councillors wise and Maslin and apologies for lateness from Councillor Davis Clerk is now going to read out the names of members of the Audit Panel please can you confirm that you were present when cold
Sarah Ewart
3 ethical to and me
you'll need it again Sarah
Sarah has put him to chat but she comes with her sound I will read out the names then could we start with Councillor Millbank
present Councillor Hall present Carol Marie
your your Newcastle
president nectar present in place are present Stephen Warren present her cake thank you everyone
we've got quite a few officers and it's individuals on grant forcing her presenting tonight for the sake of anyone who is watching online arm as unlikely as that may be would you like to introduce yourselves now just so everyone knows it shovels are just take it in turn to been popular Cameron and say your name
engaging read from consultancy external audit
I'm like me full so on the charge from Grant Thornton
my name is Steph reflecting the legal advice that the Committee
they are often from the Council of the Finance side and evident on order item
selly Tolson dark for fires at lotion
cerebral Jacqueline senior manager from graphing sim sorry I was on yet
Apple Callinan acting great Finance magical accounting
Lorraine Richards Head of revenues of devolution
Christine Webster had been 10 audit here for the Internal Audit's and item
Terence badgered Lewisham finance

1 Declarations of Interest

I think that's all of us to a cake absent thank you very much everyone OK in that case we will now proceed on to item 1 on the agenda which is the operations of interest members need to make sure about declaring any disclosable pecuniary interests register of interests or non-reversible interests if anyone does have a conflict of interest please say so now

2 Minutes

OK I'm not seeing any declarations of interest so we can move on to the next item on the agenda bats be meetings of the last arm Patrick Yu panel does anyone have any comments or questions on the meeting and I'm looking at Stephen here because we know him well
Yepes even come in
thank you
I'm applications and one question
beyond the page 6 item fine
fifth paragraph starting the Redmond review I think it when it says recommended that internally to take more account of its work that should be external audit
I'm back probably things the case and have you got your audio working Sara or you still down on that one
there is is that supposed to be external Audit then I can make that change yet excellent working and my other feet there was the final sentence of that paragraph officers will consider the recommend recommendations and producers something for the next audit and then didn't appear to be on the agenda
I'm that was I can can action probably for David arm
it wasn't anything with this with and activating the put in because of the revised external accountable to focus on the by next meeting I took that to mean the the next one in the new year
OK the next quarterly meeting I'm I'm also seeing cattle
mine I picked up on exactly the same time to that's already been mentioned about that external audience didn't turn again is exactly the same character as anyone else have anything and so the whole Councillor wankers not OK in that case can be agreed in its place

3 External Audit

I cannot see any objections and lots of nodding heads so I'm taking the has agreed so will now move on to agenda Item 3 which is the final accounts 2 thousand 19 20 from Porton's Audit findings report so crammed fought and if you could join his place
a report just feel free to start on whenever you're ready and are going thank you said report you having front of you there is the main Audit findings report for the main financial statements there's the pension fund on your Audit findings report for the pension Fund financial statements and then as an addendum with some additional a couple of additional additional adjustments that also need reflected in the accounts which didn't quite make the report went to it when it was first submitted to the Committee I'll take the main audit report first as you will no doubt recall from previous years the sums up the totality of the work we've done across the Code Audit carries for the whole of the 2 thousand 19 20 year and reports to you the key elements of our work from their cats perspective so that you have this information for interview before the Council recommended for approval for the value-for-money works that you you having fun to be the key findings of the work we've done throughout the year that inform the value for Money conclusion
with the financial statements the as an overview in proposing an unqualified opinion on the financial statements
there have been movements from the draft submitted to award it to the final position the there's we reported last year some weaknesses in terms of cut off and the ability of the Council to ensure that a cut off applies has been applied appropriately so that the the transactions for the White year recalled are recorded appropriately we extrapolated error we found in terms of things from from different years either being in an it shouldn't be or vice versa the extrapolated error is 6 point 6 million so we're happy that to the extent of the area would not be material in terms of the financial statements and certainly the the sample items that they're the call of that extrapolation are dubious bow small so we reported to you so that you you you having fun to be the understanding that there is our in there but we're comfortable that Anna would not represent a material misstatement of the accounts even if it were to be representative across the fund at the cost of population that we tested we had some issues with the valuation of surplus assets in that they weren't revalued they they now been additional valuation reports were carried out and and dated values reflected in the accounts testing of the floor areas and the inputs to some of the schools valuations also identified that there are no incorrect and again adjustments to the valuations are being undertaken and reflected in the updated accounts there's also an update to a pension fund us evaluation for Level 3 valuation after the year end
which again as has been reflected in the account so that the the balance sheet position is as up-to-date as it can be in terms of both property Plant and equipment and pension Fund Blyth a pensions liabilities the other point to note what we reported last year in terms of the proposed and a number of errors within the financial statements and we found a Shire was still quite a lot and probably more and more I think than than comparable Boas it is a complex set of financial statements and a London borough is one of the largest organisations you can have in local government so it's it's we we wouldn't expect it to be none and I think it's been an improver from the prior year but are still work to be done in terms of maximising the that the quality of the cancer do get submitted fraud it I'll come on a bit later in terms of some adjustments which are later on in the report the or other things point out macro level and and I mention this at the previous meeting in in September is the fact that management has correctly disclosed or within the statements that the valuations of property plant and equipment and evaluations in respect of pension liabilities or subjective material valuation and certainty and this is due to the impact as at the balance sheet date of COVID-19 it's slowed the property market right down the the normal dated of be available as at that date in order to Aribert accurate valuations simply wasn't now because everything had ground to a halt so the the relevant experts of disclose to management that's the values are given on the basis of the material valuation uncertainty Management cuscus any accounts we agree with a disclosure of
we believe that disclosure and we will also be emphasising those matters within our opinion to and to reiterate that's not a qualification of the opinion that was done the right thing it is just a relevant fact for the reader of the accounts and a reader of the opinion that is is worth highlighting to them because of the unusual circumstances in place at this year and compared to a normal you and
materiality for the Audit as you said in the plan was 16 million for the main order and 16 and a half million for the group the the report therefore reports to you anything above 16 million individually or cumulatively would would suggest the Council materially wrong adjustments have been made and we're happy as no material error within the financial statements that's the infant with you few finally bits and bobs I think there's a few updates to the annual governance statement in the narrative report which which management are of finessing but otherwise we are comfortable in terms of the work is done that is by enlarged finished in we'll be seeing an unqualified opinion
going concern we've looked at and again comfortable councillors taking into account all of the the financial impact in terms of Covid in an and it plans to come it responded well in terms of having at the understanding needed a financial position to be able to understand what the impact was and the work we've done we're comfortable there's no going concern issue that would need to be disclosed in the financial statements for the 12 months to come given it the authorities the level of reserves balances has in its ability therefore to absorb the shocking packed of something like a global condemn ICC and annual cost of that brings with it
we raised on page 36 of the report a number of recommendations which we've agreed with management
the first four elected to the financial statements and in the final two VFM ones which are common to little bits later integrate the VFM
setted recommendations related to the fact that for the first 5 relate to the too much statements talked about the the errors and and the need for for the the quality review before they are submitted forward it it reflects a surplus assets that we've mentioned it reflects the cut off testing and the needed to to address some at whatever the underlying causes are there the other 2 1 relates to a good practice points which is in terms of the declaration of interest this is done at the front of meetings as we expect
what there isn't though is a central annual process including nil returns for for for Members to filling this would destroy helps strengthen management's ability to confirm they hadn't missed anything that needs disclosing the accounts when it comes to the transparency of other interests that that Members may have I and a final point relates to IT deficiencies within the Council's 80 these efficiencies which don't feed through into him a material misstatements in terms of the accounts they are largely as you can see related to sort of or access login password security that that's what a thing we we raised it because quite a few and been after every year but we also very comfortable that none of these have led to a material misstatement and in the accounts
partly because of the nature of the issues but also partly because of the fact that the the Audit approaching adopters fully substantive and so had any of these issues lead to a material misstatement the Audit testing approach we've got would have identified those in the accounts by jump ahead to page 38 we in terms of the prior year recommendations we followed up on those and is an update here in terms of how the doing some of them are familiar I've mentioned cut off quality of the financial statements
I T and the need to the Members' interests points at all all the points that that work full out we raised this year and yet the scene we see the in terms of how they are being presented and impedes 40 onwards lists all of the adjustments that are made to the accounts and aversion it was submitted fraud it could aversion at now I've been through an audit and see that both adjustments to the primary statements but also adjustments in terms of misclassification presentation and disclosure matters over the next few pages plus the addendum which lists a couple more that little so apply and I think it's the it's the six pages worth of adjustments is is probably more I think than we report generally in terms of Council but it is it is as a as I say a complex large London bow and and there's a lot of estimation and nobody really expected to be spot-on from amenity was submitted for audit
so he proposed an unqualified opinion on the financial statements the other work we do is the value for Money work or where again proposing an unqualified conclusion on the value for money on the arrangements in place to secure value for money for the Council just to clarify that's not saying it's not a it's not a conclusion says the Council has therefore achieved value for money but it is an assessment of the arrangements in place and whether there are any material deficiencies in those arrangements which could cause the Council not achieve value for money when it does we we've not find anything we believe which is material in those arrangements
are in place we've set out in in a fair amount of detail and analysis of the council which I won't go through what I will do into on page 37 just highlight a 2 recommendations were made in respect of fear from unease again these aren't necessarily to correct a deficiency which has bring an arrangement below the line the these to enhance arrangements already in place so what one is in respect of the now to which is already in place and we recommended previously that an improved monitoring in terms of savings programmes and what isn't achieved thus being done we suggested you could be further enhanced with also an idea having identified some slippage all it that's savings are not being delivered in in in the way intended further now it of to explain what the corrective action is and what's being done in order to either mitigate the under delivery or to correct it in terms of getting back on track and then the other arrangement relates to a recommendation relates to the fact that dot stunning Mr. R or lease a third of the proposed savings aren't being delivered so indicate potential weaknesses either in the ability to identify appropriate savings in the first place or the ability if they are appropriate at the ensure they do happen and so it's we recommend in the Council look into that little a little bit further understand exactly why that is with with a view to increasing the percentage of planned savings which actually then become realised savings at the end of the at the end of the programme again proposing an unqualified opinion on the value for money and in the final part of our work is the pension Fund Annual finally audit findings support the same material valuation and certainty plays in that as the main audits in terms of the pension liabilities and that relates to the uncertainties in place for property investments held by the pension fund and for level 3 investments such as private equity data investment infrastructure investments all of which at the balance sheet date were hard to verify Harding I'd verify because of the circumstances in place and and therefore management is appropriately disclosing the material uncertainty and we've emphasising that in our opinion
the charity was 13 million we are comfortable with the Council materially accurate gave a concern again overview of the US at the pension fund we have no material concerns that a and and we we there's no material disclosures missing in terms a going concern and it's Noddy per cent funded and we can be comfortable and the government concerned status of of of the fund our work on level 3 investments to all with the trickiest ones notwithstanding material valuation uncertainty were satisfied that the investments are otherwise materially accurate within the financial statements and the one control finding we make in terms of the pension funds we we noticed over a lot of manual adjustments made between the trial balance from the system and the accounts which presented fraud it and whilst we've had we been able to audit all of those and traces through are satisfied that all appropriate it is it's not the best way of doing it and ideally you would have few Emmanuel adjustments between system and accounts because it reduces the risk of misstatement creeping in the first place but also reduces the extent of audit work and and council officers time to respond to that needed during the audit process itself so as an improvement points again to minimise or reduce some of the risk that could creep in in terms of misstatements within the accounts but otherwise again pension funds it's it's a sort of well Walwyn it'll funds and we are proposing again an unqualified opinion on the pension Fund financial statements as well so that that that summarises some of the key messages I think from our work is a lot more detail in reports and very happy to take questions on on anything I've covered or indeed any of the detail in the reports that I didn't draw out directly in his presentation factor game poll arm how they it's helpful
arm I've packed questions or any from Ian and Carol in which like to start
thank you very much larger source 2 questions it might need the input of them officers as well on the 6 point 6 million cattle
issue I appreciate is not material to the financial statements but it is material to the amounts of a budget overspend that has been reported so that's effectively been under reported I appreciate that it's an extrapolation is not this a completely hard number so kind of under reports the at disclosed overspend in the year but also presumably it gives a 6 point 6 million hole in next year's Budget the Rory got 6 point 6 million to cover off not Grant Thornton obviously got the council so I just wondered if is not an adjusting item whether given you know the the materiality to the disclosed overspend
it's worthy of disclosure I also given about the Jimmy creates a bit of a problem for hitting next year's budget as well as this 6 point 6 billion of expenditure of pushed into this financial year that ideally or not ideally but that body accounting standards should have been in the previous Banerjee that's one question and at the second question what it shall we do with that one and ensure Moncef question sounds like a motion for David Austin to make a patchy I think from it from an audit respective if if if I can if if if roof with your permission shouting survey it's it's worth I think being being really clear that because it is an extrapolation spoke so if it were actual Ella then all the point you say would apply in in that sentient knew the budget the overspend would be different by that much this year and and begin dental Ganesha but it bin it because it isn't an actual ever and it's just next up and or order does have an uncanny knack I've been over other of a population of thousands and thousands and thousands of transactions are finding the one that is an ever and we the extrapolation is purely to assess whether or not from the work we've done we need to do more work because there ever is indicative of the can't be materially Wong said extrapolation is no more than a confirmation that that if if if that last a warm as the worst case scenario but it doesn't necessarily mean that there is 6 million of ever within the financial statements it's purely the evidence which means that we don't sufficient work that even if there were it wouldn't it wouldn't mislead the reader and on that basis it could be that if we did extra testing we found no more errors of that nature whatsoever I think unlikely given given the nature but it doesn't necessarily mean a 6 point 6 million difference in terms of what's been spent compared to what's been budgeted and simply doesn't necessarily mean as the 6 million hole in in the years either side either because it doesn't stop relation methodology to assess whether the EMAs material not an indication of actual error
I can't thank you so I'm not sure his best placed in Lewisham is it Paul or Terry and if someone could bearing and just give an officer perspective
heliport yet
so if you could just address on for his poll be issue raised by him
there's no sooner just something with my settings yes
yeah I mean as you say on the face of it you know it doesn't look very good in terms of potential understatement of our spend but I think you know all we can really do from this point is kind of look look in more detail at the actual errors that were found and see whether that points us in the direction of you know what the underlying cause might be of of those you know incorrect accruals or missing accruals and see whether we can innovate Siewert see whether it's you need to one or two particular services or whether it makes more Council wide I think that that's all I can really suggest at the moment and that that will obviously have an effect on the current year rather than requiring any prior adjustment so arm if 6 point 6 million is be extrapolated arm variance I suppose arm what was be actual figure
well that's that's the kind of the unknown is it's really impossible to say it could be a could be lot lower it could be higher
it's in a fundamentally it just needs further investigation I mean because there were always going to be a certain amount of Erin accruals casino some of them are partly estimated and and so on and so forth but yes a very difficult one to answer I can't answer it scientifically
so far
6 point 6 million arm it's obviously it's been extrapolated from a lower figure and so what is the lower figure it's been extrapolated from think come you know
42 thousand it's on page 44 of the Grant Thornton report Yankee 346 thousand Elkann nothing we also note that as one of the extrapolation they did that extend the testing that thing didn't finally others may not see that doesn't change the underlying sample but even the visual thumping nothing further with
found which is part of the explanation for not making the adjustment and when I think the point that that come through as the risk remains a cut off is always a risky part of any closure and audit and as caused Cowler the sat on the officer side we accepted it's one that we do need to pay more more acute attention to not not by way of an excuse of course but this year end closing also took place in some slightly unusual circumstances in terms of where everybody was in the work they were doing in their normal budgetary process but that doesn't and that that's that's a fact but it doesn't excuse the risk and is a risk that looks like we're gonna have to and be mindful of again come this March as well so we will be
are you happy with him I just want to follow the foremost yes that at the thank you for those answers that's appreciated and what I would say those is down on on the schedule on page 4 page want 44 or page 53 depending on what numbering festival of it is down as unadjusted misstatement get that is a now that amount albeit an extrapolation is presented here as unadjusted misstatement which makes it sound like it's a bit more than just an extrapolation and you do that you would handle is required to approve management's proposed treatment of all items recorded below so that reads though we are being asked to sign off on the non adjustment of a 6 point 6 million pound error now you might justify that I say Well it's just an extrapolation it is just an extrapolation I would argue it's not necessarily an unadjusted error because you're saying it's it's on that you used an indication as to whether you need to do more testing but here you're saying it's an unadjusted error so I think that's the point I'm really trying to get
clarity on and that wanted to be technical aspects of the pension was your sampling methodology
but extrapolation
if it does have a
it is an estimate of what the area could be based on your what you're sampling method is it can act as a proxy for natural underlying error I think that this Ashway having implies it's just there to flag a bit of risk and we should be aware of it so as is the one I'd really making is wearing us sign off as it would appear on 8 6 point 6 million pound unadjusted error and I saw make sure colleagues are comfortable in in doing that because that's the ask of the paper Callan Stephen Green View any comments on Bath with for professional background
I will chip in here that OK Chair I think it's relevant for the council and the officers to sat at satisfied themselves
perhaps by extended testing as to whether this is a a non-trivial type of issue or not and I would be more comfortable if we have more information before we were asked to endorse or otherwise her and adjustment not being made
OK thank you Stephen Carroll any views
not tonne not on this issue I have some very general questions on the Holt if you looked at the time and now arm yeah I mean I I think we've got a situation here where a and Stephen have given us a vices the Panel which I think we probably consider but let me take a questions now Carol we can potentially address this at the end of the item
I can and I just wanted to know whether the outstanding items on page 15 have taken provided now
which page 15 Carroll and audit peppers always have age always have free page numbers which is not the most helpful
and they take 58 of the pack with a
Page 6 of Grant Thornton's report a case of page 17 of digital version page 15 of the paper version page 6 of grant fortune's version here own your parsley Blanchette repressed if as a Kaiser revising Aisyah a subsequent version of the annual governance statement Mr. went for that one we've re re perceived their work is but a minimum Revenue provision calculation and I think it exit payments now for are still waiting for lung bank statement revelations a brief cross scope than it once did an outstanding list and the at the other LAs bears' who comes at the end of the order which are always an outstanding this will be only sign-off from the last couple of varies
and Martha comestibles as a general one was no in your report you listed lotions reserves against other councils I just wondered whether the pressures in the overspends that at Lewisham are having Arthur in line with similar councils across London
yes really the
and in particular if if if you're you referring to the pressures coming from the pandemic and all those costs that they buy and as they are in some cases Lewisham fares slightly better but annotate it marred slightly on the basis that there there isn't a great investment in invests in commercial properties and in an investment assets that some other councils to
confirmed and as such you are less exposed slightly to that sort of income reduction risk in an economic downturn than other councils who are more who will be investing more heavily in that area of income generation but then in the other areas reduction in parking and gee general reductions in fees and charges yes it's Lewisham's not doing any worse and then in India and than any other Council in in a similar position and are of a similar size yeah by and large are generally reflective of what's happening of our elsewhere and simile author intention to respond so most of the Council's I ordered to actually
with the exception of Croydon ha had a level of reserves that were able to withstand the shock and also had some contingencies built in we certainly in the short term for the 12 months to come admit that there that that the the there's no material concern over the ability for the Council to continue to pay its bills and again that is also consistent with a number of other Councils that we we were with not including when
what about the Children's Services pressures the oldest continuing overspends in Children's Services is that common it can be some councils are or aspire to have a bit of a better grip on it in one sense but I think that is much often as much cultural as it is financial and in that sense so because chill services of a demand led service it is very
it is not unusual that the that the that's in overspends against budget and particularly the case where it's happened for many years and and a culture and can set in and are not seen as what has happened in Lewisham but it can be the case in many demand-led services especially well related to children's on the basis that while the the budget or where good in and if we meet it we can but actually there is children are in need and and almost expectation can be there with the budgets always going to be a couple of million short no matter how much you increase it by
so I think arresting it is a lot easier said than done because it is often as much cultural as it is financial in in that sense is not necessary the budgets of 1 is that the rigour that's also needed at the ground level to to to to meet the budgets
now also needs addressing as well I think so the it's an unusual name it it's not massively out of step but there are some councils that's that are more able to contain it but equally some councils there are better they they put more funding and so it's slightly easier to contain it and say it's as much cultural as its financial
OK thank you that's an OK thank you very much count on just to follow up quickly pull on something Campbell mentioned subsidy
the children and Young People's Directorate in tune social can particularly something which you made reference to quite a lot in your narrative both for written narrative and your verbal one arm and I was obviously I was looking at the 2 thousand 19 20 savings probing and when it came to see my p it met
only 1 point 6 per cent of its savings total compared to essentially if 68 point 8 percent overall but if you take CYP after consideration via directorates had an average of 82 point 5 percent so that's a huge variance between the ability to meet budget targets for CYP and non CYP Departments arm I was wondering whether as part of your all day you heard investigated budget performance inside CYP in any more detail on about something which just you didn't get down to because it wouldn't material Ceann it's it's essentially or your final point is it knows it on the head it's the to admit to justify US encourages costs which ultimately customer to pay for it would need to be would need to be ever a level where we thought actually this this could cause a council to fall over and we don't get is that levers not that poor smitten at sensitive becomes existential to the Council's ability to continue
so we haven't gone down into detail to investigate further beyond noting that there are there and noting clearly that this Amey ever spends on the trend over over the years has been to reduce the the the overspends or the variances are smaller than they were previously and so also for that reason we've got some assurance that it's not necessarily fix but it is going in the right direction we'd be more concerned actually the the size of the overspends were growing you and you are rather than falling I think the same is one is particularly were worth focusing on but I suspected it it's a similar point whereby if you'd overspends then the the the view within the directors will be caught make savings because you don't have enough money already Richard any isn't quite that simple but and which is where I think somebody some of its cultural as opposed to just financial at CCAG thank you so you're actually made a value for Money judgement against the Council as a whole which was positive which was very pleasing but I was wondering really and it's very much because the section it's in the value for Money Budget men management section of the report were you making a value for money judgement simply on CYP is that I rhetoric it so considering it in isolation what would that judgement of vein
I suppose I don't have an answer to it really it was just on the basis of CYP as I say that the trend has been the that the variance to reducing year on year rather than increasing and I'd be more concerned if that if if the direction travel been in the opposite direction we we we don't go into enough detail to make such a judgement on CYP on its own partly because what is to be part of the council is not the only part of the Council

4 Response to Grant Thornton's Audit Findings Reports

and in the absence of any other information coming to light that was suggested services themselves or inadequate then then we we wouldn't necessarily adversely affect our conclusion on who are given one on just CYP it there would need to be more evidence than we've uncovered so far it doesn't mean see why P can't end up causing a qualified VfM conclusion for the Council as a whole whether happens they that's normally it normally it either mean needs the kind of fight the finances to be spiralling so out of control that that that they're almost not unrecoverable and or that this quality the services are sufficient that's you'll regulators have gone of come in and said you services of inadequate
both of those would lead to a qualification and see my people so on the Council as a whole and in both cases I don't think that is the case here Lewisham ack-ack thank you very much Paul are I see that Councillor Dana's under so thank you for coming Sophie so I believe my next question was from Stephen system if you'd like to come in
I had two questions he pulled the relevant document in front of me Appendix B you flagged seven areas of recommendations or the auditors have flight said navy as it or where recommendations were made in the previous year
and four of those are not assessed as adequately addressed this year I was wondering how officers can provide assurance to the panel about the robustness of the steps they are proposing to address them
do you want my second question as well

3 External Audit

a low I'm talking to me off pole save as well as this was more a question to officers I think rather than to the Auditor here I wasn't questioning the nature of the recommendations owes talking about the officer at the response I do have a question for Paul subsequently which is in Appendix D the final fee is recorded as to be confirmed and I wondered whether the Audit was proposing additional fees or not Bearcat Eurostar so when Poken take that second one
document stratified will page it stable
you'll need Steven
this is Appendix B
8 numbering gone through his paper 47 49
Page 38 38 grant thought and 47 on the paper copy 49 on the digital copy for OK thank you
schedule and go to the second question I can come back and look at this actually I've got a reason something go even though not all policy sure so in terms of the fee the we've been having conversations with with prayer say as a whole in terms of fee impact on a coded in terms of what it costs the and largely down to the fact that
doing it remotely was whilst we were able to deliver it to the same standards at the our regulators expect I mean that any diminution in terms of the level of assurance that we give you over an opinion to a normal year it does unavoidably take take longer so the TB sees essentially that the conversations with Pearcey A are still ongoing in terms of what what the final Fiona coded world may look like
we did put the fears as you as recorded in the Audit Plan reported an increase on fees and we included in that and elements take account of the fact in Caistor the level of any accounts was with necessitating more work so a good chunk of that has already been accommodated in the fee that we agreed at the planning stage the TB sees is merely adjusting case for many related Kubrat after the event bit
thank you do you have a it up the sewer Oyster looking for the relevant section God I see section I've seen the the four points Stevens Stevens referring to on 1st 2 which relates to misstatement and the and the Cuttle Foyle
we started about some of that this evening as well really in terms of as well just silk took on more time and diligence tend to failed through these things and building some more time into into what we do in terms can point me counts together
it also been said that this year has been quite unusual for us really in terms of how that the you know I've had a team of kind of operated it's been it's been a bit of a challenge but nevertheless we expect to kind of pick some of these things up sorry about cut organisation or organising ourselves to kind of work in this different way going forward and of a relatively confident that having Connock operate as process for this year we should be in a better position as we look to close down the current year's accounts going forward so I feel quite confident on that and then report was around the IT audience as well and is quite disappointing that there are so many points still on this on this old erm response was provided to Grant Thornton on on or on all of these issues I think he probably just needs a bit more clarity and some of the some of it relates to the inherent way in which the Oracle system is built so in other finisher Kanye causes some issues at some of it relates to legacy systems like resourcing which no longer exist we got a small number of licences for for some shows I'm people as well that probably just requires a bit more of a response from certain myself and and the finance team to to to reassure but just Grant Thornton but also on the panel members as well Chair that you know we are on on on top of that too
OK thank you so it is that task factory Stephen
I think he will be helpful I think there's a subsequent paper on this as well and to see at a subsequent meeting or a more nuanced action plan that we can monitor against in the course of the year
thank you and I think Councillor Millbank was gets job would you like to come in yeah thank you Chair I just want you to go back to the point that Carroll made about the live reserves point it's on page 15 of the Audit report or 26 or 24 whichever version you're looking at and just so my point is allowed to pull Grady plays and could you just lie for you might you made the comment about that Lewisham's reserves were roughly lobby other Local authorities that just one clear you talked about the actual level or you talking about the proportion in relation to the size of the budget and also I just wondered are also on the reserve how far do you actually look into the level of reserves because obviously here you're just kind of note in down what management is saying and I just wondered what you know how far as your to look into a level of reserves thank you
OK thank you sorry in terms of what when when I say though the
broadly similar or amongst average it's in relation to the two graphs that we've presented in the report so that the first one is first was looking to all your your usable reserves other than the school's ones even though there been earmarked so it's too because it's it's some councils do of course have a habit of for earmarking reserves all sorts of purposes so the General Fund looks smaller so this takes everything into account and compares that against its councils it is both on total level in an absolute level in terms of hundreds of thousands but also as a percentage of your net Service Revenue Expenditure as well so it so it is both absolute and as a percentage or of as as a percentage of your spend and therefore the second one as the gives a better idea as to how able you are to continue at your current levels of spend with reserves at you've got I mean that when also you are slightly better than average and slightly more resilient than the average which is good good good place to be in terms of how do we know in a and actually are and I think there's there's the one about so yes it is what Council say and actually reserved the auditing of reserves as little more than
checking the earmarking decisions are supported by a council for your properly proper council decisions so the legality is there and and an otherwise it is was it is what they tell us I guess the the reserves in themselves that they are backed by cash they are backed by assets I backed by a number of of of elements of the top of the ballot sheet and so in one-off themself you can't really point of reserve and say Well that that's where it is almost an accounting construct in in in that sense and so it'd be a list of the current Council can do other than tell us but it's supported by the fact that I wondered of the top of the ballot sheet needs that we are comfortable that the balance sheet is materially accurate in terms of the assets and liabilities which generate the the levels of reserves new difference the way one thing I think Jetton just to actually in and it relates to some of the previous points as well in in terms of the accounts themselves and now we've talked about the level of error and and the the
the need for some things to to to improve and it is also worth stressing that in in in this year in in particular it it was difficult
and not just dodgy auditing is more challenging but also producing the accounts was chancing from a wholly remote way working to produce accounts of this complexity in in in an also and to respond to the audience and the increased demand on officers' time that we've we've asked for because it does take longer for them to show a stuff over meetings like listen sharing screens than it does to us to walk on the core and have a quick chat with for all Alteri an erratic in Athens loosens done pretty well because there are very very very few single digit percentage of if that of councils in the country who have had their accounts signed off very few in this position where we are able to come to you with the Audit having been completed and so in Athens Lewisham is is leading the pack really nationally in terms of both having got your catch to us at the time that you did and also having been able to facilitate the completion of the Audit in in the way that you've done slowly I think that there are things to improve continue but I think that that Prince also worth making as well that that actually this year Lewisham isn't one of the later or cause to be signed it's it's it's come up near the front of the park
does that satisfy YE Yang
yes thank you I said that that the appointment to make sure that goes in the minutes of this meeting then I went was made thank you care thank you Councillor whole added Europe next thank you Chair I just wanted to to go back to the point that the the poor mentioned about the culture really because we've we've had several meetings him over the years and it does seem repetitious the bit about or recommendations are made and then not carried through and they then reappeared not and a subsequent audit them and I think for me that that is I mean I think that is one of the key points because it surely we should be developing a system where we shouldn't be seen this on such a regular basis so I just wondered if we could capture that point and also at it read a little bit of the critique of Croydon and it was in common with most councils you know their focus was on the place and on investments we're not unexposed we do have the Catford developments coming our way at the moment they're they're not particularly featuring in the in the accounts and it was demanded services that were the overspends were not been tackled in the Croydon as scenario and then the auditors obviously after the event which is the nature of Audit said that there was an element of corporate blindness it would have been propped prep useful if they said that before
the from but I don't want us to get into that position I just wanted to know you know how can we tackle that cultural issues has been raised with us
I'm so I think the cultural peace is I think it's it is indicative that that could be part of feature what we haven't done his is any form a cultural ordered or dive dive to the detailed say yes this is definitely one of your issues my experience of other places where where an overspends continues is that there was often a cultural element to it and I see that a lot in the NHS and light should services the NHS is often a demand led service and so the cultural bitters is when you get to the position that you believe cut corporately it's just a gleeful as you whatever the budget is it it'll probably be a couple of million short no matter what you make it the cultural bit doesn't met will mean the budget wrong it means it actually
different issue to address in order to address that particular issue what I'm not saying is definitely what the problem is I'm saying my experiences that's probably at least a factor in it
just pick up on co-ordinating the public interest support the point was we have been saying for several years the reason went public was because it hadn't been listening one and soon after the event
and as that as thank you yes I think that's very useful and I think if we look back on what Grant Thornton has told the council it has for several years of the council needs to follow up on his own recommend action
thank you very much as an
I thank you both questions as well as John Dallat
so you don't recast yes
and actually being answered the Thanki OK that's Goodman thank you I've got a couple of my Nashi most able of being picked up already by people on so I was interested in be issues relating to the valuation of land and buildings so that's on a couple of pages on 9 18 slash 20 but mainly 13 slash 22 slash 24 arm as I said Battisti Grant Thornton's papers the paper copy then the digital coffee foes of you are
audit Veterans will be aware of this issue I was interested in knowing what percentage of assets were revalued this year was it the entirety of the Council's holdings or was it only a subset of them
Paul Jolley will be able to currently I believe it was most of the assets that were revalued the end because you of the precise pretended he I can appear immediate decide anything the accounts note 10 I think he is it tells you how me as it for evaded addition let me just trying to find it for you very quickly
so chaired I was there to point 2 million to put a billion pounds when less' Wee-Bey this year out to point 4 billion a khaki that's good arm surfacing implosion debt that's the basis of current proportion and is backed something which is going to be carried out on an annual basis from this point because obviously valuation of assets has been a problem arm in multiple reports over the last few years is back now a standard part of the process or is it a one off that we revalued me portfolio and it's going to stay as a case for the next several years but probably something having for officers rather than grant foreign to come in on
yes and the plan is that we will over Fedi all the assets and for 20 21 you know exactly for the reason that you've stated that there's just too much of a risk of leaving you know something important out of the equation and yeah is assessed to be thorough I mean it'll be honest it'll cost us a bit more but I think it's worth it
thank you us go back to something addresses my concern say it's been one of the recurring issues which if that's now happening on an annual basis should no longer he showing up on so that's everything I've got in terms of myself and be external Audit findings both of pension fund and for the Council itself arm I got a couple of quick queries about the a Statement of accounts unless someone else has got more questions for this section
there came not seeing anyone so statement of accounts arm and this was page 22 of statement of accounts 100 and 10 the paper copy 100 and 12 on the for the digital
he just get it up on my own
yet so it's be obviously it's the CS I'm interested here in the variances in the children Young People's Directorate and the contribution of housing capital receipts to government pool so Burnett expenditure figure there we've got a variance of 35 million expenditure
between the two years in CYP and we've got a variance of 18 million in be housing capital receipts in government pool and between those two variances we've got 85 percent of the total variance imprison of services I want to double check what those have been caused by
I'm fought pretty should take this one and on the housing a conclusion to the housing pool there so she repayment of prior year housing receipts that are going back into the pool they are still available to Lewisham in the future but some though they were payments that needed to be made this year
and on the CYP I believe I can't haven't got the figures to hand that most of that was done was down to revaluation impairment going into CYP rather than actual spend itself and I can provide the full breakdown out after this meeting a firm if you'd like no no that's absolutely fine arm I was just interested in because obviously because they were be really the only major variances in the next spending figures but that makes perfect sense does anyone have any queries about the statement of accounts or our be satisfied about this entire section of the report

4 Response to Grant Thornton's Audit Findings Reports

OK I'm not seeing any questions so we're going to go to item 4 which is officers reported response to Grant Thornton so I think David Austin's representing this one so if you'd like to join us I think it will be so Umberto who those part of this we need to come back to you and question about your comfort with the cut of point yet what I think we forget we could get your response that my apology to its sound so it said here her Executive Director Corporate Resources as being
chair of essentially poor presenting this is poked a hole
the poll that pulls poor the final of his paper
sorry yeah I mean the kind of thrust of this paper is really I think we've really covered many of the points already it just sets a bit of them you know just sets a bit of context for this year's accounts and in terms of the extended deadlines
you know at the end of November for the audited accounts and then it goes through you know some of those main audit findings you know the 6 point 6 million in paragraph 5 point to 1 am we've already discussed that again 5 point to two
we've already discussed that as well
and the
5 point c is again another valuation issue regarding the pension Fund which ENO basically rely on our rectories for and so it is really just a question of tracking that we're mo you know completely up-to-date or the or that the actors are completely up-to-date in all the events which affect the current value of the pension Fund and
5 point to point 4 again avoided discussed that we've spoken about
you know the number of presentational amendments to the financial statements
you know it we simply need to build more solid time into reviewing the draft accounts and in awe of got a few ideas that I want to talk to other officers about on this I think we need to do things slightly differently
and the pension fund accounts
yet again just responding to the Audit findings report there
again down to valuations valuation adjustment of 2 point 1 which was quite late so readjusted the pension fund for that again with with discussed already the coding weaknesses regarding the pension Fund
so overall we've managed to you know kind of deal with the main problems presented by COVID during the process annual governance statement is still subject to finalisation as we know
and just to give a brief update on the public inspection public inspection took place between Augustin September of this year and we didn't receive any objections to the accounts we had a few enquires from the public which were answered apart from one minor point which is still outstanding
and also to update that the the objections outstanding in respect of 26 17 have now been answered by Grant Thornton so that really is to stir a summary of our kind of few of the issues arising from the audit and a general overview of the process
any questions on their
yes our market Stephen first fair I've got Carol Stephen
it's helpful to hear officer his initial reaction to the findings the Mecom indications of Grant Thornton I think for the point of view of this Panel it would be helpful to have a more considered and detailed response with specific actions and target dates and the sponsor abilities are bought her subsequent meeting of this Panel
OK yeah
and character
Council to mention that the general ledger have weaknesses as so in financial reporting sets of difficult manual adjustments when having to be done and I want to know if there's any move to improve that for next year
but some there's something which has to be discussed with L custodians I believe that's regarding the pension fund only as an it
I mean it was on the draft come in David
well I mean the the point about improving the simplicity with the to prepare the accounts from the ledger
it is complicated by the way the fun mouth reporting through the custodian and as it was previously set up we have done some work on that year the custodian and but we clearly as has been highlighted by Grant Thornton not completed the work to align it effectively into the financial ledger without have to a significant amount the manual work so that's the next phase of it put some that that is what we're working on
I thank you to start satisfying Carroll
yes in a Stephens' side multi tackle coming back flooded in that my actions they've Damond here yes I think the Panel would absolutely expect to have a more detailed report in terms of when officers have more time to digest findings Grant fought and put together a timetable on our detailing what's going to happen and when we actually got another meeting which will be happening early next year a porosity quarterly cycle so I think we do expect to have it by then so I know that Papert as an action please presumably for Selwyn or David to carry out
does anyone else have questions on this section or should we move on to part 2 of the agenda
I think I saw Alan trying to spit Alan Garner came it is just a final question I didn't I just quickly read the annual governance statement her thanks pull for direct me to that I just wanted to make it her to make sure that term the changes to this Panel are included in any future work and because on pay 250 or a page 2 3 8 or from the pack it says that the internal control board is part of the part of the arrangements to show that to the annual governance is working and acoustic Internal control board has been abolished and the work who necessarily come to this Panel and I think we need perhaps to have some sort of clarity on what the role of the Panel is in relation to that because it is quite a acquire responsibility for us to to get involved into the into that level of detail thank you though I think you've missed the bit Alan it's some 100 50 paper aren't arm 200 so 150 own side the beast accounts 2 3 8 arm of the paper to 40 of the digital arm it governance statements Pacific in doubts be icy been dissolved and its some functions have been taken over by the Executive Management Team so that is in the governance statement
that's good he shifted the the thing consequential changes to our our panel only to be noted as well
I'm not sure that they actually taken effect I believe bed begot held up because of Covid so we still need to get them on to Constitution working party into Council it's something that David myself discussed but once they take effect when they can obviously show up inside a report David is anything to add to that I'm nervous because that's what we discussed at the last meeting which was that we do need to get the Panel terms of reference Review to convert me panel took Committee that would also of course tidy up the point about the ICB recognising that it did exist for the majority of the period of a couple by the accounts and so I still referenced here it feels out of date as yours enters the Council on order by its nature is historic so that's why it feels a bit today
I thank you very much so before we close beside a move to part to do does the Panel want to do anything about the 6 point 6 million armed was misreported in barong financial year also 512 521 thousand which extrapolated would've been 6 point 6 million or are we satisfied that we've raised it on the record of with officers and that sufficient I'm looking again to Karoly and Stephen here for guidance on what would be best practice
feting you want to then
but those descriptive refer to model Stephen soon as it felt like a bit more work needed to be done on it to be honest
OK so in terms of actions what would you advise but the Panel should do is it a referral to arm Marin cabinet is it to is asking officers to come back to us with a new report detailing what's happened
I would say the latter actually rather than that the former Bogarde defer to two colleagues ammonium beaches to be back on the time nine were working 2 thousand needs to probably be done in fairly short order
I have seen Steven nodding his head to I come in thank you Chair
I I would support a what ends saying I don't think this needs necessarily to be a huge piece of work but I do think of says on we have to do some more inquiries to satisfy themselves
on the potential scale of the issue here and in night and evaluation of the potential scale with a little bit more certainty than we have a moment of decision on whether and adjustment dissipate or not could be made that I am seeing Joan as well jaunt to yellow just ask at what level of detail would be by you recommend in Xi because of the and this is a technical point and optically clear on so
this is relatively small sample being taken by the external auditor is there to detect whether this the potential for material error or rather than via Vodafone quantified that is an ever of a significant but not material
the management and members may think ones Adjustment and I think to make that call at the moment the better you got as the extrapolation that the auditors of the Zen but the still point bit of uncertainty extended sample even form a bit of new and you may take the view he 2 million or 2 million you wouldn't want their just on the other hand of its eight or nine you would want to adjust the informed judgment that makes sense on David is the scope to get that bit of work done and what would be the time lying for it
we had a
the Finance Team would need to review elected a total again of the cut of work they've already done I either it will mean documenting what they have done subsequent to the finding and sharing that or possibly during a bit further
I think what we ought to try and do is targeted I'm not I don't have the detail but it's in a particular area of the Council or a particular service that we focus
it on that rather than try and do a a sub or whether if the something from the auditors hasn't found something in other areas I don't wanna go I wouldn't just go fishing but if we got a concern which you have for those areas where the one or two invoices have been found we do something a little bit more thorough for those areas and then just report back on that so it would not be a cake
yes thinking I was just thinking about how long it would take really and left the can revert to to to all all Terry for that long him constantly the timeline of getting everything really an available for dispatch on the 17th November for the meeting of full Council which takes place on the 25th and but as they certainly can be
if it can be focused just the kind of Pickney something I think that might be might be doable would we need to have it done for them so obviously it's or is it something which we can be aware of sign off the accounts as his days but in this knowledge but it's being looked into or is it something which we need to get resolved before the panel could recommend signing off the accounts
the thinking and
I would say it needs to be
resolved to our satisfaction as a Panel
a cap on Saturday and I'm gonna have agree that obviously its serene my we've got encountered Stephen here and it's because we're not accountants so can we try and get that done I imagine it very difficult to have another meeting of Panel before 17th arm some gonna assume that it would ever be satisfied if we get that report sent to us via e-mail so that we can review it and then agree on via e-mail so its formal and Council systems but it happened wherever not satisfied with that I don't see any other way to do this

5 Exclusion of Press and Public

icac something of signals so if we can make that happen from so when I get back you Cheryl I thank you very much on been of late bats beside him concluded pending obviously about item be council go to Full Council for sign off thank you very much everyone for your time on that one we're now going to Item 5 which is exclusion of Press and public we are moving to a section of report which does a confidential media so only members of the Panel and relevant officers will remain thank you very much to everyone who has helped in part one and thank you can't forward and becoming a more seasoning and presenting report and for all your excellent work in producing feeds and load it on a timely basis and the high quality basis and if we could just get an indication once the Rocastle