Agenda item

Members to note the Final Statement of Accounts update.

The Chief Technical Accountant introduced the update and apologised that there were no audited accounts to be reviewed by the Committee at its July meeting as expected. It was explained that there were a number of reasons for this, and that at present no auditors were on site as work had been prioritised elsewhere. Members were informed that the accounts sign-off was now expected to take place at the September meeting.

Questions and Discussion

The External Auditor (MH) stated that the key reason for the delay in completing the audit of NNDC accounts was a difference of opinion between EY and the Council on how investments were treated. He added that the Council had sought a legal opinion on the matter and were awaiting a response. The External Auditor (MH) then confirmed that it was no secret that EY had suffered resourcing issues that had delayed audits elsewhere. As a result, Members were informed that EY auditors had been redirected to other authorities to allow time for an agreement to be reached on the accounting practices first. He added that there was no apportionment of blame regarding the disagreement, but stated that it had to be resolved before the accounts could be signed-off. The Chairman accepted that EY and the Council had a difference of opinion on accounting practices with regards to investments, and asked whether a compromise could be reached. The External Auditor (MH) replied that unfortunately there was no middle ground with regards to the accounting treatment of investments, and either the Council or EY would eventually have to accept the findings. The Chief Technical Accountant stated that both the Council and EY had been aware of the issue for over a year and had been working on a preliminary agreement, but had not been successful. She added that Councils that had sought a legal opinion on the issue had been supported by their findings, and as a result, it had been recommended that the Council did not change its accounts unless a decision was made otherwise. Members were informed that support was also being sought from CIPFA, and that if they backed Council’s opinion, audit firms could be expected to alter their opinion.

Cllr S Penfold asked for clarification of the reasons for the delay in signing off the accounts. The External Auditor (MH) replied that the accounting issue was the cause of the delay in signing off the accounts, and as a result, the decision had been made ten days prior to the meeting to divert resources elsewhere to authorities where there had not been a similar disagreement. Cllr S Penfold asked whether EY would be open to the possibility that they could be wrong. The External Auditor (MH) confirmed that it was possible that the legal opinion could change their position. He added that whereas the legal opinion might look at the nature of the investment, auditors approached the situation from an accounting perspective only. The Chief Technical Account stated that having to seek a legal opinion suggested that there was a legal aspect to the disagreement.

Cllr J Stenton asked whether there was a legal requirement to publish the accounts, to which the External Auditor (MH) replied that the Council would have to publish its accounts by July 31^st, with or without an audit opinion. He added that if they were published without an opinion, a reason would have to be given for this, and a statement had been prepared. The Chairman asked whether this would have any impact on investors opinions, to which the External Auditor (MH) replied that the deadline was arbitrary, and that there would be no knock-on impact.

Cllr C Cushing stated that it was his understanding that the legal advice would not be definitive, and asked whether EY would adopt the advice. The External Auditor (MH) stated that EY would take the legal advice into account, but could not guarantee that it would change their position. It was confirmed that other audit firms had taken the same position on the issue as EY. The Chief Technical Accountant stated that this was another reason that the Council had also sought the opinion of CIPFA. She added that it was unlikely that the accounting difference would damage the overall opinion of the accounts, and that she stood by the decision to seek both a legal opinion and the opinion of CIPFA.

Cllr J Toye asked whether both accounting practices would provide a true picture of the Council’s accounts, to which the Chief Technical Accountant replied that EY believed that the current treatment was not a fair view. The External Auditor (MH) stated that EY’s opinion was that the current practice fell afoul of international accounting standards, but admitted that big companies were different from local authorities.

Cllr N Pearce stated that he was not happy about the issue, and disliked the pressure from EY for the Council to change its practices. He added that he got the impression that priority was being given to the commercial sector, and that he could foresee unfortunate repercussions from the current situation. The External Auditor (MH) replied that EY had been paid a fee to provide its opinion to the Council, and that whilst there was a difference of opinion, it was being resolved professionally.

The Chief Technical Accountant reminded Members that there was no accounts to approve at this stage, and that she expected that the sign-off would take place at the September meeting to avoid the use of delegated authority. Cllr J Toye asked whether the Council had internally audited its accounts, to which the Chief Technical Accountant replied that the Council had the same draft statement of accounts that had been brought to the last meeting, without the auditors opinion. Concerns were raised that next year’s accounts could be delayed even further, as a result of a knock-on effect of the delays.

RESOLVED

To note the update.