Item 12 - 2022 23 Audited Financial Statements
West Dunbartonshire Council · 18 December 2024
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WEST DUNBARTONSHIRE COUNCIL Report by Chief Officer - Resources Council: 18 December 2024 Subject: 2022/23 Audited Financial Statements 1. PURPOSE 1.1 The purpose of this report is to provide Members with the opportunity to scrutinise and approve the 2022/23 Audited Annual Accounts for the Council and the Charities administered by the Council. 2. RECOMMENDATIONS 2.1 Members are requested to: a. Note that the audit is substantially complete and Forvis Mazars have advised the Council they are expecting to issue an unqualified opinion on the Council’s Accounts and the Accounts of the Charities administered by the Council for the year ended 31 March 2023. b. Approve the information provided within the Audited Annual Accounts 2022/2023 - covering the Council and the Charities administered by the Council – appendices 2 and 3 to this report. 3. BACKGROUND 3.1 Forvis Mazars (Mazars) have been appointed as the Council’s external auditors from financial year 2022/23 for a period of five years. 3.2 The Council’s unaudited 2022/23 Annual Accounts (including the Group Accounts) were passed to the Accounts Commission on the 03 July 2023 and reported to Council on 30 August 2023. 3.3 The report submitted to the 30 August 2023 Council presented an unaudited position of an unearmarked General Service reserve of £4.489m and provided Members with information as to variances for the year. The unaudited unearmarked position for the Housing Revenue Account (HRA) reserve was £0.984m. 4. MAIN ISSUES 4.1 The audit of the accounts for 2022/23 is substantially complete, however, the External Audit Report (considered as a separate agenda item at this Council meeting) outlines that, at the time of preparing this report, some matters remain outstanding. In addition, Mazars have noted they expect to issue an unqualified opinion and the draft opinion has been inserted into the Annual Accounts included at appendix 2. ITEM 12
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West Dunbartonshire Council Annual Accounts 4.2 Assuming here are no further changes to the Accounts, the main adjustments, in addition to presentational changes, are summarised below. • Pensions adjustment to reflect required Asset Ceiling calculations. • Revaluation and indexation adjustment to reflect movements in Other Land and Building assets carried at Depreciated Replacement Cost outside the normal five-year valuation cycle. • Reduction in the PPP liability to align the closing liability to the PPP accounting model. • Move Cost of Living expenditure from revenue to capital. • Reassigning PPP expenditure from interest payable to payment of the lease liability. • Movement of the DBFM income received from the Scottish Government from grant Income and Taxation to Education (no bottom-line impact on the Comprehensive Income and Expenditure Statement). • Strathclyde Passenger Transport and the Strathclyde Concessionary Travel Scheme have been included as Related Parties for 2022/23 and removed as Associates from the Group Accounts in 2022/23 and prior year which resulted in a prior year adjustment as detailed on pages 99- 101 of the financial statements. 4.3 In 2022/23 the changes between unaudited accounts and audited accounts resulted in the balance sheet movement as noted below. These adjustments did not affect the usable reserves positions of the Council. Unaudited £,000 Audited £,000 Change £,000 Long Term Assets 1,338,462 1,134,286 (204,176) Current Assets 71,414 71,415 1 Current Liabilities (402,179) (402,081) 98 Long Term Liabilities (391,242) (405,343) (14,101) Total 616,455 398,277 218,178 4.4 The main variance was due to a reduction in the net pension asset (£275.632m) offset by an increase in property, plant and equipment of (£56.065m) as a result of an additional valuation exercise on direct replacement cost valued assets following discussion with Mazars. 4.5 Members were advised at the Council meeting in August 2023, that the accounting standards IAS19 and IFRIC 14 limit the recognition of a pension asset on the balance sheet to the extent to which the Council can recover the benefits through either refunds or reduced contributions. The Council is unable to withdraw from the scheme or recover funds directly, therefore, the asset ceiling is limited to the forecast reduction in contributions compared to the future service costs.
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4.6 In consultation with the Council’s external auditor, Hymans Robertson LLP (the Council’s Actuaries) were instructed to calculate the “Asset Ceiling” based on the present value of funded obligations. This resulted in a revised net asset position of £28.030m. As a result, a net liability of £15.390m is shown on the Balance Sheet. This is detailed in Note 13 on page 68 of the financial statements. 4.7 The overall general fund reserves increased by £1.229m from £29.079m to £30.308m partly due to capital expenditure that had been incorrectly recognised as revenue (£0.225m) and £1.004m because of a correction to PPP recharges which were incorrectly allocated to interest payable. There were no changes to the HRA reserve position as a consequence of the audit. This is summarised in the table below. General Fund Housing Revenue Account Free Reserve £,000 Earmarked Reserve £,000 Total Reserve (£,000) Free Reserve £,000 Earmarked Reserve £,000 Total Reserve (£,000) Unaudited Accounts 4,489 24,590 29,079 984 1,650 2,634 Reallocation of Cost of Living Expenditure from Revenue to Capital 225 225 Correction of PPP expenditure incorrectly allocated to interest payable 1,004 1,004 Audited Accounts 5,493 24,815 30,308 984 1,650 2,634 4.8 Mazars have issued a clean audit opinion in relation to the Council Accounts. 4.9 The management commentary on pages 2 to 16 of the Annual Accounts summarises the major matters contained within the document and provides an explanation of the Council’s financial position as at 31 March 2023. 4.10 The Annual Governance Statement on pages 18 to 23 of the accounts provides assurance that the Council has in place a sound system of governance control and identifies a number of areas where officers have identified improvements can be made. Charitable Trusts’ Accounts 4.11 Mazars have issued a clean audit opinion in relation to the Charitable Trust Accounts. 4.12 Page 87 of the Accounts details the Statement of Balances and highlights a decrease in the balances held from £0.279m as at 31 March 2022 to £0.258m as at 31 March 2023.
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4.13 It is disappointing to note the delay in the audit of the Charities accounts meant we were not able to meet our obligations to submit the Audited accounts to OSCR by 31 December 2023. There are no material consequences to missing this deadline. General 4.14 The audit process has been disappointing and frustrating this year. In addition to how late the audit has been completed, levels of engagement with Mazars have not met expectations. The delays in the audit have resulted in Finance officers who normally are focused on the Council budget work from October onwards having to manage both budget and annual accounts work. Furthermore, the Finance team had to complete the 2023/24 year-end process without having concluded the 2022/23 audit which is not ideal as it means there will be additional work to incorporate the 2022/23 adjustments into the draft 2023/24 accounts. 4.15 The 2022/23 audit delay has meant the audit of the 2023/24 financial statements is yet to commence which will have a further impact on the Finance team. 4.16 Furthermore, any recommendations for improvement set out in the annual audit report (considered as a separate agenda item) are of reduced value as we have been unable to incorporate them into the 2023/24 as they were received too late. 4.17 The Council Chief Executive and Chief Officer Resources has informed both Mazars and the Accounts Commission of our dissatisfaction with the 2022/23 audit process. Early discussions have been held with the Mazars team about areas for improvement to reduce the risk of similar issues arising again in the future and it is hoped that the process, communications and timescales will be improved for the 2024/25 audit and in future years. 4.18 A formal request for a rebate on the 2022/23 audit fee has been rejected by Audit Scotland as they state they have no mechanism for paying rebates to audited bodies under the Public Finance and Accountability Act (Scotland) 2000. Further to this response Audit Scotland were asked to confirm that an approach has been made to Mazars to query whether they would voluntarily agree to a rebate. Audit Scotland advised they discussed this request with Mazars and, in their written response, Audit Scotland stated: ‘The audit work undertaken by Forvis Mazars has to date cost them more than they will receive from the original fee, and while they are entitled to charge additional fees where additional audit work has been required, in recognition of the circumstances they have agreed it would not be appropriate. It would therefore be reasonable to pay for the statutory audit service based on the original expected fee set by Audit Scotland.’ So, Audit Scotland have concluded it is reasonable for the Council to pay for the statutory audit service based on the original expected fee that they set.
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This response is disappointing to the Council as it appears there is nothing in the contract put in place by Audit Scotland for the benefit of the Council to ensure financial recompense where performance has fallen well below what is expected. It also fails to acknowledge the impact the excessive delay has had on Council officers, on the delivery of other areas of work, and furthermore appears to place limited focus on monitoring the performance of externally appointed audit bodies to carry out statutory audits. The matter remains with Legal Services for consideration of further options open to the Council. 5. PEOPLE IMPLICATIONS 5.1 There are no people implications in relation to this report. 6. FINANCIAL AND PROCUREMENT IMPLICATIONS 6.1 There are no financial and procurement implications in relation to this report. 7. RISK ANALYSIS 7.1 No risk analysis was required 8. EQUALITIES IMPACT ASSESSMENT (EIA) 8.1 No equalities impact was required in relation to the production of this report. 9. CONSULTATION 9.1 The views of all Chief Officers have been requested on this report and feedback incorporated herein. 10. STRATEGIC ASSESSMENT 10.1 The report is in relation to a statutory function. As such, it does not directly affect any of the strategic priorities. Laurence Slavin Chief Officer - Resources Date: 05 December 2024 Person to Contact: Carol Alderson, Finance Manager Email: carol.alderson@west-dunbarton.gov.uk Appendices 1. Adjustments to 2022/23 West Dunbartonshire Council financial statements 2. Audited Annual Accounts 2022/23 – West Dunbartonshire Council 3. Audited Annual Accounts 2022/23 – Charitable Trust Funds Background Papers Draft Annual Accounts 2022/23 to Council – 30 August 2023