Audit Findings Report for Lichfield District Council 2018/19
(Report of the External Auditors – Grant Thornton)
Grant Thornton (External Auditors) presented the Audit Findings for Lichfield District Council and detailed the key findings and other matters arising from the statutory audit in the preparation of the Council’s financial statements for the year ended 31 March 2019.
The report detailed the audit risks and the work performed to address these. The commentaries were discussed and Grant Thornton stated that the only non-trivial adjustment to the financial statements related to the valuation of pension fund’s net liability. They explained that the adjustment to the pension liability on the balance sheet had been a culmination of three issues:-
1. The initial actual valuation was based on an estimated asset return at December 2018 as provided by the pension fund officers. The actual asset return for the pension fund for the year to 31 March 2019 was significantly different;
2. The impact of the McCloud judgement, a legal ruling around age discrimination in the police force and fire service. As at the end of the financial year there was still uncertainty: the Council’s actuary had omitted this from their valuation but, in fact, at the end of June, the Government’s application to appeal the ruling was denied;
3. Liabilities for guaranteed minimum pensions relating to gender discrimination.
Grant Thornton explained that none of these issues individually were material but the three added together had a material impact on the Council’s liability.
They also highlighted their assessment and comments related to the property fund investment and IFRS9. It was explained that this was the first year of IFRS9 and the Council had elected to present changes in fair value in other comprehensive income. Grant Thornton, as a firm, did not agree with this approach. However, the difference was trivial at this stage: it amounts to a very small figure in the accounts (circa £45,000) although it needed highlighting in case it became material in the future.
Mr Thomas agreed that it was seen to be a technical accounting matter and not all audit firms were taking the same approach. Grant Thornton assured the committee that significant discussions were being held between the finance team and themselves on this issue. It was immaterial at the moment but could become material in time. In the meantime, it was shown in the report as an agreed difference.
The Committee indicated that they would like to see a resolution to the issue before the next set of Financial Statements were completed.
The reference to “going concern” in the Audit Findings Report was queried and Grant Thornton explained that this had become an area of greater focus in recent years following issues experienced by some bodies in the sector. They also explained that it was different to the assessment made in the private sector, as the focus of the assessment was on any possible risks to the continued delivery of service.
Mr Thomas stated that the Strategic Plan looked four years ahead at self-sustainability, the Council had a healthy position and were addressing the funding gap. He explained that most authorities had a gap, and we attempted to be proactive.
Grant Thornton said the Value for Money assessment came out unqualified and they wanted to highlight a couple of points:-
1. On Friarsgate, Grant Thornton will monitor the scheme going forward, as part of their value for money;
2. While it was positive in analysis of financial sustainability, it was important that the Council carried out appropriate diligence on plans relating to the property investment strategy, including the company progressing to ensure that financial risk was minimised and advantages to the local community were maximised.
Grant Thornton thanked Mr Thomas and the finance team for their hard work and this reassured the committee. However, additional time had been needed for further discussions with the finance team especially around pensions and this may involve an increase in the audit fee for 2018/19, which the committee noted.