London Street – Lovejoy’s bookshop was on the left

Reading has all but broken up for the summer and the ‘Reading Borough Council (RBC) Finances’ section on Mr Lovejoy’s bookshelves was looking very sad and empty with no bumper holiday edition.

However, hot off the press is the latest edition of RBC accounts for the year ended 31 March 2017 which was reviewed by RBC audit & governance committee on 1 August.

The preface to this 156 page epic subtitled ‘unaudited final draft’ highlights the key changes that have taken place since the sixth edition, submitted to external auditors Ernst and Young (EY) on 20 March this year. It is the first set of publicly available accounts since the second edition of draft accounts was issued about the same time last year in overly optimistic expectation that the accounts would be signed off by September 2017.

The changes made relate to a late plot twist introduced by EY associate partner Maria Grindley at the last audit & governance meeting in April. The scene was described to committee members in the blurb on the jacket of the new edition:

In particular the two key issues identified in EY’s technical review: the valuation bases used for Property Plant and Equipment and the carrying value of the Council’s PFI [public finance initiative] contracts remained unresolved due to their complexity and specialist nature.

This plot twist has taken a new dramatic turn and not only was the valuation of these two items an issue in the financial year ended in 2017 but also in previous years. This has resulted in adjustments to the opening balances at 1 April 2016 and previous years’ accounts as described in Note 2 on pp65-67.

We are told that this has affected RBC’s reserves but critically it has not affected the £6.5 million general reserve and about £800k has been found which has been added to the risk and transformation reserve which is used to support future savings.

This was the first meeting of the audit & governance committee since the start of the new mayoral year when changes were made to its membership.

The presence of lead councillors on the committee has been criticised, not least by EY. Leader of the council, councillor Jo Lovelock and deputy leader, councillor Tony Page are no longer members of the committee. However on the night councillor Lovelock sat in on the meeting, at the end of the councillors’ table.

Councillor Liz Terry, lead councillor for children remains on the committee and has been joined by councillor Jason Brock, on the committee for the first time and lead for the newly created portfolio of Corporate and Consumer Services.

Councillor David Stevens is still chair of the committee and the other members are councillors Richard Davies (new), Paul Gittings (new), Emmett McKenna and Emma Warman (new).

The recently appointed Head of Finance described the adjustments which had been made to the accounts and explained that a fully quality assured set of working papers have been produced to support them.

Councillor Brock said that it was “great that the end is now in sight”. He went on to say [at 0:12:35]:

It does seem curious to me that previous auditor’s before EY did not spot some of these issues and it concerns me in some way but they are being remedied, they are being corrected in the 16/17 accounts.

He went on to commend the team for all their work.

David Stevens agreed that there was “something to be said about why it wasn’t identified earlier” [at 0:13:50].

This is the second year’s accounts which EY have audited. They were appointed auditors for the 2015/16 accounts and took over from KPMG. EY shocked members of the audit & governance committee at the end of their first audit when, in November 2016, they criticised RBC for not putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2016.

EY will recommence their audit work on 6 August and RBC expect that audited accounts will be presented to the next Audit & Governance committee. That is currently scheduled for 27 September, by which time accounts will be have exceeded the statutory deadline by a full year.

With the 2016/17 accounts out of the way, work is continuing on 2017/18 accounts. The accounts should have been available for audit and public inspection by 31 May but are not expected until the end of August. The statutory deadline for completion of the audit of local authority accounts for this year was 31 July 2018.

2017/18 will be the third year that RBC has delivered its accounts late.

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