Report of the Chamberlain.
Members received a report of the Chamberlain relative to the City’s Cash financial statements for 2021-22.
The Chamberlain introduced the report, and Members noted the following points:
· There were no significant matters arising from the audit report.
· There were some outstanding queries which the Chamberlain and Crowe were working on
· The financial statements had been delivered one month late. A constructive meeting had been held with Crowe on how to resolve this issue going forward.
A Member said that the statements showed that the City Corporation ran a consistent operating deficit, with a reliance on increased value in capital to remain solvent. They asked if this was a sustainable way to run the organisation. The City Corporation had historically aimed for to break even in income and expenditure, but the significant amount of spend required for the Markets Co-Location Programme and the enabling works required as part of City Corporation’s landlord responsibilities for the Museum of London project needed to be drawn down from the balance sheet. The Chamberlain considered this to be a reasonable action when viewed as a going concern. The Finance Committee had responsibility for this strategy, and considered it closely along with the Policy and Resources Committee. The Chamberlain undertook to circulate a paper to that had gone to Policy and Resources in October 2022 which provided an assessment of the affordability of major projects. The Chamberlain said that she felt the most prudent position had been taken.
A Member asked if the risks surrounding this approach were present on the risk register. A Member, also the Deputy Chairman of the Finance Committee, said that the risk was covered by CR35 City Cash. They felt that some reasonably prudent use of capital for expenditure was acceptable, but it was important to remember that there were limits and that the City’s finances were in the middle of a pivot from assets providing reasonable returns, to the assets with less predictable returns. They felt that it was important to focus on the serious risk that this created.
The Chairman said that it was likely that the period of extraordinary financial returns was probably coming to an end, and that the risks around City’s Cash had not been historically recognised in this context. The Chamberlain replied that the strong performance of the City Corporation’s balance sheet provided a starting point for the affordability for the capital spend. It was important to consider how much could be appropriately drawn down, and what it should be used for. For example, the City Corporation had an aging estate which required essential maintenance work, where it would be more expensive in the long run to not spend anything now. The Chamberlain had previously flagged the need for the Court to consider how many years it would take to return to a break even position on City’s Cash, which had helped inform the Court’s decision in March 2022 to take a medium to long-term view on the finances.
Members noted the highlights of the report from the External Auditors.
The Chairman asked the External Auditors if they were comfortable with the processes surrounding the management override of controls. In reply, officers from Crowe said that they had found the right behaviours in this area.
The Chairman said that it was disappointing to see that several Members of the Court had not completed their related parties declarations. The Chamberlain agreed, and said that there had been IT issues when the request to submit these had gone out to Members. She said it would be helpful to have the backing of the Chairman and the Committee to help encourage Members to complete these. A Member asked if co-opted Members to Committees should also be recorded. The Chamberlain undertook to look into this and provide an answer.
A Member asked why it was not possible to identify the assets and liabilities in the teachers pension scheme. The Chamberlain replied that it was not a scheme administered by the City Corporation.
A Member asked for further information about the resourcing issues in the Chamberlain’s Department. The Chamberlain replied that the Department had been a victim of its own success, as accountants within Corporate Accounting had progressed to positions elsewhere in the organisation. This required external recruitment to fill the vacancies. While half of the senior vacancies had been filled, the City Corporation faced a competitive jobs market in this area. Recent departures had pushed the Finance Team into the red risk on knowledge retention, but interim arrangements had been established and supplier expertise brought in.
RESOLVED, that – Members:
· Note that the external auditor Crowe UK LLP intends to give an unqualified audit opinion for both City’s Cash and the 10 consolidated charities’ individual financial statements;
· Note the contents of the Audit Management Report issued by Crowe UK LLP ; and
· Recommend approval of the 2021/22 City’s Cash Financial Statements, and the financial statements of each of the 10 consolidated charities, for the year ended 31 March 2022 to Finance Committee.