Agenda item

Report of the Chamberlain.

Members received a report of the Chamberlain concerning the City Fund and Pension Fund Statement of Accounts.

The Town Clerk noted that late papers had been circulated at the end of the previous week, including the City Fund and Pension Fund financial statements under Item 8A. With Members’ agreement, the Chair opted to take this item ahead of the Risk Management Update. The Chair acknowledged her appreciation to officers and external auditors but expressed her concern that Members had only received papers late on Friday before a Monday morning meeting; this left Members with limited time to digest and review the information. She requested that future papers be circulated earlier to allow proper consideration. The Financial Services Director explained that the delay was due to efforts to include the most up-to-date information and auditor feedback, noting that the statutory deadline for publishing the final accounts is 30 September. She agreed to work with the Town Clerk to explore moving future September committee meetings to later in the month to better accommodate this timetable.

The Chamberlain and the external auditors took the Committee through the highlights in the Statement of Accounts. The highlights included:

• Out of the 13 audit recommendations from previous years, five remained outstanding and were being addressed in the 2025/26 accounts.

• Out of the 25 improvement recommendations from the auditor’s findings report, 16 have been addressed and four superseded. Attention was drawn to a key recommendation on page 34 of Appendix 5 regarding HRA pressures and reserves.

• On related party disclosures, she noted that 43 remain outstanding, including 18 from ex-Members which had been progressed through the Chamberlain, and if they remained unresolved within a week, the issue may be brought to the Committee for further escalation.

An officer from the Chamberlain’s Department presented the key changes in the updated accounts, directing Members to Appendix 1 (updated statement of accounts) and Appendix 2 (audit findings report). He highlighted that three material adjustments had been made since the draft accounts were presented in July:

• City Fund’s Net Pension Liability – The City Fund did not apply the accounting standard IFRIC 14. The Local Government Pension Scheme (LGPS) was in surplus for the first time in recent memory, but an asset ceiling needed to be applied, limiting the recognition of the surplus. This oversight led to a material adjustment in the accounts; the net pension liability increased by £90 million and a corresponding adjustment was made to the remeasurement of the net pension liability.

• Reclassification of Rents in Advance – A £1.3 million reclassification between long-term and short-term rents in advance, affecting the presentation on the balance sheet.

• Assets Under Construction – A correction to the classification of £19.2 million previously listed under property, plant, and equipment. This amount comprised £13 million of investment properties and £6.2 million of intangible assets, requiring reclassification. A prior period adjustment will also be made in consultation with Grant Thornton.

The Officer clarified that none of the adjustments effected the general fund balance. He added that discussions had taken place with Grant Thornton to arrange additional training for the finance team to prevent similar issues in future. The External Auditor (Grant Thornton) and the Chamberlain reassured Members that the City Corporation remains on track with its six-year recovery plan for the pensions deficit.

The External Auditor for the City Fund audit noted that work was nearing completion and summarised the findings from the audit. Recommendations included the approval of journals under 100k and the prompt removal of people who had left the City Corporation from the Oracle system. The audit team noted that they had two weeks to close the audit and proposed to work with the finance team after the committee meeting to close the remaining items. It was noted that there were no additional significant issues anticipated from finalising and closing the audit, but the External Auditor reassured Members that if additional findings were found, they would be reported and flagged. 

The Deputy Chair queried the timeline for progressing the HRA programme. The Chamberlain confirmed that funding plans for improvement works were due to return to the Finance Committee and the Policy and Resources Committee in October. It was highlighted that that the financial health of the HRA remained critical, with reserves in a fragile state and a 10-year recovery plan was put in place, aligned with a 30-year asset management strategy. The Chamberlain reassured Members that work was on-going, with close budget monitoring and potential engagement with Government for additional flexibility.

A Member highlighted the importance of cross-committee collaboration, noting that housing issues, though financial in nature, had direct implications for health and social care, particularly for City residents. They asked how Members would be kept informed to ensure coordinated oversight. The Chamberlain agreed that housing issues were a key consideration and confirmed that officer-level coordination was on-going, particularly with Adult Social Care, to ensure legislative requirements (e.g. housing standards, black mould) were met. It was also highlighted that the relevant committees will receive the financial plans for scrutiny.

A discussion took place regarding former staff access to the Oracle system, prompted by the audit findings. The Chair raised concerns regarding the delays in removing access for leavers and the potential risks that this posed, such as if a disgruntled former employee retained access to financial systems. The Head of Internal Audit explained that account closures involved multiple teams but committed to make further inquiries to clarify responsibilities. He noted that if a user’s network account was correctly closed, retaining access to the Oracle system was unlikely and suggested that the issue was about ensuring consistent housekeeping rather than a systemic control weakness. The Head of Finance further clarified that the upcoming implementation of the new SAP system would help streamline the process of deactivating user access across systems.

A Member sought clarification from Grant Thornton on Improvement Recommendation 2 and questioned whether Members were receiving City Fund performance information effectively. The auditor explained that the recommendation aimed to streamline reporting by focusing on key performance indicators to avoid information overload and highlight relevant metrics.

The External Auditor (Grant Thornton) provided an overview on the Auditors Annual Report for Members.

The External Auditor (Grant Thornton) provided an overview of the Pension Fund audit and reported that it had gone well.

The Chair queried whether the new SAP system would also assist with the entries under 100k for the Pension Fund, and the Head of Finance confirmed that it would. The Chair also referred to the internal audit of the Pension Fund and asked whether internal audit work was included in the new audit cycle. The Head of Internal Audit confirmed that it was included in the internal audit plan and revealed that scoping work had already begun.

The Chair went on to question why the assurance rating for effective controls was amber rather than green, specifically regarding complaints monitoring data. The Chamberlain suggested reviewing the management response to ensure that it provides sufficient assurance and reflects the Corporation’s commitment to addressing the issue.

RESOLVED – That,

• Members consent to agree to the recommendation approval of the 2024/25 Statement of Accounts for both the City Fund and the Pension Fund to the Finance Committee.

• Members consent to agree to the amendment to the substantive recommendation report and agree to change the wording to: delegate authority to the Chamberlain, in consultation with the Chairman and Deputy Chairman and wider membership of the Audit and Risk Management Committee in a period of 24 hours, to approve of any material changes to the financial statements required before the signing of the audit opinion by Grant Thornton, which is expected by 30^th September 2025.

• Members considered the audit findings report for the City Fund and Pension Fund 2024/25 and noted its content.

• Members consent to approve the management representation letter for the City Fund and the management representation letter for the Pension Fund.

• Members received the Auditors’ Annual Audit Report 2024/25 and noted its content.