Agenda item

The Committee noted the response to a question submitted by Councillor O’Rourke. There were no Supplementary Questions but Councillor O’Rourke urged the Committee to take forward an internal review of arrangements relation to the final salary remuneration of the ex-Chief Executive.

The Committee then heard statements from Councillor O’Rourke and Councillor Hopkins.

The representative from BDO summarised the report and invited questions. The following points arose from debate:-

1. The Chair referred to the Table at Page 209 and the column on Pension Fund Liability. It was noted that actuaries used the figure of 26 years for life expectancy after retirement but this Council used the figure of 26.2 years which was not significantly longer so questioned why this was an issue. BDO acknowledged that this figure was not far greater than 26 years but because of the sensitivity of the valuation to these assumptions gave rise to a £6.3m overstatement which was significant although not material to the Council’s accounts and was therefore set out in Appendix 1 under Unadjusted Audit Differences. The different rates did not impact on what the Council contributed to the Avon Pension Fund;

2.  BDO had contacted the National Audit Office (NAO) to ask that when actuaries provide details of “normal” assumption ranges for the purposes of the central assurance review, that they also provide details of where local areas were applying a figure outside the normal range so that action could be taken earlier on and so reduce the risk of delays. The Committee noted that these findings related to the whole Avon Pension Fund not just the City Council.

3. Reference was made to Page 218 – Key Audit and Accounting Matters. It was noted that the valuation of subsidiaries of Bristol Waste and Bristol Energy had been calculated at £10.8m.This had resulted in a £12.8m impairment which had been corrected and put through in the accounting year. The preference shares were regarded as debt;

4. The representative from BDO acknowledged that the auditing of the accounts was still ongoing due to the complexity of issues arising. It was vital to fully investigate all issues in order to produce a quality report. All significant issues with the exception of the use of resources were in the report. It was not possible to give a date for the final report as BDO were still awaiting some pieces of information from the Council. Should any other matters arise before the report was finalised they too would need to be addressed. The Service Director – Finance advised the Committee that it was being asked to agree the accounts as true and fair subject to there being no further reportable issues;

5. The representative of BDO clarified that the issue regarding the ex -Chief Executive’s final salary payment was true and fair for accounting purposes, so the accounts appropriately disclose the position.  The outstanding issue was the use of resources arrangements and potential use of auditor powers but this did not impact on the opinion relating to the financial statements;

6. Councillor Negus wished to see BDO’s final assessment regarding the ex-Chief Executive’s final salary payment before he accepted the report as true and fair;

7. The Service Director – Finance confirmed with respect to the ex-Chief Executive’s final salary payment that officers had considered the latest advice given by the external auditors and Avon Pension Fund and had adjusted the accounts accordingly;

8.  The Interim Service Director – Legal and Democratic Services reported that advice on this matter had changed over a period of time. He was confident that the decision arrived at now was correct. He was unable to speculate on previous legal advice;

9. Councillor Brain stated there was a lot of public interest in the matter which needed to be fully investigated;

10. The Chair noted that the authority had paid a previous Chief Executive very generously also and he wished to be assured that this did not happen again;

11. Discussion took place on how to progress a review of the final payment arrangements. The Committee’s Legal Advisor reminded the Committee it was not part of its Terms of Reference to commission enquiries into individual cases but it was within the Terms of Reference to consider the effectiveness of governance arrangements;

12. Simon Cookson agreed with this position but stated that one of the remits of Internal Audit was to review value for money and it may be appropriate to review the arrangements of the final payment upon receipt of the final report from BDO;

13. The Chief Internal Auditor highlighted that all Audit Committees should be apolitical;

14. Councillor Radford noted that Full Council had delegated terms and conditions for senior officers to HR Committee. If BDO determined that what was agreed was not the same as what was given then this was a governance issue which needed to be investigated;

15. Councillor Stevens reminded the Committee of the Bundred report and in particular the criticism of the Audit Committee. The default to openness and transparency was not evident in relation to the arrangements of this final payment and therefore must be reviewed. He formally proposed that members of the Audit Committee meet informally, upon receipt of the BDO report, to develop a scope based on the adequacy of governance involved in the final salary arrangements and this was seconded. On being put to the vote it was:-

Resolved (Unanimously) –

1. That BDO’s 2017/18 Audit Report and action plan agreed by management be noted;

2. That the report from BDO on the arrangements associated with the final salary payment to the Ex-Chief Executive be considered by the Audit Committee as soon as it is made available;

3. Should the Audit Committee resolve, on considering the BDO report, that the arrangements merit a review, the Audit Committee shall meet informally to develop a scope for that review and report back to the next Audit Committee.