The item was introduced by Avtar Sohal, who highlighted the main risks that had been identified. These were management override of controls; valuation of land and buildings; and value of net defined liability. Material statements on valuations were completed every month, meaning there was a higher chance of a mistake being made. Valuations would be compared on a year-on-year basis and these would be highlighted in the final version of the report. Virginia Rennie (Strategy and Commissioning Manager, Strategic Finance) confirmed that valuation comparisons would take place as part of the quality assurance process, and any discrepancies would be clarified with the auditors.
Virginia Rennie said an external company was commissioned to carry out the valuations. Properties could be assessed on their market for sale value, whereas the cost of roads was assessed on their historical value and how much money had been spent on them. Schools would have displacement costs associated with them if there was a need for them to be replaced. Virginia Rennie said the valuer had changed this year, and they were being commissioned on a three-year contract. Responding to a question from Councillor Sarah Feeney, Virginia Rennie said property valuations were based on their present use and potential change of usage was not taken into account.
Councillor Kettle said potential impacts of inflation on valuations and statements had not been recognised in the report. Virginia Rennie highlighted that inflation and interest rates had been included in the report as an area of uncertainty and there were risks associated with this. The Chair said it had been noted earlier in the meeting that this had been audited and appropriate actions to take had been agreed by the Council. Councillor Kettle said although he accepted officers would do everything they could to mitigate risks, he said the auditors had not specifically raised it as a risk. Gary Morris (Technical Specialist, Accountancy Standards) explained the role of the auditor was to ensure a true and fair opinion was being issued in the financial statements, so they would look for different risks compared to those Council officers would highlight.
Responding to a point raised by Councillor Kettle regarding derecognising infrastructure assets, Avtar Sohal said there had been a big challenge in forming valuations of assets for the purposes of financial statements. He explained that if work took place on an asset, then its value would be carried forward. However there was disagreement if this was the correct course of action. Virginia Rennie said this was a national issue, and a consultation regarding infrastructure assets had been taking place. This meant the draft accounts could not published until after the consultation had finished, and it had concluded on 26 June. Virginia Rennie said the accounts had been marked as saying there were in draft form, subject to clarification from the outcome of the consultation, so as not to delay the auditors.
Councillor Feeney asked how the auditors demonstrated the effectiveness of schemes that had a risk of not showing good value for money, such as SEND, by balancing the spend against the outcomes. Avtar Sohal said it wasn’t just financial considerations that were taken into account; for example regulatory reports and procurement also formed part of its valuation. The auditors would then look at whether the recommendations in the report had been taken seriously and acted upon, and what progress had been made. If there had not been sufficient progress then this would be highlighted as a risk.
The Chair said the Financial Reporting Council had chosen Warwickshire County Council to be examined at random and they had discovered two areas of weakness as a result of the audit. He said the FRC had been in touch with him, as well as Warwickshire County Council, to make sure these two areas of weakness were recognised. Andy Felton said Warwickshire had been chosen at random. He said the timing of the previous audit had been unfortunate as it had coincided with the SEND review, and this had impacted on its value for money. He highlighted that in spite of this, the key performance indicator relating to SEND had been amber rather than red. The Chair told members that the FRC would be made public in due course.