(Director of Resources) To consider the attached report (AGC-006-2017/18).
The Director of Resources, Mr Palmer noted that one of the key roles of this Committee was scrutinising the annual Statutory Statement of Accounts. All Members of the Council would have the opportunity to debate the accounts at Full Council and part of that debate would be to consider the recommendation of this Committee.
He noted that the budget for the general fund was set in February 2016 it was on the expectation that our expenditure would exceed our income by £36,000 which was not taken as a concern as we had ample in reserves to cover this. As it turned out, expenditure exceeded income for that year by £65,000.
A succession of ministers at the DCLG had expressed concerns about local authorities having excessive balances and had threatened to remove or tax these balances in some way. Our balances have been carefully managed over many years and were higher than most other district councils. Given this underspend and the concern of potential government intervention members decided to take the opportunity to increase the contribution from the general fund revenue account to the financing of the Capital Programme by £1million. This left our general fund balance at £6.2million which was £3million higher than the minimum level adopted by members. So despite this transfer the reserve levels were still comfortable. The level of variance as being reported was not unreasonable given that our gross expenditure on the general fund was approximately £70million. It was also better to have an underspend than an overspend. So overall our financial position was good and we do remain in a strong position for the end of the year.
Councillor Knapman noticed that we had a salary underspend and wondered if we had enough people. He gave an example of the land searches section taking longer than other councils. Mr Palmer said that we did not have a recruitment freeze in place. The salary budget was about £20million so a £120,000 underspend was not that much. He could ask the appropriate Assistant Director to clarify.
The meeting noted that there had been one significant change to the annual Statutory Statement of Accounts for 2016/17. For 2016/17, the segmental reporting arrangements for the Comprehensive Income and Expenditure Statement had changed with the introduction of the new Expenditure and Funding Analysis. This analysis brought together the figures as they were presented in the Statutory Statement of Accounts, following proper accounting practice, with the figures more normally seen in the Council’s budgets for the General Fund and Housing Revenue Account, based on the statutorily defined charges.
In preparing a set of accounts at a point in time it was inevitable that some of the information required would not yet be available. If an actual amount was uncertain an estimate would be used. The estimate would be based on the assessment of information available at the time the accounts were closed. When the actual figures were determined any difference was usually accounted for in the following year. If the estimate was wrong by a material amount it would be necessary to consider re-stating the figures, this is extremely rare.
The largest creditor on the Balance Sheet was the Council’s liability to the pension fund. The Balance Sheet shows that the pension liability for the Council had increased in the year from £66.981 million to £81.121 million. This increased deficit was due to the £36.362 million increase in the value of the projected liabilities being greater than the £22.222 million increase in scheme assets.
The key to calculating the value of the projected liabilities was the discount rate, and as this falls the size of the liability increases. The decrease in the discount rate from 3.5% to 2.7% reflects the decrease in yields in the corporate bond market, which actuaries are required to base discount rates on.
There were two other areas in the Statement of Accounts to bring to Member’s attention as having required a major element of judgement. The first of these was asset valuations, Property, Plant and Equipment (PPE), dominates the Balance Sheet with a value of just over £760 million and Investment Properties were the next largest asset with a value of £68 million. Assets were revalued periodically to ensure their valuations are correct and up to date.
This year had seen an increase on revaluation of more than £56 million on PPE, of which more than £48 million relates to Council Dwellings and Garages. As in previous years, the valuation of the Council’s Dwellings and Garages was undertaken by the District Valuer. Investment Properties were revalued by The Council’s Estates Service and this resulted in an increase of £1 million in the value of industrial estates and £4m in the value of commercial properties.
One other area to note was the provision for business rates appeals, and central government had given local authorities the liability for settling the outstanding appeals. The Collection Fund included a provision for Appeals of £3.5million, which was similar to 2016/17.
Mr Palmer was happy to report that there were no extraordinary or unusual transactions during the year. And that no significant adjustments had arisen from the audit, although this was still to be concluded and any significant adjustments would be reported to this Committee. Neither the Internal nor External Auditor had reported any material weakness in internal controls. If any arose before the conclusion of the audit they would be reported to this Committee.
The Committee then received some tabled papers updating a few pages of the Statement of Accounts 2016/17 with more up to date figures to keep the report in line with what was published in the full Council agenda. These were minor amendments that were noted by the Committee.
Councillor Knapman asked what the strategy was that we had in place to deal with the pension liabilities. Mr Palmer replied that the County Council administered the scheme and would cover it. We were contacted every three years and given a number of options on the deficit recovery period and repayments and ongoing contributions. The last decision was made in December last year. The deficit recovery period was reducing, so the payment strategy that the County Council had put in place seemed to be working.
Councillor Knapman asked Mr Palmer to say why he was not concerned about this at this time. Mr Palmer said that to some extent this was an artificial figure, if the markets moved next year then the size of the deficit would fall again.
The Committee was happy to accept the findings highlighted in the report on the Annual Statement of Accounts.
That the Audit and Governance Committee recommend to the Council that the Statutory Statement of Accounts for 2016/17 be adopted.