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Agenda item

Financial Statements (Statement of Accounts) 2018/19

This report presents the Council’s Statement of Accounts for the period 1 April 2018 to 31 March 2019.

Minutes:

The report from the Financial Services Manager (FSM) presented the Council’s Statement of Accounts for the period 1 April 2018 to 31 March 2019 (attached as Appendix A to the report). He advised Members of two changes to the published agenda papers:

 

(i)            The ongoing audit of the Council’s 2018/19 accounts by the External Auditor [Min. No. 6 refers], required a re-wording of the report’s Recommendation to: ‘That Members consider and approve the Statements of Accounts 2018/19 for publication, subject to any changes from the ongoing audit being agreed by the Strategic Director (Internal Services), in consultation with the Audit Board Chairman’;

(ii)          Incorrect figures in Note 22 of the Statement of Accounts regarding – Operating Activities (Cash Flow Statement) [agenda p.164], had required an errata sheet be produced and tabled for Members information that evening.

 

The FSM reminded Members that the Statement of Accounts was prepared in accordance with ‘proper accounting practice’, as contained in the various rules issued by the Accounting Standards Board (ASB), and the Chartered Institute of Public Finance and Accounting (CIPFA) Code of Practice for Local Authority Accounting. In addition, the Council had to also adhere to statutory regulations. The report and Appendix A set out how ‘proper accounting practice’ and the appropriate statutory regulations had been reconciled, to produce the Council’s Financial Statements (Statement of Accounts) 2018/19.

 

As previously advised by the External Auditor in her Audit Findings Report [Min. No. 6 refers]; the main development for Members to note in the period under review had been the adoption of new International Financial Reporting Standard 9 (IFRS9) Instruments, which dealt with the categorisation and subsequent accounting of financial instruments. A particular issue arising from the standard is the treatment of ‘Pooled Funds’.

 

The Council’s Accounts treated all such ‘Pooled Funds’ as Fair Value through Profit and Loss, which meant that movements in the value of these investments affected the surplus or deficit on Service figures. Temporary (5 year) regulations brought in by the Ministry of Housing, Communities & Local Government (MHC&LG) to deal with the changes introduced by IFRS9, enabled any changes in the value of ‘Pooled Funds’ to be reversed through the Movement in Reserves Statement, so that the Reserves (the Council’s tax setting position) remained unaffected.

 

The Council had sought and received legal advice that it could protect the taxpayer from unrealised fluctuations in the values its funds, by electing and categorising the new IFRS Instruments as Fair Value through Comprehensive income. The External Auditors [Grant Thornton UK] did not agree with the Council’s legal advice, and consequently, the Accounts as stated in Appendix A to the report, categorised all funds as fair value through Profit and Loss. Discussions with the External Auditors continued over this policy interpretation, and the outcome would be reported in a future report to the Board if required.

 

The FSM highlighted the following specific points for Members in the 2018/19 Statement of Accounts:

·         Expenditure and Funding Analysis (EFA) [agenda p. 114]: these figures compared the statutory position in column 1 with the accounting position in column 3. This showed that on a statutory basis (the most important measure) that the net cost of Council Services was £11.584M, and that after other income and expenditure was considered, a surplus of £7.053M had been achieved. This surplus was further broken down in the Movement in Reserves Statement (MIRS) between £7.659M for the General Fund and a deficit of £606,000 for the Housing Reserves Account (agenda p.110);

·         Comprehensive Income and Expenditure Statement [agenda p. 109): this showed an accounting surplus on the Provision of Services of £17.022M on a comprehensive income and expenditure of £30.107M which matched the EFA. Some £7M had been moved to Useable Reserves to give a UR balance of some £23M;

·         Cash Flow Statement (CFS) [agenda p.113]: The CFS showed the changes in cash and cash equivalents of the Council during the period under review. Capital accounting was kept separate from charges to Council Tax payers;

·         Balance Sheet  [agenda p.112]: This showed the assets and liabilities of the Council at 31 March 2019;

·         Housing Revenue Account (HRA) [agenda p.189]; This was kept separate from the General Fund by statute, to ensure that monies from Council rents were not used to fund other Council activities, or monies from other Council activities were used to subsidise Council rents and other housing initiatives.

 

In conclusion, the FSM advised the Board that the outturn, compared to budget, was formally reported to Cabinet.

 

In response to subsequent questions from Members the FSM confirmed the following points:

 

·         Contributions to Collection Fund Surpluses and Deficits [agenda p.199]: These were paid to precepting authorities monthly, based on estimates taken over a 2 year period;

 

·         Reserves Formula: General Reserves covered all risks up to £2.5M and fluctuated upwards and downwards. Earmarked Reserves were for more specific risk and were estimated annually.

 

In response to a specific question from the Chairman, the External Auditor confirmed that Grant Thornton did undertake an audit of the Council’s Reserves, to ensure that they were spent according to plan. That audit [of the Council’s Reserves] also formed part of the External Auditor’s Value for Money Conclusion.

 

 

                        RESOLVED:

 

1.    That Members approve the Council’s Financial Statements (Statement of Accounts) 2018/19 for publication, subject to any changes arising from the ongoing audit by Grant Thornton UK (External Auditors), being agreed by the Strategic Director (Internal Services), in consultation with the Chairman of the Audit Board.

 

Supporting documents: