SLIDE 1 HERTSMERE BOROUGH COUNCIL
PART I Agenda Item No
11
AUDIT COMMITTEE
Document Reference No
A/17/17 DATE OF MEETING: 31st May 2017 PRESENTATION OF THE 2016/17 DRAFT STATEMENT OF ACCOUNTS PORTFOLIO HOLDER: COUNCILLOR GRAHAM SUMMARY This report presents the Council’s draft 2016/17 Statement of Accounts to members for noting prior to submission for external audit.
1.1. That the Committee notes the draft Statement of Accounts for 2016/17 (Appendix I) and approves its submission to external audit.
- 2. REASONS FOR RECOMMENDATION
2.1. The Accounts and Audit (England) Regulations 2015 requires that: the Chief Financial Officer must, by the 30 June following the year end, sign and date the Statement of Accounts, and confirm that they present a true and fair view of the financial position as at 31 March and for the year then ended, and; the Statement of Accounts must be approved by the Council (or a delegated body) following the external audit and no later than 30 September following the year end. 2.2. It is also important to note that the government has issued statutory instrument 234, the Accounts and Audit (England) Regulations 2015, which will require certification of the accounts by 31 May and audit and publication by 31 July with effect from 2017/18.
SLIDE 2 2.3. In line with recommended good practice members are requested to note and approve the draft Statement of Accounts to be submitted for external audit which will commence 1 June 2017. Following the audit period the final audited accounts will be represented to the Audit Committee for approval
2.4. Although the earlier closedown deadlines (p2.2) only becomes binding from financial year 2017/18 onwards officers have taken the opportunity to work with our external auditors during 2016/17 to implement these regulations
- ne year ahead of schedule with a view to using 2016/17 as a “dry run”.
- 3. SUMMARY
3.1. The draft statement of accounts, which have been prepared under International Financial Reporting Standards (IFRS) in accordance with the Code of Practice on Local Authority Accounting in the UK (The Code) and is comprised of a;
- statement of responsibilities
App I
- auditors report (to be updated post audit)
App I
p7.2
- expenditure and funding analysis
p7.3
- movement in reserves statement
p7.6 – 7.13
- comprehensive income & expenditure statement
p7.3
App I & II
App I 3.2. If there are any enquiries relating to specific figures in the draft 2016/17 Statement of Accounts it would be helpful, in view of the complexity of the accounts, if these could be directed towards the report author prior to the meeting who will then be able to provide a written response prior to the meeting, or come to the meeting prepared with the appropriate response. Officers will be able to comment on any points of principle contained within the Statement of Accounts. 3.3. Due to the size of the statement of accounts this document will only be provided electronically, however the primary statements (Balance Sheet, Comprehensive Income & Expenditure Account, Expenditure & Funding Analysis, Movement in Reserves and General Fund note) have been provided in Appendix III.
4.1. None applicable for the purposes of this report.
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- 5. PLANNED TIMETABLE FOR IMPLEMENTATION
5.1. In accordance with the Accounts and Audit (England) Regulations 2015, the Chief Financial Officer is required to certify the Statement of Accounts as true and fair by 30th June following the year end. Although it is worth noting that officers will be implementing the earlier closedown timetable one year ahead of the statutory deadline. 5.2. The Council’s external auditors, Ernst & Young LLP, will carry out the external audit from Thursday 1 June 2017 and will present their findings to the Audit Committee on 31 July 2017. Following this presentation the Audit Accounts Committee will be requested to formally approve the audited Statement of Accounts, which in accordance with audit regulations shall be signed by the person presiding at the committee or meeting at which that approval was given.
6.1. None applicable for the purposes of this report.
- 7. FINANCIAL AND BUDGET FRAMEWORK IMPLICATIONS
Statement of Accounts 7.1. The Statement of Accounts has been prepared in accordance with the Code of Practice on Local Authority Accounting in the UK (The Code) and the Best Value Accounting Code of Practice (BVACOP), which are both regulated by the Chartered Institute of Public Finance and Accountancy (CIPFA).
Draft SOA approved for audit by Audit Committee 31 May 2017 External audit commences From 1 June 2017 Presentation of audit findings and audit opinion to Audit Committee 31 July 2017 Re-confirmation of Statement of Accounts by CFO and Audit Committee Chairperson 31 July 2017 Publication of final audited accounts 1 August 2017
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Narrative Statement 7.2. The Narrative Statement (which replaced the explanatory foreword in 2015/16) provides information on the Council and its performance for the year as well as highlighting risks and other key issues likely to affect the Council in the coming years. Expenditure & Funding Analysis (EFA) 7.3. The Expenditure and Funding Analysis (EFA) takes the net expenditure chargeable to taxation and reconciles it to the Comprehensive Income & Expenditure Statement (CIES). To aid understanding the service analysis is now presented in the way in which the council organises itself and manages financial performance, rather than the previous CIPFA prescribed categories as specified in the Service Reporting Code of Practice.
7.4.
For 2016/17 the council reported a £0.283m under spend for the year. This figure differs slightly from the EFA due to the inclusion of some minor and “one off” items not routinely reported in the Financial Monitor such as misc. income, movement in bad debt provision and Hertsmere’s share of the business rates pooling gain. See table 1/2.
Table 1 Balance per Financial Monitoring £’000 (Appendix III) 283 LAMS guarantee write off 4 LEP loan interest 2 Bad Debt Provision (85) Hertfordshire Pooling gain 738 Transfer to Business Rates equalisation reserve (738) Total reconciling Items (79) Increase in Council Fund balance 204 Balance Sheet extract £’000 Table 2 As at Mar 2016 As at Mar 2017 Change £ £ £ General Fund Balance 24,557 26,690 2,133 consists of: Council Fund 7,698 7,902 204 Earmarked Reserves 16,859 18,788 1,929 24,557 26,690 2,133
SLIDE 5 7.5. In 2016/17 net expenditure on services as reported in the CIES was £18.288m with other income and expenditure totalling £21.553m, resulting in a surplus for the year on the Provision of Services of £3.265m. After accounting for statutory adjustments (depreciation, pension IAS19, leave accrual etc.) the resulting increase on the cumulative General Fund balance is £2.133m. Of the £2.133m noted above, £0.204m relates to an increase in the Council Fund of c2% in line with annual inflation as stipulated in the Finance
- Strategy. £1.929m relates to the net increase in earmarked reserves for the
year as summarised in p7.11. A detailed breakdown of the movements to/from useable reserves is shown in note 29 to the draft accounts. Movement in Reserves UNUSABLE RESERVES 7.6. This statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e., those that can be applied to fund expenditure or reduce local taxation) and other reserves. 7.7. The annual difference between the accounting requirements and the funding requirements for local authorities is represented by the line ‘Adjustments between accounting basis and funding basis under regulations’ in the Movement in Reserves Statement. The reserves in question include the Capital Adjustment Account, the Financial Instruments Account, the Unequal Back Pay Account and the Pensions Reserve. 7.8. The Revaluation Reserve has increased by £21.8m, (£40.9m 2015/16 to £62.8m 2016/17) due to the revaluation of council dwellings, commercial property, land, garages and investment properties (£23.9m) offset by prescribed accounting adjustments transferred to the Capital Adjustment Account (£2.0m). 7.9. Deferred Capital Receipts (£2.4m) relates to a previous affordable housing S106 agreements (Taylor Wimpey, Isopad House) for which the council received a percentage share in the value of the property in lieu of a cash receipt. The councils share is protected by way of a legal charge on the property. 7.10. Following the March 2016 triennial valuation of the fund the Council’s net pension fund deficit has increased over the last year by £5.653m, from £32.562 million to £38.215 million. This is mainly due a reduction in the net discount rate (as a result of market conditions) applied to estimate long term assets and liabilities of the fund, which has placed a higher net value to the benefits payable in the future.
SLIDE 6 USABLE RESERVES 7.11. In line with the Finance Strategy the councils general fund balance has increased by c2% or £204k (£7.698m 2015/16 to £7.902m 2016/17). Earmarked reserves stand at £18.788m, a net increase of £1.929m. Notable movements into the earmarked reserve include £1.1m New Homes Bonus grant, £0.738m pooling gain from the Hertfordshire business rates pool and £0.2m additional EFS rent. There has also been a number of
- ther smaller movements in and out of earmarked reserves such as the
drawdown and set aside of funds for car park repairs and renewals and the use of reserves to pay for vehicle replacements. 7.12. The capital receipts reserve has increased by £0.318m, from £6.267m to £6.585m. During the year capital receipts totalling £0.739m was received from Affinity Sutton housing association in relation to the sale of ex council homes under right to buy. £0.105m was also received for the sale of the councils share in 2 properties in Gemini Park (see S106 p7.9). During 2016/17 £0.542m was utilised to finance capital expenditure. 7.13. Capital grants unapplied increased by £3.9m (£0.925m 2015/16 to £4.832m 2016/17) the main reason for this increase is the receipt of CIL
- monies. We received £3.9m in CIL (Community Infrastructure Levy) in 16-
17 towards HBC projects (excluding admin/parish receipts). Out of this £1.6m came from Hertswood School (14/1767/FUL) in relation to planning permission to demolish the school building and Ark theatre and replace with residential units. The other main contribution £0.862m was received for Elton House, Watford (15/1972/FUL) for the demolition of an existing office building and replacement with a care home. PROPERTY, PLANT & EQUIPMENT 7.14. Property, Plant & Equipment has increased by £18.514m because of revaluation movements £19.590m, additions and enhancements during the year £2.886m, offset by disposals £0.595m, reclassifications to investment properties £0.775m and depreciation charges £2.592m. CURRENT ASSETS 7.15. Debtors have increased by £2.043m mainly due to the reclassification of the LAMS (Local Authority Mortgage Scheme) balance from long term to short term debtors as this loan is scheduled to be repaid in Nov 17 (£2m). There has been no overall increase in Debtors as this reclassification is fully offset in Long Term Debtors. 7.16. Cash/Investments have increased by £7.392m since last year following the receipt of CIL funding (£3.9m), collection fund balances owed to DCLG/HCC (£1.6m) and New Homes Bonus funding (£1.2m) and other balances (£0.5m) held in earmarked reserves.
SLIDE 7 CURRENT LIABILITIES 7.17. Creditors/Provisions have increased by £2.2m caused by an increase in amounts owed to third parties in the collection fund (£0.9m), a reclassification of the LAMS loan from long term to short term creditors (£1m), receipts in advance (£0.3m), other creditors (£0.5m) and a reduction in the NDR appeals provision (-£0.4m)
8.1. The Accounts and Audit Regulations 2015 require that the Chief Financial Officer must, no later than 30 June immediately following the end of the year, sign and date the Statement of Accounts, and certify that it presents a true and fair view of the Council’s financial position at the end of the year it relates, and of the Council’s income and expenditure for the that
- year. This report and the appendices, fulfils the statutory requirements of
the Accounts and Audit Regulations 2015.
- 9. PERSONNEL IMPLICATIONS
9.1. None applicable for the purposes of this report. 10. CORPORATE PLAN & POLICY FRAMEWORK IMPLICATIONS 10.1. Subject to final audit opinion, the information disclosed within the Statement of Accounts gives a true and fair view of the financial standing
- f the Council at 31 March 2017. Therefore, the information contained
therein will be used to assist in the preparation of the 2017/18 Finance and Capital strategies. 11. RISK MANAGEMENT 11.1. None applicable for the purposes of this report. 12. APPENDICES ATTACHED Appendix I – Draft Statement of Accounts 2016/17
(due to the size of the document Appendix I to be provided electronically only)
Appendix II – Primary Statements 2016/17 Appendix III – Financial Monitoring Summary Position 2016/17 13. BACKGROUND PAPERS USED IN PREPARATION OF THIS REPORT 13.1. None applicable for the purposes of this report.
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14. AUTHORS 14.1. Principal Authors: Daniel Omisore (Financial Services Manager) Email: daniel.omisore@hertsmere.gov.uk Ext: 3145 14.2. Contributory Authors: Sajida Bijle (Director of Resources) Email: sajida.bijle@hertsmere.gov.uk Ext: 5000 15. CONSULTATION ON DRAFT REPORT 15.1. On 10 May 2017 a copy of the draft report was sent to the following: Chief Executive, Directors, Heads of Finance & Business Services and Legal & Democratic Services, and Service Heads.
