11 HERTSMERE BOROUGH COUNCIL PART I Agenda Item No Document AUDIT - PDF document

11 HERTSMERE BOROUGH COUNCIL PART I Agenda Item No Document AUDIT COMMITTEE A/17/17 Reference No 31 st May 2017 DATE OF MEETING: 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. ACTION RECOMMENDED 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.

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 on the 31 July 2017. 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 one 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 - narrative statement p7.2 - expenditure and funding analysis p7.3 p7.6 – 7.13 - movement in reserves statement - comprehensive income & expenditure statement p7.3 - balance sheet App I & II - notes to the accounts 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. ALTERNATIVE OPTIONS 4.1. None applicable for the purposes of this report.

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. Draft SOA approved for audit by Audit Committee 31 May 2017 Publication of final audited External audit commences accounts From 1 June 2017 1 August 2017 Re-confirmation of Presentation of audit Statement of Accounts by findings and audit opinion CFO and Audit Committee to Audit Committee Chairperson 31 July 2017 31 July 2017 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. DELEGATION 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).

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. For 2016/17 the council reported a £0.283m under spend for the year. This 7.4. 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 £ ’000 283 (Appendix III) 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 As at As at Table 2 Mar Mar Change 2016 2017 £ £ £ 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

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 t he 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.