SLIDE 1 Page 1 of 6 HERTSMERE BOROUGH COUNCIL Meeting name & Date AUDIT COMMITTEE 30 May 2019 Agenda item 13 Report title Presentation of Statement of Accounts 2018/19 Report reference no. A/19/17 Wards affected All wards Report author, job title & email Jean Cole, Interim Financial Services Manager jean.cole@hertsmere.gov.uk List of Appendices Appendix A – Unaudited Statement of Accounts 2018/19 (due to the size of the document, Appendix I has been provided electronically only). Reason for urgency Portfolio Holder Councillor John Graham, Portfolio Holder for Finance, Property and Economic Development. PUBLIC REPORT - this report is available to the public. 1 RECOMMENDATION 1.1 That the Committee notes the draft Statement of Accounts for 2018/19 (Appendix A) and that these will be submitted to Ernst & Young LLP (EY), the Council’s external auditors. 2 PURPOSE OF THIS REPORT 2.1 This report presents the draft Statement of Accounts for 2018/19 to Audit
- Committee. These statements will be presented again to the Committee, for
approval, on 30 July 2019, following the completion of the external audit by Ernst & Young. 3 REASONS FOR RECOMMENDATION 3.1 The Accounts and Audit (England) Regulations 2015, amended by Statutory Instrument 234, requires that: from the financial year 2018/19 the Chief Financial Officer must, by the 31 May following the year end, sign and date the Statement
- f Accounts, and confirm that they present a true and fair view of the
financial position as at 31 March and for the year that ended, and; the Statement of Accounts must be approved by the Council (or a delegated body) following the external audit and no later than 31 July following the year end.
SLIDE 2 Page 2 of 6 4 ALTERNATIVE OPTIONS 4.1 None applicable to this report. 5 BACKGROUND 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 31st May following the year end. 5.2 The Council’s external auditors, EY, will carry out the external audit from Monday 1 July 2019 (on site from 8 July 2019) and will present their findings to the Audit Committee on 30 July 2019. Following this presentation the Audit 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
- f Practice on Local Authority Accounting in the UK (The Code) 2018/19
regulated by the Chartered Institute of Public Finance and Accountancy (CIPFA).
Draft SOA presented to Audit Committee 31 May 2019 External audit commences From 1 July 2019 (on-site 9 July) Presentation of audit findings and audit opinion to Audit Committee 30 July 2019 Re-confirmation of Statement of Accounts by CFO and Audit Committee Chairperson 30 July 2019 Publication of final audited accounts 31 July 2019
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Page 3 of 6 Narrative Statement 7.2 The Narrative Statement 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. 7.3 The statement provides a reconciliation of the Financial Monitor presented to members at Operations Review Committee, with the figures appearing in General Fund Balance. It also provides a reconciliation of the Expenditure and Funding Analysis to the Financial Monitor. The reconciliation between the surplus presented to Operations Review Committee and the £2.971m movement in General Fund Balance, as represented by General Fund (contingency) and General Fund (Earmarked Reserves) is:
General Fund Reserves Total Table 1 £'000 £'000 £'000 Financial Monitoring Report as at 31/3/19 Surplus 489 489 Items not in the monitoring Report: (65) (65) Planned transfers as per revenue budget 2018/19 (Note 1) 890 890 Housing Benefits Equalisation Reserve (Note 2) 677 677 Capital expenditure funded from earmarked revenue reserves (Note 3) (822) (822) Funding variances: NNDR Growth and S31 Grants 1,639 1,639 New Homes Bonus 161 161 Transfer from GF and other minor variances (200) 202 2 General Fund Balance 224 2,747 2,971
Note 1: These planned reserve transfers form part of the Council’s approved Annual Revenue Budget 2018/19, which includes a contribution to Refuse Vehicle Replacement reserve £349k. Asset Management £233k, Parking Services (Car Park Management) reserve £140k, and a net drawdown from the Drainage Reserve of £157k. Note 2: The Housing Benefits equalisation Reserve includes the gains and losses against what is paid out and what is refunded by central government (DWP). The total expenditure fluctuates in the order of £37m, and with the move to universal credit, there is an ongoing risk to the council. Note 3: This is for planned capital expenditure which it has been agreed will be funded from an earmarked reserve, such as Refuse Vehicle Replacement reserve for procurement of refuse vehicles.
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Page 4 of 6 Balance Sheet extract Table 2 2018 2019 Change £’000 £’000 £’000 General Fund Balance 28,025 30,996 2,971 consists of: Council Fund/General Fund 7,962 8,186 224 Earmarked Reserves 20,063 22,810 2,747 28,025 30,996 2,971 The movement in the Council’s General Fund balance of £224k follows the Council’s policy of increasing the General Fund balance broadly in line with inflation. 7.4 In 2018/19 net expenditure on services as reported in the Comprehensive Income and Expenditure Statement (CIES) was £14.802m with other income and expenditure totalling (£14.916m), resulting in a surplus for the year on the Provision of Services of £0.114m. After accounting for statutory adjustments (depreciation, pension IAS19, leave accrual etc.) of £2.857m the resulting increase on the cumulative General Fund balance is £2.971m. Of the £2.971m noted above, £2.747m relates to a net increase in earmarked reserves for the year which mainly contributed by £1.6m additional Business Rate growth income and £700k Housing Benefit over payment recovery. Movement in Reserves UNUSABLE RESERVES 7.5 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. 7.6 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 Accumulated Absences Account and the Pensions Reserve. 7.7 The Revaluation Reserve has increased by £7.3m, (£66.1m 2017/18 to £73.4m 2018/19) due to the revaluation of council properties including leisure centres, commercial property (non-investment), land and garages (£8.6m) offset by prescribed accounting adjustments transferred to the Capital Adjustment Account (£1.3m). 7.8 Deferred Capital Receipts (£2.7m) relates to affordable housing S106 agreements (Taylor Wimpey, Gemini Park and a few others) 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.
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Page 5 of 6 7.9 Following the March 2016 triennial valuation of the fund the Council’s net pension fund deficit has increased over the last year by £4.342m, from £35.509m to £39.851m. This is due mainly to a change in the net discount rate (as a result of market conditions) which has increased the assessed value of liabilities (as a higher value has been placed on benefits payable in the future). USABLE RESERVES 7.10 In line with the Finance Strategy the Councils General Fund balance has increased by 2.81% (£7.962m 2017/18 to £8.186m 2018/19). Earmarked Reserves stand at £22.810m an increase of £2.747m. Notable movements into the earmarked reserve include £1.6m added to the Business Rates Retention reserve, £0.7m added to the Housing and Council Tax Benefit equalisation account, and £0.5m added to the Flexible Homeless Support reserve. 7.11 Capital grants unapplied increased by £1.6m (£6.607m 2017/18 to £8.237m 2018/19) the account was credited with an additional £4.1m funding, including CIL (Community Infrastructure Levy) of £2.0m in 2018/19 towards HBC projects (excluding admin/parish receipts). £2.5m of grants already sitting in the reserve were transferred to the Capital Adjustment Account, to finance expenditure incurred in year. PROPERTY, PLANT & EQUIPMENT 7.12 Property, Plant & Equipment has increased by £7.615m. This movement includes additions of £2.197m offset by various adjustments for revaluations, depreciation and impairment. Most notably, the revaluation of the Council’s leisure centres in year. CURRENT ASSETS 7.13 Debtors have increased by £0.931m mainly due to the ‘InspireAll’ Leisure Trust loan of £0.263m due and £0.286m for Government Departments and housing benefit overpayments. 7.14 Cash/Investments have decreased from £55.655m to £53.188m, a movement of £2.467m. The main item of significance is the £3.2m loan advanced to ‘InspireAll’. Otherwise, these represent normal income, expenditure and working capital movements CURRENT LIABILITIES 7.15 Creditors/Provisions provisions have decreased by £0.3m, mainly due to the settlement of a legal claim for uninsured losses of £0.450m offset in part by an increase of £0.122m for NNDR appeals. There was a significant fall in creditors of £3.0m – from £11.5m to £8.5m, due mainly to less being owed to government departments. The long term NNDR appeals provision has
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Page 6 of 6 increased by £0.795m. This is due to the continued delays at the Valuation Office, and delays in the submission of appeals under the check, challenge and appeal process. 8 LEGAL POWERS RELIED ON AND ANY LEGAL IMPLICATIONS 8.1 The Accounts and Audit Regulations 2015 require that the Chief Financial Officer must, no later than 31 May 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 EFFICIENCY GAINS AND VALUE FOR MONEY 9.1 None for the purpose of this 10 RISK MANAGEMENT IMPLICATIONS 10.1 None for the purposes of this report. 11 PERSONNEL IMPLICATIONS 11.1 None for the purposes of this report. 12 EQUALITIES IMPLICATIONS 12.1 None for the purposes of this report. 13 CORPORATE PLAN and POLICY FRAMEWORK IMPLICATIONS 13.1 None for the purposes of this report. 14 ASSET MANAGEMENT IMPLICATIONS 14.1 None for the purposes of this report. 15 HEALTH AND SAFETY IMPLICATIONS 15.1 None for the purposes of this report. 16 BACKGROUND DOCUMENTS USED TO PREPARE THIS REPORT Document Title: Filed at: Statement of Accounts 2018/19 Finance Department
