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HERTSMERE BOROUGH COUNCIL REPORT TO COUNCIL
ITEM NO 8 DOCUMENT REFERENCE NO C/03/42 DATE OF MEETING/DECISION 24 SEPTEMBER 2003 PRESENTATION AND APPROVAL OF STATEMENT OF ACCOUNTS FOR 2002/03 PORTFOLIO HOLDER COUNCILLOR GRAHAM SUMMARY The report presents the Council’s Statement of Accounts for 2002/03 for approval by Members in accordance with the Accounts and Audit Regulations 2003. Copies of The Statement of Accounts 2002/03 and the full set of Management Accounts will be sent separately for all Members and are available in the Members’ room and the Civic Office’s reception. An electronic version is available
- n the Council’s website and intranet (Finance section).
1. ACTION RECOMMENDED 1.1 To note and approve the Statement of Accounts 2002/03 as required by the Accounts and Audit Regulations 2003. 2. REASON(S) FOR RECOMMENDATION 2.1 The Accounts and Audit Regulations Act 2003 requires that the Statement of Accounts for 2002/03 must be approved by the Council before 30th September 2003. For the purpose of this report the two prime documents - Consolidated Revenue Account (Appendix I) and Consolidated Balance Sheet (Appendix II) are attached. The complete set of reports (The Statement of Accounts 2002/03 and Management Accounts 2002/03 referred to as Appendix A and Appendix B respectively) will be sent separately to Members and will be available as stated in the summary above. 2.2 Also as mentioned in the summary above the budget monitoring reports (Management Accounts 2002/03) that compare 2001/02 actuals, 2002/03 budgets and 2002/03 actuals are available via internet, intranet and in the Members’ room. The detailed background to these reports along with explanatory notes has been presented on a regular basis to the Financial Monitoring Panels and to the committees throughout the year. 2.3 If there are any enquiries relating to specific figures in the 2002/03 Statement of Accounts it would be helpful, in view of the complexity of the accounts, if these could be directed towards the report author who will then be able to provide a written response prior to the meeting.
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2 Officers will be able to comment on any points of principle contained within the Statement of Accounts. 3. ALTERNATIVE OPTIONS 3.1 None applicable for the purposes of this report. 4. PLANNED TIMETABLE FOR IMPLEMENTATION 4.1 As mentioned earlier, it is a statutory requirement to approve the Statement of Accounts for 2002/03 by 30th September 2003.
5.1 None applicable for the purposes of this report. 6. FINANCIAL AND BUDGET FRAMEWORK IMPLICATIONS Statement of Accounts 6.1. The Statement of Accounts has been prepared in accordance with the Statement of Recommended Practice (SORP) and the Best Value Accounting Code of Practice (BVACOP) which are both regulated by the Chartered Institute of Public Finance and Accountancy (CIPFA). 6.2. The new Accounts and Audit Regulations 2003 came into force on 1 April 2003. According to regulations 10 and 11, the accounts for the financial year 2002/3 will have to be approved and signed by 30 September 2003 and published by 31 December 2003. The 2002/03 accounts were prepared by the end of July 2003. However, 2003/04 accounts will have to be approved and signed by 31 August 2004 and published by 30 November 2004. Every measure has been taken to meet this challenging task. It is a legal requirement for the Leader of the Council or the person presiding as the chair of the committee that approves the accounts to sign the prime statement when formal approval is given by committee. 6.3. In compliance with regulation 5 of the Accounts and Audit Regulations 2003, certain changes have been made to the format of the Consolidated Revenue Accounts, Fixed Assets notes; and Cash Flow Statements. The new SORP 2002 requires additional disclosures in respect of Retirement Benefits as disclosed per note 12. The accounts conform to the new disclosure requirement of Financial Reporting Standard 17. The Statement of Accounts also includes a Statement on the System of Internal Financial Control. 6.4. This year’s Statement of Accounts was completed and ready for audit by 31st July 2003. The external audit began on 11th August 2003. Hence it was considered more efficient to wait for any potential adjustments and avoid having to report on more than one occasion. 6.5. The prime financial statements include a Consolidated Revenue Account, a Consolidated Balance Sheet, Movement in Reserves Statement, Cash Flow Statement and the Collection
- Fund. In order to understand the purpose of the main and additional statements, please refer to
the explanatory forward contained in the Statement of Accounts on page 4. 6.6. The Secretary of State gave the Council the required authority to close its Housing Revenue Account (HRA) in 2001/02 and hence 2002/03 does not include a Housing Revenue Account.
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3 6.7. The Consolidated Balance Sheet demonstrates that the Council has revenue reserves of £13.8m as at 31 March 2003. This is made up of the following: - 6.8. Although this amount appears to be a significant sum it is clear from the above that more than half of the total is earmarked for specific projects already agreed by the Council. The major items included within this earmarked reserve provision include Land Drainage, Pension Fund Reserves, Leisure Sinking Fund and Non-recurring items reserves 6.9. Prior to 1997, in conjunction with District Audit advice, this Council formally approved a minimum General Fund Reserve level to be maintained at £5m. Applying an average 3% per annum increase for the last six years results in this reserve level requirement being £5.9m. 6.10. The Council has experienced, in 2002/03, a shortfall in income of approximately £300K as a result of a reduction in the Elstree Studio’s turnover related rent. This has led to a deficit of £25K as per the Consolidated Revenue Account (Appendix I) for the year ended 31 March 2003 instead of an anticipated inflationary increase of £275K. It has to be borne in mind that the Council will have to take necessary steps to address this issue in order to keep the General Fund Reserve at the £5m mark, in real terms 6.11. The Consolidated Balance Sheet (Annex II) also shows that the Council has £13.5m remaining in its unallocated Usable Capital Receipts. This has reduced in recent years (£13.9m - 2001/02 and £15.4m - 2000/2001) mainly due to planned capital spending on Elstree Film Studios and Leisure Centres. The Council’s capital strategy aims to ensure that the capital spend is matched to the corporate priorities of the Council. 6.12. The Consolidated Revenue Account shows that the Council has made a deficit of £25K for the financial year ended 31 March 2003. This is after allowing for revenue funding of capital expenditure amounting to £276K. Please note that the 2002/03 actuals reported in the Financial Monitoring reports may vary from the Consolidated Revenue Account because the monitoring reports do not need to comply with the rigorous accounting principles and concepts detailed in the SORP and as a result of any audit adjustments. 6.13. Even though the External Auditors have completed the audit fieldwork, the Statement of Accounts will not be signed off till a later date. So far the feedback from the external auditors regarding the audit has been positive and the auditors have noted the Council’s quest to further improve the accounts. 6.14. Except for Elstree Studio, the disclosures in respect of Related Businesses and Companies have been extracted from audited accounts. 6.15. At the time of writing, a copy of the auditors’ Annual Audit Letter has not yet been received. An update of the auditors’ findings will be communicated orally on the presentation of the report. £’000 Earmarked Reserves 7,759 General Fund Reserve 6,014 13,773
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4 The following adjustments – although not material – have been made to the Statement of Accounts since approval was sought from the Executive Committee on the 3 September 2003.
- Transfers have been made to certain Earmarked Reserves and Capital Financing Reserve
as measure of tidying up. The net effect on the Consolidated Revenue Account amounted to £76K - credit.
- The net book value of the fixed assets has been reclassified to reflect the revaluation
gain based on the opening cost as opposed to the closing cost of fixed assets. This adjustment has no effect on the Consolidated Revenue Account. Budget Monitoring Reports 2002/03 6.16. An analysis of these reports at Appendix B shows the following position for expenditure (excluding capital financing charges, reserves transfers and one-off expenditures) - at the year-end. It should be noted that detailed analysis of expenditure has been monitored throughout the year by way of the monthly financial monitoring reports. Budget Actual Variance Fav/(Adv) £ £ £ Planning Transport & Building Control 1,216,520 1,227,898 (11,378) Health & Housing 1,290,740 1,276,333 14,407 Technical Services 2,674,580 2,667,412 7,168 Community Services 1,728,480 1,718,023 10,457 Asset Management (762,310) (565,734) (196,576) Revenues Benefits & ICT 2,664,430 2,767,400 (102,970) Legal Services (306,880) (198,911) (107,969) Organisational Development 250,010 215,688 34,322 Secretariat 2,052,750 2,106,733 (53,983) Communications 111,150 107,032 4,118 Best Value/CPA 41,680 43,205 (1,525) Best Value 13,853 10,081 3,772 Cost of Democracy 49,500 49,500 Mortgage Interest 42,000 26,914 (15,086) Exceptional Items (264,506) 264,506 Total (before audit adjustments) 11,066,503 Audit adjustments (Immaterial) (101,237) 76,353 As per Consolidated Revenue Accounts (24,884) 11,137,568 6.17. The total overspend of £101,237 (before audit adjustments) represents an increase of £5,484 when compared with the amount reported as per the March 2003 financial monitoring report. This amount is not material and mainly due to minor year-end adjustments. 6.18. Investment Income Total income received £984,000 was £424,000 above budget due to the higher than estimated investment portfolio. But this has been entirely used for one-off items funding purposes.
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5 6.19. Planning Transport & Building Control (adverse variance £11,378) 6.19.1. Planning Services (adverse variance £24,453) had an income surplus of £52,888 and savings (£55,249) on employees’ expenses due to vacancies in the early part of the year. Supplies and Services and Agency costs were overspent by £118,043 mainly due to legal and consultancy costs relating to contested Planning cases. The savings in employees’ expenses were offset by lower than budgeted recharges to other units. 6.19.2. Building Control had an income surplus of £44,007. This was partly offset by an overspend in employees’ expenses arising from the high level of work generated. The net result was a favourable variance of £38,007 6.20. Health & Housing (favourable variance £14,407) 6.20.1. Homelessness showed an overspend of £106,620 due to Bed & Breakfast charges arising from changes in government legislation and social trends. However, this deficit was funded from investment income. 6.20.2. Housing Services showed an overspend of £35,673 due to reduction in the ‘Supporting People’ grant received. Operating costs were overspent due to extra work carried out in respect of meeting the Best Value objective and producing the Common Application form. 6.20.3. Miscellaneous Services showed a surplus of £26,199 due to Entertainment and Taxi licensing income being higher than budgeted. Surpluses were also realised in Public Conveniences and Health & Safety due to the budget not being fully utilised. 6.21. Technical Services (favourable variance £7,168) 6.21.1. Refuse services were overspent by £80,275. Employees’ expenses were above budget by £83,232 (due to vehicle breakdowns, cover for staff absence, collection of side waste) and transport costs by £62,922 (due to high vehicle maintenance costs). These overspends were partly offset by a surplus in income of £66,369 (due to an increased customer base and increased charges for existing customers). 6.21.2. Cleansing Services were overspent by £39,698. This was due to fly-tipping costs, although these were partly offset by savings within staff costs due to vacancies. 6.21.3. Waste Recycling had a favourable variance of £116,668 due to a buyer being obtained for paper collected, and third party collection costs being less than anticipated. 6.22. Community Services (favourable variance £10,457) 6.22.1. The Community Services Unit was overspent by £29,478 due to the budgeted saving of £20,000 in employees’ expenses. ‘Youth & Arts’ showed a saving of £14,545 due to a staff
- vacancy. Voluntary Sector grant aid showed a saving of £14,453. Meals on Wheels had a
surplus of £10,764 due there no longer being a recharge to the service from central reception.
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6 6.23. Asset Management (adverse variance £196,576) 6.23.1. Elstree Studios turnover rent had a shortfall of £311,132 due to lower rent and increased recharges by the Studios compared to prior years. Income for other commercial properties had a favourable variance of £62,000 due to a number of rent reviews. Grounds Maintenance unfavourable variance of £20,567 was because of a slippage in payments from the previous year and variation orders in 2002/03. The underspend of £94,406 on the Building Maintenance is because of lower than anticipated repairs and maintenance costs. 6.24. Revenues Benefits & ICT (adverse variance £102,970) 6.24.1. Council Tax Benefits and Rent Allowances were overspent by £28,269 and £191,547 respectively due to an increase in demand for these services. The actuals for both of these budgets can not be determined until after the year end due to the complexity of the formulae for government funding and the need for prior year adjustments. Because of these factors an external consultant, who has expertise in these areas, is employed to finalise these
- calculations. Benefit Verification Framework has savings on employee expenses of £24,533
as a result of vacancies and increased grant income of £5,380. Benefit Administration has an adverse variance £12,668 due to additional staff to cover the increased workload. 6.25. Legal Services (adverse variance £107,969) 6.25.1. Parking income is below budget by £125,000 mainly due to business permits. The budgeted increase in business permits could not be implemented without HCC consent and this was finally agreed from 1st October 2002. The number of fines issued between June and October was below budget due to long-term sickness and staff vacancies. Land Charges income was £12,239 above target this was a difficult out-turn figure to predict as the service is demand led. 6.26. Organisational Development (favourable variance £34,322) 6.26.1. Print Services have a favourable variance, £55,840 following an excellent final months trading both internally and externally. Central Reception had an unfavourable variance of £15,000 due to the employment of extra staff for the ‘one stop’ reception area. Civic Offices Catering is overspent, by £16,506. The Civic Offices restaurant closed on 7 February 2003. 6.27. Secretariat (adverse variance £53,983) 6.27.1. The first year of the new executive arrangements has seen printing of minutes and agendas exceed budget by £19,463 shown within “Costs Associated with Meetings/Members”. There are savings of £21,800 against expenditure in Committee Costs for O&S witness payments. The reallocation of support services has led to an overspend of £51,000 in Democratic Representation & Management. 6.28 Communications (favourable variance £4,118) 6.28.1 The favourable variance of £4,118 was due to savings on reallocated support services. Expenditure above budget £13,199 was funded from investment income as agreed.
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7 6.29 Corporate Performance and Assessment/Best Value (adverse variance £1,525) 6.29.1 Originally budgeted for one post, two officers were employed and as a result there was an adverse variance of £19,280 but it was agreed that investment income of £17,755 could be used to fund restructuring overspends. 7 LEGAL IMPLICATIONS 7.1. Statutory compliance with the Accounts and Audit Regulations Act 2003 by approving the Statement of Accounts before 30th September 2003. 7.2. Effective financial management, which includes the preparation of the Statement of Accounts and monthly monitoring reports, forms an essential component in the new regulations surrounding the Comprehensive Performance Assessment (CPA). It is important therefore that the Council is aware, informed and satisfied with the financial results so that the future CPA
- utcome is within acceptable limits.
7.3. It is a common occurrence that during the audit of the Statement of Accounts, changes take place as per the external auditor’s suggestions and advice. The audit has been completed and any identified adjustments (though not material) have been made. No further adjustments are expected that will materially change the Statement of Accounts. 7.4. However, if any material changes are required a separate report will be prepared and submitted to the full Council, as required by statute, detailing the adjustments. 8 PERSONNEL IMPLICATIONS 8.1. None applicable for the purposes of this report. 9 CORPORATE PLAN & POLICY FRAMEWORK IMPLICATIONS 9.1. Subject to final audit opinion, the information disclosed within the Statement of Accounts gives a true and fair view of the financial standing of the Council at 31 March 2003. Therefore, the information contained therein can be used to assist in the preparation of the 2003/04 Finance and Capital strategies. 9.2. The information contained in the reports attached can also be used to inform the policy decisions in relation to setting the 2004/05 budgets. The information can be compared to the aims and priorities contained within the corporate plan and highlight areas for additional funding so that these aims and priorities are achieved.
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8 10 APPENDICES ATTACHED – 10.1. Appendix I – Consolidated Revenue Account. 10.2. Appendix II Consolidated Balance Sheet. 11 BACKGROUND PAPERS USED IN PREPARATION OF THIS REPORT 11.1. Statement of Accounts 2002/03 – Hertsmere Borough Council. 11.2. Best Value Accounting Code of Practice – CIPFA. 11.3. Statement of Recommended Practice – CIPFA. 11.4. Accounts and Audit Regulations 2003. 11.5. Capital Accounting by Local Authorities – Guidance Notes CIPFA. 11.6. Statement of Recommended Practice Disclosure Checklist for 2002/03 Accounts – CIPFA. 11.7. Financial Statements in compliance with Best Value Accounting code of practice – CIPFA Best Value Bulletin 3. 12 AUTHORS 12.1. Principal Author - Dev S Gopal (Deputy Head of Finance) Ex 5320 12.2. Contributory Authors - Sajida Bijle (Head of Finance) Ex 3145 Mike Hatton (Business Accountant) Ex 3140
