Agenda item

Draft Statement of Accounts (Agenda Item 5)

Report of the Chief Accountant.


The Chief Accountant presented the report and the draft Statements of Accounts, which had been prepared in accordance with the Accounts and Audit Regulations and in accordance with proper practices issued by The Chartered Institute of Public Finance and Accountancy (CIPFA) in its Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of Recommended Practice (SORP).


It was noted that there had been a number of further changes to the SORP this year, which primarily affected the accounting treatment of fixed assets, with the revaluation reserve and capital adjustment account replacing the fixed assets restatement account and the capital financing account.


The Committee made a detailed examination of the Statements of Accounts, during which the following matters were discussed:


A correction to the heading in the Table of Contents to read “Statements of Accounts” was noted.


In the Explanatory Foreword (pages 1-5), it was explained that there had been no effect on last year’s figures as a result of the accountancy regulatory changes.


It was felt that it would be helpful if the note on the Collection Fund (page 1) was expanded to clarify the relationship with Council Tax.  It was noted that town and parish precepts were included within the Collection Fund.


Clarification was sought on the difference between the “Original” and “Probable” figures contained in the Income & Expenditure Account (page 3).  It was explained that the Original figures related to the budget as approved by the Council at the start of the year at the time of setting of the Council Tax for 2007-08.  The Probable figures were those as revised during the year within the scope of the budget and those amendments were incorporated into the budget for 2008-09 approved by the Council in February and March 2008.  This information provided a useful comparison with the previous year but it was noted that it was not an “audited” item as such.


A member thought it was notable that the final outturn figures were very close to the original budget forecast.


So far as the item on loss on disposal of fixed assets was concerned, it was explained that this included assets transferred to housing associations to provide additional benefits to the community (Note 2, page 16).  Members suggested that this note should be expanded to emphasise the community benefit realised from such disposals.


It was further explained that the use of the reserves from the Budget were subject to approval during the year but any under spend in a budget at the end of a year (for example, on hired services) would be returned to the General Fund for the next year, when budgets would be reset.  Grants were not affected by the year end cut-off and the Council Tax precept set at the start of a year could not be changed. 


In summary, the information showed that the Council looked at what it thought it would spend and what had changed and demonstrated that it was managing its budget.  However, the core budget was not affected.


A key note was the relationship between the General Fund deficit (£2.7m) shown in the outturn balance for 2007-08 and the actual General Fund balance being carried forward over the previous year (£4.8m, an increase of £902,000 over the previous year).  The reason for the difference in these figures was that the Income and Expenditure Account (page 11) was a single consolidated statement of income and expenditure relating to all the Council’s functions which, under the requirements of the SORP, was then adjusted by removing certain elements (such as depreciation), ensuring that there was no effect on the Council Tax.  The same process was applicable to the revaluations resulting in impairment charges being made to services.  This was a somewhat complicated accounting procedure and members felt that this needed to be clearly explained in the presentation to Council.  The notes to the Statement of Movement on the General Fund Balance (pages 3 and 11) expanded on the various elements of the accounting procedure and Note 17 on page 23 gave a fuller explanation of the adjustment of items from the Income and Expenditure Account as part of the reconciliation process on the General Fund Balance. 


Members suggested it would be useful to add a note in the Explanatory Foreword under the heading of General Fund to highlight the net increase and cross-reference it to the further information given on page 11 and in Note 17 on page 23.


A member drew attention to the new term “Impairment of Fixed Assets” shown in Note 17 on page 23.  It was explained that this was a change required under the new SORP procedures and was the term now to be used to reflect changes in the capitalised value of fixed assets from revaluations of those assets, which could result in an upwards or downwards valuation.  The notes on pages 7-9 gave fuller information.   The presentation to be made to Council would use a simpler analogy to explain the position.


A member asked about the Revenue Support Grant (RSG).  It was explained that although the amount of RSG had gone down, this was offset by the redistribution of the National Non-Domestic Rate (NDR) settlement, which had increased.  All Councils had been affected similarly by the downward trend in RSG but increased NDR.


A question was also asked about how the parish council precepts were treated in the accounts.  It was explained that the precepts were paid to the towns and parishes via the Collection Fund but they did not share in any balances in the Collection Fund resulting from collection performance.


A correction was noted on page 12 (Statement of Total Recognised Gains and Losses) removing the brackets on the figures in the line for Deficit on Collection Fund.


Members noted that the Statement on page 12 reflected the overall increase in the balance sheet over previous years, which was felt to be a key message that needed to be highlighted.  It was also noted that the figures reflected upwards-only revaluations on assets, an excellent return on the Dereham High Street investment, as well as other good investment returns.


It was explained that the Council was restricted in the number of items it was able to include in the Statement of Total Recognised Gains and Losses and therefore some of the background information to the figures was not shown, for example in relation to the capital adjustment accounts. 


So far as the Balance Sheet on page 13 was concerned, it was suggested the word “usable” be deleted from the line “Usable Capital Receipts” in future, as it was felt this would simplify the reference.  It was explained that the capital reserves were used to fund the capital programme.  It was also noted that the Pensions reserve figure compared to the previous year reflected updated valuation information.


The Cash Flow Statement on page 15 gave a comparison of changes between expenditure and income with previous years.  A Member commented that this demonstrated good capital management.


In the Notes to the Core Financial Statements (page 16), it was suggested that Note 3 – Trading Operations should be expanded to make reference to explain the significant contribution made to the General Fund from this trading account and which supported Council Tax.


It was also noted that Note 2 – Loss on Disposal of Fixed Assets would also be expanded, as referred to earlier.


In regard to Note 8 (Local Authority (Goods and Services) Act 1970), it was asked that background information on the reasons for the loss on this account be available when the report was presented to Council.


In answer to a question, it was explained that Note 10 – Employees Remuneration (page 20) reflected the changes that had been made to the Corporate Management Structure.


In noting the reference to Members’ Allowances (Note 11, page 20), the Committee highlighted the issue of mileage rates for future review.


Members asked that information on the influence of the timing of invoice runs on the figures for Debtors contained in Note 22 (page 28) be given in the presentation to the Council.  The Committee also highlighted the item on Benefits Overpayments for future review of the process and how their reduction was being managed.


It was explained that Note 30 – Revaluation Reserve and Note 31 – Capital Adjustment Account (page 30) were new items and therefore no comparables were available.


Similarly, Note 33 – Financial Instruments (page 31), was also a new item this year and it was explained that there was no impact on the Council as a debt-free Authority.


In noting the Organisational Developments Reserve on page 33, the Committee identified this item as a future review topic to examine how it was spent and ensure best use of funds.


The Committee also identified the LABGI Reserve (page 34) as an item for future review to monitor its use and sustainability of funding.


Members concurred that the new Business Plan and revised Council Priorities offered an opportune time to look at the issue of reserves generally and to consider if any changes were desirable to ensure best fit.


The Annual Governance Statement (page 41) had been reviewed at the previous meeting.  Members suggested some minor text format amendments to enhance its readability.


In concluding its examination of the Statements of Account, an aide-memoire of questions designed to help establish and provide evidence of a robust review of the accounts was considered by the Committee and is appended to these minutes.


In connection with the aide-memoire, it was noted that so far as the closedown timetable was concerned, it was hoped that the draft Accounts would be produced by the end of May in future years.  A final proof-check of the draft would be made prior to presentation to the Council meeting.  So far as public inspection of the accounts was concerned, it was noted that requests were rarely received and last year, just one request had been made in respect of the accounts for the ARP.  A member suggested figures be included.  Ideas were also put forward for an Accounts inspection open day for Members and to canvass a wider audience.


RECOMMEND TO THE COUNCIL that, subject to the matters and suggested amendments noted above,


(1)         the draft Statements of Accounts for 2007-08 be approved;

(2)         the Annual Governance Statement be approved; and

(3)         the matters highlighted in Section 3 of the report be noted.


Supporting documents:

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