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 Jean Cole, Interim Financial Services Manager & email jean.cole@hertsmere.gov.uk Appendix A – Unaudited Statement of Accounts List of Appendices 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 of 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. Page 1 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 31 st May following the year end. Draft SOA presented to Audit Committee 31 May 2019 External audit commences Publication of final audited accounts From 1 July 2019 (on-site 9 July) 31 July 2019 Re-confirmation of Presentation of audit Statement of Accounts by findings and audit opinion CFO and Audit Committee to Audit Committee Chairperson 30 July 2019 30 July 2019 The Council’s external auditors, EY, will carry out the external audit from 5.2 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 of Practice on Local Authority Accounting in the UK (The Code) 2018/19 regulated by the Chartered Institute of Public Finance and Accountancy (CIPFA). Page 2 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. Page 3 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. Page 4 of 6
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