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 on 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 30 th 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. Document Reference No. C-03-42 / V1.1 1
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 30 th September 2003. 5. DELEGATION 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 31 st July 2003. The external audit began on 11 th 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. Document Reference No. C-03-42 / V1.1 2
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: - £’000 Earmarked Reserves 7,759 General Fund Reserve 6,014 13,773 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. Document Reference No. C-03-42 / V1.1 3
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