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Report to: |
Audit and Governance Committee |
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Date: |
22 November 2022 |
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Title: |
Annual Statement of Accounts 2021/2022 |
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Portfolio Area: |
Performance & Resources – Cllr C Edmonds |
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Wards Affected: |
All |
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Urgent Decision: |
N |
Approval and clearance obtained: |
Y |
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Date next steps can be taken: 22 November 2022 |
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Author: |
Clare Scotton Pauline Henstock |
Role: |
Principal Accountant Head of Finance Practice and Deputy S.151 Officer |
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Contact: |
01803 861559 clare.scotton@swdevon.gov.uk 01803 861377 pauline.henstock@swdevon.gov.uk |
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Recommendations:
It is recommended that Members approve:
1. Executive summary
1.1 This report presents a summary of net revenue and capital expenditure for Members’ consideration and seeks approval of the audited Statement of Accounts for 2021/22. Following approval of the accounts, the Chairman of the Audit Committee is required to sign and date the accounts. Members are also required to consider the content of the Letter of Representation. Following approval of its wording, the Chairman of the Audit Committee and the Section 151 Officer (Director of Strategic Finance) are required to sign the Letter of Representation.
1.1 The 2021/22 Audit has identified one adjustment to the Draft West Devon Borough Council Accounts which were considered by the Audit Committee in September and this relates to some notional depreciation charges.
1.2 During 2021/22, an asset Revaluation exercise was carried out and also an exercise to review the Useful Lives of assets was carried out simultaneously by the Assets team. When the results of the Revaluation exercise were accounted for within the Balance Sheet for 31.3.2022, it was thought that the useful lives data was also part of the Revaluation exercise. Therefore the accountancy team reversed out some notional depreciation charges. However it was later established that the useful lives changes were not part of the Revaluation exercise and therefore the notional depreciation charges should not have been reversed out. This change was identified as part of the external audit of the Accounts and a correction has been made to the Audited Accounts for 2021/22. Officers will ensure that clearer communication between the assets team and the accountancy team will mitigate any future re-occurrences of this nature.
1.3 A reduction of £458k has been made to Property, Plant and Equipment and the corresponding entries of £241k to the Revaluation Reserve and £217k to the Capital Adjustment Account have been made. This adjustment has no impact on revenue therefore the Income and Expenditure Account is not affected, it is purely a capital accounting entry. This is detailed further in the Audit Findings report from Grant Thornton, a separate item on this Audit Committee agenda.
2. Background
2.1 The Accounts and Audit (England) Regulations 2015 set out the requirements for the production and publication of the local authority’s annual Statement of Accounts (SOA). These regulations introduced revised procedures for the approval and publication of accounting statements. In line with common practice in the commercial sector, local authorities are now required to approve the accounts following the completion of the audit.
2.2 The statutory timetable relating to the production and publication of the final accounts was brought forward from 2017/18. Since then the Council has been required to publish the draft SOA by 31 May, one month earlier than previously. However, due to the Covid-19 pandemic the 2020/21 and 2021/22 statutory timetable was extended. In accordance with statute, the draft Accounts for 2021/22 were published by 31 July 2022. The Accounts and Audit Regulations require that the audited accounts and opinion is published by 30 November 2022 for the 2021/22 Accounts.
2.3 The SOA is an essential feature of public accountability, since it provides the stewardship report on the use of funds raised from the public. The closing of Accounts is also important to the budgetary process, since it confirms the availability of reserves and balances for future use.
2.4 The attached booklet (Appendix B) contains the Council’s final accounts in full, including details of the Comprehensive Income and Expenditure Statement (CIES), the Balance Sheet and Collection Fund together with statements setting out movements in reserves and cash flow.
2.5 The accounts have been prepared in accordance with all relevant and appropriate accounting standards, including International Accounting Standard (IAS) 19 which deals with pension costs. This standard ensures that the full cost of employing people is recognised systematically in the accounts and that creditors reflect the Council’s liability to pay money into the pension fund. A full explanation of the pension’s liability is included in the Council’s Statement of Accounts. Members are advised that the accounting arrangements for IAS 19 are for reporting purposes only. Indeed the required entries are reversed out of the accounts and consequently, IAS 19 has no impact on the Council’s surplus for the year.
2.6 The Annual Governance Statement (AGS) for 2021/22 shown in Appendix C reflects the reporting requirements introduced by CIPFA/SOLACE’s 2016 Delivering Good Governance in Local Government Framework. The requirements include:
· An acknowledgement of responsibility for ensuring there is a sound system of governance.
· A reference to and assessment of the effectiveness of key elements of the governance framework and the role of those responsible for the development and maintenance of the governance environment.
· An opinion on the level of assurance that the governance arrangements can provide.
· An agreed action plan.
· A conclusion.
2.7 The CIPFA/SOLACE 2016 Framework recommends that the Council carries out annually a self-assessment of the extent to which it complies with seven core principles of good governance. Examples of the framework the Council adopts to comply with the Code’s key principles are included within the AGS, as well as an accompanying assurance statement.
3. Outcomes/outputs
Revenue Expenditure
3.1 Revenue expenditure represents the ongoing costs of carrying out day-to-day operations, and is financed from council tax, business rates, fees and charges, government grants and interest earned on investment activity. The under spend on the General Fund in 2021/2022 of £196,000 is essentially a break-even position. The 2021/22 budget was £7.30 million and therefore the saving of £196,000 means that the actual spend was 2.7% less than the budget. The main variations from budget are shown on Page 9 of the Narrative Statement in the Statement of Accounts. This saving will go into the Council’s Unearmarked Reserves which now stand at £1.490 million.
Capital Expenditure
3.2 Capital expenditure represents monies spent on the purchase, construction or major refurbishment of assets. The Council’s capital expenditure amounted to £1.1 million in 2021/22. The main areas of expenditure were as follows:
· Housing renovation grants including disabled facilities grants (£0.6m)
· IT schemes (£0.2m)
· Purchase of property (£0.2m)
The capital programme is funded from capital receipts, capital grants, external contributions and earmarked reserves (see Note 33 of the Statement of Accounts for 2021/22).
Audit of Accounts
3.3 The draft SOA was considered by the Audit Committee on 6 September 2022. These accounts are required to be audited by the Council’s external auditors Grant Thornton, who give their opinion on the draft accounts. The annual audit commenced at the beginning of July 2022 and was completed in November 2022. A hybrid approach was taken for 2021/22 with some of the audit being undertaken face to face and some work being carried out remotely again this year.
In essence, the audited accounts for 2021/22 are the same set of accounts that were considered by the Audit Committee in September. There is only one notional adjustment to the draft accounts as detailed above in 1.2 and 1.3, which has no impact on revenue and a few disclosure changes.
3.4 Grant Thornton have substantially completed their audit of the financial statements for 2021/22 and subject to outstanding queries being resolved, Grant Thornton anticipate issuing an unqualified audit opinion following the Audit Committee meeting on 22 November 2022.
3.5 Value for Money (VFM) arrangements
Grant Thornton’s Value for Money work will provide a commentary on the work Grant Thornton have undertaken to address the key elements of governance, financial sustainability and how to improve economy, efficiency and effectiveness.
Grant Thornton have not yet completed all of their VFM work and so are not in a position to issue their Auditor’s Annual Report. An audit letter explaining the reasons for the delay was issued to the Chair of the Audit Committee in September 2022. Grant Thornton currently expect to issue their Auditor’s Annual Report in February 2023. This is in line with the National Audit Office’s revised deadline, which requires the Auditor’s Annual Report to be issued no more than three months after the date of the opinion on the financial statements.
4. Other items within the Final Accounts for 2021/22
Earmarked Reserves
4.1 The total Earmarked Reserves balance at 31 March 2022 of £9.2m includes £1.6m held in the Business Rates s31 Compensation Grant Reserve. This is due to a technical accounting adjustment where Councils were compensated for the business rates holidays that were announced by the Government for the retail, hospitality and leisure sectors in 2020/21 and 2021/22 (this funding is in the S31 Compensation Grant Reserve). This temporary increase in reserves will reverse back out again in the 2022/23 Accounts, to fund the deficit on the Collection Fund. Therefore this is not money which is available for the Council to spend and it is important that this is not misinterpreted in the Accounts, as this is a national issue.
5. Proposed Way Forward
5.1 The Council Constitution delegates approval of the Accounts to the Audit Committee. The Council is also required to sign a Letter of Representation every year, which gives representations to the Council’s external auditors. The Chairman of the Audit Committee and the Section 151 Officer (Director of Strategic Finance) are required to sign the Letter of Representation. The letter is attached at Appendix A. It is recommended that Members approve the wording of the Letter of Representation.
6. Implications
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Implications
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Relevant |
Details and proposed measures to address |
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Legal/Governance
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The Statutory Powers that apply to this report are Section 151 Local Government Act 1972 Section 21 (12), Local Government Act 2003 and the Accounts and Audit (England) Regulations 2015.
The Accounts and Audit (England) Regulations 2015 requires all relevant bodies to prepare an Annual Governance Statement (AGS).
The Council Constitution delegates approval of the Accounts to the Audit Committee.
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Financial implications to include reference to value for money
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The financial implications to this report are that an under spend of £196,000 was generated in 2021/2022. This means that the Council’s actual spend for 2021/2022 was 2.7% less than the budget set for the year.
As part of Grant Thornton’s value for money work, they will assess the arrangements the Council has in place for:- · Improving economy, efficiency and effectiveness · Financial Sustainability · Governance This work will be concluded by Spring 2023 in their Auditor’s Annual Report.
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Risk |
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Public Accountability – the accounts have been drawn up in strict accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2021/22 which is recognised by statute as representing proper accounting practice.
Resource Planning – the Council takes into account any significant issues when developing the Council’s Medium Term Financial Strategy.
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Supporting Corporate Strategy |
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The Annual Statement of Accounts and Annual Governance Statement support all of the Delivery Plans within the Council’s strategic vision, ‘A Plan for West Devon’.
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Climate Change - Carbon / Biodiversity Impact |
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None directly arising from this report. |
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Comprehensive Impact Assessment Implications |
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Equality and Diversity |
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None directly arising from this report. |
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Safeguarding
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None directly arising from this report.
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Community Safety, Crime and Disorder |
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None directly arising from this report.
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Health, Safety and Wellbeing |
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None directly arising from this report.
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Other implications |
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None directly arising from this report.
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Supporting Information
Appendix A – Letter of Representation
Appendix B – Audited Statement of Accounts 2021/22
Appendix C – Annual Governance Statement 2021/22
Background Papers:
None
Approval and clearance of report
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Process checklist |
Completed |
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Portfolio Holder briefed |
Yes |
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SLT Rep briefed |
Yes |
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Relevant Exec Director sign off (draft) |
Yes |
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Data protection issues considered |
Yes |
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If exempt information, public (part 1) report also drafted. (Committee/Scrutiny) |
N/A |