Agenda item

To receive a report from the Deputy Chief Executive (S151) presenting the final version of the annual Statement of Accounts to Members.

 

(To follow).

The Committee had before it a report * from the Deputy Chief Executive (S151) presenting the final version of the annual Statement of Accounts highlighting any areas which have been amended since the draft accounts were published on the website and presented for external audit in June.

 

The Deputy Chief Executive (S151) outlined the contents of the report and provided the following summary of the main points:

 

He stated that here were four reports that need to be jointly considered; the AGS; the accounts; the Audit Findings Report from Grant Thornton and the Letter of Representation, supplied to Grant Thornton.

 

He continued….we are now arriving at the conclusion of the annual audit process. In a separate agenda item to be discussed you will hear from the external auditors, Grant Thornton, when you will be asked to consider their Audit Findings and the Letter of Representation.

 

·         The statements themselves are on pages:

o   44 being the Movement in Reserves Statement

o   46 being the Comprehensive Income and Expenditure Statement

o   47 being the Balance Sheet

o   & 48 being the cash flow

·         These statements account for the General Fund, the Housing Revenue Account and the Collection Fund.

 

·         General Fund

o   Deficit in the year of £232k

o   General Fund balance at 31 March - £2.252m satisfying the requirement set by Cabinet in January that a balance of at least £2m should be held

o   EMR utilisation in the year £683k – after also allowing for the transfer of Brexit funding received in 2018/19 to the General Fund of £18k balance of GF EMR at 31 March was £13.688m.

o   This represents a healthy level of balances for known future expenditures

o   Details note 6 – page 61

 

·         HRA

o   Surplus in year was £608k

o   After this was transferred to the Housing Maintenance Fund the HRA balance remained at £2m

o   HRA also carries ear marked reserves of £18.310m

o   This includes the 30 year modernisation reserve of £14.198m. Officers are working on plans to increase the housing stock over the coming years.

o   HRA notes P113–125

 

·         Collection Fund

o   Mid Devon is a collection authority for council tax and national non-domestic rates (NNDR), and as such, is required to produce a collection fund account for the Mid Devon area. The Council collects council tax on behalf of Devon County Council, Devon Fire and Rescue Service, Devon & Cornwall Police and the Town/Parish Councils, as well as Mid Devon Council itself.

o   The council tax collection rate for 2019/20 was 97.8% (97.8% in 2018/19). This demonstrates how our Revenues section has consistently been effective in collecting the annual charge in extremely challenging economic times. The Non Domestic Rates collection rate was 98.8% for 2019/20 (99.3% in 2018/19

o   Collection Fund notes P126-129

 

·         Pension Fund – Note 21 – page 72

o   Net liability from the defined benefit obligation relating to the LGPS reduced £541k to £57.785m.

o   Fair value of plan assets £5.375m lower at £60.635m largely due to a downward revaluation of assets caused by economic concerns arising from the pandemic.

 

·         PPE – Note 22 – page 80

o   £198m 2019 to £194m 2020

o   Relatively flat year with no major asset purchases.

o   Construction of 26 properties at Palmerston Park – now Turner Rise – completed – then immediately revalued to 35% being existing use social housing valuation.

o   Similar for 3 RTB properties repurchased in year.

o   Also commencement of new finance lease arrangements for vehicles.

 

·         Covid 19 – Note 59 – page 112

o   Little impact in year due to limited overlap of crisis with the reporting period.

o   Expectations of negative economic impacts led to increase in bad debt provisions.

o   Financial statements given an ‘except for’ audit opinion in respect of material valuation uncertainty. The District Valuer who completed the annual valuation of the Council’s assets applied this qualification to his work, once again in view of the market uncertainty caused by Covid 19 and to a lesser extent Brexit.

o   Note 59 describes the ongoing financial implications of the crisis. As members are acutely aware the implications of Covid 19 continue to unravel. The prudent financial management of this Council means that it is able to place some reliance, in the short term, on its reserves. Those reserves were however accumulated to counter other more foreseen threats to funding in the coming years. It must be the objective of this Council therefore to maintain its reserve level. With this in mind the Authority continues to lobby government for substantial compensation for its losses.

 

·         3 Rivers – group p130-141

o   3 Rivers is the wholly owned subsidiary to the Authority. This development company is consolidated into the accounts which are available on pages 130-141.

o   In the year development and working capital loans to 3 Rivers increased from £2.613m to £9.061m or by £6.448m.

o   These loans are largely represented within the Group Accounts as work in progress being the construction costs for projects not yet completed.

o   During the year 3 Rivers returned to MDDC £251k by way of interest charges. Whilst this is funded during the construction period through the mechanism of the working capital loan from Mid Devon, ultimately it will be repaid from profits arising from the development projects. As such it represents a significant increase on alternative investment returns.

o   The accounting team have assessed and made provision for likely repayment and non-payment of loans within the 19/20 accounts.

 

·         Audit

o   Auditors worked on these financial statements over a 3 week period in June.

o   Since then there have been outstanding queries which the finance team have worked with them to resolve.

o   Due to Covid 19 this has involved remote working and I think both teams would agree that in the circumstances the arrangements have worked well, thanks largely to a committed and cooperative attitude all around.

o   A couple of outstanding issues which are out of our hands relating to pension fund reporting.

o   Reference to the auditors’ report to this committee in the form of the Audit Findings Report.

o   They have given the financial statements a clean audit report except for the material valuation uncertainty described above. Once again this does not reflect on these financial statements but rather the circumstances we find ourselves in.

o   Finally the auditors intend to apply an “except for” audit opinion in respect of the value for money audit reflecting their concerns regarding group governance arrangements.

 

The Chairman extended the thanks of the Committee to the Deputy Chief Executive (S151) and his team for their hard work and dedication in producing the Accounts. He would be writing to staff individually to reiterate this.

RESOLVED that the Statement of Accounts be approved (subject to the recommendations made by the external auditor, Grant Thornton) and that the letter of representation attached at the back of the Accounts be signed by the appropriate people.

 

(Proposed by Chairman)

 

Reasons for the decision:

 

There was a legal requirement to produce and publish audited accounts for the year to 31 March 2020, by 30 November and for those accounts to be considered by a committee and approved by the person providing at the committee.

 

The Accounts had been confirmed as true and fair by auditors Grant Thornton with an “except for” opinion relating to material valuation uncertainty.

 

The Letter of representation was provided to Grant Thornton for the purposes of expressing their opinion.

 

Note: * Report previously circulated; copy attached to the signed minutes.