Minutes:
The Committee considered the Annual Statutory Financial Statement for the year ending 31 March 2014.
The report indicated that the Statement of Accounts for the year ending 31 March 2014 had been completed and independently audited to meet the statutory deadline for the 2013/14 accounts to be formally approved by 30 June 2014. The County Council went a step further than what was required statutorily (approval by 30 September 2014) and ensured these were finalised, audited and approved by 30 June 2014.
The independent external auditor had indicated that they would issue an unqualified audit opinion subject to the Committee approving the statements and there being no matters arising from the public inspection period.
The two key headlines were:
· An underspend against the County Council's cash limited revenue budget of £0.1 million, and
· An decrease of £10.2 million in County Council useable reserves.
There were no further matters of substance that needed to be bought to the Committee's attention.
The Head of Corporate Financial Strategy introduced the report and made the following main points:
· He thanked Grant Thornton for the smooth running of the audit which had been completed in a short timescale which was particularly impressive given the work associated with the Waste PFI contract
· In overall terms, revenue spending was within delegated cash limits of £341 million; The Council's General Balances were at £13.0 million, a reduction of £2.1 million from 2012/13 (they were planned to be reduced by £2.2 million when the budget was set)
· The Council's long term assets had been compared against its liabilities and overall debt levels had reduced over the last 3 years, and
· The audit of the Pension Fund had been particularly successful and the external auditors had been complementary about the work undertaken by the Internal Audit pensions section.
Helen Lillington and Terry Tobin introduced the Audit Findings Report of the Council and the Pensions Fund and made the following points:
· The audit had been very positive and presented within the proposed timescale. Work was continuing in response to issues raised in relation to the Council's waste solution which would need to be finalised before a conclusion could be reached on the Value for Money (VFM) element of the work
· A number of adjustments to the accounts related to Property, Plant and Equipment and although efforts had been made by officers to address the issues raised last year, further focus on this area of work was required
· If any financial questions/objections were received during the public consultation period, it was possible that the accounts could not be signed off by the proposed closure date of 18 July. To date nothing had been received but there was still time. Any delay of this nature would not detract from the work that had been done to date
· Given the large volume of correspondence from members of the public and the unique nature of the arrangements associated with the Energy from Waste contract, a detailed review of the process had been undertaken. Although some of the correspondence was irrelevant, it was still necessary to read through every item of correspondence. There was a reasonable expectation that an objection to the accounts would be received and therefore the matter had to be treated in a quasi-judicial manner
· An area of the Energy from Waste contract that had been focussed on was how the decision had been made in December 2009 to determine which technology would be used to deal with the residual waste. The officers' report to Cabinet recommended a particular form of technology however it was considered that the report should have been more detailed with a cost/benefit analysis of the preferred option and an evaluation of alternative options. However it was not anticipated that this matter would impact on the VFM conclusion and the auditors were minded to give an unqualified opinion
· In relation to the Pension Fund, there were very few issues that had been identified to be addressed by the Council. The work of the Internal Audit pensions team had made the process very smooth and their help was appreciated.
In the ensuing debate, the following principal points were raised:
· Did the external auditor expect to receive representations from members of the public on the accounts during the public consultation period? Helen Lillington stated that comments needed to relate to an item of expenditure in the accounts. There were items of expenditure in the accounts associated with the Energy from Waste contract and it was anticipated members of the public would be legitimately use these items as a basis to object to the accounts
· Had the letters received to date from members of the public been individually hand-written or batch copied? Terry Tobin stated that the motives behind the letters varied. Some comments were being totally irrelevant whilst others contained detailed technical information. The Head of Corporate Financial Strategy added that a lot of work had gone into the report to Cabinet in December 2013 including advice from external consultants. Many of the objections related to this particular decision. Grant Thornton had examined this decision and made no comment which was a positive reflection on the decision made at that meeting
· What was the cost to the Council of the work undertaken by Grant Thornton's in relation to the VFM conclusion? Terry Tobin explained that the cost of their work was anticipated to be approximately £30,000 but the precise amount would be reported to a future meeting
· Useable reserves had been reduced by £10m, was this as a result of funds being withdrawn from the reserves to balance the accounts? The Head of Corporate Financial Strategy commented that the reduction in useable reserves had been the result of planned activities. Helen Lillington added that Grant Thornton had examined the level of reserves as part of the VFM conclusion and found them to be financially resilient, comparing favourably with other councils
· The external auditor's report referred to the Council needing the appropriate skills to manage a variety of contracts as part of its new commission-based operating model. As this was a matter of concern for the Council, what could members do to oversee the procurement process and performance management? Helen Lillington stated that the future operating model of the Council was a key decision which formed part of the VFM conclusion. Grant Thornton had been in conversation with the Chief Executive of the Council to ensure that the new structure for the Council reflected the way in which the commissioning-based operating model had been set up and the need to provide appropriately skilled staff. The Head of Corporate Financial Strategy added that a new position of Director of Commercials and Change had been created in the new structure to oversee this aspect of work. Although all key decisions on commissioning would be taken by Cabinet, the scrutiny committees would have an important role in challenging the commissioning arrangements. The role of Internal Audit would be reviewed as part of the commissioning process and any decision made would be referred to this Committee
· In response to a query, the Head of Corporate Financial Strategy undertook to provide a clear link between corporate objectives and the reporting of the Council's financial performance by Directorate in future financial statements
· What was the reason for the net actuarial gain on pensions assets and liabilities and the reduction in the deficit of the Pension Fund over the previous financial year? The Head of Corporate Financial Strategy explained that an upturn in the market had meant that the value of assets had increased significantly. In addition, the continual low rate of interest had had an impact on net liabilities. As a result, the Actuary had updated his view on the economic performance of the Pension Fund which was up by 30%. Small variations in the performance of the market had a big impact on the performance of the fund
· What was the basis for the calculation of the compensation to employees for loss of employment? The Head of Corporate Financial Strategy explained that there was a statutory requirement to pay compensation in certain circumstances as part of the employees' terms and conditions. No enhanced payments had been made under these arrangements. There had been a transcription error in the accounts and the figure quoted of £70,000 was incorrect and should read £50,000
· The Committee asked that their appreciation be passed on to the Pensions audit team for their work in completing the Pension Fund Accounts
· The Committee were reminded that they were required to authorise the Director of Resources to sign the Letter of Representation.
RESOLVED that:
a) the Final Accounts Pack including the Statement of Accounts for the financial year ending 31 March 2014 be approved; and
b) the Director of Resources be authorised to sign the Letter of Representation on behalf of the Council.