Agenda item

(a)       That the draft Statement of Accounts 2015/16 (including the Annual Governance Statement), be noted; and

(b)       That Members note the ability to discuss any aspect of the Statement of Accounts with officers or the Wales Audit Office throughout July, August and September prior to the final audited version being brought back to the Committee for recommendation to Council for final approval on 26 September 2016.

The Corporate Finance Manager presented the Statement of Accounts 2015/16 (subject to audit) for information only at this stage.  The final audited accounts would be submitted to the Committee on 26 September for approval and recommendation to County Council on the same day, prior to the statutory publishing deadline of 30 September.

A presentation was given covering the following areas:

·         Purpose and Background

·         Action Plan Update

·         Governance Group

·         Changes to Statement of Accounts for 2015/16

·         Links to Budget Monitoring Report

·         Headline Figures

·         Timeline and Next Steps

The Committee was advised that no comments had been raised by the Clwyd Pension Fund Committee on the draft accounts for the Clwyd Pension Fund.

The Finance Manager - Technical Accountancy referred to the updated action plan for issues raised during the audit of the 2014/15 accounts.  Most actions had been completed with significant progress made on the three outstanding.  The work of the Accounts Governance Group had helped to oversee and support the preparation of the accounts at a strategic level.  The Chief Executive said that this approach was viewed as a good model in helping to raise ownership of the accounts and to fast-track any issues arising.

Councillor Glyn Banks asked whether a different financial arrangement could have been made alongside other councils to exit the Housing Revenue Account subsidy.  It was explained that all 11 stock-retaining councils in Wales had signed the voluntary agreement as a group which included a requirement to borrow from the Public Works Loan Board (PWLB) at pre agreed rates.  This was a complex agreement made in advance of the legislation, with all of the councils paying the same rate.  Councillor Banks referred to the loan period ending in three years’ time and asked whether an arrangement could be made at the end of the loan period to help cover the debt.  It was explained that the Council would need to make total pre-determined interest payments for the first five years of the agreement.  After the five year period ended, the best approach would be considered as part of wider Treasury Management activity with repayment and re-financing options being considered.  In response to a further question, the Finance Manager provided clarification on the beacon valuation technique used for council housing stock, valued at market value with an adjustment factor to reflect that properties would be owned in perpetuity for rent to social housing tenants.

On borrowing, Councillor Arnold Woolley asked if a ‘sinking fund’ could be considered and how the Council intended to repay borrowing and interest in the future.  He was advised that the Welsh Government anticipated that councils would acquire some debt to finance the provision of long-term capital assets each year, supported through revenue funding within the Settlement to service the cost of debt.  Borrowing was only undertaken to fund long-term capital assets.  The borrowing cost was spread over the life of the asset so to match the benefits of the use of the asset with the costs in future periods.  The central loans and investment account had an annual budget of circa £14m and included amounts set aside to repay debt and interest on debt.  This was built into the annual budget setting process and the Medium Term Financial Strategy.  The Corporate Finance Manager stated that variances to the budget were set out in detail as part of Revenue Budget Monitoring reports.

Following a query on capital expenditure, the Finance Manager drew attention to the recently updated Prudential Indicator report which demonstrated the prudence, sustainability and affordability of the Council’s capital expenditure plans.  She offered to discuss separately with Councillor Woolley the links to sustainable borrowing.  The Chief Executive spoke about the cautious approach to prudential borrowing and the additional strain which could be created if, as an example, decisions were taken to build new schools funded from borrowing.

When asked by Councillor Haydn Bateman about the interest on the £79m Housing Revenue Account settlement payment, it was explained that this was in the region of £3.3m, though the Council anticipated savings of around £1m a year as a result of the end of the subsidy system.  Concerning the increased costs for rock salt, officers explained that stocks were periodically replenished and stored.

On the movement of earmarked reserves, Councillor Bateman queried the reduction in the amount transferred in for Single Status/Equal Pay in 2015/16.  The Finance Manager said that adjustments may have been needed to the different elements involved in implementing the Single Status agreement, however she would provide specific details separately.  The Corporate Finance Manager said that there had been a two month overlap to the introduction of the Single Status agreement which had resulted in two months’ budget being added in.  The Chief Executive gave a reminder that this budget was ringfenced with some contingencies included for any future unforeseen costs.  Implementation of the Single Status Agreement was nearing completion and any remaining reserves would be used for people ‘exit costs’ to support the Portfolio Business Plans.  Officers would also provide separate clarification on the £147K transferred out for car parking charges in 2015/16.

Mr. Paul Williams sought assurance that the £899K overspend in Streetscene & Transportation had been dealt with by Overview & Scrutiny.  The Chief Executive confirmed that this was the case, and cited the main reason for the variance as non-achievement of long-term efficiencies in-year.  Mr. Williams went on to refer to the issues raised during the previous audit, and welcomed the work undertaken by the Accounts Governance Group and Finance team to put in place improvements.  The Chief Executive spoke about the importance of the views and influence of the Committee in strengthening the process.

Councillor Ian Roberts raised concerns about school balances in general and asked whether officers were satisfied that there was sufficient capacity in Education to give the necessary support to schools with considerable deficits.  The Chief Executive said that the School Budget Forum had discussed this and that advice had been given to schools, however assurance could not be given that all schools had plans in place to recover any deficit.  Councillor Roberts said there was real concern about the impact on schools with positive balances.  He therefore asked that a confidential general report on school balances for all schools be brought to a future meeting to raise awareness.

When questioned if this was a matter for Overview & Scrutiny, Councillor Roberts felt that the Committee should be made aware that this could become a corporate risk if pressures continued on school budgets.  Mr. Williams said that any concerns/recommendations from the Education & Youth Overview & Scrutiny Committee should be fed into the report to help the Audit Committee focus on the process.  It was agreed that the report would be scheduled accordingly to include the views of both Overview & Scrutiny and the School Budget Forum.

In response to a question from Councillor Bateman on operating leases, the Finance Manager agreed to provide a separate response on the reason for the reduced amount for vehicles, plant and equipment.  The Chief Executive said that current work on reducing the fleet size would form part of this explanation.

RESOLVED:

(a)       That the draft Statement of Accounts 2015/16 (including the Annual Governance Statement), be noted; and

(b)       That Members note the ability to discuss any aspect of the Statement of Accounts with officers or the Wales Audit Office throughout July, August and September prior to the final audited version being brought back to the Committee for recommendation to Council for final approval on 26 September 2016.