Agenda item

Statement of Accounts 2018/19

This report will be presented by the Financial Services Manager, Carolin Martlew.


            The Financial Services Manager advised the Committee that there were no uncorrected misstatements and very little in terms of other issues (mainly presentational typos) which was good news for the Council and this Committee.


The significant issue around HRA depreciation had been resolved and Arun now had a depreciation methodology that was acceptable to both the Council and the External Auditors.  This was quite a significant piece of work as was not always easy to find auditable historic information on component assets like the age of boilers and pipes.


Turning to the Statements of Accounts it was explained that these were very different to the outturn report which although was in the same format as the approved budget and would be considered at the Cabinet meeting on 2 September, the difference was that the Statement of Accounts was prepared using proper or generally accepted accounting practice underpinned by International Financial Reporting Standards (IRFS), which was more relevant to commercial entities.


The Financial Services Manager advised that it was important to note that, as a Local Authority, certain accounting adjustments required under IFRS – mainly depreciation and valuation adjustments were not allowed to be funded from Council Tax or Rents by statute.  These types of adjustment therefore had to be reversed in the Movement in Reserves Statement (MiRS).  She confirmed that these adjustments effectively had zero effect.



The Committee was informed that the Expenditure and Funding Analysis was nota core statement, but it provided a link between what was chargeable to the Tax and Rent payer in the outturn report and the net expenditure in the Comprehensive Income and Expenditure Statement.


Explaining the first of the core statements [Comprehensive Income and Expenditure Statement] that showed the accounting cost in the year providing services rather than the costs that can be funded from taxation or rent.


In relation to the Movement in Reserves Statement (MiRS) she advised that it showed changes in the Council's reserves for the year, and essentially reconciled the Comprehensive Income and Expenditure Statement with those items that may not fall to be charged, to the General Fund under statute and those which do fall to be met from the General Fund were also under statute. It was here that the large movements relating to property revaluations are disclosed.


Showing where the valuation/accounting adjustments that were mentioned earlier were essentially reversed out.   Most importantly it showed the level of usable Reserves and Unusable Reserves at 31st March 2019.


It was made clear that usable reserves could be used for service provision or the reduction in tax, whereas unusable reserves could not.  That was because unusable reserves rise, due to things like the valuation adjustment and these would not be realisable until that asset was sold.


The usable reserves could be seen in the General Fund balance.  Arun started the year with £9.344M and applied £2.268m ending with a General Fund balance of £7.076m at 31st March 2019.


Stating that the Council requires a reasonable level of balances for unexpected events or emergencies. It also acts as a cushion for un-even or unpredicted cash flows to avoid unnecessary temporary borrowing.  Crucially the General Fund balance added resilience to the Council’s expenditure on services as government funding levels continue to drop.


The funding of Local Government was undergoing significant change and the outcome of the Spending Review (SR19) would result in significant further cuts in District Council funding.  Further information on this subject would be available in the Financial Prospects Report which would be considered at the Cabinet meeting on 2 September 2019.


It was confirmed that the MiRS also showed the level of Earmarked Reserves which were held for known or predicted liabilities.  The balance at 31 March was £15.394 million these included a revenue reserve for projects that had to be completed like the Wave, significant sums received from partners to provide projects, services, and things like the pensions reserve.


Explaining the Capital Receipts Reserve £2.791 million related to one for one receipts that must be used for the provision of social housing under the agreement with the Government.


The Balance Sheet showed a Net worth of £256 million which was balanced by usable and unusable reserves. It was dominated by Property Plant and Equipment (PPE), that in turn was dominated by Council Dwellings of £216 million.


It should be noted that the £223 million that was shown in the unusable reserves was mainly due to valuation adjustments which meant they could not be used to fund service provision. 


In discussing the information provided by the Financial Services Manager Councillor Brooks asked some questions in relation to Car Parks and it was agreed that a written response to his queries would be provided upon investigation.


Councillor Tilbrook asked what the impact would be if there was a snap election or if any other election event was called soon. It was advised that if any such election was called then this would be refunded by the Government.


The Committee


            RESOLVED - That


1)    note the findings of the Ernst & Young Audit Results Report;


2)    approve the Letter of Representation on behalf of the Council and


3)    approve the Statement of Accounts for the financial year ended 31 March 2019 which will be signed by the Chairman of the Committee.



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