Agenda item

The Financial Compliance Report was presented which detailed the financial deliverables, including the closure of accounts process. As the backstop disclaimer opinions had been agreed under the previous item, the Council’s draft Accounts for 2020/21, 2021/22 and 2022/23 financial years were presented to the Committee under this agenda item.

The draft accounts for 2020/21 and 2021/22 had been subject to the statutory 30 working day public consultation and were now being presented before the 13^th December 2024 backstop deadline. The 2022/23 Accounts were published on 2^nd December and the authority to approve them would be delegated to the Chair, subject to the Committee’s agreement, for these accounts to be signed after the public consultation period had finished.

The Committee was informed that subject to agreement of the Committee, the Council’s Letters of Representation submitted under Appendix B, alongside the Accounts for 2020/21 and 2021/22 would be signed by the Chair of the Committee and the Council’s Section 151 Officer after the conclusion of this meeting. Following this, the External Auditor would reissue the Council’s Value for Money and other audit opinions as final. It was highlighted that the Council had been taking action on the points within the Value for Money reports which was significant in terms of driving improvement.

There was a question about what would happen concerning the Council’s Section 24 Notice once the new External Auditor, Ernst and Young, took over auditing of the Council’s accounts. It was noted that the Council had implemented five of the six key recommendations of the Section 24 report, and nine of the thirteen improvement recommendations.

It was noted that there was a change to the Council’s future auditor arrangements, with Bishop Fleming resigning as the auditors and Ernst and Young now being confirmed as the Council’s next auditors from 2023-24 financial year audit. All Members were reminded to complete the returns of the onboarding questionnaire for the new auditors, Ernst and Young, as soon as possible to comply with the backstop date for 2023-24 accounts auditing.

It was reported that the target to have the Council’s 2023-24 Accounts published on the Council’s website was 17^th January 2025, this would provide time for the 30 working day public consultation before the backstop deadline for the 2023-24 financial year accounts of 28^th February 2025.

The Council’s budget for 2024/25 was approved at the Council meeting on 26^th February 2024. As part of the budget setting for 2025/26, there would be a public consultation on the budget; this addressed one of the requirements of the Value for Money report – to have a better consultation process on the budget.

In terms of legislative requirements and deliverables, the Council was mostly up to date, with the majority of the key returns delivered. The two outstanding returns were the 2021/22 Revenue Outturn and Capital Outturn reports to the Government, as this was the last year that these returns had to be done based on actuals and estimates could not be used. Significant work had been undertaken by the Council’s Tax advisors PS Tax in liaison with HMRC in order for the Council to return to normal VAT reporting. The HMRC had acknowledged some delays on their part in finalising this issue.

It was highlighted that the closure of the 2020-21 to 2022-23 Accounts was a positive step, however, lack of audit opinion on these accounts would be a significant issue in terms of sustainability and validation of the Council’s overall position. There was uncertainty regarding what steps the Government would take regarding the validation of accounts that received disclaimer opinions. The uncertainty for the Council’s future sustainability was exacerbated by the news of potential local government reorganization within the county in the next three years.

In terms of the position on the 2022-23 Accounts, the outturn position was a revenue overspend of £178,000, relating mainly to fleet maintenance and increased fuel costs for the Council’s fleet, reduced number income from community housing, and an application of a number of covid grants. There was a £2.4 million deficit movement on the General Fund reserves – the difference between revenue overspends and reserves movement being largely due to capital charges, depreciation and pension funds. There was a capital underspend of £3 million against a budget of £5.4 million and this was due to delayed starts to projects and slower spend than anticipated. There was a small surplus on Housing Revenue Account (HRA) of £11,000.

In terms of the comprehensive income and expenditure statement, it was noted there was a large underspend in finance and customer services due to offset reallocation against the taxation line and also due to repayment of the housing benefit covid grant and lower receipt grants than received in the previous year 2021-22.

In 2022-23 Accounts, there was a large variation on movements in the Housing Revenue Account (HRA), following on from exceptional spend in that area in 2021-22. In planning, there was an exceptional level of planning applications in 2021-22. Financing and investment income and expenditure was skewed against 2021-22 accounts due to the HRA. Property, plant and equipment revaluation was also done in 2022-23 which had not been done in the previous two or three years.

Movement in reserves statement for 2022-23 showed that the Council had just under £9 million in general fund reserves and just under £18 million of earmarked reserves. In terms of the balance sheet, it was remarked that short term debtors and short term creditors decreased in value due to effective cash management on the part of the Council. The short term liabilities had also reduced in 2022-23 which was due to the Council’s management of Section 106 (i.e. planning obligations), payroll and changing the presentation of inter-entity transactions in the accounts.

Group balance sheet reflected the Rubicon Leisure position, and reflected Rubicon’s unusable reserves of circa £2.1 million, largely around personal protective equipment (PPE).

The Portfolio Holder for Finance addressed the Committee and stated that even though the Council’s reserves position was healthy, the Council could not be complacent due to the situation around disclaimer audit opinions. Therefore, the Portfolio Holder for Finance stated that the Council would continue in its prudent financial approach, which was why the finance department had been asked to find efficiency savings this financial year, to ensure there was a balanced budget.

It was anticipated that the increase in National Insurance contributions that would come into effect from April 2025 would be subsidised by the Government for public bodies. This had not been confirmed to date. It was stated that the increase in National Insurance employer contributions would be a larger issue for Rubicon Leisure as the company would also need to cover increases in salaries from April 2025 in line with increases to the minimum wage. It was predicted that additional cost to Rubicon would be around £200,000.

RESOLVED that

1)    Following the receipt of the “Disclaimer Opinion” from the External Auditors for the 2020/21 Accounts that these accounts are approved.

2)    Following the receipt of the “Disclaimer Opinion” from the External Auditors for the 2021/22 Accounts that these accounts are approved.

3)    That the Chairman of the Audit, Governance and Standards Committee is delegated authority to approve the 2022/23 Accounts following the completion of the Statutory 30-day Public Consultation.

4)    The External Auditor’s “letter to those charged with governance on the application of the local authority backstop” be noted and outstanding actions followed up in subsequent Audit, Governance and Standards Committee meetings.

5)    The process for inducting the Council’s new External Auditors, Ernst and Young, be noted.

6)    The process and progress to date on the delivery of the 2023/24 accounts be noted.