To consider the report attached as Appendix G coloured white
Contact Officer: Tony Skeggs (01296) 585273
The Committee received a report on the current position in terms of accounts preparation, and which also identified significant changes to accounting policies applied in the preparation of the accounts. The budget outturn position was also reported in a management style for the information of Members.
Members were informed that whilst the Quarterly Finance Digest (QFD) did not form part of the statutory accounts, it did provide a more understandable guide to the financial events that had taken place in the last year relating to the provision of Council services. The outturn position for the year shown in the Digest was a contribution to balances of £135,703, as against a budgeted contribution to balances of £101,100. The actual contribution would have been greater but during 2014/15 the Council had agreed to a special use of balances of £10,000 to fund the continuing costs associated with HS2.
The early generation of savings in advance of 2014/15 and higher income associated with revised service provision had contributed to this underspend, although this had to be offset against a shortfall in income from investment interest.
Some of the main factors that had been reported during the year and which had contributed to the outturn position were savings/extra income from Housing Benefit Administration, Office Accommodation, Development Control higher fee income, Waterside theatre (business rates and other cost savings), and domestic refuse (savings on salaries and vehicle running costs). Factors that had negatively impacted included Environment and Health administration, partnership costs associated with iESE, business transformation (project and salary costs), redundancy costs associated with the restructure of Planning Business Support and lower income offset by reduced running expenses for the IT Division.
The latest Quarterly Finance Digest had also detailed the top 5 underspends and overspends by service areas for 2014/15, and showed that the General Fund Statement of Balances position at the year end was £3.765m after taking into account the outturn position.
During 2014/2015, transfers to and from reserves had been as follows:-
· That £2.7m had been transferred out of reserves and £6.3m transferred into reserves, making a net increase of £3.6m.
· The largest use of reserves had been £0.657m from the income investment reserve that had been transferred to the General Fund in order to meet the shortfall on investment interest. Investment interest continued to be lower than expected due to interest rates remaining unchanged throughout the year. The 2015/16 budgets had been revised to more accurately reflect the anticipated interest for the year so that there was less call on the reserve in the future.
· A contribution of £0.5m had been transferred from the Property Sinking Fund (revenue to capital) to help fund the Swan Pool improvements.
· Other movements out had been £405,000 from the Planning reserve to fund appeal costs, and £401,000 from the Repair and Renewals Fund to meet the costs of planned operational building repairs.
· There had been one sizeable contribution to reserves, which was £3.45m of New Homes Bonus into the New Homes Bonus reserve. This gave a year end balance of £7m, of which £1.113m was earmarked for Parish initiatives.
· Whilst the reserves showed a net increase for the year, this was solely due to the contribution to the New Homes Bonus. However, this reserve had committed £5 million to the Council’s East / West rail contribution (Council decision of 17 July 2013). The commitment was spread over a number of years. Other commitments included £1.5m to the High Speed Broadband project, £0.986m for the Pembroke Road depot and £0.945m towards the Swan Pool improvements. Without this contribution the total amount held in reserves would have risen slightly to £24.3 million.
· A review of reserves would be carried out in advance of the 2016/2017 budget setting process, and the full list of reserves and provisions was detailed in Appendix B to the Committee report.
The Council had an approved capital programme for 2014/15 of £24.3m, of which £13.8m was earmarked for the UCAV (University Campus Aylesbury Vale) facility, £2.0m for the Swan Pool improvements and £1.5m for Pembroke Road upgrade.
The actual spend was £15.4m, of which £7.8m was for the construction of the UCAV facility. The other area of significant spend was on enabling grants to Housing Associations, which totalled £4.5m. The spend was £8.9m less than expected due to delays relating to the UCAV facility starting later than expected and with the second phase of the Depot alterations, where no agreement has been reached with AVE on which properties were available for development.
The Council was still in the position that it could not generate vast sums of capital receipts as it had disposed of the majority of its assets. During 2014/15, £6.4 million had been received. £2.8 million had come from house sales and £3.6 million from the sale of the Circus Fields site and land at Barlow Road, Wendover.
During 2014/15 the Council had taken out further long term borrowing in order to meet its capital expenditure commitments. One loan, totalling £13.5m, had been taken out with the PWLB for a period of 36 years. This took the total borrowings at the end of the year to £28.5m.
During the year the remaining balance of £2.5m being held with a Fund Manager, Investec, had been repaid.
The statutory code for the production and authorisation of the accounts, that all Councils had to follow, was set out within the Accounts and Audit Regulations. These required Members to only approve the accounts in September when they could be informed of any audit findings and, therefore, make an informed decision on their accuracy.
The Council’s Chief Financial Officer had certified the draft accounts by 30 June and had published them on the Council’s website. Guidance from the Accounts and Audit Regulations suggested that, while there was not a requirement to do so, it was best practice to give Members an early notification of the financial outcome of the previous financial year. As such, Members had been provided with the previous year’s full statements and were asked to consider these alongside the year-end financial information contained in the Quarterly Finance Digest (QFD).
Members’ attention was drawn to the two main statements, namely the Comprehensive Income and Expenditure Statement (CIES) and the Balance Sheet. The CIES contained the same spend and income information as detailed in the QFD, but it was presented in a different way to comply with the Statement of Recommended Practice (SORP).
There had not been any accounting changes that had been incorporated in the accounts this year.
There had not been any significant issues that had been required to be reflected in the 2014/15 accounts. However, some of the main information points were:-
· Icelandic Banks – Heritable Bank: No payments had been received during the year, which left a balance of £49,603 outstanding against the £1 million deposit.
· Fixed Assets – The only assets valued at the end of the year were the Community Centres.
· That the year end position was that Aylesbury Vale Estates (AVE) owed the Council £32.7m, made up of £28.6m deferred receipts, £2.9m Hale Leys loan and a debtor of £1.2m.
During the course of the year the deferred receipts balance had reduced by £3,938,903. This was a result of AVE repayments of £362,473 against loan one and a repayment of £3,576,430 against loan two, which was now fully repaid.
The provisional year end position of the AVE group was a £1.101m profit, which was made up of an AVE LLP profit of £628,000 and a Hale Leys LLP profit of £473,000. These figures were reflected differently in the AVDC and AVE accounts as they were prepared using different accounting regulations.
AVE LLP had declared a dividend of £208,388 for 2014/15, split 50/50 between AVDC and Akeman. As in previous years, AVDC had converted the Council’s share of the dividend into a further loan.
Accounting estimates had needed to be used in a number of areas in the course of preparing the accounts, including for fixed assets, debtors and creditors, provisions, Pensions and Council tax accounting. To enable a better understanding of these figures, a table of estimations was included at Appendix C to the Committee report. The table highlighted how the methods and assumptions were made, and helped to explain why an estimate might be widely different from the actual position.
Members sought clarification around a number of issues, including the level of working balances, the Debtors/creditors position, the level and allocation of reserves, the position around AVE and the funds made available through the New Homes Bonus allocation. With regard to AVE, the Director with responsibility for finance indicated that the AVE Business Plan was the subject of report to the Finance and Services Scrutiny Committee annually and that a report to that Committee was imminent.
That the current position in relation to the statutory accounts preparation and the outturn be noted.