Agenda item

(To receive a report from Claire Machej, Head of Finance (Corporate), which provides the Committee with the opportunity to consider the draft Statement of Accounts for Lincolnshire County Council for the financial year 2016/17)

The Committee received a report which provided members with the opportunity to consider the draft Statement of Accounts for Lincolnshire County Council for the financial year 2016/17.

The Chairman wished to record the Committee's thanks to Ian Fifield from LG Futures for the training he delivered in relation to the Statement of Accounts on 17 July 2017.

It was reported that the County Council prepared its Annual Statement of Accounts in line with the proper accounting practices required by section 21 (2) of the Local Government Act 2003 and set out in the Code of Practice on Local Authority Accounting in the United Kingdom 2016/17.  The Committee was advised that the document also showed the Council's accounting policies, which were considered by this Committee in March 2017.

It was noted that the table Movement: Expenditure and Funding Analysis for the period 1 April 2016 to 31 March 2017 was additional data which had been included for the first time this year.

Members were also advised that there would be some further changes to legislation next year which would require the Council to prepare the accounts by the end of May and for the external auditors to sign off on the accounts by the end of July. 

KPMG, the Council's external auditors, would set the materiality figure, which was expected to be at around £15m.  The figure was usually between 1-3% of gross expenditure.

Members of the Audit Committee were asked to scrutinise and comment on the Statement of Accounts, and some of the points raised during discussion included the following:

·         Note 3 – it was confirmed that the critical judgements were generally made in accordance with best practice and were broadly in line with expectations set out in the code of practice.  In particular, those in relation to the PFI contracts and in relation to the Energy from Waste facility were well established.

·         It was unlikely that the changes to the business rate pooling would affect the accounts.

·         Page 22 – it was noted that the figure for 'Annual Income' was less than the 'Gross income' on page 30, and it was queried what the relationship between these two figures was.  It was clarified that this was likely due to movement of reserves.  It was noted that overall there was a contribution of £8m into reserves.

·         Note 37 – it was queried why there had been such a sharp increase in fees payable to the external auditors in respect of other services since 2015/16.  Members were advised that this was due to the Council asking the external auditors to undertake a particular piece of work in relation to Agresso.

·         Page 27 – in relation to financial health and performance, and the £100k which could be released from the general fund, it was noted that there were local policies as to what level the general fund should be maintained, and the release of this £100k was to keep the fund at this level.

·         It was noted that the Council was again only setting a one year budget due to pressures from reduced funding, and it was queried what would be necessary for this to be given recognition in the critical judgements (Note 3).  However, in relation to uncertainty around levels of funding, if this authority was having problems then other authorities were also having problems.  As an organisation, the Council needed to be able to set a budget which was balanced and prudent. 

·         There had been a lot of uncertainty around Adult Social Care funding, but with the announcement of additional funding for local authorities, it was reported that the Council may be able to set a two-year budget in the next budget round.

·         In terms of asset valuation, members were advised that these were given on 31 March each year.  Assets were valued according to their current use.  Therefore, if the use changed then the valuation would also change.

·         It was queried whether the production of the accounts was 'back to normal' and officers advised that this was not quite the case.  It was noted that difficulties had been experienced the previous year due to the implementation of a new financial system, and in terms of getting the processes exactly as they needed to be, it was expected that this would not happen until the following year.  It was noted that the authority had had very established process with SAP, which had been used for 15 years, and the transfer to using Agresso also came with a movement of staff as well as a reduction in the number of staff in the finance team.   An action plan had already started being put together, which it was noted was done each year, which would include information on what had gone well, what had not gone well and what would be done differently.  Officers would always expect to be planning and changing as it was a fluid area of work.

·         It was queried whether the Audit letter for 2016/17 would be more positive than that of the previous year.  It was reported that an improvement in the financial control environment had been seen but it had not been significant enough.  Payroll still remained an area of low assurance.  There had been improvement but not sufficient for that area to become adequate.  The previous year there had been issues around budget management information, some issues were still being picked up by KPMG around transactions, but there had been an improvement in accounts payable and accounts receivable.

·         NOTE 10 – it was noted that there had been some changes around coding in relation to earmarked reserves temporary holding code.  It was noting that this was due a timing issue, as when the accounts were prepared the Council had not given a decision on the use of this balance.  Following the meeting of the County Council on 12 July, this amount had been approved for allocation.  This line would disappear in the final accounts produced in September.

·         It was confirmed that the movements on debtors and creditors year on year was in line with expectations.

·         There was a 5 year rolling programme of valuations of land and buildings.

·         Useable reserves had been discussed at the Council meeting on 12 July 2017.

·         Note 24 – a query was raised in relation to the pension reserve and members were advised that more detailed notes on the Pension fund could be found at Note 44 and Note 45.  The pension fund accounts could be found on p.126 of the agenda pack.

·         It was noted that there seemed to be an underspend in the schools budget across a number of schools.  However, members were advised that money for schools was ring fenced and it would be for the Schools' Forum to decide how any underspend clawed back from specific schools would be allocated.

·         The accounts would come back to the September meeting in their final format.

RESOLVED

            That the comments made by the Audit Committee in scrutinising the draft Statement of Accounts be noted.