Agenda item

Members considered the Audited Statement of Accounts for 2021/2022. An introduction was provided by the Section 151 Officer, who was pleased to advise that the Statement of Accounts 2021/22, had received an unqualified audit opinion. The Statements reflected the Authority’s financial activity for the year up to 31 March 2022.

Prior to opening the debate, and at the request of the Chairman, the Monitoring Officer confirmed all present had undertaken the required training in accordance with the Constitution.

In opening, Members congratulated Officers on the presentation of the report and commented on the positive impact the Council’s Community Grant Scheme had on local communities and in levering in match funding.

Lengthy questioning ensued and explanation was requested and received regarding the details of note 11 on page 131 of the agenda pack, regarding the corrections listed. The Section 151 Officer explained the movement in earmarked reserves had been recategorized for consistency into three types of reserves as required by the newly instated statement of recommended practice. Members were assured that it was a requirement to classify, and provide competitors contingency and risk service investments.

In responding to further questions in respect of the Council owned companies and joint ventures, the S151 Officer advised as to why these companies were only referenced in a disclosure note to the Accounts.  This was primarily due to them not being material in size.  Officers outlined how materiality was defined and Members were reminded where Business Plans and accounts for such ventures were reported to.

Members were keen to ensure there was a route by which subsidiary companies were reviewed to ensure they still met their objectives, were fit for purpose, served a need and were still the appropriate mechanism. Furthermore, there should be transparency around any such review. Members were assured that the Monitoring Officer could consider reviews and future audits into West Lindsey District Council's subsidiary companies and it was suggested these should be considered for inclusion in the Annual Audit Plan. 

Members also learned the decreased received money was due to the decline in Covid-related activity provided by the Authority.

In responding to a question which sought clarity of what the service investment fund was used for and how it was replenished, Members ascertained such funds were used for IT upgrades, IT replacement programmes, and new systems such as the new finance system introduced in year. Service Investment Funds were generally funded by a combination of under spends in a year, where something had been budgeted to take place in one year, but the actual renewal took place in the following year, creating a special ear marked reserve for it, or any surplus in grant funding that wasn't expected. Earmarked reserves were created either from an underspend or where there was a known future liability.

Members further sought clarity as to whether service investment, involved investment in training.  In responding the Section 151 Officer advised that earmarked reserves could be used, for invest to save projects, these may be capital investments or training where this would lead to savings in the future, citing a good example as the T24 programme.  Change, officers were funded from earmarked reserve and provided business analysis that would lead to future savings and/or improved service delivery.

Members sought from the Section 151 Officer the key points she would draw from the report to provide confidence that the Authority was in sound financial position, firstly it was noted that unlike a number of Councils, the Authority was not at risk of issuing a Section 114 notice. The Officer highlighted three key successes.

The first was the borrowing levels. The Officer explained that the Authority could pay off the long-term and short-term borrowing levels in one payment, highlighting the high risks with local government finances and other local authorities' situations. The second success was the cash flow statement, which had a net increase over the financial year, with £17 million available. The third element was surrounding the future funding gaps against the general reserve balances of £4 million. The funding gap over the medium term remained within the grasp of the current general fund balances over the next two to three years. The Committee also indicated that a note on the statements to explain these positive features may have been helpful, particularly in communicating the statements. Noting an increase in salaries over the year Officers advised that this were primarily funded from the successful Levelling Up Grant Fund, which had allowed additional Officers to brought in fully funded.  These Officers were on fixed term contracts aligned with the funding.

Noting the impact of inflation, Members questioned where the biggest risks to the Council were.  The biggest cost to the Authority was it staffing but as a result of prudent budgeting for a 4% increase, further supported by a decrease in the national insurance contributions by employers, no significant overspend was projected. In a related query about inflationary concerns, the Section 151 Officer explained that though electricity was the primary concern, the larger buying arrangement with ESPO and provisions in the 2022/23 budget placated significant inflation-related concerns. There was no forecast of substantial overspend.

There were, as always, concerns about the Pension Fund deficit and Committee sought indication as to whether inflation was helpful or unhelpful in reducing the deficit. Members were advised that at the latest tri- annual review the Council’s position in terms of the value of assets and liabilities was that the increase to the scheme, in terms of the payment the Council had to make, was lower than expected. Due to a move from a final salary pension scheme to an average salary pension scheme, whilst the liabilities remained high, it was anticipated that the adversity of that situation would reduce over time, as more people in the scheme were based on average salary rather than final salary.  It was stressed that any reduction in the fund (amount owned) could not be used in budgeting due to the re-evaluation process. 

It was also noted the likelihood of the deficit having to be repaid all at the same time was highly unlikely.  Due to the points raised regarding pensions, the liability and the uncertainty they created on a Council’s budgets, it was suggested the Committee’s comments and concerns be raised with Council’s representative on the Lincolnshire County Council’s (LCC) Pensions Board.

Noting the decrease in monies received from the Council companies, Members sought indication as to whether that should be cause for concern, but were advised that the decrease in 21/22, was really following quite a significant increase during 20/21, during Covid. The Committee heard the benefits this arrangement had afforded.  Noting the increase in temporary staffing and that this primarily related to refuse drivers delivering the waste contract, Members enquired as to whether this was due to the Purple lidded bin roll out.  It had been suggested LCC was to fund the project and Members enquired as to what costs had been borne by West Lindsey. Officers undertook to find the detail.

In responding to further questions, Members were assured that the decrease in the creditors and debtors in the cash flow statement was due to the timing of receiving grant money, meaning money was moved forward to pay it out in time for schemes, such as  the Energy Rebate Scheme, Covid Grants, Business Rate Relief This resulted in cash flow swings larger than expected but it was anticipated the large swings would reduce through 23/24.

It was confirmed the increases in heritage assets were due to re-evaluations as opposed to new assets being on the register.

Near the end of the debate, the Monitoring Officer clarified that a portion of the Annual Governance Statement, which focused on the areas for improvement had been excluded from the version attached to the Statement of Accounts. The statement agreed by the Committee in July 2022 remained the same namely: -

“Governance Risks – Areas for Improvement during 2022-23 (year ahead)

Whilst we are satisfied with the effectiveness of the corporate governance arrangements and systems of internal control, as part of our continued efforts to improve governance the following issues have been identified for improvement as part of the 2021-22 Annual Governance Statement process. An action plan will be implemented to ensure activity takes place to bring about the improvements.

·       Loss of key staff – ensure that processes are fully documented, succession plans in place where appropriate, identify activities which are overly reliant on one individual

·       Financial settlement – continue to update the MTFS as we gain greater certainty on the level of funding for future years

·       Preparing for all out elections in May 2023 – ensure robust election planning and deliver an effective member induction plan

·       New finance system – ensure it is effective and compliant

·       Continue the review of corporate procurement procedures (carried forward from last year). The Council historically has bought in services from Lincolnshire Procurement but due to recruitment issues they can only provide a limited service

·       Continue the implementation of CIPFA FM Code requirements.”

This section would be included in the published accounts.

RESOLVED that: -

(a)        having reviewed the Statement of Accounts, Committee confirmed that there were no concerns arising from the Financial Statements that need to be brought to the attention of the Council.

(b)        the Statement of Accounts for 2021/22 and their certification by the Chairman of the Committee be approved; and

(c)        the Section 151 Officer and the Chairman of this Committee be permitted to certify the letter of representation to the Auditor, Mazars, on completion of the audit.