Agenda item

Appendix A to the report, the draft Statement of Accounts 2020/21, will follow in a Supplementary Papers pack.

The Interim Director of Finance presented the draft Statement of Accounts 2020/21 and in doing noted that the Council had not been able to deliver these Accounts before the statutory deadline of 30^th November 2021, which had resulted in a Section 24 Statutory Recommendation being issued to the Council on the 31^st October 2022.

It was highlighted that the Accounts had been published in a supplementary agenda because the S151 Officer had to be fully satisfied that they complied with legislation before they were presented before the Committee. It was added that a significant work had been required to reallocate balances in the Council’s suspense accounts and the method of this reallocation represented a risk for the 2020/21 Accounts that would need to receive signoff by the external auditors as part of the overall Audit process.

It was noted that the presentation of the draft Statement of Accounts provided the Committee with an opportunity to review the Accounts and formally approve them prior to the commencement of the external audit, estimated to start in mid-January 2023. Whilst under regulations the Council’s Audit Standards & Governance Committee was no longer required to approve the accounts prior to audit, the Council considered it a good practice for Members to have the opportunity to review these draft Accounts.

The Interim Director of Finance proceeded to provide an explanation of the most relevant sections of the Statement of Accounts 2020/21 submitted before the Committee. The following sections and technical notes were highlighted for Members’ consideration:

·       Page 8 provided an infographic of what services Council delivered during the pandemic period (January 2020 – February 2021) and it was preceded by the significant amount of grants that the Council provided in that period.

·       The Statement of Accounts included an Internal Audit Statement given in July 2021 on the internal audit control for the financial year 2020/21 at pages 19-20.

·       Comprehensive income and expenditure statement was on page 25.

·       Note 3 on page 40 provided critical judgements in applying accounting policies for the 2020/21 Accounts.

·       Note 5 on page 42 detailed material items of income and expense applicable from the 2019/20 Accounts.

·       Note 10 on page 46 highlighted the movement in the Council’s reserves position for the 2020/21 financial year.

·       Note 33 on page 64 showed the Council’s Grant Income which included significant amount received in Government support grants during the Covid-19 pandemic.

It was highlighted for Members’ attention that the General Fund Balance table as note 9 on page 45 included £3.190 million of items in suspense to be discussed with external auditors, which was flagged up as a major issue. Officers reported that they would continue to work on trying to reduce the number of items in suspense in the next couple of weeks before the Accounts were handed over to the external auditors. The Committee would be updated if further reallocation of items in suspense was necessary.

Following the presentation, Members discussed the contents of the Statement of Accounts 2020/21 and the responses provided to questions were as follows:

·       Members commented that the formatting of some statements could be made clearer. Officers undertook to rectify this and explained that there was work done to embed spreadsheets directly in word processor documents rather than as images.

·       In relation to the £3.1 million of transactions in suspense, it was queried how many items of business this represented. Officers responded that the figure was not to hand but undertook to review the data and provide Members with an approximate figure.

·       Officers reported that it still had to be confirmed whether the £3.1 million of items in suspense would impact on the balance sheet of the Statement of Accounts. The allocation of suspense items in the Accounts needed to be agreed with external auditors and this might lead to a restatement of the 2020/21 Accounts.

·       The external auditors confirmed that they would be provided with proposals by the Council’s finance Officers regarding the allocation of suspense items on the balance sheet which would then be audited on the basis of that proposal.

·       It was highlighted that Auditors would not issue a specific report to confirm that Section 24 had been lifted. In the case of Bromsgrove, the reason for issuance of Section 24 was the non-submission of the 2020/21 Statement of Accounts to the Auditors by 30^th November 2021. As such the approval of the 2020/21 Accounts by the Auditors and then the Committee would represent a confirmation that the Council was no longer under the Section 24 measures.

·       It was noted that Officers monitored cash position daily as the Council could not be in an overdraw position. Throughout the 2020/21 financial year the capital position was subject to fluctuation as significant cash movements took place due to Covid-19 related grants being received which needed to be distributed to businesses and residents.

·       It was noted that usable reserves had increased significantly from 2019/20 to 2020/21 due largely to provision of Covid-19 grants. Many of these grants had to be distributed in 2021/22 financial year.

·       Members queried why the Council’s balance sheet displayed a deficit in total liabilities of over £19 million. Officers explained that this was in large part due to the accounting practices that had to be followed by public bodies, which meant that for example any fluctuations in pension fund liabilities were reflected in the long term liabilities. Another factor affecting the year-on-year figures was the valuation of assets which displayed a significant downward trend in 2020/21 due to the Covid-19 pandemic with many of the assets valued down in that period.  Reassurance was provided, however, that the Council was solvent with a recovery plan in place and had a fully functioning pension fund.

·       A typographical error was identified in note 27 on page 61 (cash flow from investing activities) where the figure for short term investments read as £353 million instead of £353,000. Officers undertook to rectify this error.

·       In relation to external audit fees, it was noted that a fee increase due to additional auditor work on 2020/21 Accounts would be noticeable from the 2021/22 financial year with the figure provided for 2020/21 remaining a standard audit fee.

RESOLVED that the draft Statement of Accounts be approved prior to the commencement of the Audit.