The Committee considered the report of the Head of Finance and Customer Services setting out the un-audited Statement of Accounts for 2011/12 which had been produced in accordance with the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2011/12.  It was noted that:-

·  Under the amended Accounts and Audit Regulations 2011, there was no longer a requirement for Members to approve the Statement of Accounts prior to it being submitted for external audit.  Instead, the Statement had to be signed by the Director of Regeneration and Communities, as the responsible officer, by 30 June and then approved by the Audit Committee by 30 September following the external audit.  Notwithstanding these revised arrangements, it was considered appropriate to provide an early opportunity for Members to review the Statement and ask questions.

·  After the introduction of International Financial Reporting Standards in the 2010/11 Code of Practice there was only one significant change in 2011/12, this being the introduction of a category for Heritage Assets.  These were defined as assets with historical, artistic, scientific, technological, geophysical or environmental qualities that were held and maintained principally for their contribution to knowledge or culture.  Following a review of assets a number of Heritage Assets had been identified and valued where it was practical and cost effective to do so.  Full details were disclosed in a note to the Accounts, and the Balance Sheet for 2010/11 had been restated to reflect the position had this category been in existence then.

·  The Statement provided evidence that the Council had been able to continue to effectively manage its resources through the particularly difficult economic conditions of the last few years, and that it was in a good position to deal with the continuing economic uncertainty.

·  Key messages from the Statement were as follows:-

The value of Long Term Assets had decreased by £9.9m.  The major part of this decrease was a significant downward revaluation of the Maidstone Leisure Centre.  The new value was a reflection of a different set of assumptions used by the valuer in arriving at the figure compared to those used in the previous valuation.  (A new valuer was engaged for this year).  Subsequently, the External Auditor had suggested that the change be dealt with as a prior period adjustment and that last year’s balance be re-stated.

Current Assets had decreased by £7.1m.  This was due, in the main, to a reduction in the value of cash investments at the end of the financial year, and reflected the continuing use of resources to fund the capital programme which included major projects at the Museum, Mote Park and in the High Street.

Current Liabilities had decreased by £6.0m reflecting changes in monies owing to Central Government at the end of the financial year in respect of Housing Benefits and Business Rates.

There had been an increase in Long Term Liabilities of £15.4m, which was primarily due to a change in the projected deficit on the Pension Fund, which had increased from £30.3m to £46.6m.  This movement reflected the actuary’s short term view on the value of the Pension Fund’s assets and differed from the three yearly, long term actuarial review.

In introducing the report, the Senior Accountant (Client) confirmed that although there had been problems in the collation of the agenda which had resulted in the distortion of text, there had been no problems with the copy of the Statement of Accounts sent to the External Auditor.

The Committee asked a number of questions of the Officers relating to, inter alia, the arrangements for funding the projected deficit on the Pension Fund; the changes negotiated nationally in relation to the Local Government Pension Scheme; the difference between the annual and triennial Pension Fund valuations; the Council’s powers to make discretionary awards of retirement benefits in the event of early retirements; the accounting arrangements for the projected overspend in relation to the Museum East Wing project; the circumstances in which prior period adjustments might arise and the way in which they were recorded in the Accounts; the way in which the depreciation of revaluation gains was shown in the Accounts; the reason for the reduction in grant income received in Non-Domestic Rates; and the Council’s investment and banking arrangements.

A Member expressed concern about (a) properties and other assets depreciating in value due to them not being maintained properly and then being sold for less than they might have been if they had been maintained and (b) the need for training to understand the new accounting policy for Heritage Assets.  The Officers explained how loss of value due to lack of maintenance might be shown in the Accounts, but suggested that the Statement of Accounts was not the document/mechanism to inform policy and strategic choices in relation to the Council’s property portfolio and the way in which assets were maintained or protected.  This was dealt with through the Asset Management Strategy, medium term financial planning and the annual budget setting process.  It would be a matter for the Audit Committee if there were any risks arising.  However, the concerns expressed about the Council’s asset management arrangements would be referred to the Property Services Section and the Heritage Assets aspect of the accounting process could be covered in a future training session.

RESOLVED:  That the un-audited Statement of Accounts for 2011/12, which has been produced in accordance with the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom 2011/12, be noted.