Agenda item

The Committee considered agenda items 13 (Annual Accounts 2020/21) and 17 (External Auditor’s Audit Progress Report) together.  The recommendations in the report at agenda item 17 superseded those in the report at agenda item 13.

The Head of Finance advised the Committee that:

·  At the time of drafting the report for agenda item 13, it was understood that the audit would have progressed sufficiently to enable the findings to be presented at this meeting and for the accounts to be approved subject to minor amendments.  Unfortunately, after the agenda was published, the Officers had been advised by Grant Thornton, the External Auditor, that although substantial progress had been made with the audit, it would no longer be possible to present an audit findings report to this meeting.  This was due to capacity constraints within the local government audit sector, including slippage at other sites, which had resulted in delays to audit work at Maidstone.  This year, work did not commence until late August 2021, which was considerably later than in previous years.

·  It was therefore recommended that approval of the Statement of Accounts 2020/21 be deferred until the audit findings report was available.  This meant that the Council would be unable to meet the statutory deadline of 30 September 2021 for finalising its 2020/21 financial statements.  There were no significant practical implications such as fines or penalties, but any protracted delays could result in operational challenges for the Officers involved with the audit.

·  Instead of the audit findings report, the External Auditor had provided an audit progress report and an update on emerging national issues and developments relevant to the local government sector.  At this stage, it was understood that there were no significant audit findings to report.

·  The updated version of the Statement of Accounts at agenda item 13 reflected a small number of minor updates to the draft which had been submitted to the last meeting of the Committee.

In response to questions/comments, the Head of Finance said that:

·  In terms of the significant change in the Collection Fund Adjustment Account from a deficit of £26k as at 31 March 2020 to a deficit of £13.036m as at 31 March 2021, the Collection Fund was carrying a large deficit for 2021.  The main reason for that was the way Collection Fund income was accounted for and the relief that was subsequently announced.  The COVID-19 Business Rates Relief took a considerable amount of Business Rates away from the Collection Fund which only reflected the income collected from taxpayers.  The Council did receive a significant amount of Section 31 grant that offset this and that would be paid back into the Collection Fund from the General Fund over the coming years.

·  She had noted the typographical error in the first line of paragraph 3.2 of the report relating to the Statement of Accounts 2020/21.

·  In terms of funding the deficit on the Pension Fund liability, there was a triennial valuation, which was a separate exercise to the accounting exercise, that worked out a primary rate of contribution which would be a percentage of the payroll and then a secondary rate which was for funding deficits.  The assumption was that the deficit would be repaid over a period of 16 years.  At present, this stood at just over £1m a year in addition to the Council’s primary contributions as an employer.  That figure would be updated every three years, every time there was a revaluation.  Assumptions had been made in the Medium Term Financial Strategy about budgeting for this and an increased level of contribution following the next triennial valuation in 2023/24 recognising that there would be a risk of that.

·  In terms of the position going forward, allowance had been made for an increase in the Council’s contributions of £150k per year over the three years from 2023/24.  In percentage terms this was in line with the increase seen at the last triennial valuation.

·  As requested, details of the assumptions used by the actuary in arriving at the Pensions Reserve figures would be included in the report to the Committee in November 2021.

·  The Officers would review how information in the Narrative Report (Key Facts about Maidstone) was presented.

·  Unusable Reserves generally arose from accounting adjustments or statutory arrangements and could not be spent.  They were subject to audit and did not impact on the spending power of the Council.

·  Based on a review against the Accounting Standards, it was considered that the Council had no leases (property or equipment) that needed to be classified as finance leases.

RESOLVED:

1.  That the approval of the Statement of Accounts 2020/21 be deferred to the next meeting of the Committee scheduled to be held on 15 November 2021.

2.  That the External Auditor’s progress report, attached as

  Appendix 1 to the report of the Head of Finance, be noted.

Note:  Mr Trevor Greenlee of Grant Thornton, the External Auditor, was unable to join the meeting remotely due to connectivity issues.  Mr Greenlee sent his apologies and undertook to speak to the Chairman later in the week.