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Agenda item

Audited Statement of Accounts 2015/16

Minutes:

The Director of Finance and Business Improvement introduced his report setting out the audited Statement of Accounts for 2015/16 for approval by the Committee in accordance with the Accounts and Audit Regulations, the External Auditor’s Audit Findings Report and the Letter of Representation written by the Council to the External Auditor.  It was noted that:

 

·  None of the amendments to the Accounts identified during the audit process had affected the Council’s General Fund Balance as at 31 March 2016.  A number of other minor changes had also been made to improve the presentation and clarity of the Statement of Accounts.

 

·  The External Auditor’s Audit Findings Report also included a review of Value for Money which concluded that in all significant respects the Council had put in place proper arrangements to secure value for money in its use of resources for the year ended 31 March 2016.

 

·  The External Auditor intended to issue an unqualified opinion on the 2015/16 Statement of Accounts and an unqualified Value for Money conclusion.

 

In response to questions, the Officers/representatives of the External Auditor explained that:

 

·  In terms of Short Term Debtors and the Provision for Bad Debts, particularly in relation to Council Tax and Business Rate payers, the Revenues and Benefits team had strict follow-up procedures in place if an instalment was not paid on the due date.  The collection rate was very high and monitored closely.  More information relating to the collection statistics would be circulated to all Members of the Committee and to the Parish Council representatives.

 

·  As long as the tax payer remained liable, the Council would continue to issue reminders and take steps to collect payments.  Once a debt was over one year old, a 40% provision would be created for it in the accounts and once it was over six years old, 100% provision would be made for it.  The debt would not necessarily be written off, but for accounting purposes, there was a need to recognise the risk in the accounts that it might not be possible to recover the debt.  The provision made in the accounts was based on the age profile of the debts, and the revenue system would identify how many debts were over one year, two years etc. (a percentage figure based on the age of the debts).

 

·  The Revenues and Benefits team would continue to issue reminders and try to reach agreements for payments by instalments and if payments were still being made, the debt would not be written off even if it was twenty years old.

 

·  With regard to the distribution of Business Rates and the treatment of Bad Debts, the Council was required to account for the way it collected Business Rates and a number of forms had to be completed over the course of the year:  NNDR1 at the beginning of the year showing the amount the Council expected to collect in Business Rates to the end of the year and NNDR3 showing the amount actually collected in cash terms.  The amount paid over to the Government after all adjustments had been made was 50% of the cash collected rather than 50% of the amount notionally due.

 

·  The provision made in the accounts for Bad Debts was reviewed each year and could be reversed.  The External Auditor looked at the estimates made for reasonableness, and, as far as the Officers were aware, they had never been found to be overly cautious.

 

·  Where the Council was unable to collect the Business Rates payable, it took a robust approach to their recovery.  This involved progressive action following a strict timetable, typically starting with a reminder for non-payment and then escalating, as necessary, to an application to the Courts for a liability order, then instruction of bailiffs, followed by bankruptcy or liquidation.

 

·  Having regard to the percentage of Business Rate debt recovered, there was not much scope to achieve a higher percentage by accelerating the process.

 

·  One of the key findings/conclusions of the External Auditor was that the updated Medium Term Financial Strategy assumed £4,178k of savings over the five year period which would be a considerable challenge for the Council despite its track record in recent years.  This was simply an acknowledgement of the scale of the challenge faced by the Council with the caveat that whilst the Council was well placed, its past track record was no guarantee of success in achieving this target.

 

·  The £460k delivered to date through the Council’s Commercialisation agenda represented the additional income generated by the individual projects.

 

·  With regard to the compatibility of the Medium Term Financial Strategy and the indicative housing trajectory in the Local Plan submitted for examination, the Local Plan was not a financial document, but assumptions were made in the Medium Term Financial Strategy about increases in Council Tax due to growth in the number of homes.  Whilst the documents were broadly compatible, it was not an exact science, and it was reasonable to take a cautious approach.

 

·  The level of materiality used in planning and performing the audit was 2% of the prior year gross revenue expenditure of the Council (£1,794k).  The External Auditor had also set an amount below which misstatements would be clearly trivial and would not need to be accumulated or reported to those charged with governance because it was not expected that the accumulated effect of such amounts would have a material impact on the financial statements.  The External Auditor had defined this amount to be £89.7k.

 

·  The concept of materiality to provide a level of assurance was well established and 2% was the standard used for local government clients.  The application of the concept of materiality allowed the External Auditor to focus on key areas.  As well as focusing audit effort, it also influenced the way in which the findings were reported to the Council.  If the External Auditor did identify some errors in the financial statements that were cumulatively or individually above the materiality level set out in the Audit Plan, and the Council decided not to amend the statements for those errors, the External Auditor would have to decide whether to qualify the accounts.

 

RESOLVED:

 

1.  That the External Auditor’s Audit Findings Report, attached as Appendix I to the report of the Director of Finance and Business Improvement, be noted.

 

2.  That the audited Statement of Accounts 2015/16, attached as Appendix II to the report of the Director of Finance and Business Improvement, be approved.

 

3.  That the Council’s Letter of Representation to the External Auditor, attached as Appendix III to the report of the Director of Finance and Business Improvement, be approved.

 

Supporting documents:

 

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