Agenda item

Training Session - Understanding the Statement of Accounts


The Corporate Finance Manager gave a presentation on Understanding the Statement of Accounts. 


The background to the presentation of the Statement of Accounts to Members of the Audit and Standards Committee was that the Council is required to approve the Statement of Accounts in accordance with the Accounts and Audit Regulations 2015 and the Chairman of the relevant Committee (the Audit and Standards Committee) was required to sign and date the accounts.


The Statement of Accounts were the formal accounts of the Council and showed what the Council’s services cost in the year of the account, where the Council’s income comes from and what the Council’s assets and liabilities were at the year-end. The Accounts must cover the period 1 April 2018-31 March 2019 and must be drafted by 31 May and finalised and audited by 31 July.  During the period from 31 May to 31 July they are open to a six-week period of public inspection (3 June – 12 July), by any member of the public, Members, employees and other interested parties. 


The Accounts had been prepared according to a range of principles and practices and governed by the Code of Practice on Local Authority Accounting and had to be signed off by the responsible financial officer (the County Treasurer) who was responsible for agreeing that the Accounts presented a ‘true and fair view’.  The external auditors, Ernst & Young, were appointed independently of the Council, by the Public Sector Audit Appointments. The main accounting principles to note were materiality (gross expenditure over £1bn) and accruals (to ensure that all income and expenditure is included in the year to which it relates).  Notional transactions may take place.  This meant that no cash was leaving or being received by the Council for those transactions, but an amount needed to be included in the financial statement to comply with the financial regulations.


There were four main sections to the accounts.  The narrative statement provided an overview of the financial position.  The accounting policies were the rules used in the preparation of accounts. There were four main financial statements followed by 47 notes and finally, the Pension Fund accounts.  A comprehensive income and expenditure statement was included that reported the net costs for services for the year (2018/19) and the principal sources of financing (amounts to be funded from taxation) to give the net surplus/deficit for the year. 


The Accounts showed a net deficit on provision of services is £16.8m.  This was because of the number of notional transactions and represented a smaller deficit than in 2017/18.  The main points to note were the net cost of services were less than 2017/18, in line with MTFS expectations.  There has been an increased loss on disposal of school assets due to the number of schools transferring to academies (a notional transaction).  The net pensions liability was slightly larger due to the impact of the McCloud judgement and other assumptions made by the actuary.  The McCloud judgement came about following a recent Court case where an individual complained about age discrimination in pension transition arrangements.  The Government had accepted the judgement of the Court but because of the recent nature of this case local authorities have not been able to quantify the financial impact across the public sectors.  The actuary had predicted an increase in the pension liability for Staffordshire of £11.2m.  Finally, the Accounts showed an increase in income due to additional Council tax and capital grants being received in 2018/19.


An explanation was given of Prior Period Adjustments.  These were required where there had been either a change in accounting policies, only made through changes in accounting practices, or where material errors had been found.  Changes had been made retrospectively by amending opening balances and comparative accounts.  During the 2017/18 accounts it was found that there were timing differences in the disposal of school assets when the school converted to academy status. This was reported to the Committee last year.  An exercise had been undertaken to cleanse the data in the asset register and ensure assets were disposed of in the correct financial year and a prior period adjustment had been made to ensure all disposals were shown in the correct year.  This was a notional adjustment and had not had an impact on reserves or cash balances.


The balance sheet summarised the Council’s financial position for the year indicated by the value of its assets less its liabilities (£89.4m), the level of balances and reserves at its disposal and its reserves (usable and unusable).  The impact of the McCloud judgement was a small percentage of the pension liability (a totally hypothetical figure) which had increased from £947.9m to £1,128.2m.  There had been an increase in cash and short-term investments at the year end to ensure liquidity around Brexit.


In total the Council’s usable reserves had increased by £67.0m.  General balances were now at £30.4m.  This level would be reviewed as part of the MTFS process. Schools’ reserves had decreased by £1.4m. The Movement in Reserves Statement showed more detail on changes to the reserves during the year.


Details of the Pension Fund are given on pages 175-212 of the papers.  These were separate accounts for which the County Council was the administering authority.  The pension fund accounts must be included in the County Council’s Statement of Accounts and had increased in value by 7.4% during 2018/19.  There had been a net increase in the fund value of £353.3m.  The Pension Fund also produced its own Annual Report.