Agenda item

The Director of Finance submits a report which provides an opportunity for the committee to consider on the Council’s Draft Statement of Accounts 2019-2020, before they are brought back to committee for formal approval.

The Chief Accountant submitted a report, which provided an opportunity for the

Committee to comment on the Council’s Draft Statement of Accounts 2019-2020 before being brought back to the Committee for formal approval.

It was acknowledged that whilst this would usually be signed off in July, this had been delayed by the Covid-19 pandemic and as such it was likely to come back to the Committee in November to be signed off and become a formal document. This was in line with national arrangements.

It was noted that it had been a difficult year for accounts due to estimates having to be made and the effect of the Covid-19 pandemic on financial and property markets.  As such it was noted that the pension fund liabilities had been estimated at the end of January, but it was now necessary to wait for the final figures to come through for the end of March.  It was hoped that what had been happening with the markets at the end of March had been taken into full account, but this would not be known until the figures were published by the pension fund, and as such this was subject to change as some of the assets were measured at market value. Further valuation changes to the date of signing the accounts might also become necessary.

This difficulty in the accounts was given as a reason as to why the report from Grant Thornton had been included highlighting some of these issues.

Looking at key issues in the accounts, the Chief Accountant noted:

• In the prior-period adjustments two schools which were now academies had not been removed as assets from the accounts and as such this had needed to be done retrospectively. This had no effect on the Council’s financial position.
• With regard to the Officers’ Remuneration it was noted that the £50,000 threshold for inclusion had not increased as salaries had increased with inflation and as such more people had been included.
• Pension liability had decreased from the previous year, however, it was acknowledged that this fluctuated between years as it was based on estimates taking into account issues such as mortality, inflation and the conditions of the markets (as already noted).

The Chief Accountant further offered informal Question and Answers sessions and one-to-one sessions with Councillors.

Councillor Dr Moore thanked the Chief Accountant for the statement.

Councillor Dr Moore raised the question as to whether there was provision in the current Capital Programme to address the recently highlighted issues in the local textile sector. She further asked as to whether there could be funds in the budget to respond to the Black Lives Matter movement, such as funding for education, training or investigation into recruitment practices.

The Chief Accountant responded that this report concerned Capital funds spent in the previous year, and that new provision in the current or future capital and revenue budgets would need to be discussed by councillors with the City Mayor.

Councillor Dr Moore further requested clarification on what the Leicester North-West Major Transport Project was.

The Chief Accountant clarified that it mostly concerned highway works in the area and creating better connections.  The Chief Accountant offered to send a link to the Capital Programme outturn report on the agenda of the forthcoming Overview Select Committee (OSC) meeting to Councillor Dr Moore.

Councillor Dr Moore further requested that a simplified digest of the information in the report be produced, containing a breakdown for the spending for the year and a comparison with spending for previous years on certain areas such as Adult Social Care.

The Chief Accountant noted with the statutory accounts it was difficult to do year on year comparisons on department spend as this includes items such as depreciation and pension liability changes.  As such comparing spend on Adult Social Care or indeed any other service it is recommended to look at the Overview Select Committee (OSC) for the following week.  The Chief Accountant offered to send a link to the Revenue Outturn Report to members of the Committee.  

Councillor Joshi referred to the pension liability and the pension deficit and noted that the deficit had been around £650m, then rose to £812m in the previous year and then fell again to £606m.  He asked as to the reason for this drop and what the projection would be for the next year.

He further noted that on the 2019/20 Spend by Category the biggest spend was on Adult Social Care at 36%.  He asked as to the effect Covid-19 had on this budget for the coming year.

Following on the issue of Covid-19, Councillor Joshi drew attention to the source of funding where business rates were the biggest source of funding at 43%.  He noted that businesses had been forced to shut due to Covid-19 and some were waiting to open.  He asked as to how business rates would be collected from these businesses struggling to pay the rates and facing financial crisis.

With regard to pension liability, the Chief Accountant reported that Leicestershire County Council aimed to recover this over a 20-year period. There could be large fluctuations from time to time due to factors such as the assumed effect of inflation on pay and pensions, assumed mortality rates and projected returns on investments.  The estimate on inflation had been reduced for the coming years.  She added that some assets performed better than anticipated which brought the unfunded liability down.  She further indicated that small percentages can result in large changes for unfunded liability.

With regard to the spending on Adult Social Care, the Chief Accountant reported that the OSC had been receiving regular reports on how Covid-19 was affecting the Council and additional spending was being seen in Adult Social Care.  It was as yet unknown how to forecast how this would change on a more permanent basis, and it was reported that OSC would be receiving regular reports during the upcoming year.  She further reported that the Council was in a relatively good financial position compared to many other councils, some of which are introducing emergency spending controls.

In relation to business rates, the Chief Accountant noted that whilst collection of rates had dropped off slightly, in the case of smaller and retail businesses they were receiving business rate relief from central government this year.  This means the Council were receiving the money directly from the government.  She further reported that money had been received from the government for business grants.

Councillor Joshi further enquired as to whether the 2% allocated to reserves had needed to be used.

The Chief Accountant responded that this had not yet been the case, however, there was a managed reserve strategy aimed at funding the budget gap each year.  She added that it was not yet known what reserves would be needed for the current financial year, however this was being closely monitored and more would be known towards September.

The Deputy Director of Finance confirmed that small businesses with properties of rateable value of less than £15,000 would not pay business rates this year and businesses in retail, hospitality and leisure would have a one-year rates holiday regardless of rateable value.  He added that around £70m had been paid from the business grant scheme to around 6,000 businesses with £10,000 going to most small businesses that pay rates.  He further added that many businesses in the retail, hospitality and leisure sectors had received £10,000 or£25,000. He however expressed concern over whether the government would continue the retail, hospitality and leisure relief schemes in future years, and hence reflected concerns over the future of some businesses and their ability to pay business rates.

Councillor Kaur Saini enquired as to what Corporate Items referred to in the context of the Comprehensive Income and Expenditure Statement.

The Chief Accountant clarified that this referred to charges that affected the whole organisation and were controlled centrally, giving the example of banking charges.

RESOLVED:

That the Draft Statutory Statement of Accounts 2019-2020 be noted.