Agenda item

To seek approval of the Annual Governance Statement 2023/24 and approval of the Audited Financial Statements 2023/24 for publication (report of the Deputy Chief Executive – Corporate Development (S151) enclosed).

Consideration was given to the report of the Deputy Chief Executive – Corporate Development (S151) which sought approval of the Annual Governance Statement 2023/24 and the Audited Financial Statements 2023/24 for publication.

The Deputy Chief Finance Officer – Corporate (PSPS) introduced the report which accorded with the Accounts and Audit Regulations 2015 in seeking approval by the Governance and Audit Committee of the Annual Governance Statement 2023/24 and the Audited Financial Statements 2023/24 prior to their publication on the council’s website.

The covering report outlined the following:

• Background to the report: including the legal deadline for the publishing of the Financial Statements 2023/24 of 28 February 2025 in keeping with the national backstop arrangements;
• That the external auditor had proposed a ‘disclaimed opinion’ for 2023/24 due to the audit of the Financial Statements 2022/23 not being completed;
• Adjusted audit differences;
• Unadjusted audit differences;
• Corrected disclosure differences;
• Control deficiencies;

The Audited Financial Statements 2023/24 were at Appendix 1.

Members considered the report and made the following comments:

• Members referred to the adjusted and non-adjusted differences and queried the measures in place to mitigate the need for adjustments in the future.
  • The Deputy Chief Finance Officer – Corporate (PSPS) responded that:
    • Regarding the car parking permit income: this had been addressed and the value included in the data for the current year;
    • Regarding the sum returned from Lincolnshire County Council: the issue had occurred during a period when bank reconciliations had been outstanding however the issue had been resolved and assurance was given that bank reconciliations had been fully up to date since September 2024. Any potential issues would therefore be identified at an early stage. An Internal Audit update on the matter would be presented to the committee as part of the agenda item 8 of the current meeting; and
    • Regarding the missed accrual: it was not uncommon for auditors to identify invoices which had been paid in a different financial year to the related item. Although the aim was to capture all transactions within the relevant period by a specified ‘cut-off’ date, any identified later would not be deemed material to the accounts and therefore remain unadjusted.

• Members referred to the HRA 2023/2024 Outturn on page 44 of the agenda pack, and queried the reason for the higher than expected depreciation.
  • The Deputy Chief Finance Officer – Corporate (PSPS) responded that the 2022/23 budget had not been uplifted for 2023/24 however this had been addressed for 2024/25. The value of the HRA had increased which had also contributed to the higher depreciation figure.

The following queries were raised in respect of the General Fund performance detailed on page 42 of the agenda pack.

• Members queried the £725,000 overspend for Repairs and Maintenance.
  • The Deputy Chief Finance Officer – Corporate (PSPS) referred to the Cabinet Outturn report which had presented that £500,000 of the variance data related to responsive repairs, £126,000 to void repairs and £112,000 to planned external repairs. The supportive narrative stated that “the response for void repairs budgets had been consistently under pressure as a result of increased labour inflation and volume demand”.
• Members queried the relative high cost of smoke alarms.
  • The Deputy Chief Finance Officer – Corporate (PSPS) would investigate the matter and provide a response after the meeting.

• Members referred to the General Fund on page 42 of the agenda pack and queried the overspend of the Regulatory budget.
  • The Deputy Chief Finance Officer – Corporate (PSPS) referred to the Cabinet Outturn report and responded that Land Charges Inspection Fee income had underachieved by £38,000 and Building Control fees by £77,000.
• Members queried the overspend relating to the Minimum Revenue Position (MRP).
  • The Interim Treasury Manager (PSPS) responded that this had resulted from a lower than expected unfinanced capital expenditure in the previous year (potentially due to slippage of the Capital Programme) but actioned during the current year.The future Capital Programme had been amended to account for the slippage and the MRP amended within the budget.

• Members queried the nil outturn for ‘Efficiencies Requirement’.
  • The Chief Finance Officer (PSPS) referred to the Cabinet Outturn report 2023/24 and confirmed that £695,000 was achieved against a target of £887,000. The variance stated of £192,000 represented the residual element that was not achieved.

• Members referred to page 47 of the agenda pack regarding the use of the HRA Reserve to finance the Capital Programme. The reduction in balances was not sustainable long-term and therefore assurance was sought that there were no major concerns in this area.
  • The Deputy Chief Executive – Corporate Development (S151) responded that:
    • The HRA Reserves had been utilised to finance the acquisition of new Shared Ownership and Section 106 properties with 75 properties acquired in 2023/2024. The expenditure was therefore not recurring, and this element had been removed from the proposed Capital Programme for 2025/2026 and onwards;
    • It was to be noted that:
      • The authority held £7 million of capital receipts in respect of the HRA;
      • The HRA was able to take debt if deemed affordable according to the HRA Business Plan which was overseen by the Assistant Director – Housing, with advice provided by Savills PLC. A report from Savills PLC on the matter would be presented to Cabinet in the near future; and
      • A similar pattern would be evident in 2024/2025 due to the decarbonisation grant funded programme. 

• Members requested an understanding of the increased pension liability outlined at note 4 of the ‘Notes To The Accounts’, specifically that which had resulted from the £3.250m actuarial loss.
  • The Deputy Chief Finance Officer – Corporate (PSPS) responded that:
    • A variety of elements affected this aspect including the return on fund assets being lower than obligations and liabilities, due to changes in demographic and financial assumptions; and
    • Pensions training for members was due to take place in the coming months which would assist with the provision of a greater understanding of the elements relating to the ‘Pensions Assets and Liability’ note.

• Members requested an explanation of note 6 with particular interest in the Housing element.
  • The Deputy Chief Finance Officer (PSPS) responded in respect of the 2023/24 data:
    • The column ‘net expenditure in the comprehensive income and expenditure statement’ represented the total cost of services, and included required technical accounting adjustments resulting from revaluations from the significant elements of pensions and housing stock;
    • The column ‘net expenditure chargeable to the General Fund and HRA balance’ represented costs that could be charged to the taxpayer; and
    • The column ‘adjustments between the funding and accounting basis’ included the reversal of some of the technical accounting adjustments from the income and expenditure statement to achieve the General Fund HRA balance; and
    • Significant swings were to be expected and would be detailed when the draft accounts were presented.
  • The Deputy Chief Executive – Corporate Development (S151) clarified that the Housing element referred to the council’s retained housing stock which numbered circa 4000 properties. The high volume of stock contributed to substantial changes at the revaluation stage, and which followed through to the depreciation values. This was distinct from Welland Homes which was a company operating in the private rental sector, charging market rents, and which held circa 60 properties.

• Members referred to the balance sheet on page 54 of the agenda pack and requested clarification of the utilisation of ‘usable reserves’ and ‘unusable reserves’, particularly in relation to ‘property, plant and equipment’ outlay.
  • The Deputy Chief Finance Officer – Corporate (PSPS) responded that note 24 of the accounts provided a breakdown of ‘unusable reserves’ The property, plant and equipment revaluation was one of many accounting adjustments to go through the unusable reserve.
  • The Chief Finance Officer (PSPS) added that unusable reserves were used for accounting adjustments, such as from revaluations of assets, whilst useable reserves comprised cash-backed assets (bank balances).

• Members referred to note 30 in respect of ‘officers’ renumeration’ and queried how a negligible decrease in the Chief Executive salary from 2022/23 to 2023/24 had resulted in an increased pension contribution of £11,000.
  • The Deputy Chief Executive – Corporate Development (S151) stated that comments could not be made on individual circumstances.

 AGREED:

1)    That the Annual Governance Statement 2023/24, detailed on pages 112-123 of Appendix 1, be approved;

2)    Following approval of the Council’s Annual Governance Statement, that the Financial Statements 2023/24, at Appendix 1, be approved;

3)    That, in consultation with the chairman of the Committee, the Section 151 Officer be authorised to approve any amendments, if required, after the committee date and prior to the official signing of the Financial Statements; and

4)    That, in consultation with the chairman of the Committee, the Section 151 Officer be authorised to approve the letter of representation on its behalf once received from KPMG.