Agenda item

The purpose of the report was to present the audited accounts for Middlesbrough Council for 2019/2020. Members' approval would be subject to satisfactory completion of a number of outstanding items in EY's results report and any changes that might occur consequent to that.

 

The draft Statement of Accounts (SOA) 2019/2020 had previously been considered by the Committee at a meeting held on 30 July 2020 and a training session had also been provided for Members on 5 November 2020 to ensure that Members were equipped to take a judgement on the Accounts.

 

The Committee's attention was drawn to five main accounting issues, four of which had been amended in the update accounts and one that had not, due to its relatively small size and the amount of work that would be needed to restate. The amendments were as follows:

 

●     Pensions Liabilities

 

The overstatement of assets on the Pension Fund meant there was a direct correlation of that to the size of the net Pensions Liability in the Accounts and also in the other Tees Valley Local Authorities' Accounts. All the Councils were making changes for the overstatement of assets on the Pensions Fund.

 

●     Finance Lease Liability

 

The amount that should have been recognised in the Accounts had been recalculated at £12.374m, a difference of £8.460m from the draft Statements in July 2020. The value of the lease liability in the Accounts would be revisited annually to ensure it is assessed each financial year in line with the standard approach. The Accounts had been updated with the revised amount and the net liabilities recorded on the Council's Balance Sheet had improved due to this audit adjustment.

 

●     School Bank Accounts

●     Interest Accruals

 

Minor errors had been identified which were resolved through adjustments in the Balance Sheet between creditors and cash and borrowing.

 ●         Lease Surrender Costs

 

It was proposed that the Accounts were not adjusted for this transaction given that it was only 7% of the Council's materiality threshold.

 

A number of disclosures issues were also highlighted. More explicit information was included in relation to Going Concern, due to the risk presented by Covid-19 to local income streams. An additional and comprehensive disclosure had been included in Note 1 on accounting policies to satisfy this requirement. Enhanced disclosures in relation to the Centre Square liabilities had also been included.

 

Although the Pension Fund Accounts were subject to a separate audit from the Council's accounts, they were included within Middlesbrough's Statement of Accounts due to its role as the administering authority. A number of disclosures had also been given greater focus due to Covid-19, including the impact of material valuation uncertainty on the Fund, the Going Concern basis for the preparation of the financial statements, and a post balance sheet event note to indicate that the losses on the Fund experienced in February and March 2020 were mainly recovered in the first quarter of 2020/2021.

 

Members raised the following queries:

 

●     Officers' Remuneration

 

The Chief Finance Officer agreed to undertaken an analysis of savings on Officers' remuneration in relation to savings from staff restructures and circulate the information to the Committee.

 

●     Borrowing

 

Assumptions around borrowing and the Council's Investment Strategy were factored into the Medium Term Financial Plan (MTFP) and it was confirmed that there was sufficient funding to cover existing borrowing and any future borrowing planned.

 

Over the last two to three years of the Council's Investment Strategy, capital expenditure had been significantly higher than previous years, due to the delivery of large projects such as Tees Advanced Manufacturing Park (Tees AMP) and the two Centre Square office blocks. The Council's approach was to borrow at the lowest interest rates and the best value for money process. The Council was prudent in terms of investment, looking at affordability and sustainability of investment plans going forward.

 

It was suggested that an audit of the Council's current borrowing should be carried out.

 

●     Middlesbrough Development Company (MDC)

 

MDC was a wholly owned subsidiary of the Council and as more projects were approved the Company's financial assets and liabilities would have an impact on the Council's financial position. For the 2020/2021 financial year it was anticipated that Group Accounts would be prepared and MDC's Accounts would be incorporated into the Council's as an addendum to the Statement of Accounts.

 

●     Reserves

 

With the agreement of Council, £4m had been moved into reserves from the capital programme, towards the costs associated with addressing issues arising from the Covid-19 pandemic, to ensure the Council's reserve fund was above the recommended level of balances of £9.4m.

 

The Chief Finance Officer wished to place on record his thanks to Council Officers and Auditors for their hard work and dedication in producing the Statement of Accounts in difficult circumstances due to the Covid-19 pandemic.

AGREED as follows that:
1.  Middlesbrough Council Audited Statement of Accounts 2019/2020 was received and noted.
2.  An analysis of savings on Officers' remuneration as a result of staff restructures would be undertaken and the result circulated to the Committee.
3.  The Chair and Chief Finance Officer would discuss a potential audit of the Council's current borrowing and present any proposals to the Committee for approval.