A report of the Director of Finance (Section 151 Officer) was presented for Members of the Corporate Affairs and Audit Committee to note and review the draft Statement of Accounts (SOA) for the 2021/22 financial year.
The report presented the draft SOA for the 2021/22 financial year, commented on the main movements in the organisation’s financial position during the year and set out the legal processes that underpinned the SOA process and the responsibilities that needed to be undertaken.
This report was presented two months behind last year’s draft SOA and four months later than in financial years pre-Covid-19. The Committee were aware of the reasons for delay on the audit process (from previous reports in 2019/20 and 2020/21).
The draft SOA was a highly technical and complex document and the main form of external financial reporting provided by local authorities. Its format and content was prescribed by the CIPFA Accounting Code of Practice with the aim of giving a high level of visibility and transparency over the Council’s financial affairs.
The SOA comprised:
• A narrative report from the Director of Finance that provided an explanation on the financial position of the Council and described the key activities/highlights for the Council during the year. The report also contained performance-based information that illustrated what had been achieved by the use of these funds during the financial year.
• The Council’s financial statements. These were the core elements of the SOA and included the movement in reserves statement, the income and expenditure statement, the balance sheet and the cash flow statement for 2021/22.
• Notes to the accounts which included detailed narrative and figures that supported the key totals within the financial statements and other issues that were of interest to local authority stakeholders.
• The Collection Fund, covering Council tax and business rates activities and the accounts of the Teesside Pension Fund for which Middlesbrough Council was the administering authority. For the first time this year, the Council had produced a set of group accounts (financial statements and notes) which consolidated the wholly owned subsidiary, Middlesbrough Development Company, into the Council’s own accounts. This was due to the size of assets and liabilities associated with the company exceeding the Council’s materiality threshold during the financial year.
• The Annual Governance Statement that set out how the Council had complied with best practice governance arrangements and any key issues that had arisen from it. Due to the governance issues identified by Ernst & Young (EY) during the audit of the 2020/21 accounts, this document was not finalised at present. It would be added into the draft SOA once the Statement had been considered by Members at a subsequent meeting.
The timetable for the approval of the SOA was set out at paragraph 13 of the submitted report and it was highlighted that the timescale for the audit and approval of accounts was outside of this statutory timeframe. This was not uncommon in recent years and a CIPFA survey showed that only 9% of local authorities had their 2020/2021 Accounts audited by the legal date of 30 September 2021. It was also highlighted that the target date of 2 March 2023 for the Committee’s approval of the audited accounts was based on there being no significant delays or issues. The period available for inspection of the Accounts had been extended by one day due to the recent additional public holiday for Queen Elizabeth II’s funeral.
The balance sheet for the Council had improved significantly during the financial year from a negative net worth of £44.9m to a positive position of £64.5m. An improvement of £109.4m. This predominantly related to the net pensions liability and the position in relation to International Accounting Standard (IAS) 19. Further analysis of this movement was contained within Note 39 to the accounts. This change was also reflected in the movement in reserves statement as part of unusable reserves and in the income and expenditure statement as an actuarial gain.
Members’ attention was drawn to other areas of interest outside of the Core Financial Statements including:
• The narrative report.
• The going concern disclosures for the Council in Note 1 to the accounts.
• Note 7 on Earmarked Reserves.
• Note 12 on Grant Income.
• Note 14 on Officers’ Remuneration.
• The various notes on non-current assets (notes 21-28).
• The various notes on Financial Instruments (notes 29-31).
• The new section on Group accounts.
A query was raised in relation to the increase in audit fees from 2021 to 2022. It was clarified that issues around Children’s Services and governance had taken more audit time. It was also noted that the figures for both years were the Finance Team’s assessments and not the actual fees. The External Auditor would report the final fees through the audit report once the audit was completed.
Discussion took place regarding the provision of additional training for Committee Members in relation to the Accounts which would provisionally take place before the December meeting.
AGREED that the draft Statement of Accounts for the 2021/22 financial year, published by the Director of Finance on 8 August 2022, representing a true and fair view of the Council’s financial position as at 31 March 2022, was received and noted.