Agenda item

The Chief Finance Officer (and Deputy Director for Business Services) has approved the statement of accounts for 2012/13 as presenting a true and fair view of the county council’s financial position as at the 31 March 2013 and its income and expenditure for the year.  The accounts are attached at Annex A to this report for Member debate and approval.  The committee is asked that these be approved and published, subject to examination by the external auditors.

The draft accounts of the Surrey Pension Fund for the year ended 31 March 2013 are also included at Annex A, as required by the county council’s obligations as the administering authority of the fund under the Local Government Pension Scheme Regulations. The pension fund accounts summarise the fund’s transactions for the 2012/13 financial year and its position at year-end as at 31 March 2013.

The Annual Report for the authority is also attached at Annex B for consideration by the Committee.

Declarations of Interest:

None.

Officers:

Kevin Kilburn, Deputy Chief Finance Officer

Nikki O’Connor, Finance Manager (Assets, Investment and Accounting)

Charles Phipp, Senior Finance Officer (Pensions and Treasury)

Phil Triggs, Strategic Manager (Pension Fund and Treasury)

Key Points Raised During the Discussion:

1.    The Finance Manager (Assets, Investment and Accounting) introduced the item.  She informed the Committee that the external auditors had started work the week prior to the meeting and the final Statement of Accounts would come back to Committee in September with the external auditor’s report.

2.    The Chairman highlighted that members of the Committee had been given a briefing session to ensure that they understand the structure of the accounts and the difference between local authority accounts and company accounts. 

3.    Members queried how many officers had inputted into the Statement of Accounts.  The Finance Manager (Assets, Investment and Accounting) informed the Committee that there were two full-time equivalent staff who work on the Statement of Accounts.  There are also contributions from many other areas of Finance, including an officer producing the accounts for the Surrey County Council Pension Fund. 

4.    Members queried the Earmarked Reserves listed in the Explanatory Foreword by the Chief Finance Officer.  The Chairman suggested that the descriptions of the reserves provided in the Annual Report should be included within the Statement of Accounts.  The Finance Manager (Assets, Investment and Accounting) felt that this would be appropriate under Note 8 rather than within the Explanatory Foreword.

5.    The Deputy Chief Finance Officer informed the Committee that when a school becomes an Academy, any long term borrowing remains as the Council’s liability.  In this way, Academies were treated differently to previous situations where services moved out of local authority control.  For example, when the police moved out of local authority control, Councils did keep the debt but the Home Office provided a grant to pay it off.  This could be due to local authorities retaining responsibility for education within their borders but not for policing.

6.    The Chairman requested that under Capital Expenditure in the Explanatory Foreword (page 54 of the Committee papers), the significant capital investment agreed as part of the MTFP be explained by reference to the need for more school places rather than stimulation of the local economic recovery.

7.    Members asked whether Surrey County Council was in a minority for not undertaking external borrowing at the present time.  The Deputy Chief Finance Officer assured the Committee that the Council was not in a minority.  He explained that the cost of carrying surplus cash balances was currently not good value for money, and therefore using such balances to fund fixed assets was a cost-effective approach.  It was queried whether there was capacity for more short-term borrowing.  The Deputy Chief Finance Officer pointed out that this would need to be repaid and this could be at a time when interest rates had risen.

8.    Members asked where the Heritage Assets were held.  Officers explained that artefacts were held at County Hall and the History Centre.  Note 14 explained how heritage assets are valued.

9.    Officers assured Members that the Accounts had been prepared in accordance with the International Financial Reporting Standards (IFRS) and that this was clearly stated under General Principles within Note 1 of the Accounts.

10.  The Chairman requested that the Fire Fighters’ Pension Fund is mentioned under Pensions Liability in Note 5.

Tim Hall left the meeting.

11.  The Chairman highlighted that in Note 12, ‘de-recognition – others’ refers to schools being given Academy status.

Tim Hall re-joined the meeting.

12.  A Member suggested that within Note 13, it be made clear that the Foundation School which transferred to Academy status was already excluded from the balance sheet.

13.  Members queried whether the full liabilities of PFIs were included in Note 16.  The Deputy Chief Finance Officer clarified that this was an assessment of what will probably need to be paid for the implied lease element as opposed to the debt element of PFIs.

14.  The Chairman highlighted the increase in past due debt of less than six months and a decrease in past due debt of more than a year.  He queried the position with social care debt.  The Deputy Chief Finance Officer stated that, while social care debt had increased to £7.6m during 2012/13, it was down to £7.3m at the end of May 2013.  The increase in social care debt is partly due to SWIFT identifying more cases that can be billed for.  Therefore, income had increased and this was reflected in the debtors balance at year end.  If this had not happened, social care debt would have reduced more significantly.  The Deputy Chief Finance Officer confirmed that provision for social services debt which included the health service was £6.8m. 

15.  Members queried how, if investments are not to be made in banks from countries whose sovereign rating is not AAA, the Council can make investments within the UK.  The Finance Manager (Assets, Investment and Accounting) agreed that this reference would need to be re-worded.

16.  Members queried where the figure for Council Tax arrears had come from.  Officers explained that Borough and District Councils inform us what our share of their respective collection fund provisions for bad debt is.  In-year monitoring data had been requested from Borough and District Councils.  Members requested an update on Council Tax collection in September.

17.  The Deputy Chief Finance Officer clarified that bad debt belonging to PCTs had been transferred to the new CCGs.  Provision is being made to secure the debt.

18.  The Finance Manager (Assets, Investment and Accounting) agreed that the paragraph on Unequal Pay Claim within Note 23 needed to be updated following the Birmingham City Council court case which determined that pay claims could be made for a further six years.

19.  With regard to redundancy costs, explained under Note 23, the Finance Manager (Assets, Investment and Accounting) explained that decisions on redundancies were made in 2012/13 but payment would be made in 2013/14.  Therefore a provision is made in the accounts of 2012/13.  There is a caveat that some staff may be redeployed and so redundancy payment would not be made. 

20.  A Member asked why, according to Note 34, the salaries of the Strategic Director of Change & Efficiency and the Assistant Chief Executive had gone down over the past year.  Officers suggested that this would be due to salary sacrifice schemes.  In relation to this, the Chairman queried whether the Chief Executive’s bonus arrangements were included within the Statement of Accounts.  The Finance Manager (Assets, Investment and Accounting) informed the Committee that the bonus arrangements were subject to certain conditions which were yet to be met.  Therefore, the bonus was not a current liability.  Officers were not aware of any other bonus payments but that if there were any they would be budgeted for at the time of payment.

21.  The Chairman commented favourably upon the 40% reduction in fees to the external auditor, which had been previously reported to the Committee.

22.  A Member suggested that it would be useful to set out the lifetime costs of PFI contracts within Note 41.  The Deputy Chief Finance Officer agreed that this was a valid point for long term financial planning but explained that what was included within Note 41 was heavily prescribed.  The Finance Manager (Assets, Investment and Accounting) referred him to Note 43 which does set out this information.

23.  In response to a query, officers explained that if the Eco Park does not go ahead, the Council may be liable to repay all or some of the Government grant.

24.  Members queried the phrasing “employee contributions are matched by employers’ contributions” in the Surrey Pension Fund Statement of Accounts.  This suggests that the employer puts in the same amount of funds as the employee.  However, this is not the case in the Surrey Pension Fund. 

25.  Members discussed the terms for the transfer of liabilities from the Local Government Pension Scheme to the Principal Civil Service Pension Scheme for the Magistrates Court Service.  It was queried who would pay remaining balance.  The Senior Finance Officer (Pensions and Treasury) informed the Committee that the Department of Justice would pay.

26.  The Chairman informed the Committee that this was the first time that the Audit & Governance Committee had been asked to comment on the draft Annual Report.  It contained similar information to the Explanatory Foreword of the Statement of Accounts. 

27.  Members raised the cluster of senior officers within the £75,000 to £79,999 salary band.  Members also suggested that there needed to be clarity over whether the Annual Report includes or excludes bonus information.

Actions/Further Information to be Provided:

1.    The descriptions of the reserves provided in the Annual Report to be included within the Statement of Accounts (Recommendations tracker ref: A23/13).

2.    That under Capital Expenditure in the Explanatory Foreword (page 54 of the Committee papers), the significant capital investment agreed as part of the MTFP be explained by reference to the need for more school places rather than stimulation of the local economic recovery (Recommendations tracker ref: A24/13).

3.    That the Fire Fighters’ Pension Fund is mentioned under Pensions Liability in Note 5 (Recommendations tracker ref: A25/13).

4.    That an update on Council Tax collection be provided in September (Recommendations tracker ref: A26/13).

Resolved:

1.    That the Committee APPROVES the County Council’s annual statement of accounts, including the fire-fighter’s pension accounts for 2012/13, as approved by the Chief Finance Officer, for audit.

2.    That the Committee APPROVES the pension fund accounts, as approved by the Chief Finance Officer, for audit.

3.    That, pending the completion of the audit and subject to the accounts being represented to the Audit & Governance Committee in September, the accounts be PUBLISHED.

4.    That the Committee NOTES the Annual Report and ENDORSES it for publication, subject to comments made.

Next Steps:

None.