Report by Chief Financial Officer (attached).
The Committee considered a report by the Director of Resources and Deputy Chief Executive regarding the Statement of Accounts 2021/22 (circulated previously). The Director of Resources and Deputy Chief Executive highlighted the following points for the Committee:
· The draft accounts for 2021/22 financial year were signed off by the Chief Financial Officer on 5th July.
· An Unqualified opinion had been issued by the auditors, which was a clean audit of the accounts.
· The Council had originally budgeted to spend £13.639m in 2021-22. As at 31 December 2021, the Council was forecasting a net surplus of £89,000 against the budget.
· The last quarter of the financial year had seen some favourable variances since the last reported position; most notably additional recycling sales income and reduced spend in the Waste and Recycling service, together with general employee vacancy savings.
· It was pleasing to report that the final out turn position was a budget surplus of (£604,000) against original budget, which was an overall movement of (£515,000) from the last forecast at quarter 3.
· The original budget for 2021-22 included a forecast to achieve £225,000 worth of salary vacancy savings, this was exceeded by £99,000 giving an overall actual salary vacancy saving of £324,000. The movement from Q3 of £515,000 could be attributed to:
Ø ICT reduced spend £78,000.
Ø Waste & Recycling reduced spend £110,000.
Ø Waste and Recycling Sales income £74,000.
Ø Car parking income £60,000.
Ø Crematorium contribution £41,000.
Ø Employee vacancy savings £60,000.
Ø Borrowing costs – Interest Payable £41,000.
Ø Other Reduced costs £51,000.
· Members approved in June 2021 to proceed with the acquisition of Green Lanes Shopping Centre; for which the Council completed the purchase in November 2021.
· The purchase of Green Lanes Shopping Centre was a once in a lifetime opportunity to acquire a strategic asset and complement other significant regeneration improvements being delivered within the Barnstaple town centre through the Future High Streets project.
· The financial modelling demonstrated that revenue income generated from the centre would cover both the repayment of the loan and asset management costs and would return a contribution to the Council, which could be used towards mitigating future risks on income volatility, investment back into the centre and the overarching council budget.
· The financial outturn for the Centre produced a net return (income less costs) for the 2021/22 year of (£243,600) due to minimal borrowing costs for last financial year as those would start in 2022/23. This was a positive return for the Council for the four and half months ownership in the 2021/22 year. The net return to the Council of (£243,600); of this it was proposed to place £75,000 into an earmarked reserve to protect the council budget and mitigate against any future income volatility that could materialise as it moved forward with the centre and a further £168,600 into an earmarked reserve to fund future asset management initiatives to promote, market and maximise the occupancy of the Centre over the next few years, which the Council anticipated would then have a positive financial return on ongoing revenue streams.
The Director of Resources and Deputy Chief Executive read out some recent feedback that had been received from Knight Frank (Commercial Property Specialists) to the North Devon Council team, which stated
“As we discussed our involvement with Green Lanes is long standing. Prior to your purchase I have to say that the level of voids within the scheme provided a fairly depressing experience however on my most recent visit the overall feel of the scheme had changed with the recent lettings which have been undertaken both improving occupancy levels but also improving the customer ‘experience’ within the scheme”.
He added that this was really positive feedback for the Council and demonstrated its intent to make the Centre a success, both operationally and financially.
· As at 31st March 2022 the Collection Fund reserve balance held was £5,722,000. This earmarked reserve was created to deal with the timing impacts of the Collection Fund (Business Rates), which ensured the revenue budget was not unduly affected in the year the taxes were collected. Collection Fund deficits/surpluses were reversed out to bring the revenue account back to the budgeted figure for the year; the deficits/surpluses were recovered/distributed in the following financial years.
· This reserve included an £4,523,000 balance that would be utilised in 2022/23 and 2023/24 to mitigate timing differences of business rate reliefs awarded in 2021/22 that from an accounting perspective impact over the next two financial years; thus leaving the Collection Fund reserve with a residue balance of £1,200,000 protection against future volatility.
· The recommended level of general fund balance was 5%-10% of the Council’s net revenue budget. It was pleasing to report that the combination of in year measures and robust budget management saw the Council through the financial pressures and resulted in a general fund reserve balance at 31 March 2022 of £1,211,000, which was a level of 8.9%.
· The Balance Sheet indicated the Councils total net worth was £47m.
· The value of the Councils long term assets had increased from £98m as at 31st March 2021 to £121m as at 31st March 2022.
· The Councils long term borrowing had increased from £501,000 as at 31st March 2021 to £3m as at 31st March 2022.
· The Council’s Defined Benefit Pension Scheme Liability had decreased from £71m as at 31st March 2021 to £64m as at 31st March 2022 and there was a note related to the breakdown of the figures on page 149 of the report.
· The cash flow statement and collection fund information was detailed on pages 89 to 91 of the report.
· Pages 92 to 111 of the report detailing the accounting policies for which there were no material changes.
· The notes to the accounts were detailed on pages 112 to 161 and provided a breakdown of the accounts figures.
· Pages 162 to 168 detailed the draft auditor’s report, which gave an unqualified opinion on the financial statements.
In response to questions from the Committee, the Director of Resources and Deputy Chief Executive advised:
· The Council budget always shows annual vacancy savings as jobs were advertised and filled throughout the year.
· The Local Government Pension scheme changed in 2014 from a final salary scheme and was subject to a three yearly review, the next of which was scheduled for November 2022 and would provide a valuation and expected contributions for the next three years.
· The vehicle leasing scheme replaced the original capital programme purchase scheme, which allowed the Council earlier access to vehicles as and when required. The revenue costs from leasing were roughly the same as previous borrowing costs. However, the leasing scheme provided a better choice of vehicles. The transfer to a leasing scheme meant that the Council would no longer have to buy vehicles at the same time and the replacement of vehicles was spread out over a longer period. This also allowed the Council greater flexibility should it wish to transfer to electric vehicles in the future.
RECOMMENDED that the Statement of Accounts 2021/22 be approved and proceed to Council for consideration.