Agenda item

To present the report of the Interim Head of Function (Resources) and Section 151 Officer. (REPORT TO FOLLOW)

The report of the Interim Head of Function (Resources) and Section 151 Officer incorporating an explanatory outline of the key areas of the Statement of Accounts for 2013-14 was presented for the Committee’s consideration.

The Interim Head of Function (Resources) and Section 151 Officer reported that although completing the draft Statement of Accounts in line with the end of June statutory deadline had been a challenging process, the deadline was met and the draft Statement was signed by the Interim Section 151 Officer on 30th June. The Statement of Accounts will now be subject to external audit prior to its re-submission to the September meeting of the Audit Committee along with the Auditors’ opinion thereon. The Officer summarised the revenue and capital out-turn positions for the 2013-14 financial year which were reported to the Executive on 9th June.

The Interim Accountant (Closure of Accounts) said that thanks were due to the staff of the Finance Service Team for their efforts in ensuring the completion of the draft accounts within the prescribed timescale and he referred to the requirements involved in the closure process and what the Auditors will be examining in terms of the accuracy of the financial statements and the qualitative aspects of their presentation.

Mr Joe Hargreaves, PwC confirmed that the audit of the accounts had commenced and is proceeding, and that any issues arising therefrom will be reported to the Audit Committee at its September meeting.

The Chair echoed the sentiments expressed as regards the credit due to the Finance Service for meeting its obligations in closing the accounts on time and he invited the Committee to comment on the information presented.

In the discussion that ensued, Members of the Committee raised questions regarding the following matters –

•           Doubtful Debts Impairment/Allowance. Concern was expressed in relation to Council’s stated short-term debtor balance of £29.3m which it was felt was excessive especially at a time when the Authority is under increasing pressure to produce savings and to make the resources it has at its disposal go further. Members sought clarification of the situation in terms of the origins of the debts; any measures taken or planned to recover the monies owed and the length of time over which the debts have been allowed to accrue.

The Interim Head of Function and Section 151 Officer acknowledged the concern and said that a robust process has been put in place to address the issue in the coming months regarding which there is engagement with the SLT and Members, but because the matter of doubtful debts has been identified, then in the interests of accuracy, provision must be made for it in the accounts. The Officer said that the non-collection of debt can be due to a number of reasons and normally there would be a process for bringing forward doubtful debt to avert its accumulation over time. A progress report on the project for dealing with the matter will be presented to the September Executive and can also be brought to the Audit Committee if Members so wish. The immediate objective is to focus on a few high value debts which if resolved, will bring the total down considerably.

Mr Joe Hargreaves, PwC reported that a provision of £4.4m for doubtful/short-term debts was made in the 2012/13 Statement of Accounts. This has risen by approximately £1.2m in the intervening period. From an audit perspective, doubtful debt provision will be audited this year as a matter of course; although a large sum it is not considered a material increase based on the numbers. As regards the construction of the £29.3m, the accounts do contain a disclosure note which sets out the broad categories of debtors.

•           The Local Government Pension Scheme and the situation with regard to the net Pensions liability and the apparent deterioration in the pension position. Mr Joe Hargreaves, PwC reported that the Gwynedd Pension Scheme has been formally revalued since the previous Statement of Accounts and the liability has increased. The factors involved are incorporated in the actuarial valuation. The Auditors will be auditing those assumptions and have already assessed the calculations underlying it. The Auditors will also audit the information which the Authority provides to the Gwynedd Council Pension Scheme. The Interim Accountant (Closure of Accounts) explained the factors which impact on the performance of the Pension Fund as well as the assessments and judgements on which the liability position as reflected in the accounts is based. The Audit Manager referred to the presentation on the Gwynedd Local Government Pension  Fund made to the Audit Committee last year and said that it had been the intention to report back to the Audit Committee annually on the performance of the Pension Fund.

•           The adequacy of the provision made in the accounts for Job Evaluation and Equal Pay liabilities. The Interim Head of Function (Resources) and Section 151 Officer said that the Authority has set aside a sum to cover equal pay liabilities. It successfully sought permission from the Welsh Government to capitalise any costs so monies paid out last year were funded from the Council’s capital resources meaning that there was negligible recourse to the revenue monies set aside. That money is still potentially available for any future claims.

•           The rationale for maintaining an Internal Insurance Fund which seems to have flatlined over the past few years and on which very little call appears to have been made. It was asked whether the resources within this Fund could be diverted to more useful ends. The Interim Head of Function (Resources) said that the Fund provides a reserve on which the Council can draw to meet claims which would otherwise be met by an external insurance provider for which a premium would have to be paid. It is a way of managing liabilities and risks whereby the outlay is minimised. The Risk and Insurance Manager explained the purposes of the internal insurance Fund as opposed to the protection provided by the Authority’s external insurance cover. The Interim Head of Function (Resources) and Section 151 Officer said that the extent of the Council’s various  reserves and balances and the rationale for having them will be the subject of a report to the September Executive which can also be brought to Audit Committee if Members so wish.

•           It was asked whether the statement made in the report that the uncertainly about future levels of funding for local government is not judged sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision still holds true in view of an indicative reduction of 4.5 % in the grant from the Welsh Government. The Interim Head of Function (Resources) and Section 151 Officer said that the accounting process requires a judgment to be made and a view expressed on the financial viability of the Council and that the judgement expressed is that taking into account the mechanisms and processes which the Council has in place to address the financial challenges it faces, it remains a viable financial entity.

•           Clarification was sought regarding the staffing situation and the apparent discrepancy between the current position whereby the Council is employing more staff than it did a year ago and service underspends which are partly accounted for in the report by unfilled vacancies. The Portfolio Member for Human Resources clarified the position and confirmed that staff are doing more with less and are working in different ways e.g. by adopting agile working practices.

It was resolved to note the report and the key items outlined within it along with the observations made thereon.

ACTIONS ARISING: Interim Head of Function (Resources) and Section 151 Officer to provide the Audit Committee at its September meeting with the following –

•           A progress report on the project tasked with addressing the Council’s debtor position and balance.

•           A report on the range and extent of the Council’s reserve funds and balances and the rationale for them.