Agenda item - Statement of Accounts 2012/13

Report of the Executive Director of Finance & Resources (copy attached).

29.1         The Committee considered a report in relation to the Statement of Accounts 2012/13. The report recommended approval of the 2012/13 Statement of Accounts and the Letter of Representation on behalf of the Council. In line with legislation the Council’s Statement of Accounts had to be agreed by 30 September 2013, and the Audit & Standards Committee were currently charged with this function. The Council’s external auditors (Ernst & Young LLP) were required to give assurance that the Statement of Accounts was free from material misstatement and to report significant matters arising from the audit. Ernst & Young had conducted its audit of the Statement of Accounts and had identified one material misstatement relating to the valuation of the Royal Pavilion together with one relatively small number of presentation and disclosure amendments prior to issuing their opinion and the publication of the accounts. The report presented the revised 2012/13 Statement of Accounts following the audit, and it outlined amendments since they were presented to the June 2013 meeting of the Committee; it also provided assurances in relation to the preparation of the Statement of Accounts. The report also provided information regarding the summary accounts and informed the Committee of the outcome of the public inspection of the accounts.

29.2         Councillor Sykes asked for clarification in relation to the level of reported reserves against what was recommended; he also asked why the Council were currently holding high levels of reserves on the balance sheet and the Housing Revenue Accounts (HRA). In response the Executive Director of Finance & Resources explained there had been guidance that recommended reserves in the region of 5% of the organisational annual turnover, but this did not exist anymore and was a matter for local judgement. At the balance sheet date the Council had un-earmarked reserves in excess of that agreed working balance; however, the most recent budget setting exercise had committed to spend the entirety of the un-earmarked reserves for areas such as the voluntary redundancy scheme; the Council’s transformation fund and a significant proportion had been set aside for potential business rate refunds. Although the amount was shown as high it would be more challengeable if the authority had not made plans to spend it. The HRA had a higher level of reserves largely due to the profiling of the capital programme.

29.3         Councillor Sykes went on to ask about the increase in the pension liability, and in response the Executive Director of Finance & Resources explained that the difficulty was that the liability reported was a snapshot of the fund at a moment in time. There were a whole range of factors that contributed to this including the length of time people now lived for and the underperformance of the stock market. There were a range of national reforms including changes to employer and employee contributions and the auto-enrolment scheme; the impact on the funding gap was not yet clear. It was also noted that the overall responsibility for the fund sat with East Sussex County Council, and the Council sent trustees as representatives. Whilst the concern with pension funds was a national issue; the Council would continue to plan to help close the gap.

29.4         Councillor Wealls asked about adjusted misstatements and in particular who would oversee this and where the assurance was that the incident was an isolated example. The Executive Director of Finance & Resources explained that the testing was undertaken by the external auditors; who would do further sample testing to consider errors in balances across other areas. The External Auditor, Mr Mather, added that if the auditors could not conclude that the example was isolated they would then extrapolate to provide an estimate; if the estimate went above £12M then more testing would have to be undertaken. It was the practice to avoid testing where possible.

29.5         Councillor Summers highlighted a typographical error in relation to schools balances, and it was confirmed the matter would be clarified after the meeting.

29.6         RESOLVED:

(i)                 That the Committee notes the findings of Ernst & Young in their Audit Results Report (ARR). The ARR is a separate item on this agenda.

(ii)               That the Committee notes the adjusted misstatements to the 2012/13 Statement of Accounts (paragraph 7.3 and Appendix 4).

(iii)             That the Committee considers the advice in relation to unadjusted misstatements and agree that they should not be adjusted for (paragraph 7.4 and Appendix 5).

(iv)              That the Committee notes the results of the public inspection of the accounts (Section 9).

(v)                That the Committee approves the letter of representation on behalf of the council (Appendix 1).

(vi)              That the Committee approves the audited Statement of Accounts for 2012/13.