The 2016/17 Statement of Accounts (SOA) have been externally

audited and are now presented to Governance and Audit Committee

for approval. The External Auditor (Mazars) has reported their findings

in two separate Audit Completion Reports, one for the Council and

another for the West Yorkshire Pension Fund. Members are asked to

consider these before approving the SOA.

The Strategic Director, Corporate Services will submit Document “M”

which provides an overview of the 2016/17 Statement of Accounts and

includes a response to the Council’s Audit Completion Report.

Recommended-

That the 2016/17 Statement of Accounts be approved and signed

by the Chair of the Committee.

                                                          (James Hopwood – 01274 432882)

The Appendix to Document “M” is a lengthy document and is therefore

being circulated on a restricted basis.  It is available on the Committee

Database of the Council’s Internet site www.bradford,gov.uk or in

Committee Secretariat by contacting Fatima Butt on 01274 432227.

The 2016/17 Statement of Accounts (SOA) had been externally

audited and were now presented to Governance and Audit Committee

for approval. The External Auditor (Mazars) had reported their findings

in two separate Audit Completion Reports, one for the Council and

another for the West Yorkshire Pension Fund. Members were asked to

consider these before approving the SOA.

The Strategic Director, Corporate Services submitted Document “M”

which provided an overview of the 2016/17 Statement of Accounts and

included a response to the Council’s Audit Completion Report.

          It was reported that significant items in the Statement of Accounts included:

·                     The total value of the Council’s financial assets were less than its outstanding liabilities, as measured by accounting rules. The Council had a negative net worth of £292m at 31 March 2017.

·                     The overriding reason for the negative net worth was that the valuation of the pension fund showed a deficit of £829.9m. This deficit represented a future shortfall between long-term pension benefits promised to employees and the investments set aside to fund them. The comparison between pension benefits and investments looked into the future, so is sensitive to the assumptions used to do this.

·                     The pension fund deficit shown in the SOA is based on a projection of the future using assumptions prescribed to a large extent by accounting rules. However, different assumptions were used in the triennial valuation of the pension fund, commissioned by the West Yorkshire Pension Fund to determine Bradford’s actual pension contributions. Using these different assumptions suggested that the costs of pension benefits versus investments were more in balance. Also, as the triennial valuation determined pension contributions and these were fully allowed for in the Medium Term Financial Plan, the deficit shown in the SOA had no cash flow impact.

·                     Contributing to the negative net worth were net liabilities of £143m for schools built under the Private Finance Initiative (PFI). There was a net liability because while the Council was still paying for the building costs, accounting rules meant that the schools could not be shown on the balance sheet. The schools converted to academies and accounting rules determine that the Council exercised insufficient control over academies to include them on its balance sheet. It should be noted though, that the Council receives a Government grant each year to pay off the building cost for the schools, so the net liability had no cash flow impact or implication for the Medium Term Financial Plan.

·                     Other schools, in addition to those funded by PFI, converted to academies in 2016-17 contributing to the Council’s negative net worth. The conversion of schools to academies was the main cause of the £125.9m reduction in the value of long term assets shown on the Council’s balance sheet.

·                     Other significant items in the SOA are the £20.4m (£22.7m at 31 March 2016) set aside in provisions. These provisions were for past commitments up to 31 March 2017 which had a financial cost and required payment at a future date. The provision included amounts set aside for expected redundancy costs, due to past budget decisions to reduce staffing. A provision had been set aside to pay for successful appeals against Business Rates. There was a provision to contribute to insurance pay-outs on submitted claims against the Council up the 31 March 2017.

·                     The long term borrowing shown on the Council’s balance sheet increased by £16m to £322m in 2016-17. This was due to £26m of new borrowing in 2016-17 less £10m of previous borrowing due to be repaid in 2017-18, shown as a short term creditor on the balance sheet.

·                    Total expenditure on the capital programme in 2016-17 was £61.5m including £6.2m on affordable housing, £5.4m on expanding primary school provision and £3.7m on disabled adaptations in residents’ homes. 20% of this capital programme was funded by internal borrowing, with the remainder funded from grants, revenue contributions and capital receipts..

·                     The Comprehensive Income and Expenditure Statement showed a deficit on the provision of services of £150.5m in 2016-17. However, this deficit included accounting adjustments, such as valuation changes on land and buildings, which had no cash flow impact. After removing these, which were also not chargeable against Council Tax, services spent £0.3m less than the approved 2016-17 revenue budget of £378m.

·                     Overall, the Council held £191.3m of useable reserves at 31 March 2017. £38.3m of this was available to fund the capital programme in future years, with the remainder to fund anticipated liabilities, direct to Council priorities and support budgets.

·                     The Collection Fund Statement showed Council Tax and Business Rates collected by the Council and how this income was distributed between the Council and other parts of the public sector. Overall, the results for 2016-17 showed just a small £0.2m pressure for the Medium Term Financial Plan.

The Finance Director thanked Mazars for the constructive and respectful relationship the Council had with them.

In response to a Members question it was reported that useable reserves were used to fund anticipated liabilities such as changes in VAT, page 361 explained

the amount reserved for such liabilities.

Resolved-

That the 2016/17 Statement of Accounts be approved and signed

by the Chair of the Committee.

Action:                    Strategic Director, Corporate Services