The Deputy Director of Resources presented a report for Members of the Audit and Governance Committee to receive and review the Middlesbrough Council Draft Statement of Accounts 2011/2012. The Statement of Accounts included the accounts for Teesside Pension Fund for which the Council was the administering authority.
The Statement of Accounts was a technical publication containing accounting statements that had been prepared in accordance with the Code of Practice on Local Authority Accounting in Great Britain and the Statutory Accounts and Audit Regulations (The Code). The Code was updated annually and specified the accounting principles and practices required to prepare a Statement of Accounts that presented a true and fair view of the position of a Local Authority.
The 2011/2012 Statement of Accounts had been prepared in compliance with International Financial Reporting Standards (IFRS).
As previously requested by the Audit and Governance Committee, the Explanatory Foreword included details of the key indicators of the state of the local economy and the impact on the Council. The overall economic conditions continued to be difficult, although the impact of these circumstances varied significantly depending upon which sector individual businesses were operating in. Nationally, retail continued to struggle, whilst those serving wider markets such as engineering and the oil and gas sectors were taking advantage of increasing global opportunities.
The Annual Governance Statement reported on the key financial controls and wider governance arrangements in operation within the Council and was approved by the Corporate Affairs Committee on 24th May 2012.
The Deputy Director of Resources highlighted that the financial performance of the Teesside Pension Fund in the year to 31 March 2012 was again positive, with the Funds value increasing by 0.4% to £2,597 million. Although the market value of investments had fallen, this was more than offset by investment income. The membership of the Fund continued to increase, however over the last five years the number of active members had fallen by almost 7.5%, the number of pensioners increased by 25.4% and the number of deferred members by almost 54%.
At the last valuation of the Fund, the Actuary declared a funding level of 99%. This had allowed many of the employers in the Fund to decrease the amount of their contributions for the following three years, and release money for front-line services. The next valuation would be carried out in March 2013.
The Pension Liability increased to £199.5 million from £79.1 million at March 2011, due to a reduction in the value of assets and lower returns on investments held. This was the value placed on the Council liability by the Pension Fund Actuary and was offset in the balance sheet by a corresponding credit on the Pension Reserve. The Deputy Director of Resources confirmed that this was a technical adjustment in the accounts and related to a specific band rate that all Local Authorities had to use when working out liabilities.
The Statements would be subject to external audit by Deloitte which would commence on 3 July and was expected to be completed by 31 August 2012. A Statement (ISA260) would be produced which would detail any unadjusted misstatements found during the course of the audit.
Overall the accounts showed a sound financial position for the Council with the level of balances being in line with the Councils Medium Term Financial Plan.
The application of sound financial management across all services was reflected in the final outturn for the year with a net saving compared to budget of £506,000 (0.37%).
The Council had identified savings from service efficiencies, staffing structure reviews, a review of accommodation, joint working with other bodies, and service reductions to fund reductions of £13.8 million in 2011/2012. The cuts process was continuing with reductions of £12.8 million for 2012/2013 and the Council would need to make some difficult and fundamental changes in the services it provided and the way it operated to make the level of savings due in 2013/2014 and 2014/2015.
There would be a significant risk on the delivery of planned savings/cuts and the Council would need to continue to invest in service reconfiguration in order to improve services and generate greater savings. The £1.2 million savings made during 2011/2012 had been transferred to the Change Programme Reserve to fund this essential investment. In addition, £0.5million had been transferred into the Social Care/Vulnerable Children Reserve to cover financial risks related to increased demand in those areas.
Actual capital spend in the year was £63.7 million, compared with a budget of £70.0 million. Expenditure during the year was mainly funded from grants (70.3%), from borrowing (22.8%), and from capital contributions (6.96%). The percentage of spend achieved compared to the budget represented 91.0%.
RECOMMENDED that the contents of the draft Statement of Accounts 2011/2012 be noted.