Agenda item

The Committee received the Statement of Accounts for 2008/09 and the tabled written comments from John Snelling, Employee Side Secretary. 

Kevin Bartle (Head of Corporate Finance) and Graham Oliver (Head of Finance – Accounting and Control) introduced the report which detailed the financial affairs of the Authority.

The Committee noted that the accounts relating to Alexandra Palace and Park (AP&P) were for information only and did not form part of the Authority’s accounts for approval by the Committee.   Councillor Khan questioned the view that the AP&P was not controlled by the Council as the Council had funded a £2 million deficit with which AP&P closed the financial year.  Mr Oliver explained that control of AP&P had been reviewed according to CIPFA (Charted Institute of Public Finance and Accountability) guidance and it had been concluded that there was not a group relationship between AP&P and the Council, therefore the AP&P accounts were presented to the Committee for information only. In relation to the deficit funding Mr Oliver advised the Committee that the Council had a legal obligation to fund any loss incurred by the Palace and that this funding was budgeted for and monitored throughout the year.

In response to a question about the potential loss relating to the Council investments in Icelandic banks, Mr Bartle reported that the amount that would be lost to the authority under the current predictions was £4.718 million. However, accounting regulations required the authority to account for the fact that these funds had not and would not be available for the authority’s use

until the future dates identified for repayment. The overall impairment loss recognised in the Income and Expenditure Account in 2008/09, £7.814 million, had been calculated, therefore, by discounting the assumed cash flows at the effective interest rate of the original deposits in order to recognise the anticipated loss of interest to the authority until monies were recovered. Adjustments to the assumptions would be made in future accounts as more information became available. The Authority had utilised the capital finance regulations (issued February 2009) to defer the impact of the impairment on the General Fund, and a sum of £9.311m had been transferred to the Financial Instruments Adjustment Account, which related to the capital sum invested. The balance of £1.497m related to interest which had been borne in

full by the General Fund.

Mr Bartle went on to explain that the interest impairment of £1.497 million was based on the investments remaining with the Icelandic banks through to 31^st March 2009, at the rate at which the original investments were made, which ranged between 5.44% and 6.45%. The actual loss of interest, if the deposits were returned at maturity dates, was £877k. The additional loss identified was again as required under accounting requirements which it was deemed would take account of the loss from being unable to invest the capital sums further. Mr Bartle stressed, however, that in reality this would not have happened given that interest rates had reduced significantly (down to 0.5% or lower) and it would have been impossible for the authority to have achieved the previous levels of return.

Councillor Khan (Chair of the Audit Committee) confirmed that at its meeting on 2^nd June 2009 the Audit Committee had commented on the Governance Statement and the concerns/ comments made thereon appeared to have been modified in the revised version along with the Statement of Accounts but asked why, in relation to the balance sheet, cash from the “Net Current Assets” had not been utilised in the past as was the case in 2008/09.  Mr Bartle explained that Treasury Management considerations were made and it had been decided to utilise some of the cash due to the uncertainty of current markets rather than borrow to help finance its capital programme .

Councillor Khan expressed concerns at the increase of expenditure on Central Services in 2008/09 and that there had been a lack of consultation on this increase.  Mr Oliver explained that Property Services was included within Central Services and there had been a significant decrease in the value of the Council’s assets. Mr Oliver also reminded the Committee that the Council’s budget had been approved by Cabinet and subsequently scrutinised by the

Overview and Scrutiny Committee.

The Statement of Accounts would be brought back to the Committee at its meeting on 24^th September 2009 following the completion of the external audit.

RESOLVED

That subject to amendments to the minor discrepancy of the figures reported for the General Fund on the Balance Sheet (page 35 of the report) and the Statement of Movement on the General Fund Balance (page 33 of the report) the Council’s financial statements for 2008/09 be approved.