Agenda item

Report of the Chief Operating Officer to provide the Committee with further information and guidance on some key financial terms, in particular:

-       Balances;

-       General reserves; and

-       Earmarked reserves.

The Committee considered the report on the overview of key finance terms, presented by Neville Murton, Lead Finance Officer, and in addition considered the details of the earmarked reserves as set out in the Statement of Accounts 2014/15, tabled at the meeting. The Committee noted that in addition to the earmarked reserves, there was a General Reserve for non-earmarked funds of £25.7m and a £2m contingency in the revenue account. The Committee noted the difference between the £2m contingency in the revenue account, which was included in the budget each year, and the reserves, which were not replenished once used. In response to a question from the Committee it was confirmed that there were also contingency sums within the budgets for certain large capital projects.

In response to a question regarding the ‘balance’ of the Council’s budget overall, Mr Murton advised that each account had its own balance. There was additionally a funding balance that would exactly meet the Council’s net expenditure (currently around £220m). It was confirmed that the general reserve, earmarked reserves and £2m contingency were the only reserves held by the Council.

The Committee noted the Group Entity Reserves as set out in the Statement of Accounts, and noted that this included Homes for Haringey and Alexandra Palace. Mr Murton advised that Alexandra Palace accounted for the majority of the deficit reflected in the accounts. The Chief Operating Officer confirmed that the Alexandra Palace and Park Trust was responsible for the scrutiny of budget and resources at Alexandra Palace, and Mr Murton advised that, as Alexandra Palace was included in the Council’s budget and the Council provided capital and revenue support to Alexandra Palace, this was included in the reports relating to the Council’s budget setting process. Mr Murton confirmed that the Alexandra Palace and Park Trust were a separate legal entity from the Council, but that it was necessary to consolidate their accounts as part of the Council’s group accounts under accounting regulations. In respect of the outstanding loan from the Council to Alexandra Palace, the Committee asked which body on the Council side had responsibility for oversight of progress in the recovery of the amount owed to the Council. The Chief Operating Officer advised that this responsibility rested with the Corporate Committee and it was agreed that a report on this matter would be brought to the Committee for consideration.

The Committee expressed concern at the apparent high level of reserves held by the Council, and whether this was justifiable in the context of recent decisions regarding service cuts. Mr Murton clarified that the reserves held were only available on a one-off basis and could therefore not be used for ongoing funding requirements. It was noted that Full Council, in considering the budget, had a duty to satisfy itself that the Council’s reserves were adequate, and that it was the responsibility of the Chief Operating Officer, in her capacity as Section 151 Officer, to provide advice in this respect.

The Committee asked about the level of the Insurance reserve; Anne Woods, Head of Audit and Risk Management, advised that this was monitored on a monthly basis and was required due to the value of claims, which could take several years to come through. As an example, Ms Woods advised that one current claim being processed amounted to £1m. It was also noted that legal precedents meant that reserves were necessary to cover historic asbestos-related claims for which the Council had to accept liability, even where these pre-dated the establishment of the London Borough of Haringey.

Mr Murton referred the Committee to the report, which explained the purpose of each of the earmarked reserves, in response to questions. The Committee asked specifically about the length of time the PFI lifecycle reserve would be required for, and it was reported that this was for 25 years starting from around 2000 when the school buildings had been constructed. It was noted that there was less call on this reserve in the early years, when the school buildings were newly-built, however the likelihood of a draw down on this reserve increased as the buildings aged and maintenance was required. It was noted that there was a separate provision for these buildings once the 25 year period had elapsed. The Committee also asked about the Community infrastructure reserve, and how long this had been in place. The Chief Operating Officer reported that this had been in place for around 3 years and that a draw down had recently been made on this reserve, details of which would be set out in this year’s accounts.

RESOLVED

That the content of the report be noted.

Post-meeting note: At its 8 February meeting the committee asked about the impact of consolidating reserves from the Council’s grouped organisations (Alexandra Palace and Park Charitable Trust (APPCT) and Homes for Haringey (HfH)). At the time it was explained that the largest impact on the Council’s earmarked reserves was the debt owed by APPCT to the Council. However, it has been subsequently clarified that the debt has been written out of the Trusts Balance Sheet in 2014/15 – which has been explained in the report presented to the 14 March meeting. The reason for the net negative asset position on group reserves is in fact the unfunded pension liabilities of HfH (c£36m)  and APPCT (c£0.5m).