To approve the critical accounting judgements that will be used in completing the 2014/15 annual accounts and to note the key sources of estimation uncertainty.

10.1           The report of the Finance and Asset Management Group Manager, circulated at Pages No. 43-48, set out the critical accounting judgements and key sources of estimation uncertainty that would be used in preparing the 2014/15 accounts.  Members were asked to approve the judgements and to note the key sources of estimation uncertainty.

10.2           The Finance Manager explained that the Audit Committee had approved the accounting policies to be used during the 2014/15 closedown at the meeting in March 2015.  In applying the Council’s accounting policies, certain judgements had to be made about complex transactions, or those involving uncertainty about future events, and it was considered that it would be beneficial for Members to know what assumptions were made during the preparation of the accounts which the Committee would be asked to approve in September.  The judgements were set out at Appendix A of the report and would be included as a note in the Statement of Accounts.  Members were advised that there was a high degree of uncertainty about future levels of funding for local government and an assumption had been made that it would remain an ongoing concern in the future.  It had been deemed that the Council had control of the Swimming Bath Trust on the basis that it had the right to appoint the majority of representatives to the board and, as the management agent, it had control over the financial and operating policies of the pool.  However, as the site had been revalued to nil as part of the work around the delivery of a new leisure centre, a decision had been taken not to prepare group accounts on the basis of immateriality.  The Finance Manager went on to explain that the Council’s former insurers, Municipal Mutual Insurance Limited, had ceased to trade in 1992 and the Council had become a party to the scheme of administration for outstanding liabilities at that time.  The directors had triggered the scheme of arrangement which meant that the Council was subject to a maximum liability of £159,699.  An initial rate of £23,954 had been suggested to achieve a solvent run off and that had been paid over in January 2014; however, an additional 10% had been included in the long term provisions in case more money was required.  The level of business rate appeals under the business rate retention scheme had been calculated using historic appeals information.  The ones which were outstanding where statistical information was available relating to the outcome of past appeals had been calculated using the average success rate and rateable value loss.  The appeals relating to Virgin Media had been treated separately as they were unique cases.  The hearing relating to the 2005 assessment had resulted in a reduction in rateable value of 40% and that had been used as the basis for establishing a provision for the outstanding 2010 Virgin Media appeals.  Members were advised that IAS 19 disclosures included information on the assets which made up the Local Government Pension Scheme for the Council.  Rather than including the full list, a decision had been taken to summarise the categories that the Pension Fund had invested in.

10.3           The Finance Manager advised that the Statement of Accounts contained estimated figures taking into account historical experience, current trends and other relevant factors.  The items in the Authority’s Balance Sheet as at 31 March 2015, for which there was a significant risk of material adjustment in the forthcoming financial year, were set out at Appendix B to the report, however, Members were informed that the version attached to the Committee report was incorrect and an updated version was circulated around the table for information.  With regard to Property, Plant and Equipment, Members noted that the current economic climate made it uncertain that the Council would be able to sustain its current spending on repairs and maintenance which called into question the useful life of assets and, as such, the depreciation charge could be inaccurate.  Business rates were a major source of estimation and uncertainty and the provision for the current year was £3.8M for the Council’s share, a significant increase from £1.1M the previous year.  It was likely that some appeals would be settled differently to anticipated which could increase costs for the Council.  In terms of arrears, the Council had a balance on doubtful debts of £737,289, of which £722,211 related to a general provision.  Housing benefit general provision had increased from 45% to 60% due to the levels of debts increasing, increased pressure on benefits and the future introduction of Universal Credit.  Pension liabilities were included by the actuaries as part of their work and was based on a number of estimates including the discount rate used, the rate at which salaries were projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets.  The actuaries carried out an analysis to work out the impact of those assumptions, based on the figures in the accounts.   A Member queried whether there was a specific reason for the debts of over £5,000 set out in the arrears section and whether this was unusual.  The Finance Manager explained that this related to housing benefit debt which had been outstanding for a long period of time, for instance, when people failed to notify of a change in circumstances.  The Council was active in attempting to recover this money but it was not always a straight forward process; some people paid back their debts at a low rate which meant that it took some time for the overall amount owed to be reduced.

10.4           Having considered the information provided, it was

RESOLVED          That the critical accounting judgements that would be used in completing the 2014/15 annual accounts be APPROVED and the key sources of estimation uncertainty be NOTED.