Agenda item

Consider various unaudited annual reports and accounts by Chief Financial Officer prior to their submission to the External Auditors (copies to follow):

(a)          Scottish Borders Council

(b)          SBC Common Good Funds

(c)          SBC Charitable Trusts:

(i)           SBC Welfare Trust;

(ii)         SBC Education Trust;

(iii)        SBC Community Enhancement Trust;

(iv)        Ormiston Institution;

(v)         SBC Charity Funds

(d)          Bridge Homes LLP.

(e)          Lowood Tweedbank Ltd

7.1       With reference to paragraph 3 of the Minute of 25 June 2019, there had been circulated copies of a report and associated papers, by the Executive Director Finance and Regulatory, providing an opportunity to scrutinise the draft Scottish Borders Council and Group Annual Report and Accounts for the year ended 31 March 2020 prior to its submission to the External Auditors.   It was explained that the draft Report and Accounts were still subject to Statutory Audit, which would commence in July as normal, but was likely to conclude later than usual due to competing audit demands as a result of the COVID-19 pandemic.  It was estimated that following the Audit process, the final report and Accounts would be submitted to Council in November 2020.  The Accounts summarised the financial transactions for the 2019/20 financial year and the balance sheet positions as at 31 March 2020 as set out in the Local Authority Accounts (Scotland) Regulations 2014.  The draft Annual Accounts for 2019/20 were attached as Appendices to the report as follows: Annual Accounts for Scottish Borders Council; SBC Common Good Funds; SBC Welfare Trust; SBC Education Trust;  SBC Community Enhancement Trust; Ormiston Trust for Institute Fund;  SBC Charity Funds; Bridge Homes LLP; and Lowood Tweedbank Ltd. The accounts would be submitted to the External Auditors, Audit Scotland or KPMG as appropriate for full audit by 30 June 2020 and be available for public inspection on the Council’s website for a 14 day period commencing 1 July 2020.

7.2       The Executive Director highlighted the main points from the Scottish Borders Council 2019/20 accounts by means of a visual presentation.  Before doing so, he paid tribute to his staff for their achievement in preparing the accounts within the original timescale, despite the very difficult circumstances.  The presentation provided the following headline figures:  the Revenue Outturn for 2019/20 showed £1.538m underspend (0.58% of final approved budget); £13.263m Financial Plan Savings had been achieved, 70% of those on a permanent basis; £8.412m of Earmarked balances from 2019/20 were carried into 2020/21 including £1.16m of DSM carry forward; Net Assets excluding Pension Fund liabilities had increased by £9.6m on the Balance Sheet; and there had been Capital Expenditure of £44.3m with a timing movement of £8.4m into 2020/21.  The presentation gave an analysis of revenue expenditure by service and a graph detailing efficiency savings achieved over the past 5 years, categorised into permanent and temporary savings brought forward.  With regard to SB Contracts in 2019/20 turnover had increased by £9m, or 57.2%, to £25.6m, with 20% of the total being generated by external works.  In terms of the Council’s reserves, the Useable Reserve as at 31 March 2020 equated to £30.1m.  The presentation went on to refer to the Group accounts that were included with the papers.  It was noted that with regard to the Scottish Borders Health and Social Care Partnership, the Integration Joint Board accounts had not been finalised for 2019/20, due to NHS resources being directed towards response to the COVID-19 outbreak.  The group position reflected 2018/19 figures and would be updated once the accounts were available. 

7.3       The Executive Director answered Members’ questions on the accounts and provided further clarification where requested.  Issues covered included: the pension liability and how this was calculated for the purposes of the accounts; the statement of indebtedness in relation to the IJB; the strategy in relation to reducing future demand for services; and the assessment and mitigation of risk of the current reduction in activity for SB Contracts. With regard to the percentage of total savings achieved on a permanent basis, Mr Robertson  advised that whilst he would prefer to see a higher percentage of savings achieved permanently in line with the agreed financial plan, he recognised that in reality this was becoming tougher to achieve year on year, particularly taking into account the challenges now posed by COVID-19.  In terms of the cumulative risk going forward due to the pandemic, he drew attention to a paper being presented to full Council on the response to the COVID-19 outbreak and the unprecedented financial challenge facing the Council.  In this regard and in response to another question, he confirmed that the Council had useable reserves of £30.1m of which £7.8m were unallocated.  Other reserves earmarked for specific purposes could also be used to support the response if this was considered prudent.  The use of reserves would have to be repaid in future years.  In terms of bad debts and the estimated ultimate collection rate for Council of 98.8% within the budget, the Executive Director explained that this was being monitored closely and accepted that this may have to be amended in the 2021/22 budget, also taking into account effect on cash flow.  He confirmed that the Council would adopt a sympathetic approach to the collection of outstanding Council Tax and other debts and agree payment plans where appropriate.  With regard to the average rate of interest of 4.67% paid on external debt, he explained that this was the average pooled rate on the Council’s Loans Fund and that historic loans were re-financed at lower rates as the opportunities arose. The Chairman thanked the Executive Director and his team for their work behind the preparation of the accounts.

DECISION

            AGREED:-

(a)        to note the Draft Annual Report and Accounts 2019/20 for Scottish Borders Council and associated Group Accounts; and

(b)       to support its submission for review by the External Auditors, Audit Scotland for Scottish Borders Council, Common Good and Trust Funds accounts, and to KPMG who continue to provide the external audit of the Council’s subsidiary Bridge Homes.