PURPOSE OF REPORT

This report is to present to members the audited Statement of Accounts for 2019/20 including the Annual Governance Statement. This report also presents the findings of the Auditor General for Wales which confirms an unqualified audit opinion.

EXECUTIVE SUMMARY

The draft accounts were submitted for audit on 29 May 2020. These confirmed net expenditure of £35.226m resulting in a contribution to reserves of £0.011m. The final audited position remains unchanged.

The Authority’s Annual Governance Statement is set out in Appendix 2 and demonstrates compliance with the CIPFA/Solace Delivering Good Governance in Local Government Framework (2016).

The report issued by Audit Wales on behalf of the Auditor General for Wales confirms an unqualified audit opinion.

In compliance with the Accounts and Audit (Wales) (Amendment) Regulations 2010, it is a requirement that the audited accounts and annual governance statement are approved by Members by 31 July 2020. However due to the Covid 19 pandemic, the Accounts and Audit (Coronavirus) (Amendment) Regulations 2020 No. 404 extended the publication date of the Accounts to 30 November 2020.

RECOMMENDATION

Members are asked to:

(i) approve the audited outturn position and performance as detailed within the 2019/20 Statement of Accounts (Appendix 1);

(ii) approve the earmarked reserves carried forward as at 31 March 2020;

(iii) approve the governance arrangements and action plan as outlined within the 2019/20 Annual Governance Statement (Appendix 2);

(iv) note the report of the Auditor General for Wales which confirms an unqualified audit opinion (Appendix 3); and

(v) approve the proposed letter of representation.

OBSERVATIONS FROM AUDIT COMMITTEE/EXECUTIVE PANEL

Members of the Authority were presented with a financial performance report for 2019/20 at the Fire and Rescue Authority briefing on 12 October 2020.

BACKGROUND

In compliance with the Accounts and Audit (Wales) (Amendment) Regulations 2010 and Accounts and Audit (Coronavirus) (Amendment) Regulations 2020, the Authority has produced a statement of accounts and governance statement which have been subject to external audit.

INFORMATION

REVENUE EXPENDITURE

The briefing presented to Members on 12 October 2020 confirmed the draft out-turn position of net expenditure of £35.226m, resulting in an in year contribution to general reserves of £0.011m. The final audited position remains unchanged.

BALANCE SHEET

The Balance Sheet provides further information on the Authority’s long term financial position and is contained in the Accounts (set out in Appendix 1). The following paragraphs provide further information.

Fixed assets

The Authority held assets of £45.9m as at 31 March 2020 which included in year additions of £0.78m. The value of borrowing as at 31 March 2020 was £30.9m which is in line with the limits set by the Authority.

Pension Liabilities

The Authority is required to account for the estimated liabilities relating to its pension schemes. The Authority has two schemes; the Firefighters’ Pension Scheme and the Local Government Pension Scheme. The value of future liabilities is calculated by the actuary for each scheme.

The Pensions Act 2013 introduced changes to the public sector pension arrangements. The key change related to the way in which employees accrued their pension entitlement. Historically this had been calculated using their final salary at retirement and the changes required adoption of a career average salary. Transitional arrangements were put in place nationally for each pension scheme with the aim of providing protection to those closest to retirement.

The Fire Brigades Union (FBU) raised a legal challenge to the transitional arrangements. During December 2018 the Court of Appeal found that the UK Government had indirectly discriminated in applying the age related transitional arrangements. The matter has now reverted to an Employment Tribunal for remedy.

Whilst the outcome of the Employment Tribunal is not known, the UK Government considers that this will result in increased liabilities for all public sector pension schemes. The Government Actuary’s Department (GAD) has undertaken modelling to assess the potential impact. The pension liability as at 31 March 2020 was estimated to be £312.118m which includes the impact of the legal challenge.

Usable reserves

The Authority’s reserves as at 31 March 2020 were £3.206m which included £1.387m of general fund reserves and £1.819m of earmarked reserves.

ANNUAL GOVERNANCE STATEMENT

Since 2010/11 all local government bodies have been required to prepare an Annual Governance Statement which is published as part of the Statutory Accounts.

The Annual Government Statement has been prepared in accordance with the seven principles set out in the guidance document Delivering Good Governance in Local Government: Framework (CIPFA/SOLACE 2016).

The Annual Governance Statement for 2019/20 is set out in Appendix 2. It provides an overview of the governance arrangements and confirms the work plan for 2020/21.

The Annual Governance Statement is reviewed by Audit Wales to confirm that it is consistent with its knowledge of the Authority and no issues were noted.

AUDIT OF THE FINANCIAL STATEMENTS

The Auditor General for Wales is responsible for providing an opinion on whether the financial statements give a true and fair view of the financial performance and position of the Authority for the year ended 31 March 2020.

In performing the audit work, Audit Wales does not seek to provide absolute assurance but considers whether there are any material issues which may result in a reader of the accounts being misled. When an error or misstatement is identified Audit Wales will consider whether an amendment is required.

The Auditor General for Wales proposes to issue an unqualified audit opinion which means that the accounts present a true and fair view of the financial transactions of the Authority. The report is contained within Appendix 3 and the following is noted:

• The audit report recognised that all of the recommendations that were made following the 2018/19 audit have been implemented.

• The audit identified a number of amendments which were agreed with management. The amendments did not impact on the Authority’s reported position and included a number of adjustments necessary to fully comply with the Code of Practice on Local Authority Accounting.

• Within the audit report there are two significant issues which need to be brought to the attention of Members. Both issues relate to national issues concerning pensions. The first matter concerns the uncertainties surrounding the valuation of the investments held by Clwyd Pension Fund due to Covid-19. The second matter relates to the uncertainty arising from the transitional legal challenge referenced above.

IMPLICATIONS

Wellbeing Objectives - This report links to NWFRA’s long-term well-being objectives. Funding for the Service benefits the communities of North Wales and ensures there is sufficient investment in infrastructure to enable the service to provide emergency responses and prevention work well in to the future.
Budget - Budget is set annually in accordance with the proposed service delivery which includes emergency response and prevention work.
Legal - It is a legal requirement that the Authority produces the Statement of Accounts and Annual Governance Statement in accordance with the prescribed standards.
Staffing - None
Equalities/Human Rights/Welsh Language - None
Risks - Income and expenditure is closely monitored to ensure that deviations from the approved budget are properly identified and reported to Members.