Cheshire West & Chester Council Statement of Accounts 2019-20 Visit: cheshirewestandchester.gov.uk 2019-20 Statement of Accounts Contents Page Narrative Report 3 Statement of Responsibilities for the Statement of Accounts 17 Annual Governance Statement 18 Independent auditor’s report 47 Group Group core financial statements Comprehensive Income and Expenditure Statement 55 Movement in Reserves Statement 56 Balance Sheet 58 Cash Flow Statement 59 Group Notes to the core financial statements 60 to 68 Core financial statements Comprehensive Income and Expenditure Statement 71 Movement in Reserves Statement 72 Balance Sheet 74 Cash Flow Statement 75 Notes to the core financial statements 1. Significant accounting policies 76 2. Expenditure and Funding Analysis 97 3. Accounting Standards 107 4. Critical judgements 107 5. Assumptions made about the future and other major 110 sources of estimation uncertainty 6. Material items of income and expense 112 7. Events after the Balance Sheet date 112 8. Adjustments between accounting basis and funding basis 113 under regulations 9. Transfers to/from Earmarked Reserves 114 10. Material changes within CIES 117 11. Other operating income and expenditure 117 12. Financing and investment income and expenditure 118 13. Taxation and non-specific grant income 118 14. Other comprehensive income and expenditure 119 15. Property, plant and equipment 120 16. Heritage assets 123 17. Investment properties 124 18. Intangible Assets 127 19. Asset held for sale 127 20. Financial Instruments 128 21. Debtors 135 22. Cash and cash equivalents 136 23. Creditors 136 24. Provisions 137 25. Usable reserves 138 1 2019-20 Statement of Accounts 26. Unusable reserves 140 27. Cash Flow Statement - Operating activities 145 28. Cash Flow Statement - Investing activities 146 29. Cash Flow Statement - Financing activities 147 30. Trading operations 147 31. Agency services 148 32. Members' allowances 148 33. Officers remuneration 149 34. Audit costs 152 35. Dedicated Schools Grant 152 36. Grant income 154 37. Related party transactions and Interest in Companies 155 38. Better Care Fund 163 39. Capital Expenditure and Financing 165 40. Leases 166 41. Private Financing Initiative (PFI) 169 42. Capitalisation of borrowing costs 172 43. Pension schemes (Defined Contribution Scheme) 172 44. Defined schemes (Benefit Pension Scheme) 173 45. Contingent Liabilities 179 46. Contingent Assets 179 47. Risk arising from financial instruments 179 48. Trust funds 186 49. Comparative information 186 The Housing Revenue Account 188 Collection Fund 193 Pension Fund accounts 198 Glossary of terms 257 2 2019-20 Statement of Accounts Narrative Report The Statement of Accounts is produced annually to give electors, local taxpayers, Members of the Council, employees and other interested parties clear information about the Council’s finances. The narrative report is designed to provide an explanation of the Council’s financial position and to assist in the interpretation of the financial statements. It also contains additional information about the Council in general and the main influences on the financial statements to provide a link between the Councils activities and challenges and how these impact on its financial resources. The narrative report is structured as follows: 1. About Cheshire West and Chester 2. Strategic principles and priorities 3. Key achievements 4. Summary of financial performance and main issues in 2019-20 5. Main issues impacting on the 2019-20 accounts (including the anticipated financial impact of Covid-19) 6. Explanation of the financial statements 1. About Cheshire West and Chester Cheshire West and Chester is a unitary authority with a population of 333,900 and covers 350 square miles. The borough is located in the North West of England and includes the historic city of Chester and the industrial and market towns of Ellesmere Port, Frodsham, Helsby, Malpas, Neston, Northwich and Winsford. About a third of the population lives in rural areas. The Council is responsible for ensuring a wide range of services are provided to the residents, businesses and visitors to the Borough. These include education, safeguarding vulnerable children and adults, social care, public health, highways, leisure, culture, waste collection and disposal, planning, housing benefits, regeneration and community engagement. In addition to providing or commissioning services the Council is also responsible for the collection of local taxation in the form of Council Tax and Non Domestic Rates on behalf of itself and local agencies such as Police and Fire authorities. The Council is a politically-led organisation and has adopted a Leader and Cabinet model. It has 70 elected members representing 45 wards across the Borough. The political make-up of the Council as at 31 March 2020 is as follows, and as shown in the pie chart below:- 3 2019-20 Statement of Accounts Liberal Democrat Independent 4 2Cllrs Cllrs Green 1 Cllrs Conservative Independent –4 28 Cllrs Conservative –28 Labour – 35 Labour 35 Cllrs Green – 1 Liberal Democrat ‐ 2 Since 31 March 2020 the following changes have occurred: - Independent – reduced to 3 Conservative – increased to 29 Labour – reduced to 34 One vacancy 2. Strategic Principles and Priorities Cheshire West and Chester Council is an innovative organisation that seeks to pioneer new and improved ways of delivering services. As an ambitious Council we are determined to deliver the best possible services, improve the quality of life for all residents and help to tackle disadvantage. 2019-20 is the final year of the Council’s four year plan for 2016-2020 called ‘Helping the Borough Thrive.’ The Council Plan sets out the Council's vision, what it wants to achieve, and the way its staff will work. The plan is structured across the three key focus areas of Residents, Communities and Economy, and ten key outcomes. Thriving Communities • Cleanest, safest and most sustainable neighbourhoods in the country • Good quality and affordable housing that meets the needs of our diverse communities • Vibrant and healthy communities with inclusive leisure, heritage and culture opportunities • Our resources are well managed and reflect the priorities of our residents Thriving Residents • All of our families, children and young people are supported to get the best start in life • Vulnerable adults and children feel safe and are protected • Older people and vulnerable adults are compassionately supported to lead fulfilled and independent lives 4 2019-20 Statement of Accounts Thriving Economy • People are well educated, skilled and earn a decent living • A great place to do business • A well connected and accessible borough The Council Plan is fully joined-up with other key plans and strategies across the borough, reflected in 55 performance indicators monitored in a dashboard. The plan was developed alongside a four year budget plan to ensure that resources are in place to deliver the focus areas. In April 2020 a new four year Council Plan was implemented for the period 2020-24 called “Play Your Part to Thrive.” The plan supports the delivery of Council services to address the borough’s key challenges: - Tackle the climate emergency; Grow a local economy that delivers good local jobs; Support more children and young people to make the best start in life; Enable more adults to live longer, healthier and happier lives; Make all neighbourhoods even better places to call home; and An efficient and empowering Council. Financial Scenario In common with all Local Authorities, Cheshire West and Chester needs to manage a situation where the costs and demands of services are growing but the amount of funding available is reducing. Since the Comprehensive Spending Review of 2010 Central Government funding to the Council has significantly reduced. Against this backdrop the Council needs to manage growing demand for services, inflationary pressures, a need to invest in the local economy to promote growth and a desire to continually improve services. 2019-20 was the final year of the Government’s four year funding settlement and was expected to be the final year that Councils would receive any Revenue Support Grant. The Spending Round 2019 covered spending for 2020-21 only, but was the first since 2010 not to impose significant reductions in Local Government funding. It announced the continuation of a number of temporary funding streams into 2020-21 and a number of additional grant funding allocations at a national level. It did not, however, provide any information on these funding streams post 2020-21 and therefore the Council only has certainty for one year. Whilst it was hoped that the Comprehensive Spending Review in 2020 would result in a multi-year settlement and therefore give more certainty around funding for future years, it is now unclear whether the impact of COVID-19 on Central Government plans will result in another one year settlement for 2021-22 only. Consequently there was and remains considerable uncertainty about the funding for all Councils in future years. Due to this uncertainty the Council approved a budget in February 2020 for 2020-21, together with an indicative budget for the following three years. The Council is currently facing a funding gap of £31m over the period 2021-24, despite £15.7m of 5 2019-20 Statement of Accounts savings being identified for that period and £21m of locally generated income. The Council’s budget, due to the way Government announcements have been made, and the subsequent uncertainty on the Council’s funding, includes significant elements of temporary funding. If this temporary funding (i.e. Revenue Support Grant, Improved Better Care Fund, Winter Pressures, Social Care Grant) is made permanent this gap could reduce to around £22m. As a result of the anticipated fall out of temporary funding in 2021-22 there is a significant budget gap forecast of between £9m and £19m in that year. Bridging a gap of this scale will be challenging, even given the Council’s track record of financial management.
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