Cheshire West & Chester Council Draft Statement of Accounts 2020-21 Visit: cheshirewestandchester.gov.uk Draft 2020-21 Statement of Accounts Contents Page Narrative Report 3 Statement of Responsibilities for the Statement of Accounts 15 Annual Governance Statement 16 Independent auditor’s report 50 Group Group core financial statements Comprehensive Income and Expenditure Statement 56 Movement in Reserves Statement 57 Balance Sheet 59 Cash Flow Statement 60 Group Notes to the core financial statements 56 to 70 Core financial statements Comprehensive Income and Expenditure Statement 72 Movement in Reserves Statement 73 Balance Sheet 75 Cash Flow Statement 76 Notes to the core financial statements 1. Significant accounting policies 77 2. Expenditure and Funding Analysis 98 3. Accounting Standards 105 4. Critical judgements 105 5. Assumptions made about the future and other major 108 sources of estimation uncertainty 6. Material items of income and expense 110 7. Events after the Balance Sheet date 110 8. Adjustments between accounting basis and funding basis 111 under regulations 9. Transfers to/from Earmarked Reserves 113 10. Material changes within CIES 115 11. Other operating income and expenditure 115 12. Financing and investment income and expenditure 116 13. Taxation and non-specific grant income 116 14. Other comprehensive income and expenditure 117 15. Property, plant and equipment 118 16. Heritage assets 121 17. Investment properties 122 18. Intangible Assets 125 19. Asset held for sale 125 20. Financial Instruments 126 21. Debtors 133 22. Cash and cash equivalents 134 23. Creditors 135 24. Provisions 135 25. Usable reserves 137 1 Draft 2020-21 Statement of Accounts 26. Unusable reserves 139 27. Cash Flow Statement - Operating activities 144 28. Cash Flow Statement - Investing activities 145 29. Cash Flow Statement - Financing activities 146 30. Trading operations 146 31. Agency services 147 32. Members' allowances 149 33. Officers remuneration 150 34. Audit costs 152 35. Dedicated Schools Grant 153 36. Grant income 155 37. Related party transactions and Interest in Companies 156 38. Better Care Fund 165 39. Capital Expenditure and Financing 167 40. Leases 168 41. Private Financing Initiative (PFI) 170 42. Capitalisation of borrowing costs 174 43. Pension schemes (Defined Contribution Scheme) 174 44. Defined schemes (Benefit Pension Scheme) 174 45. Contingent Liabilities 180 46. Contingent Assets 180 47. Risk arising from financial instruments 180 48. Trust funds 186 49. Comparative information 188 The Housing Revenue Account 189 Collection Fund 194 Pension Fund accounts 197 Glossary of terms 250 2 Draft 2020-21 Statement of Accounts Narrative Report Introduction 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. Summary of Performance 4. Summary of financial performance and main issues in 2020-21 5. Summary of Significant Items 2020-21 6. Explanation of the financial statements 1. About Cheshire West and Chester Cheshire West and Chester is a unitary authority with a population of 339,800 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 46 wards across the Borough. The political make-up of the Council at 31 March 2021 is shown below. 3 Draft 2020-21 Statement of Accounts Following the local elections held on 6th May 2021, two new members were appointed to the Council; one member Conservative and one member Labour. 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. In February 2020 Cheshire West and Chester Council approved a Council Plan for 2020-2024 called ‘Play Your Part To Thrive’. This plan is supported by the Stronger Futures Recovery and Renewal plan which was published in December 2020 and which enabled the Council to refresh its plans in light of the opportunities and challenges arising from the pandemic. The Council Plan set out the Council's vision, what it wants to achieve, and the way its staff will work. The plan originally set out six priorities, but following the Council’s declaration of a poverty emergency in October 2020 the Stronger Futures Plan added this as a seventh priority: 1. Tackling the climate emergency 2. A Fairer Future – tackling the poverty emergency 3. Growing the local economy and delivering good jobs with fair wages for our residents 4. Supporting children and young people to have the best start in life and reach their full potential 5. More adults live longer, healthier, happier lives 6. Making our neighborhood’s even better places to call home 7. Delivering a more efficient and empowering Council The Council Plan is fully joined-up with other key plans and strategies across the borough and is monitored through a performance management framework - 79 performance indicators reported regularly through an online dashboard. The plan was developed alongside a four-year budget plan to ensure that resources are in place to deliver the focus areas. 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. The Spending Round 2019 provided a one year financial settlement for councils for 2020-21 only. 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, the Spending Round 2020 again provided a one year settlement for 2021-22 only. Consequently, there remains considerable uncertainty about the funding for all Councils in future years. 4 Draft 2020-21 Statement of Accounts Due to this uncertainty the Council approved a single year Budget in February 2021 for 2021-22, coupled with an indicative budget for the following three years. The Council is currently facing a funding gap of £10.5m over the period 2022-25 despite £19.1m of savings being identified for that period and £23.8m 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 not made permanent this gap could increase to around £20.5m. Bridging a gap of this scale will be challenging, even given the Council’s track record of financial management. It will necessitate further savings proposals being developed and further rigorous review of all areas of the Council’s budget, ensuring all areas of spend are linked to its key priorities and maximising the impact on them, and the Council is currently considering options to bridge this gap. The uncertainly around the longer-term impact of Covid-19 on the Council’s finances further adds to this challenge. 3. Summary of Performance The following table highlights key areas of Council performance during 2020-21. Due to the reallocation of staff resources to support the Council’s response to the Covid-19 crisis, as well as specific issues with collecting certain data during the lockdown, a number of performance indicators are not currently available to be reported. People There have been reported improvements in key healthy lifestyle indicators. The number of people reporting that they do not smoke fell from 13.8% in the previous year to 11.3%. The percentage of people reporting that they are undertaking regular exercise has also improved, from 67% to 71.1% over the same period. Data across Children’s Social Care and Early Help and Prevention is showing that demand on services is increasing. Both the rate of children in care (75.4) and the proportion of referrals within 12 months of a previous referral (23.1%) have slowly increased through the year. The percentage of young people becoming the subject of a child protection plan for the second or subsequent time has increased to 23.3% compared to 17.1% for the previous year but was beginning to reduce towards year end.