Report title Statement of Accounts 2019/20 Report to Date Commissioner’s Board 24 March 2021 London Fire Commissioner Report by Report number Assistant Director - Finance LFC-0507 Protective marking: NOT PROTECTIVELY MARKED Publication status: Published in full If redacting, give reason: I agree the recommended decision below. This deciso was Andy Roe remotely signed on London Fire Commissioner Date 26 March 2021 Executive Summary This report presents the London Fire Commissioner's (LFC’s) audited Statement of Accounts 2019/20, including the Annual Governance Statement, attached at Appendix 1. The draft Statement of Accounts were presented to Commissioner’s Board in November (LFC-0438), and published on 30 November with a statement that these were unaudited, and did not constitute the LFC’s final accounts, to ensure that the LFC is compliant with the requirements of the Accounts and Audit Regulations 2015. The audit of the Statement of Accounts is now complete and the audit results letter prepared by the LFC’s auditors, Ernst & Young, is attached at Appendix 2. The outturn report 2019/20 has also been amended, to update the position set out in the draft outturn report (LFC-0355), to reflect the position in the final Statement of Accounts. The amended report is attached at Appendix 3, with the changes highlighted in yellow. Recommended decision 1 of 9 For the London Fire Commissioner 1. The London Fire Commissioner approves the audited Statement of Accounts 2019/20, certified by the Director of Corporate Services and audited by the LFC's external auditor as presenting a true and fair financial position of the Authority as at 31 March 2020 and the Authority’s income and expenditure for the financial year. Introduction and Background 1. The LFC is required under Regulation 7 of the Accounts and Audit Regulations 2015 to approve and publish audited accounts, and for the LFC’s statutory Chief Financial Officer, the Director of Corporate Services, to certify draft accounts for audit and public inspection. As previously reported (LFC-0411) the deadlines for the Statement of Accounts were amended for 2019/20 due to the Covid-19 pandemic. The Audit (Coronavirus) (Amendment) Regulations 2020 extended the deadline to 30 November for the approval and publication of the accounts, and to on or before the last working day of September for certification of the accounts for public inspection and audit. 2. The draft Statement of Accounts was approved by the Director of Corporate Services and passed for external audit by the statutory deadline of 30 September 2020. The audit was due to be completed to allow the final accounts to be approved by the LFC and be published by 30 November 2020. However further challenges were experienced in particular in relation to the pandemic and the valuation of the LFC’s assets that prevented the conclusion on the audit, as previously reported (LFC-0438). 3. As previously reported, there have been challenges from the impact of Covid-19 with, in particular, additional work required on the LFC as a going concern, analysing the additional costs in responding to the pandemic and the impact on future funding, with an additional return being required with income, expenditure and cashflow forecasts for the period up to 12 months beyond the approval of the final accounts. There were also further delays in elements managed elsewhere that feed into the LFC accounts, in particular from the outcome from the audit of the pension fund. 4. The challenges on the asset valuations, also continued through the audit process with significant additional work required by the LFC’s valuer (Dron & Wright) to be fully compliant with the requirements set out by the Chartered Institute of Finance and Accountancy (CIPFA). The change in the basis of valuation, with the move a Modern Equivalent Asset, not only meant that the overall value of the LFC assets changed, and with prior year’s accounts having to be adjusted, but work during the audit also included moving from the previous portfolio basis of valuing the estate to an individual fire station basis. This in turn required significant additional work on the individual fire station valuations, including information by fire station on the size and specification, useful remaining life, and key components. This then required all accounting records to be amended to reflect these changes. 5. As set out previously (LFC-0438) the Statement of Accounts was published on 30 November 2020 to meet the statutory deadline, along with a statement that these were unaudited and did 2 of 9 not constitute the LFC’s final accounts, and that the final accounts will be published again after the conclusion of the audit. 6. The audit of the Statement of Accounts 2019/20 has now been completed. The outcome of the audit has been notified to the Director of Corporate Services. The external audit results report was issued on 17 March 2021 and the audited Statement of Accounts 2019/20 is to be made available on the London Fire Brigade (LFB) website to comply with Regulation 10, paragraph (2b) of the 2015 Regulations that requires these be published as soon as reasonably practical. The final audited accounts are presented in this report for approval by the LFC. 7. The Statement of Accounts includes a copy of the LFC’s Annual Governance Statement, which does not form part of the accounts however it is required to be published with the final accounts and has been approved by the LFC. Statutory Accounting Framework 8. The accounts for 2019/20 have been prepared in accordance with the Accounts and Audit Regulations 2015 and the Code of Practice on Local Authority Accounting in the UK (the Code) as published by the Chartered Institute of Public Finance and Accountancy (CIPFA). These specify the principles and practices of accounting required to prepare a Statement of Accounts that ‘present a true and fair view’. 9. This report provides the final outturn position for the LFC and explanations of the figures and key issues in the accounts as submitted. Statement of Accounting Policies 10. The accounting policies form part of the work in reaching the Audit Opinion. The policies are the principles, bases, conventions, rules and practices applied by the LFC that specify how the effects of transactions and other events are to be reflected in its financial statements. The use of such policies effectively secures consistency in the financial figures being reported year on year. Final Position 11. The final position for the capital and revenue expenditure and income is included in the Final Outturn Financial Position report at Appendix 4. Capital expenditure 12. In 2019/20, total spending on the capital programme for tangible and intangible assets was £31.1m, spend included the rebuilding and modernising of fire stations and other buildings (£8.6m), upgrading ICT equipment (£0.6m) and the purchase of fleet vehicles and operational equipment (£21.6m). The Capital expenditure (£31.1m) was funded by capital grants (£0.6m) and capital receipts (£30.5m). 13. The LFC took no external borrowing during the year. Settlement of maturing principal debt during 2019/20 totalled £6m. As a result, as at 31 March 2020, the level of outstanding principal debt totalled £60.7m. The average interest payable on outstanding loans as at 31 March 2020 was 4.67% (4.65% at 31 March 2019). Service Income and Expenditure 14. The statement of accounts includes accounting adjustments required by the Code of Practice on Local Authority Accounting in the UK. These provide for the inclusion of accounting adjustments for pensions liabilities under International Accounting Standard 19 (IAS19) Retirement Benefits, depreciation, impairment and revaluation charges. 3 of 9 15. The figure for net service expenditure for 2019/20, shown in the table below excludes these accounting adjustments. The outturn position after application of reserves and grants was £5.1m less than the approved budget. This a change of £1.2m from the draft outturn position previously reported in May 2020 (LFC-0355), and this change was reported to Commissioner’s Board as part of the report on the draft Statement of Accounts in August 2020 (LFC-0411). The amended outturn report in attached at Appendix 3. 16. Following movements between the general fund and reserves, the general fund balance decreased by £7.4m from £23.2m as at 31 March 2019 to £15.8m as at 31 March 2020 and the earmarked reserves increased by £10m from £52.2m as at 31 March 2019 to £62.2m as at 31 March 2020. Service Expenditure and Income 2019/20 Revised Outturn Outturn Budget Variance £000s £000s £000s Operational staff 270,131 269,955 (176) Other staff 59,911 57,594 (2,317) Employee related 24,028 25,209 1,181 Pensions 20,769 20,878 109 Premises 39,641 39,885 244 Transport 16,947 16,645 (303) Supplies and services 29,538 29,248 (289) Third party payments 2,055 1,871 (184) Capital financing costs 9,775 8,959 (816) Central contingency against inflation 123 (0) (123) Total revenue expenditure 472,920 470,245 (2,674) Other income (40,575) (44,736) (4,161) Net revenue expenditure 432,345 425,509 (6,835) Use of earmarked reserves (2,476) (2,476) (0) Financing Requirement 429,869 423,033 (6,835) Financed by: Specific grants (37,564) (35,864) 1,700 GLA funding (392,305) (392,305) 0 Net Financial Position 0 (5,135) (5,135) Balance Sheet 17. The net pensions deficit, recorded in the Balance Sheet, for both the Local Government Pension Scheme (LGPS) and the Firefighters’ Pension Schemes is £6.5bn as at 31 March 2020.