Agenda item

The Committee received the draft statement of accounts for 2016/17 and were provided with a presentation.  Following this, questions were invited:

A Member queried if any internal rates of return are applied when borrowing internally. It was responded that for projects, there may be an internal rate of interest charged but not for cash borrowing (to make a saving against the cost of external borrowing, noting that e.g. investment of the amount borrowed would net approximately 0.4% and the cost of borrowing would be approximately 1.5% - a saving in the region of 1% in the Revenue account).

Secondly, it was questioned if a significant capital expense would be amortised over time or written off in year 1.  If the latter, it was queried how cash flow is worked out of the project.  It was explained that costs are amortised over the life of assets. In the case of the Solar Farm, this would be for 20 years.  The business case took a prudent approach and considered the borrowing rate from the Public Works Loan Board but, took out an interest free loan from the Welsh Government Salix scheme.

Considering the build of two new secondary schools, a Member questioned and it was confirmed that the new properties become an asset on the balance sheet and are assessed to determine appropriate useful life to calculate depreciation (in this case between 50-60 years).  It was further explained that there are three types of schools, maintained, voluntary controlled and voluntary aided.  The buildings in the category of voluntary controlled and voluntary aided would not be held on the asset register with the exception of the playing field.

It was also questioned if there were any tax implications in relation to depreciation of assets.  It was confirmed that public sector has a different context for capital gains and losses than the private sector.  There is a periodic revaluation of every asset every 4 years.  An adjustment is made for any variation in value in the revaluation account.

A Member, referring to Monmouthshire Farm School Endowment Trust Fund, Llanelly Hill Social Welfare Centre Accounts and any other such funds, sought clarification regarding their management and whether or not this is an appropriate role for the Council.  It was commented that it is difficult to break trustee status as there is no other body better placed to hold the role.  Clarification was provided that historically, some small charity funds were transferred to the Community Fund but it was not felt appropriate to transfer the management of larger funds.

County Councillor B. Strong declared a personal non prejudicial interest as a member of the Welsh Church Fund Committee.

The Cabinet Member for Resources reported that the figures have been through full scrutiny.

The Chair noted that there are unusable reserves that are negative that correspond to the pension fund.  It was explained that the pension reserve reflects the level of liability of the fund for its members against the contributions being made and consequently shows a negative position.  Over the next three years employers will make increased contributions for its members.  It was added that it is less problematic to have an open scheme that all new employees are entitled to join.  A number of schemes have closed and new members’ contributions are not then received into the fund. In an open scheme the current members pay for the liability of the costs as a member retires and the fund will be replenished in turn as they retire.  Sensitivity of markets also has a key influence on pension funds.  It was acknowledged that there is a paper loss in the unusable reserve and also commented that pension funds in the public sector aren’t fully funded.

In response to a question, it was confirmed that it is a Defined Benefits Scheme.

As recommended, the Committee reviewed the draft Monmouthshire County Council Statement of Accounts for 2016-17, as presented for audit, reviewed the draft statements of accounts listed of the following:

·         Monmouthshire County Council Welsh Church Act Fund;

It was noted that the final figures in relation to following Trust Funds, are yet to be supplied:

      i.        Monmouthshire Farm School Endowment Trust Fund

      ii.            Llanelly Hill Social Welfare Centre Accounts.