Agenda item

Members received a report from the Assistant Head of Finance in order to appraise the Audit Committee of an opportunity to revise the Minimum Revenue Provision Policy Statement for 2016/17 and to outline the budget consequences of the proposed changes.

It was recommended that Audit Committee:

·         Scrutinise the proposed change to the MRP Policy and if agreed endorse the submission of the revised Policy to Council for approval which changes the approach concerning the Minimum Revenue Provision on Unsupported Borrowing, moving it from an equal instalment basis to an annuity basis.

·         To continue to work on reviewing the approach adopted concerning the Minimum Revenue Provision for supported borrowing, and bring back further proposals on the options available.

The differences between supported and non-supported borrowing detailed in the report, were highlighted to Members.

Following presentation of the report Members were invited to comment, during which time the following points were noted:

Members were interested to learn if the WAO supported the proposals.  WAO officers advised that there was no guidance per se from WAO.  The appointed auditor wished to make the Council alert to the factors to be considered if changing the MRP provision:

·         Prudence

·         Compliance with Statute

·         Compliance with Future Generations responsibilities

The report had been provided to WAO for comment, who would report back in due course.

Members noted that the budget need to be set by 10^th March 2015, and if this proposal was adopted the budget gap could be closed by in excess of £2 million.  It was therefore considered urgent that we receive the WAO opinion.

Concern was raised regarding inflation effects on the proposal.  Members were informed it related to interest rates rather than inflation.

Members questioned if other local authorities had adopted the principle.  We heard that 12 LA’s in England using the principle, and it was expected that 7 or 8 authorities in the South Wales area were looking at the proposals. 

It was questioned if, in effect, it could be a termed as borrowing, as it would be using capital money for revenue purposes, and there were concerns if this was statute.   The Assistant Head of Finance explained that the requirement was to pay a minimum revenue provision on your capital financing requirement, which was a revenue cost.  Members were concerned if that this was a capital cost used as a short term fix for a revenue problem.  It was questioned if this was morally correct.  The Assistant Head of Finance explained that even though he understood the point raised, one of the primary reasons for the proposal was to resolve the inequity.

It was questioned if the main purpose of the proposal was to solve the budget problems or the cash problem.  In response the Officer explained that the principle may resolve both.  In terms of prudent, meant realistic and appropriate, not necessarily conservative.  This was in the guidelines of the capital regulations and was for the Authority to decide its approach.  It was considered that the approach of annuity was a sound one and to not consider it would be remiss of the Council.

The Head of Finance explained that there was a paper on the agenda regarding the Future Generation Evaluation, which should be taken into consideration.  In terms of future impact it was important to look at what alternatives there were in order to continue services for future generations.

Wales Audit Office advised that it was unfortunate that the letter from the Appointed Auditor is yet to be issued when the Council is currently reviewing the basis for deriving its MRP.  It was considered that the decision would remain with the Council providing that due process had been followed and compliance with statutory requirements.  The fact that the paper had been to Cabinet the previous day suggests that the Council is attempting to ensure that the appropriate processes are being followed.  Until the letter was finalised and issued however it was not thought to be helpful to comment further.

A Member expressed that there was a clear benefit to accept the proposal and it was beneficial to endorse the recommendations in the report. 

However, some Members expressed concerns and felt it was more appropriate to support the principle but to make clear that should the principle not be accepted we could withdraw our recommendation.

Therefore, the proposal was that Audit Committee accept the recommendations, endorse the proposal and forward to Council.  Upon being put to the vote the following votes were recorded:

·         4 for the proposal

·         2 against the proposal

·         0 abstention