Agenda item

The Chair welcomed Ellie Harrison, a student, to the meeting who was present to observe.

The Director of Corporate Services gave thanks to the External Auditors, Internal Auditors, and the Finance Team for all their work on the arduous process of the Statement of Accounts.

The Director of Corporate Services presented the report to the meeting. The report presented the Statement of Accounts for the financial year ended 31 March 2023 which included the Authority’s 25% share of the North West Fire Control accounts. Its purpose was to give electors, local taxpayers, Fire Authority Member, employees, and other interested parties clear information about the Fire Authority’s finances.

The Committee considered the Statement of Accounts as presented.

The aim was to provide information on:

-        The cost of providing Fire Authority services in the financial year 2022/23.

-        How these services were paid for.

-        What assets the Fire Authority owned at the end of the financial year.

-        What was owed, to and by, the Fire Authority at the end of the financial year.

The narrative report provided a guide to the most important matters which were included in the Statement of Accounts. The Statement of Accounts had been prepared in accordance with the Accounts and Audit Regulations 2015 as amended by the Accounts and Audit (Amendment) Regulations 2021 and the Code of Practice on Local Authority Accounting in the United Kingdom.

The Statement of Accounts contained: -

Statement on Annual Governance Arrangements – Set out the Authority’s responsibilities regarding the system of internal control on corporate governance.

Independent Auditor’s Report to Members of Lancashire Combined Fire Authority – The Auditor’s report to the CFA on the accounts for 2022/23, which were set out in the agenda pack.

Statement of Responsibilities for the Statement of Accounts – Set out the responsibilities of the Authority and the Treasurer regarding the statement of accounts.

Comprehensive Income & Expenditure Statement – The Statement showed the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. The Fire Authority raised taxation to cover expenditure in accordance with regulations; this could be different from the accounting cost. The taxation position was shown in the Movement in Reserves Statement.

Movement in Reserves Statement – This statement showed the movement in year on the different reserves held by the Fire Authority analysed between usable and other reserves. The surplus or deficit on the Provision of Services line showed the true economic cost of providing the Fire Authority’s services, more details of which were shown in the Comprehensive Income and Expenditure Statement.

Balance Sheet – This showed information on the financial position of the Fire Authority as at the 31 March 2023, which included the level of balances and reserves at the Fire Authority’s disposal, its long-term indebtedness and the value of the assets held by the Fire Authority.

Cash Flow Statement – This showed the cash and cash equivalent movements in and out of the Fire Authority due to transactions with third parties for revenue and capital purposes.

Fire Fighters Pension Fund Account and Net Assets Statement – This presented the financial position of the fire fighters pension fund account, which showed whether the Authority owed, or was owed, money by the Government in order to balance the account, together with details of its net assets.

The Director of Corporate Services drew the Members attention to Page 17 of the agenda pack for the review of the year which included that, the Service had invested in equipment in response to climate change and operational crews had begun to deliver Business Fire Safety Checks (BFSC).

In the 2022/23 Financial Overview on Page 18 of the agenda pack, it was noted by Members that a £5 increase in Council Tax had been agreed in line with the Council Tax referendum limit which allowed for an affordable, prudent, and sustainable budget that ensured that the Authority was able to deliver against its corporate priorities. The Director of Corporate Services highlighted that the 2022/23 firefighter pay award agreed for the proceeding and subsequent year of 7% and 5% respectively, had been more than anticipated and budgeted for which added to financial pressures. The Authority had a good level of general reserves, however consequently, it had resulted in an overspend of £1.7m.

The chart on page 19 of the agenda pack illustrated that employee costs accounted for approximately 70% of the budget funding and the majority of the income came from Council Tax.

It was stated on Page 20 of the agenda pack that the Authority’s general fund balance at start of the year was £6.04m and the overspend of £1.67m from the Authority’s expenditure had been transferred to the reserve which reduced the balance to £4.37m. The Authority also held an additional £9.3m of earmarked revenue reserves and £22m of capital reserves and receipts. The Capital reserves and receipts were fully utilised within the medium-term financial strategy which would reduce to zero in 2027. Over half of the earmarked reserves related to the Authority’s two Private Finance Initiative (PFI) schemes, whereby monies were set aside in the early years of the scheme to meet future costs, thus easing the impact of inflationary pressures.

Page 21 of the agenda pack explained that the Authority’s Total net liabilities had reduced from £753.7m to £502.5m which reflected the Authority’s compliance with International Accounting Standards and in particular, the requirement to show the full pensions liability in the accounts. Whilst the liability on the Local Government Pension Scheme was partly funded, the Fire-fighters Pension Scheme was unfunded, i.e. there were no assets from which future liabilities would be paid, and hence the Authority’s overall Fire-fighters pension liability of (£651.5m) was extremely large. If this liability was excluded, the Authority’s Total Net Assets would be £149.0m. There was a significant reduction in the Firefighter Pension Scheme liability of £224.4m; a reduction of over a quarter. The change was due to several changes in actuarial assumptions, the most significant impact was a higher discount rate which was used to calculate the present value of future pension liabilities. As the discount rate increased, the pension liability decreased. The pension liability included estimated costs in relation to the McCloud judgement.

In relation to a question from County Councillor Salter, the Director of Corporate Finance explained that the overspend on premises (as listed in the table of page 20 of the agenda pack), was due to inflationary pressures and the significant increase in the cost of utilities.

County Councillor Singleton queried the meaning of intangible assets as mentioned on page 36 of the agenda pack. Adam Latham, Financial Accountant advised that intangible assets were not physical assets but consisted of the utilisation of software. The Director of Corporate Services added that where the Service spent money on implementing IT systems, it could be capitalised and depreciated over the life of the software.

In response to a question from County Councillor Clarke in relation to the sizable loss of Pensions Reserve from the previous year on page 65 of the agenda pack, the Director of Corporate Services explained that the reserve related to the unfunded firefighter pension scheme which meant that there were no assets to match the liability of £600m. The liability was reviewed every year by an Actuary relating to factors such as life expectancy, salary changes, and economic considerations. Regarding the reduction in liability, a substantial change had been the discount rate (the rate used to value the current cost of future pension obligations), which had largely been affected by inflation. Georgia Jones, Key Audit Partner, informed that the pension reserve matched the pension liability and so had reduced accordingly. It was noted by Members that it was an unusable reserve.

County Councillor Singleton queried whether the investments the Service had, were credible (page 49 of the agenda pack). The Director of Corporate Services confirmed that the investments were secure, and the Treasury Management Strategy set permitted establishments for investment. Laura Rix, Senior Auditor, advised that the Treasury Management Audit would provide more assurance and it was confirmed that the Audit concurred with the Treasury Management Audit at Lancashire County Council.

In response to a question raised by County Councillor Singleton regarding council tax debt collection (page 51 of the agenda pack), and whether LFRS had any involvement of recovery of the debt, the Director of Corporate Services confirmed that recovery of the debt was the responsibility of district councils, and the Service had no involvement.

Resolved: - That the Committee approved the Statement of Accounts and authorised the Audit Committee Chair to sign them.