Document Pack ERW JOINT COMMITTEE Y LLWYFAN, COLLEGE ROAD, CARMARTHEN AT 1.30 P.M. ON FRIDAY, 15TH JULY, 2016 A G E N D A

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1 Document Pack THURSDAY, 7 TH JULY, 2016 ERW JOINT COMMITTEE Y LLWYFAN, COLLEGE ROAD, CARMARTHEN AT 1.30 P.M. ON FRIDAY, 15TH JULY, 2016 A G E N D A 1. APOLOGIES FOR ABSENCE 2. APPOINTMENTS TO THE FOLLOWING POSITIONS FOR THE PERIOD :- 2.1 CHAIR 2.2 VICE CHAIR 2.3 LEAD CHIEF EXECUTIVE 2.4 LEAD DIRECTOR 3. DECLARATIONS OF PERSONAL INTERESTS 4. TO SIGN AS A CORRECT RECORD THE MINUTES OF THE MEETING OF THE JOINT COMMITTEE HELD ON THE 10TH JUNE RISK REGISTER LETTER FROM SCRUTINY ERW FINANCIAL STATEMENTS LEAD DIRECTOR AND MANAGING DIRECTOR UPDATE RECRUITMENT OF TEACHERS AND HEADTEACHERS; 8.2 REVIEW OF PROGRESS - DELIVERING SELF IMPROVING SCHOOL SYSTEM.

2 9. ANY OTHER ITEMS OF BUSINESS THAT BY REASONS OF SPECIAL CIRCUMSTANCES THE CHAIR DECIDES SHOULD BE CONSIDERED AS A MATTER OF URGENCY PURSUANT TO SECTION 100(4)(B) OF THE LOCAL GOVERNMENT ACT 1972

3 Agenda Item 4 PRESENT: Pwyllgor ar y Cyd/Joint Committee 10 fed Mehefin 2016/ 10 th June 2016 Y Llwyfan, Caerfyrddin / Carmarthen 2.00 p.m p.m. Councillor Alun Thomas [Chair] Councillor Jennifer Raynor Councillor Keith Lewis Councillor Barry Thomas Councillor Ellen ap Gwynne Mr Mark James Mr Eifion Evans Ms Betsan O Connor Mr J. Patterson Mr I. Eynon Ms J. Hendy Mr Matthew Holder Ms E Prysor Ms C. Sivers Mr Martin Gray Mr Kevin Thomas City & County of Swansea Pembrokeshire County Council Powys County Council Ceredigion County Council Lead Chief Executive ERW Lead Director ERW ERW Managing Director Powys County Council Pembrokeshire County Council (Deputising for ERW Section 151 Officer) Internal Audit - ERW ERW Ceredigion County Council (ERW Monitoring Officer) City & County of Swansea Welsh Government (Observor) Carmarthenshire County Council (Democratic Services) 1. APOLOGIES FOR ABSENCE Apologies for absence were received from Councillor R. Stewart (City and County of Swansea), Councillor E. Dole (Carmarthenshire), Councillor J. Adams (Pembrokeshire) Mr Phil. Roberts (City and County of Swansea) Mr Ian. Westley (Pembrokeshire) Ms Bronwen Morgan (Ceredigion), Mr Jonathan Haswell 1 Page 3

4 Pwyllgor ar y Cyd/Joint Committee 10 fed Mehefin 2016/ 10 th June 2016 Y Llwyfan, Caerfyrddin / Carmarthen 2.00 p.m p.m. (Pembrokeshire) Dr Chris Llewellyn (W.L.G.A) and from Mr Geraint Rees (Welsh Government). 2. DECLARATION OF PERSONAL INTERESTS There were no declarations of personal interests 3. MINUTES AGREED, that the minutes of the meeting held on the 5 th February, 2016 be signed as a correct record. 4. ERW SECTION 151 OFFICER FINANCIAL REPORT The Joint Committee received the financial report of ERW s Section 151 (Chief Finance) Officer detailing the 2015/16 revenue outturn budget, the 2016/17 central team revenue budget and the Wales Audit Office s 2016 Audit Plan for ERW Mr I Eynon (Deputising for the Chief Finance Officer) referred to item 2 within the report on the Revenue Outturn for the central team, and advised that due to a number of contributory factors, as detailed on page 21, it had been possible to appropriate a sum of 60k from the budget to reserves. As a consequence, the Local Authority Reserve had increased from 412k at the beginning of to a closing balance of 472k. He referred to item 4 within the report on the Grant Outturn for and allocations for and advised that for ERW had received a total of 66.9m in grants with 65.9m having been spent and a sum of 704k being carried over to With regard to the allocation, the Education Improvement Grant had been reduced by 2.3m resulting in a current anticipated grant allocation of 63m. However, that was expected to increase as a number of minor grants were awarded during the year. In response to a question on why the grants this year were significantly lower than the previous year, the Managing Director noted that efforts to gain a fair funding formula had contributed to the pace. Also, as noted in the risk register, this was custom and practice for Welsh Government s distribution. 2 Page 4

5 Pwyllgor ar y Cyd/Joint Committee 10 fed Mehefin 2016/ 10 th June 2016 Y Llwyfan, Caerfyrddin / Carmarthen 2.00 p.m p.m. With regard to the reduced Education Improvement Grant, the Executive Board, at its meeting held on the 22 nd April, had considered the three options detailed in the report on its allocation, and had agreed upon a straight line cut of 4.75%. He further referred to the Draft ERW Financial Statement for 2015/16, produced by the 31 st May, 2016 in accordance with the Joint Committee s decision at its meeting held on the 5 th February, and reported that it would now be available for inspection at Pembrokeshire County Council from the 7 th June to the 4 th July, 2016 with the public having the opportunity to speak to the Wales Audit Office s appointed inspector on the 5 th July. Thereafter, the Financial Statement and the Wales Audit Office (ISA 260) audit opinion would need to be considered and approved by the Joint Committee at its meeting on the 15 th July, The Lead Chief Executive in response to a question on the overall 3.6m reduction in the 2016/17 grant allocation confirmed that the level of grant did not include any provision to address the new Education Ministers statement for a desired reduction in foundation class sizes from 30 to 25, the estimated cost of which would be 42m. If that proposal were to be realised, education authorities may need to expand schools. In response to a question on Exhibit 2 page 31 appertaining to grant income and expenditure, it related to the Wales Audit Office requiring the Joint Committee to make an assessment on whether it remained as an acting principal body or, an agent for the allocation of grants. It was considered that the Joint Committee was the recipient of the grant and, as such, was responsible for its proper expenditure and audit. AGREED 4.1. that the 2015/16 Revenue Outturn (Central Team) be noted; 4.2. that the 2015/16 Grant Outturn and the 2016/17 Grant Allocations be noted; 4.3. that the likely overspend on the 2016/17 Central Team Revenue Budget be noted; 4.4. that the 2016/17 Education Improvement Grant Allocations be approved; 3 Page 5

6 Pwyllgor ar y Cyd/Joint Committee 10 fed Mehefin 2016/ 10 th June 2016 Y Llwyfan, Caerfyrddin / Carmarthen 2.00 p.m p.m that the arrangements for the production, inspection, audit and approval of the ERW Financial Statements for 2015/16 be noted; 4.6. that the Wales Audit Office 2016 Audit Plan for ERW be noted; 5. ERW CONSORTIUM INTERNAL AUDIT REPORT The Joint Committee received for consideration a report on progress being achieved on the scope of the 2015/16 audit plan, as approved by the Joint Committee on the 5 th February 2016 which included :- Follow up of previous recommendations Governance Arrangements, Risk Management, Compliance with the Ladder of Support Funding Arrangements and Outcomes (Specifically PDG) and Scrutiny Arrangements. The Joint Committee noted that whilst a number of weaknesses had been identified in the adequacy and/or effectiveness of ERW s governance, internal control, risk management and financial management, a substantial assurance could be given on the adequacy and effectiveness of the arrangements in place. The Managing Director referred to the work undertaken by the internal audit team, especially that by Charlotte Hodges, Audit Team Leader, and expressed her appreciation to her for building on the work undertaken during the previous year and reflecting improvement. She also referred to some of the shortcomings identified within the report and advised that primarily, they were administrative in nature and reflected staffing capacity issues that had affected the organisation s ability to maintain records and embed all new processes in the desired places. AGREED that the findings of the Internal Audit Review of ERW for be noted. 6. DELEGATION ARRANGEMENTS The Joint Committee considered a report on proposals for the delegation of operational matters from the Joint Committee to the Executive Board and or Managing Director. 4 Page 6

7 Pwyllgor ar y Cyd/Joint Committee 10 fed Mehefin 2016/ 10 th June 2016 Y Llwyfan, Caerfyrddin / Carmarthen 2.00 p.m p.m. The Lead Director reminded the Joint Committee that under Schedule 4 of the legal agreement between ERW s six constituent authorities (points 1 and 11) reference was made to the delegation of responsibilities with point 1 delegating day to day decision making on key activities to the Executive Board. However, that delegation was not noted clear enough, for example, there were no agreed parameters by which the Executive Board could make quick urgent decisions between meetings which was particularly relevant in relation to the release of late grant monies from the Welsh Government, which had been identified in ERW s risk register. As a result it was proposed that the Joint Committee consider the proposed level of delegation detailed within the report to the Executive Board and/ or Managing Director The Lead Director advised that should the Joint Committee be minded to approve the suggested delegation, it would be necessary for the legal agreement to be amended and for all six constituent authorities to agree to that amendment. He suggested that could be undertaken by and a report thereon submitted to the next meeting of the Joint Committee to be held on the 15 th July, The Joint Committee in endorsing the proposal advised that any actions taken under the delegation arrangements should be reported to its next available meeting for information. AGREED 6.1. that the suggested delegation arrangments detailed in the report be approved and that Schedule 4 of the formal legal agreement between the six constituent authorities be amended accordingly and submitted to each authority for formal approval and reported back to the Joint Committee meeting on the 15 th July, 2016, 6.2. that if the amended Legal Agreement was approved by the constituent authorities, any actions undertaken pursuant to those delegation arrangements be reported to the next available Joint Committee meeting for information. 7. ANY OTHER ITEMS OF URGENT BUSINESS It was noted that there were no items of urgent business 5 Page 7

8 Pwyllgor ar y Cyd/Joint Committee 10 fed Mehefin 2016/ 10 th June 2016 Y Llwyfan, Caerfyrddin / Carmarthen 2.00 p.m p.m. Signed: CHAIR Date: 6 Page 8

9 Agenda Item 5 AGENDA ITEM NO. 5 ERW JOINT COMMITTEE 15 JULY 2016 RISK REGISTER Purpose: To present the Risk Register. RECOMMENDATIONS / KEY DECISIONS REQUIRED: To receive the document for information. REASONS: None information only Report Author: Designation: Tel No Betsan O Connor ERW Managing Director E. Mail: betsan.oconnor@erw.org.uk Page 9

10 EXECUTIVE SUMMARY ERW JOINT COMMITTEE 15 JULY 2016 RISK REGISTER BRIEF SUMMARY OF PURPOSE OF REPORT ERW has identified the process of taking action to mitigate risk and managing risks between the LA and the region as a key area to strengthen and to build on the current position. Effective management of the region s risk will enable us to support the organisation s objectives, make effective use of resources and deliver outcomes as intended. DETAILED REPORT ATTACHED? YES IMPLICATIONS Policy, Crime & Disorder and Equalities Legal Finance Risk Management Issues Staffing Implications NONE NONE NONE NONE NONE None CONSULTATIONS Section 100D Local Government Act, 1972 Access to Information List of Background Papers used in the preparation of this report: THESE ARE DETAILED BELOW Title of Document File Ref No. N/A N/A N/A Locations that the papers are available for public inspection Page 10

11 ERW Risk Register October 2015 (Final) School Improvement - Powys Inherent Risk Risk Reference Nature / Description of Risk Risk Owner Probability Impact Risk Score Actions to Mitigate Risk Transfer detail (if necessary and date) Additional Detail LA / Hub Escalation from LA detail (if necessary and date) Following Mitigation Date appear on ERW Register Date taken off ERW Register Probability Impact Risk Score 1 Managing Director, School categorisation results in Chief Education Officer increasing numbers of amber / red / Director and Head of schools Hub Possible medium 4 Treat Analysis of data and effective support from Challenge Advisers; programme of school improvement. Bespke to need. Not necessary No early indications of increase in red/amber schools for Unlikely Medium 2 May 16 2 Estyn visits result in high Chief Education Officers proportion of schools being placed and Heads of Hub in follow up / special measures Likely High 9 Treat and Transfer Secondary strategy in place and shred with heds. To reach agreement. Bespoek support being provided with additional resource from EIG Clear plan in pace to support training and profesional each school in follow up and devlopment opportunities each school causing concern. provided and clear guidance Escalation arrangemenst and systems scheduled to inform Chief exec and elected members Possible Medium 4 March Working relationships with Trade Unions are challenging. Despite clear communication and mandate Lead HR Officer Likely High 9 Treat where possible, tolerate Common consistent training for Advisers. Likely Medium 6 March 2015 May Inconsistency in support to Schools through variability in work of individual Challenge Advisers Head of Quality and Standards & Head of Hub Possible High 6 Treat and Transfer Clear agreed arrangements set out with consistent entitlement to schools. Revised ladder of support. Comprehensive Training Programme. Training and development coaching. Chief Education Officer Successful and effective performance management and coaching and support given. This has reduced the numbers and additional support to others. Powys Unlikely Medium 2 March Insufficient monitoring of and support to schools causing concern (secondary specific) Head of Hub and Chief Education Officers Likely High 9 Treat and Transfer Standing item on Hub QA Improvement Boards in place for schools casuing concern. Robust scrutiny function Powys Possible Medium 4 May LA staff (including Challenge Advisers) unnecessarily undertaking activity outside the regional strategy Directors Possible Medium 4 Treat Analysis of data and effective support from Challenge Advisers; programme of school improvement ; building capacity of schools to support others. Work programme of Quality Manager and review of schools causing concern. High risk needs to reiterated to each individual Good communication lines between Chief Education Officer, Senior Challenge Advisor and Head of Hub Unlikely Medium 2 July 2015 Page 11 7 Difficulty in recruiting school leaders results in lower leadership stabdards Chief Education Officer and HofH Likely High 9 Escalate Embed existing ERW middle and senior leadership training; Develop stronger recruitment practices; Formally identify and develop prospective school leaders Not necessary A need to continue with the school reorganisatipon programme to esnure suffcient quality and quantity of leaders Almost Certain High 12 October /07/16

12 Page 12 ERW Risk Register School Improvement - Powys Inherent Risk October 2015 (Final) Risk Reference Nature / Description of Risk Risk Owner Probability Impact Risk Score Actions to Mitigate Risk Transfer detail (if necessary and date) Additional Detail LA / Hub Escalation from LA detail (if necessary and date) Following Mitigation Date appear on ERW Register Date taken off ERW Register Probability Impact Risk Score 8 Failure to further improve key performance indicators at secondary, in particular L2+ Chief Education Officer and HofH Likely Medium 6 Treat Clear and agreed work programme with schools, in particular those under regression line. Specific support for leadership. Powys secondary strategy in place Secondary strategy in place Possible Medium 4 October Failure to raise standards, specifically for Efsm pupils Directors Likely Medium 6 Targeted interventions and sharing most effective practice. Commissioned research. Possible Medium 4 July Hub Leads do not maintain register and risks are not mitigated efficiently enough. LAs do not esclate to local registers as necessary to manage the wider LA issues Directors, Heads of Hub Likley High 9 Escalate Hub leads to take responsibility Unlikely Medium 4 Mar-16 May /07/16

13 Agenda Item 6 AGENDA ITEM NO. 6 ERW JOINT COMMITTEE 15 TH JULY 2016 LETTER FROM SCRUTINY PURPOSE: To inform the Joint Committee of the arrangements agreed to scrutinise ERW s work. RECOMMENDATIONS / KEY DECISIONS REQUIRED: Recommendations to the Joint Committee are: To provide written clarification about the capacity of challenge advisors across the region. In particular, are all local authorities working to full capacity in relation to their numbers of Challenge Advisors? Reviews how the results of categorisation are provided to parents. The Group is concerned that the current presentation in the media causes unnecessary worries for parents when their schools have been placed in a lower category. REASONS: Report Author: Cllr Fiona Gordon Designation: Convener of the Schools Scrutiny Performance Panel, City and County of Swansea Council Tel No. E. Mail: Page 13

14 EXECUTIVE SUMMARY ERW JOINT COMMITTEE 15 TH JULY 2016 LETTER FROM SCRUTINY BRIEF SUMMARY OF PURPOSE OF REPORT The Chairs and Vice Chairs of all six local authorities Education Scrutiny Committees came together in Swansea on the 11 March 2016 for their twice yearly joint seminar. This was the second meeting of the group the first was hosted by Neath Port Talbot Council. At the meeting the group shared scrutiny work plans and from these discussions, a number of common issues emerged which would be shared with the Joint Committee for awareness and consideration. DETAILED REPORT ATTACHED? YES IMPLICATIONS Policy, Crime & Disorder and Equalities Legal Finance Risk Management Issues Staffing Implications NONE NONE NONE NONE NONE N/A CONSULTATIONS Section 100D Local Government Act, 1972 Access to Information List of Background Papers used in the preparation of this report: THESE ARE DETAILED BELOW Title of Document File Ref No. N/A N/A N/A Locations that the papers are available for public inspection Page 14

15 Y Llwyfan, Heol Y Coleg, Caerfyrddin, SA31 3EQ Ffôn: E-bost: admin@erw.org.uk Y Llwyfan, College Road, Carmarthen, SA31 3EQ Telephone: admin@erw.org.uk / 1 April 2016 Dear Councillor Ali Thomas, ERW Scrutiny Councillor Group on the 11 March 2016 The Chairs and Vice Chairs of all six local authorities Education Scrutiny Committees came together in Swansea on the 11 March 2016 for their twice yearly joint seminar. This was the second meeting of the group the first was hosted by Neath Port Talbot Council. At this meeting we agreed our terms of reference. We agreed that all of our meetings and associated papers will be available to the public. At this meeting we reviewed the ERW Business Plan for 2016/19 and looked at school standards and categorisation across the region. We also exchanged good practice in Schools Scrutiny. The meeting gave us the opportunity to share scrutiny work plans and, from this discussion, a number of common issues emerged. We would like to share these with the ERW Joint Committee for awareness and for you to consider as part of your ongoing work. The issues are: Vulnerable Learners and work works including use of Pupil Deprivation Grant, the impact of poverty on attainment and the take-up of Free School Meals for example The capacity of challenge advisors across the region and whether all local authorities in the region are working at full capacity. Public perception of school categorisation and communication with parents The role of School Governors We also discussed the following issues that we know are outside the scope of ERW but wanted to share for your awareness. Child and Adolescent Mental Health Service across the region Elective Home Education in Wales Post 16 Transport Page 15

16 Y Llwyfan, Heol Y Coleg, Caerfyrddin, SA31 3EQ Ffôn: E-bost: admin@erw.org.uk Y Llwyfan, College Road, Carmarthen, SA31 3EQ Telephone: admin@erw.org.uk / The Group agreed to discuss two of these items in more detail at their next meeting in September, namely: 1. Vulnerable Learners and a framework for what works including use of the Pupil Deprivation Grant 2. Special Educational Needs reform and how local authorities are preparing for change (outside the scope of ERW) As a Group we would like to recommend that the ERW Joint Committee: 1. Provides written clarification about the capacity of challenge advisors across the region. In particular are all local authorities working to full capacity in relation to their numbers of Challenge Advisors? 2. Reviews how the results of categorisation are provided to parents. The Group is concerned that the current presentation in the media causes unnecessary worries for parents when their schools have been placed in a lower category. A further issue, also outside the scope of ERW, which the group is concerned about, is the lack of guidance around the identification and safeguarding of home educated children and young people. We will therefore be encouraging our respective Cabinet Members for Education to write to the Welsh Government about this. We look forward to your reply and responses to our recommendations. Yours sincerely, Councillor Fiona Gordon Convener of the Schools Scrutiny Performance Panel City and County of Swansea Council Page 16

17 Y Llwyfan, Heol Y Coleg, Caerfyrddin, SA31 3EQ Ffôn: E-bost: admin@erw.org.uk Y Llwyfan, College Road, Carmarthen, SA31 3EQ Telephone: admin@erw.org.uk / 1 st July 2016 Dear Councillor Fiona Gordon ERW Scrutiny Councillor Group Thank you for your recommendations. 1. We would like to confirm that all local authorities are fulfilling their commitment to work to the irreducible minimum of Challenge Advisers. The specialist staff are also supporting schools and are adding additional capacity locally. 2. ERW officers led a successful national campaign last year to communicate a clear and positive message to all on categorisation. Welsh Government are responsible for the communication overall. Our role has been to advise and support them. On the 20 th June 2016, a meeting was held nationally to improve further the arrangements for categorisation. ERW officers raised this communication issue again with Welsh Government. We used the hashtag #categorisationsupport #cymorthcategoreiddio last year. Your continued work in scrutinising the ERW region is appreciated again. Yours sincerely Councillor Ali Thomas Lead Leader for ERW Page 17

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19 AGENDA ITEM NO. 7 ERW JOINT COMMITTEE 15 JULY 2016 Agenda Item ERW Financial Statements Purpose: Approval of the ERW Financial Statements RECOMMENDATIONS / KEY DECISIONS REQUIRED: It is recommended that the Joint Committee: Review the ERW Statement of Accounts for and the Wales Audit Office ISA260 report and audit opinion Approve the ERW Statement of Accounts for REASONS: Statutory Requirement Report Author: Designation: Tel No Jonathan Haswell ERW Section 151 Officer E. Mail: Jonathan.haswell@pembrokeshire.gov.uk Page 19

20 EXECUTIVE SUMMARY ERW JOINT COMMITTEE 15 JULY 2016 ERW SECTION 151 OFFICER FINANCIAL REPORT BRIEF SUMMARY OF PURPOSE OF REPORT Approval of the ERW Financial Statements DETAILED REPORT ATTACHED? YES IMPLICATIONS Policy, Crime & Disorder and Equalities Legal Finance Risk Management Issues Staffing Implications NONE YES YES YES NO 1. Legal Statutory requirement to approve the ERW Financial Statements by 30 September Finance Statutory requirement to approve the ERW Financial Statements by 30 September Risk Management Statutory requirement to approve the ERW Financial Statements by 30 September 2016 N/A CONSULTATIONS Section 100D Local Government Act, 1972 Access to Information List of Background Papers used in the preparation of this report: THESE ARE DETAILED BELOW Title of Document File Ref No. N/A N/A N/A Locations that the papers are available for public inspection Page 20

21 ERW Statement of Accounts for Chief Finance Officer (ERW S151 Officer) 1 Page 21

22 REVIEW OF ERW STATEMENT OF ACCOUNTS for The Joint Committee approved ERW s proposed timescale for voluntarily publishing the draft Statement of Accounts by 31 May 2016 and having them audited and approved by 31 July The deadlines required by the Accounts and Audit (Wales) Regulations 2014 were 30 June 2016 and 30 September 2016 respectively. 2. The Budget Outturn Monitoring Report for was considered by ERW s Joint Committee on 10 June The draft Statement of Accounts for were published on 27 May 2016 and were subject to audit by ERW s external auditors, the Wales Audit Office (WAO). The WAO have concluded their audit and have issued their ISA 260 report and audit opinion for consideration by the Joint Committee on 15 July The Joint Committee need to review and formally approve the Statement of Accounts for , copy attached. 4. ERW s Statement of Accounts must comply with Cipfa s Code of Practice on Local Authority Accounting (the Code), which is based on International Financial Reporting Standards (IFRS), and also the requirements of accounting and financing regulations of government. IFRS provides a comprehensive framework of mandatory requirements for the production of financial statements in the public and private sector and this framework is continually being refined. 5. The overall financial position of ERW is recognised in a number of key statements within the Statement of Accounts, namely the Comprehensive Income & Expenditure Statement, Movement in Reserves Statement and the Balance Sheet. Further details on these and other statements within the Statement of Accounts for are outlined below: Explanatory Forward The purpose of the explanatory forward is to provide a commentary on the Statement of Accounts. It includes an explanation of key events and their effect on the Statement of Accounts. Movement in Reserves Statement Reserves represent ERW s net worth and show its spending power. They are analysed into two categories, usable and unusable. Page 22 2

23 Comprehensive Income and Expenditure Statement (CIES) The CIES reports on how ERW performed during the year and whether its operations resulted in a surplus or deficit. It shows the economic cost in the year of providing services. It analyses ERW s day to day expenditure on the basis of the Cipfa Service Reporting Code of Practice (SeRCOP) groupings including future pension costs etc. Balance Sheet The balance sheet is a snapshot of ERW s financial position at a specific point in time, showing what it owns (assets) and owes (liabilities) at 31 March. Cash Flow Statement This sets out ERW s cash receipts and payments during the year, analysing them into operating, investing and financing activities. 6. The Joint Committee review of the Statement of Accounts for should be focused on the following issues: (a) Financial Reporting Standards The International Financial Reporting and Other Standards that have been issued have been applied as required by the Code. The Code requires that ERW discloses information relating to the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted by the Code for the relevant financial year. The standards introduced in the Code that are relevant are: Amendments to IAS 19 Employee Benefits (Defined Benefit Plans: Employee Contributions) Annual Improvements to IFRSs Cycle o IFRS 2 Share-based Payment definition of vesting condition o IFRS 3 Business Combinations accounting for contingent consideration in a business combination o IFRS 8 Operating Segments aggregation of operating segments o IFRS 8 Operating Segments reconciliation of the total reportable segments assets to the entity s assets o IFRS 13 Fair Value Measurement short-term receivables and payables 3 Page 23

24 o IAS 16 Property, Plant and Equipment revaluation method (proportionate restatement of accumulated depreciation) o IAS 24 Related Party Disclosures key management personnel o IAS 38 Intangible Assets revaluation method (proportionate restatement of accumulated amortisation) Amendment to IFRS 11 Joint Arrangements (accounting for Acquisitions of Interests in Joint Operations) Amendment to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (Clarification of Acceptable Methods of Depreciation and Amortisation) Annual Improvements to IFRSs Cycle o IFRS 5 Non-current Assets Held for Sale and Discontinued Operations changes in methods of disposal o IFRS 7 Financial Instruments: Disclosures servicing contracts o IFRS 7 Financial Instruments: Disclosures applicability of the amendments to IFRS 7 to condensed Interim Financial Statements o IAS 19 Employee Benefits discount rate: regional market issue o IAS 34 Interim Financial Reporting disclosure of information elsewhere in the interim financial report. Amendment to IAS 1 Presentation of Financial Statements (Disclosure Initiative) The changes to the format of the Comprehensive Income and Expenditure Statement, the Movement in Reserves Statement and the introduction of the new Expenditure and Funding Analysis The changes to the format of the Pension Fund Account and the Net Assets Statement The impact of the above changes is unlikely to be material but will result in some presentational changes and these will be disclosed in the Financial Statements. The Statement of Accounts have been prepared in compliance with the Code of Practice on Local Authority Accounting for Page 24 4

25 (b) Accounting Concepts The following pervasive accounting concepts have been used in the preparation of the Core Accounting Statements: Accruals Going concern The qualitative characteristics of financial information continue to be employed: Relevance Comparability Verifiability Timeliness Understandability Materiality Faithful Representation Completeness Neutrality Free from error Primacy of legislative requirements (c) Critical Judgements in Applying Accounting Policies and Estimation Risk In applying the accounting policies set out in the Statement of Accounts, the ERW Joint Committee has made judgements about the complex transactions and those involving uncertainty in future years. Although there is a high degree of uncertainty about the future level of funding for local government, to date funding for Education has been protected by Welsh Government. Whilst some grants may be reduced, there is insufficient evidence to conclude that the Joint Committee activities will be severely impaired or reduced in future years. In certain instances it has been necessary to estimate the charges made in the accounts using historical experience, current trends etc. Actual results may be different from the assumptions made and consequently may affect the charges made in future years accounts. 5 Page 25

26 The main risk areas are set out in the following table: Issues appertaining to items in the current Statement of Accounts: Item Risk Potential Affect Contractual Obligations Incorrect quantifications and legal challenge Additional charge to the Joint Committee and its Partner Authorities Pension Liability Actuarial assumptions incorrect Increased Employer Contributions at future date Issues potentially impacting the Statement of Accounts in the future: Item Risk Potential Affect Changes in political priorities Reduced Funding Reduction in service, or cessation of Regional Working Educational Outcomes Pupils Attainment does not Improve Loss of future grant funding/partner Authorities having to increase funding Demographic Change Assumptions Incorrect Increased service & contractual costs Grant Funding Loss of grant from Welsh Government & Europe Reduction in service provision Governance Decisions not made in timely manner Delay in improvements Budget over/under spends & loss of grant funding Page 26 Transformation/ Alternative Service Delivery Changed ways of working do not deliver assumed financial savings Budget over/under spend Separate accounting arrangements 6

27 Issues potentially impacting the Statement of Accounts in the future: Item Risk Potential Affect Welsh Language Standards Assumption incorrect Increased service & contractual costs Wellbeing of Future Generations Act Act not considered in decision making Cost of corrective action (d) Accounting Policies The accounting policies used to prepare the Core Accounting Statements, the Supporting Notes and Supplementary Financial Statements have been reviewed using the Code for (e) Internal Control Issues The ERW Head of Internal Audit Annual Assurance Statement for , to be considered by the Joint Committee on 15 July 2016, confirms that there are no significant internal control issues which would impact on the Statement of Accounts for (f) Wales Audit Office The Wales Audit Office have completed their audit of the Statement of Accounts for and have issued their ISA 260 report and audit opinion, copy attached. The ERW S151 Officer and ERW Accountant will support the Joint Committee at the meeting in reviewing the Statement of Accounts for and the specific matters highlighted above. RECOMMENDATIONS The Joint Committee review the ERW Statement of Accounts for and the Wales Audit Office ISA260 report and audit opinion. The Joint Committee approve the ERW Statement of Accounts for Page 27

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29 Education through Regional Working South West and Mid Wales Consortium Statement of Accounts 2015/16 1 Page 29

30 INDEX EXPLANATORY FOREWORD SUMMARISED FINANCIAL PERFORMANCE PAGE 3-8 AUDITOR S CERTIFICATE 9-10 STATEMENT OF ACCOUNTS Statement of Responsibilities for the Statement of Accounts Core Financial Statements Underlying Principles Financial Reporting Standards Accounting Concepts Critical Judgements In Applying Accounting Policies & Estimation Risk Statement of Accounting Policies Core Financial Statements Components and Detail Movement in Reserves Statement Comprehensive Income & Expenditure Statement Balance Sheet Cash Flow Statement Notes to the Movement in Reserves Statement Adjustment between Accounting Basis and Regulatory Funding Basis Usable Reserves Unusable Reserves Notes to the Comprehensive Income and Expenditure Account and Balance Sheet Revenue Grants Pension Costs Exceptional costs Remuneration Details Audit fees Related Parties Resource Allocation Debtors & Creditors Cash & Cash Equivalents Pension Reserve Page 30 2

31 EXPLANATORY FOREWORD Education through Regional Working is a single integrated regional professional school effectiveness service driving school improvement and learner achievement across the combined area of six local authorities in the South West and Mid Wales region within three hubs:- Carmarthenshire / Pembrokeshire Ceredigion / Powys Neath Port Talbot / Swansea The ERW region has well established governance arrangements in place with a legally constituted Joint Committee holding the regional school improvement service to account for its performance in improving outcomes for learners. The Joint Committee is established through and operates under a legal agreement signed and sealed by each constituent Council on 16th July Consortium working between Directors of Education had been an ongoing relationship for a number of years prior to the formation of the Joint Committee. Pembrokeshire County Council has been appointed as finance lead for the region. As such ERW operates under Pembrokeshire County Council s Financial Regulations, Employers Tax and VAT registration, Pension schemes, Human Resources policies (as they relate to centrally employed core staff) and all relevant accounting policies. Powys County Council Procurement policies are followed, Carmarthenshire County Council lead on Governance and Committee Services, Ceredigion County Council lead on Legal and Monitoring Officer duties, Neath Port Talbot County Borough Council lead on Risk Management and the County of Swansea lead on Scrutiny. 3 Page 31

32 SUMMARISED FINANCIAL PERFORMANCE 2015/16 The summarised financial performance provides a high level overview of the financial position of the Consortium as at 31st March Set out in the following paragraphs is the final outturn position for 2015/16 compared to the original estimate agreed by the ERW Joint Committee on the 9 February 2015 and consideration of the Central Team draft budget and funding position for 2016/17 and 2017/18 approved by the Joint Committee in February The Draft Outturn position will be reported to the ERW Joint Committee on 10 June REVENUE EXPENDITURE Central Team Gross Expenditure 2015/ / / /15 Central Team Grants Total Total Original Estimate Actual Expend Actual Expend Actual Expend Actual Expend Employees , Premises Transport Translation Supplies and Services ,879 1,934 1,200 Facilitation Grants Passported to LA's ,883 62,883 31,030 Total Gross Expenditure ,689 66,169 33,056 Income Contributions from Member Authorities (250) (250) - (250) (267) Welsh Government Grant (153) (288) (65,605) (65,893) (32,390) Sports Council for Wales (230) Other Grant Income - (2) (84) (86) - Total Income (403) (540) (65,689) (66,229) (32,887) Net Expenditure 100 (60) - (60) 169 Appropriation from Reserve (100) (10) - (10) (169) Appropriation to Reserve Page 32 4

33 DRAFT BUDGET AND FUNDING POSITION 2016/17 & 2017/ / /18 Central Team Estimated Expenditure Estimated Expenditure Gross Expenditure Employees Premises Transport Translation Supplies and Services Facilitation Grants Passported to LA's - - Total Gross Expenditure Income Contributions from Member Authorities (250) (250) Welsh Government Grant (150) (150) Sports Council of Wales - - Total Income (400) (400) Net Expenditure Appropriation from Reserve (151) (164) 1.1 Commentary on the 2015/16 Revenue Performance The ERW Consortium gross expenditure for 2015/16 totalled million which included million of grants being passported directly to the six constituent Local Authorities. The ERW Joint Committee and Executive Board received regular budget reports throughout the year and were updated on additional grant resources as they became available. All Joint Committee reports can be found on the ERW website The Central Team and their capacity to support the region has remained consistent through 2015/16. The HR Strategic Director retired in August 2015 and was not replaced until March 2016, resulting in a saving on the original budget. In July 2015, a sub-lease was negotiated with Theatr Genedlaethol Cymru for additional rooms and space. This increased expenditure by 8k for the financial year. Translation costs exceeded the original budget by 23k, but this was noted early during the year. 5 Page 33

34 Supplies and Services savings of 19k were made during 2015/16.The main savings were External Audit which was 6k less than predicted, Communications which was 10k less due to grant funding awarded, and an 8k saving on Human Resources costs. There were additional charges for photocopier usage and printing totalling 5k Local Authority contributions for 2015/16 have been collected from the six partners in the sum of 250k. Unlike other consortiums, ERW does not directly employ school improvement challenge advisors. They are employed by each Local Authority and work collaboratively across the three area hubs and the region as a whole as and when necessary to deliver an effective service. ERW therefore only directly employs a small administrative central team which support the Managing Director and some grant funded seconded staff. This model allows greater flexibility in delivery than employing all challenge advisors directly given the geographical area the region covers. Contributions towards the costs of the central team were split between the six Local Authorities on the basis of pupil numbers for 2015/16: Local Authority % of Pupils in Region Contribution Carmarthenshire 20.9% 52,250 Ceredigion 7.4% 18,500 Neath Port Talbot 15.9% 39,750 Pembrokeshire 14.1% 35,250 Powys 14.4% 36,000 City and County of Swansea 27.3% 68,250 Total 100.0% 250,000 These percentages were also used for apportioning reserves across the six local authorities. 223k of the costs of the central team have been funded by various Welsh Government grants. During 2015/16, written confirmation was received from Welsh Government that they would not be seeking any repayment of specific 2014/15 grants which were unclaimed by local authorities as the ERW Consortium as a whole had overspent their allocation. This contributed 65k to reserves. 1.2 Implications and Risks It is not anticipated that there are any unbudgeted commitments or liabilities arising from 2015/16 that the Consortium cannot meet. 2. CAPITAL INVESTMENT There was no capital expenditure in 2015/16. Capital grants from Welsh Government are passported direct to the relevant Local Authority. Page 34 6

35 3. ASSETS & LIABILITIES 3.1 Current Assets and Current Liabilities Total ERW debtors were valued at 1.720m, being mostly grant income due from Welsh Government. No issues have been identified in relation to the impairment of these or any other current assets. No issues have been identified regarding the settlement of current liabilities. 3.2 Pensions Liability ERW participates in two pension schemes - the Dyfed Pension Fund and the Teachers Pension Fund Dyfed Superannuation Scheme, which is administered by Carmarthenshire County Council, is a funded defined benefit scheme to which both employees and the ERW Joint Committee as employers pay contributions. From April 2014 pensions are based around career average pension as opposed to final salary pensions (for the post April 2014 element only). The scheme is subject to statutory triennial actuarial valuations to ensure that the fund can meet future obligations, the last valuation having taken place in The Dyfed Fund has seen an increase in its net deficit Implications and Risks Under the Compact between Welsh Local Government and the Welsh Government, one of the proposed policy reviews involved considering the number and organisational structure of pension funds in Wales. The staging date for auto-enrolment of staff in the Scheme has been transitionally postponed, as allowed under the regulations, until The major risks facing the ERW Joint Committee relate to: The overall number of contributors to the fund relative to the number of pensioners falling significantly resulting in higher employer contribution rates. Any consequential increase in employer contribution rates arising from the reforms outlined above or poor economic performance of the Dyfed Fund investments. Given the small number of employees employed by ERW its exposure to these risks is small Teachers Pension Scheme The scheme is administered by the Department for Education. This is an unfunded scheme, meaning that there are no investment assets accumulated to meet pension costs before they arise, and therefore no fund assets or liabilities appearing in the ERW Joint Committee s Balance Sheet Implications and Risks The Government introduced reforms to Teachers pensions from April Future pensions will be based around career average pension as opposed to final salary pensions. The major risk facing the ERW Joint Committee relates to: The consequential increase in employer contribution rates arising from the falling contributor to pensioner ratios and from the reforms outlined above. 7 Page 35

36 3.3 Usable Reserves and Balances General Reserve This reserve constitutes ERW s working balance and is maintained to meet day to day operational eventualities Earmarked Reserves These constitute balances held at the year end for specific purposes and will be used in accordance with those specific requirements. A working reserve of 100k will be created in 2016/17 in order to provide an adequate level of funding to deal with any unexpected expenditure. 4. SIGNIFICANT INTERESTS Members of the ERW Joint Committee, Lead Officers and Officers of the Executive Board are required to declare potential conflicts of interest arising from employment and other arrangements. There are no conflicts of interests to report. 5. PAYMENTS TO AUDITORS It is estimated that 13k will be paid to the Wales Audit Office for its work auditing the 2015/16 financial statements. All grant certification will be subject to Internal Audit as required by Welsh Government. 6. POST BALANCE SHEET EVENTS There were no events judged as material to ERW s financial position at 31 March 2016, which occurred after the financial year end but before the initial reporting date of 31 May Any events taking place between the 31 May 2016 and the 15 July 2016, the date the audited Statement of Accounts being authorised for issue by the S151 Officer, will be reported and approved by the ERW Joint Committee. There are no events to be reported. Page 36 8

37 Auditor General for Wales report to the Members of Education through Regional Working Joint Committee I have audited the accounting statements and related notes of Education through Regional Working Joint Committee for the year ended 31 March 2016 under the Public Audit (Wales) Act Education through Regional Working Joint Committee s accounting statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement. The financial reporting framework that has been applied in their preparation is applicable law and the Code of Practice on Local Authority Accounting in the United Kingdom based on International Financial Reporting Standards (IFRSs). Respective responsibilities of the responsible financial officer and the Auditor General for Wales As explained more fully in the Statement of Responsibilities for the Statement of Accounts set out on page 11, the responsible financial officer is responsible for the preparation of the statement of accounts, which gives a true and fair view. My responsibility is to audit the accounting statements and related notes in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require me to comply with the Financial Reporting Council s Ethical Standards for Auditors. Scope of the audit of the accounting statements An audit involves obtaining evidence about the amounts and disclosures in the accounting statements and related notes sufficient to give reasonable assurance that the accounting statements and related notes are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Education through Regional Working Joint Committee s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the responsible financial officer and the overall presentation of the accounting statements and related notes. In addition, I read all the financial and non-financial information in the Explanatory Foreword to identify material inconsistencies with the audited accounting statements and related notes and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by me in the course of performing the audit. If I become aware of any apparent material misstatements or inconsistencies, I consider the implications for my report. Opinion on the accounting statements of Education through Regional Working Joint Committee In my opinion the accounting statements and related notes: give a true and fair view of the financial position of Education through Regional Working Joint Committee as at 31 March 2016 and of its income and expenditure for the year then ended; and have been properly prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom Page 37

38 Opinion on other matters In my opinion, the information contained in the Explanatory Foreword is consistent with the accounting statements and related notes. Matters on which I report by exception I have nothing to report in respect of the following matters, which I report to you, if, in my opinion: adequate accounting records have not been kept; the accounting statements are not in agreement with the accounting records and returns; or I have not received all the information and explanations I require for my audit; the Governance Statement does not reflect compliance with guidance. Certificate of completion of audit I certify that I have completed the audit of the accounts of Education through Regional Working Joint Committee in accordance with the requirements of the Public Audit (Wales) Act 2004 and the Auditor General for Wales Code of Audit Practice. For and on behalf of Huw Vaughan Thomas Auditor General for Wales Wales Audit Office 24 Cathedral Road Cardiff CF11 9LJ July 2016 Page 38 10

39 STATEMENT OF ACCOUNTS ERW, SOUTH WEST AND MID WALES CONSORTIUM JOINT COMMITTEE STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT The ERW Joint Committee s Responsibilities The ERW Joint Committee is required: To make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs. In this ERW Joint Committee, that officer is the Chief Finance Officer of Pembrokeshire County Council. To manage its affairs to secure the economic, efficient and effective use of resources and safeguard its assets. To approve the Statement of Accounts. The Chief Finance Officer s Responsibilities The Chief Finance Officer is responsible for the preparation of the Joint Committee Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code). In preparing this Statement of Accounts, the Chief Finance Officer has: Selected suitable accounting policies and then applied them consistently; Made judgments and estimates that were reasonable and prudent; Complied with the Code. The Chief Finance Officer has also: Kept proper accounting records which were up to date; Taken reasonable steps for the prevention and detection of fraud and other irregularities. CERTIFICATE OF CHIEF FINANCE OFFICER The Statement of Accounts of the ERW, South West and Mid Wales Consortium Joint Committee for the year ended 31 March 2016 is contained on pages 13 to 32, and is produced in accordance with the requirements of the Local Government Accounts and Audit (Wales) Regulations The Regulations prescribe the contents of the Statement of Accounts and it is upon the contents only that the Audit opinion is expressed. I certify the accounts present a true and fair view of the financial position of the ERW, South West and Mid Wales Consortium Joint Committee as at 31 March 2016 and its income and expenditure for the year ended 31 March 2016 and append my signature to the Statement in accordance with Regulation 10(1). J HASWELL FCCA Chief Finance Officer Date : 11 Page 39

40 REPORTING AND APPROVAL These accounts, initially published on 31 May 2016, will be reported to the ERW South West and Mid Wales Consortium Joint Committee for approval following the conclusion of the Annual Audit on 15 July The audit certificate is shown on pages Chair of ERW South West and Mid Wales Consortium Joint Committee Name: Cllr. A. Thomas Offices Address: Y Llwyfan College Road Carmarthen SA31 3EQ Date: 15 July 2016 Page 40 12

41 CORE FINANCIAL STATEMENTS - UNDERLYING PRINCIPLES The application of accounting standards, concepts, critical judgements and inherent risks, and accounting policies used in preparing the core financial statements are set out in the following pages. 1. FINANCIAL REPORTING The International Financial Reporting and Other Standards that have been issued have been applied as required by the Code of Practice on Local Authority Accounting. The Code of Practice requires that the ERW Joint Committee discloses information relating to the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted by the code for the relevant financial year. The standards introduced in the 2016/17 Code that are relevant are: - Amendments to IAS 19 Employee Benefits (Defined Benefit Plans: Employee Contributions) - Annual Improvements to IFRSs Cycle - IFRS 2 Share-based Payment definition of vesting condition - IFRS 3 Business Combinations accounting for contingent consideration in a business combination - IFRS 8 Operating Segments aggregation of operating segments - IFRS 8 Operating Segments reconciliation of the total reportable segments assets to the entity s assets - IFRS 13 Fair Value Measurement short-term receivables and payables - IAS 16 Property, Plant and Equipment revaluation method (proportionate restatement of accumulated depreciation) - IAS 24 Related Party Disclosures key management personnel - IAS 38 Intangible Assets revaluation method (proportionate restatement of accumulated amortisation) - Amendment to IFRS 11 Joint Arrangements (accounting for Acquisitions of Interests in Joint Operations) - Amendment to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (Clarification of Acceptable Methods of Depreciation and Amortisation) - Annual Improvements to IFRSs Cycle - IFRS 5 Non-current Assets Held for Sale and Discontinued Operations changes in methods of disposal - IFRS 7 Financial Instruments: Disclosures servicing contracts - IFRS 7 Financial Instruments: Disclosures applicability of the amendments to IFRS 7 to condensed Interim Financial Statements - IAS 19 Employee Benefits discount rate: regional market issue - IAS 34 Interim Financial Reporting disclosure of information elsewhere in the interim financial report. - Amendment to IAS 1 Presentation of Financial Statements (Disclosure Initiative) - The changes to the format of the Comprehensive Income and Expenditure Statement, the Movement in Reserves Statement and the introduction of the new Expenditure and Funding Analysis 13 Page 41

42 - The changes to the format of the Pension Fund Account and the Net Assets Statement The impact of the above changes is unlikely to be material but will result in some presentational changes and these will be disclosed in the 2016/17 Financial Statements. The Statement of Accounts set out on pages 13 to 36 have been prepared in compliance with the 2015/16 Code of Practice on Local Authority Accounting. 2. ACCOUNTING CONCEPTS The following pervasive accounting concepts have been used in the preparation of the Core Accounting Statements: Accruals Going concern The qualitative characteristics of financial information continue to be employed: Relevance Comparability Verifiability Timeliness Understandability Materiality Faithful Representation Completeness Neutrality Free from error Primacy of legislative requirements 3. CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES AND ESTIMATION RISK In applying the accounting policies set below on pages 14 to 19 the ERW Joint Committee has made judgements about the complex transactions and those involving uncertainty in future years. Although there is a high degree of uncertainty about the future level of funding for local government, to date Education has been a priority for the Welsh Government. Therefore while some grants may be reduced and given the small number of employees directly employed by ERW, there is insufficient evidence to conclude that the Joint Committee activities will be severely impaired or reduced in future years. In certain instances it has been necessary to estimate the changes made in the accounts using historical experience, current trends etc. Actual results may be different from the assumptions made and consequently may affect the charges made in future years accounts. Page 42 14

43 The main risk areas are set out in the following table: Issues appertaining to items in the current set of accounts: Item Risk Potential Affect Contractual Obligations Incorrect quantifications and legal challenge Additional charge to the Joint Committee and its Partner Authorities Pension Liability Actuarial assumptions incorrect Increased Employer Contributions at future date Issues potentially impacting the accounts in the future Item Risk Potential Affect Changes in political priorities Reduced Funding Reduction in service, or cessation of Regional Working Educational Outcomes Pupils Attainment does not Improve Loss of future grant funding/partner Authorities having to increase funding Demographic Change Assumptions Incorrect Increased service & contractual costs Grant Funding Loss of grant from Welsh Government & Europe Reduction in service provision Governance Decisions not made in timely manner Delay in improvements Budget over/under spends & loss of grant funding Transformation/ Alternative Service Delivery Changed ways of working do not deliver assumed financial savings Budget over/under spend Separate accounting arrangements 15 Page 43

44 Welsh Language Standard Assumption incorrect Increased service & contractual costs Wellbeing of Future Generations Act Act not considered in decision making Cost of corrective action 4. ACCOUNTING POLICIES The accounting policies used to prepare the Core Accounting Statements and the following Supporting Notes and Supplementary Financial Statements have been reviewed using the 2015/16 Code of Practice on Local Authority Accounting. 4.1 General The objective of the accounting policies adopted shall be to ensure that the Statement of Accounts provides a true and fair view of the financial position of the ERW Joint Committee. The accounts shall be prepared in accordance with the latest Code of Practice on Local Authority Accounting, issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) (the Code) and adhere to the relevant Financial Reporting Standards and Practices, unless otherwise stated. Figures shall be included in the Financial Statements using the cost convention specified by the appropriate accounting standard. The accounting policies shall be revised as required from those of the previous year to reflect changes in reporting requirement with any such changes being disclosed. 4.2 Going Concern, Exceptional, Extraordinary Items, Prior Year Adjustments & Events After the Reporting Period The Financial Statements shall be prepared on a going concern basis unless there is an intention by government that the services will no longer be provided. Extraordinary items - No items of income or expense will be treated as extraordinary. All items will therefore be accommodated within one of the specified lines of the Surplus or Deficit on the Provision of Services or the Other Comprehensive Income and Expenditure. Exceptional items When items of income and expense are material, their nature and amount will be disclosed separately, either on the face of the Comprehensive Income and Expenditure Account or in the notes to the accounts. Unless otherwise sanctioned by the Code, material prior period adjustments shall result in a restatement of prior year figures and disclosure of the effect. Material events occurring after the end of the reporting period shall, if applicable at the Balance Sheet date, amend the Statement of Accounts. Other events will be disclosed with an estimate of the likely financial effect. If amended after being issued prior to the conclusion of audit the responsible financial officer shall re-certify the revised Statement of Accounts as replacing that previously issued. Materiality shall be defined as the amount estimated by the Wales Audit Office in any one year. Page 44 16

45 4.3 Leases and Lease-Type Arrangements Recognition and Classification Leases and similar financial arrangements shall be classified as either finance leases or operating leases. Finance leases are defined as arrangements whereby all risks and rewards incidental to ownership transfer substantially to the lessee but title may or may not eventually transfer. Operating leases shall be defined as all other lease type arrangements. In considering property leases, land and buildings shall be considered separately for classification purposes, with land with an infinite life generally being recognised as an operating lease. Finance Leases - shall be recorded in the Balance Sheet of the ERW Joint Committee as assets and equal liabilities in the appropriate category at fair value of the property or, if lower, the present value of the minimum lease payments the discount rate applied being that implicit in the lease. Subsequently assets are subject to revaluation and depreciation. The finance charge shall be charged to the revenue account on a constant basis over the term of the lease. Operating Leases - the whole of the rental payable under operating leases shall be charged to the revenue account on a straight line basis over the term of the lease. 4.4 ERW Joint Committee Reserves (Working Balances) Classification Reserves shall be classified as usable, being available to support future expenditure or unusable being those required for financial accounting purposes. Usable Reserves The ERW Joint Committee shall govern the management and use of all reserves. The expenditure financed from reserves shall be shown, when it is incurred, in the appropriate service section of the Comprehensive Income and Expenditure Statement. The following circumstances shall allow amounts to be reserved from revenue: i. Material commitments exist for goods and services not received or paid for by 31 March ii. Facilitation of rolling over of funding to future years to ensure the cost effective use of resources and allow for variation in service demand from year to year iii. To set aside resources for future developments or contingencies Unusable Reserves The following financial reserves shall be maintained: i. Pension Reserve to reflect the position of the Scheme s Fund. ii. Accumulated Absences Account to reflect the cost of paid absence entitlement due but not taken at 31 March. Reporting Appropriations to and from reserves shall be reported in the Movement in Reserves Statement. 4.5 Income & Expenditure Employee Costs & Benefits Salaries and wages shall be charged against the periods to which they relate and if necessary estimated accruals made using previous pay periods as a basis. An adjustment shall be made in the Comprehensive Income & Expenditure Account to take account of accrued leave entitlement. 17 Page 45

46 Pension costs see policy 4.7 below. Supplies and Services Etc The ERW Joint Committee operates a system of accruals and converted payments. Creditors will be accrued by cut off payments at the end of a predetermined period of the following year and by the inclusion of estimates for significant items remaining outstanding at this time based on quotations or past costs. An exception to this principle relates to electricity and similar periodic payments which are charged at the date of meter reading rather than being apportioned between financial years. This policy shall be consistently applied each year and therefore does not have a material effect on any year s accounts. Income All income due to the ERW Joint Committee shall be accounted for at the due date and recognised at fair value. 4.6 Government Grants And Other Contributions General Government grants and other contributions shall be accounted for on an accruals basis and when the conditions for their receipt have been complied with and there is reasonable assurance that the grant or contribution will be received. Revenue Grants and Contributions Where a revenue grant or contribution has been received, and conditions remain outstanding at the Balance Sheet date, the grant or contribution shall be recognised as a receipt in advance. When the grant conditions are met it shall be recognised in Comprehensive Income and Expenditure Statement as income and be matched in the service revenue accounts with the expenditure to which it relates. Repayment In the event of repayment this shall first be applied to any receipt or contribution received in advance. To the extent that the repayment exceeds any such receipt in advance, or where no receipt in advance exists, the repayment shall be recognised within the Comprehensive Income and Expenditure Statement as an expense. 4.7 Employee Benefits Benefits during Employment Normal remuneration costs shall be charged as an expense in the period to which they relate. A year end accrual shall be made in the Comprehensive Income and Expenditure Statement of any material costs arising from holiday entitlement not taken. However, not being a charge for taxation purposes shall be reversed out in the Movement in Reserves Statement. Termination Benefits Termination benefits shall be charged in the Comprehensive Income and Expenditure Statement when the ERW Joint Committee is demonstrably committed to the termination of employment. Pension Costs The pension contributions paid by the ERW Joint Committee shall be charged on an accruals basis to the appropriate service revenue account and, together with the contributions made by employees, shall be paid over to the respective fund. Dyfed Pension Fund The accounting policies applying to the Fund shall be determined by the administering authority, Carmarthenshire County Council, who keep the accounts of the Fund and arrange for actuarial information to be provided to participating authorities. 18 Page 46

47 Pembrokeshire County Council, as an employing authority for the ERW Joint Committee shall include the current service costs of pensions as calculated by the Fund s actuary in the cost of services in accordance with the requirements of Financial Reporting Standard IAS19 as this is accounted for as defined benefit scheme. These charges shall be reversed out in the Movement in Reserves Statement and the actual contributions paid to the Fund included to ensure that the correct cost is charged to the ERW Joint Committee. Assets and liabilities pertaining to the ERW Joint Committee shall be disclosed on the Balance Sheet. 4.8 Stocks and Works in Progress Stocks held by the ERW Joint Committee shall be valued at the lower of cost and net realisable value. 4.9 Debtors, Bad Debt Impairment & Creditors General Debtors shall be recognised in the Balance Sheet and measured at fair value of the amount receivable when revenue has been recognised. In the majority of cases fair value will equate to the cash value but in the case of long term debtors the value shall be discounted by the appropriate rate to reflect fair value. The adjustment shall be made in the Comprehensive Income and Expenditure Statement but not being a proper charge to the ERW Joint Committee shall be reversed in the Movement in Reserves Statement to the Financial Instrument Adjustment Account. Impairment of Debts General allowances for impaired debts shall be made in the Balance Sheet using the following guidelines (or in specific circumstances on a basis agreed with S151 Officer). Age of Debt %age of debt provided Less than 1 year 50% 1 to 2 years 90% 2 to 3 years 100% The bad debt allowance shall be reviewed at the end of each financial year against the debts outstanding and adjustments made in the Comprehensive Income and Expenditure Statement as is appropriate. General Creditors shall be recognised in the Balance Sheet and measured at fair value of the amount payable when goods have been delivered or services rendered. In the majority of cases fair value will equate to the cash value but in the case of long term creditors the value shall be discounted by the appropriate rate to reflect fair value. The adjustment shall be made in the Comprehensive Income and Expenditure Statement but not being a proper charge to the ERW Joint Committee fund shall be reversed in the Movement in Reserves Statement to the Financial Instrument Adjustment Account VAT Transactions shall be shown net of VAT to the extent that it is recoverable/payable Related Parties The following disclosures shall be made in respect of material transactions with related parties not disclosed elsewhere in the Statement of Accounts: i. Nature of the relationship and influence exerted either by or on the ERW Joint Committee ii. The aggregate of transactions in the year separately showing payable and receivable amounts iii. Outstanding balances as at 31 March. 19 Page 47

48 CORE FINANCIAL STATEMENTS COMPONENTS AND DETAIL The core financial statements, prepared using International Financial Reporting Standards, (IFRS) comprise of: The Movement in Reserves Statement showing the movement on the different reserves held by the authority analysed between usable reserves and unusable reserves held for financial accounting purposes. The Comprehensive Income and Expenditure Statement - showing the accounting cost in the year of providing services measured on an IFRS basis as opposed to the cost actually funded from taxation. The reconciliation to the taxation position, as represented by the actual funds available to the ERW Joint Committee, is shown in the Movement in Reserves Statement on page 21. The Balance Sheet - which sets out the financial position on 31 March in terms of the value of assets and liabilities recognised by the ERW Joint Committee and the reserves held by the ERW Joint Committee The Cash Flow Statement - which summarises the inflows and outflows of cash and cash equivalents with third parties arising from revenue and capital transactions. Supporting Notes and Supplementary Financial Statements These comprise of: Notes to the core financial statements. Page 48 20

49 MOVEMENT IN RESERVES STATEMENT This Statement shows the movement in the year on the different reserves held by the ERW Joint Committee, analysed between usable (those that can be applied to fund expenditure) and other unusable reserves. The unusable reserves include reserves that hold unrealised gains and losses that are only realised when assets are sold and reserves that hold accounting differences needed to reconcile the differences between reporting on the IFRS accounting basis and the statutory funding basis. The (Surplus)/Deficit on the provision of services reflects the economic cost of providing the ERW Joint Committee s services, more details of which are provided in the Comprehensive Income and Expenditure Statement on the following page. Actuals 2015/16 ERW Usable Reserves ERW Unusable Reserves Total ERW Reserves Balance 1 April 2015 (412) 40 (372) (Surplus) / Deficit On Provision of Services (7) - (7) Total Comprehensive Income & Expenditure (see page 22) (7) - (7) Adjustments Between Accounting Basis and Funding Basis Under Regulation (see page 28) (53) 53 - (Increase) / Decrease In Year (60) 53 (7) Balance 31 March 2016 (472) 93 (379) COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT This statement shows the economic cost in the year of providing services in accordance with generally accepted accounting practice. The Comprehensive Income and Expenditure Statement can be summarised as follows: Surplus/Deficit on Continuing Operations analyses by subjective groupings, the day to day income and expenditure on such items as employee remuneration, running costs of services, service specific grants, fees and charges. In accordance with the Code requirements, the operating income and expenditure of services include the following notional costs that are reversed out in the Movement in Reserves Statement: current service pension costs. Other Comprehensive Income & Expenditure shows the surplus or deficit arising from the remeasurement of pension assets and liabilities. 21 Page 49

50 COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT Note 2014/ /16 Gross Income Net Gross Income Expend. Expend. Expend. Net Expend. Expenditure Pg Ref 000 Employees ,234-1,234 Termination Benefits Premises Transport / Mileage Payments to Schools for Specific Work ,362-1,362 Supplies and Services Consultancy Translation Marketing Training/Conferences Support Services Repayment from LA/due to WG 17 (17) Total Expenditure 2,046 (17) 2,029 3,321-3, Income Contributions from Member Authorities - (250) (250) - (250) (250) Welsh Government Grant - (1,360) (1,360) - (3,010) (3,010) Sports Council for Wales - (230) (230) Miscellaneous Grant Income (2) (2) Other Grant Income (84) (84) Total Income - (1,840) (1,840) - (3,346) (3,346) WG Grant Passported to Member Authorities 26 Carmarthenshire 6,177 (6,177) - 12,946 (12,946) - Ceredigion 2,313 (2,313) - 4,544 (4,544) - Neath Port-Talbot 5,860 (5,860) - 10,679 (10,679) - Pembrokeshire 4,456 (4,456) - 8,967 (8,967) - Powys 3,719 (3,719) - 7,964 (7,964) - City and County of Swansea 8,505 (8,505) - 17,783 (17,783) - (Surplus)/Deficit on Continuing Operations Financing & Investment Income and Expenditure 31,030 (31,030) - 62,883 (62,883) - 33,076 (32,887) ,204 (66,229) (25) Net Pensions Interest (Surplus) or Deficit on Provision of Services TOTAL COMPREHENSIVE INCOME & EXPENDITURE (7) (7) Page 50 22

51 BALANCE SHEET This Statement shows the value at the Balance Sheet date of the assets and liabilities recognised by the ERW Joint Committee. The net assets (assets less liabilities) are matched by: Usable reserves comprising of the general reserve and earmarked reserves. Unusable reserves comprising of reserves facilitating the adjustments required between accounting basis used to prepare the Statement of Accounts and the statutory funding basis under regulation. BALANCE SHEET AS AT 31 MARCH CURRENT ASSETS: Page Ref 2014/ / Short-term Debtors and Prepayments 34 5,336-1,720 - Cash & Cash Equivalents Total Current Assets - 5,483-1,776 TOTAL ASSETS - 5,483-1,776 CURRENT LIABILITIES: Short-term Creditors 35 (5,071) - (1,298) - Payment in Advance (6) Total Current Liabilities - (5,071) - (1,304) TOTAL ASSETS LESS CURRENT LIABILITIES Net Pension Fund Liability 36 (40) - (93) - TOTAL LONG TERM LIABILITIES - (40) - (93) NET ASSETS Usable Reserves - General Joint Committee Reserve 25 - (348) - (472) - Earmarked Joint Committee Reserves 25 - (64) - - Unusable Reserves - Pensions Reserve TOTAL RESERVES (372) - (379) 23 Page 51

52 CASH FLOW STATEMENT The Cash Flow Statement shows the changes in cash and cash equivalents during the reporting period, showing how the ERW Joint Committee generates and uses cash and cash equivalents by classifying cash flows into operating, investing and financing activities. The amount of net cash flows arising from net operating activities is a key indicator of the extent to which operations are funded by way of grant income or from the recipients of services provided by the ERW Joint Committee. All cash transactions are administered by Pembrokeshire County Council as ERW South West & Mid Wales Consortium Joint Committee does not operate its own bank account. CASH FLOW STATEMENT Reconciliation of Comprehensive Income and Expenditure Statement to Net Revenue Cash Flow 2014/ / Net (Surplus)/Deficit on the provision of services (7) Adjustments to net surplus or deficit on the provision of services for non-cash movements Pension fund adjustments (40) (53) - Movements in revenue debtors, creditors, stocks etc. 1,904 1, Net Cash Flow from Operating Activities - 2, NET (INCREASE)/DECREASE IN CASH & CASH EQUIVALENTS - 2, Cash & cash equivalents at the beginning of reporting period 2, Cash & cash equivalents at the end of reporting period INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS (2,073) - (91) Page 52 24

53 NOTES TO THE MOVEMENT IN RESERVES STATEMENT 1. ADJUSTMENTS BETWEEN ACCOUNTING BASIS AND REGULATORY FUNDING BASIS Actuals 2014/ /16 ERW Usable Reserves Unusable Reserves ERW Usable Reserves Unusable Reserves Amounts included in Total Comprehensive Income and Expenditure required by regulation to be excluded to arrive at the funding position Pension Cost Adjustment (112) 112 (106) 106 Amounts excluded in Total Comprehensive Income and Expenditure required by regulation to be included to arrive at the funding position Employers contributions to pension schemes 72 (72) 53 (53) Net Adjustment Required (40) 40 (53) USABLE RESERVES Useable Reserves Balance 1 April 2015 Contrib n to Revenue Accounts Contrib n from Revenue Accounts Balance 31 March Earmarked Reserves (64) General Reserve (348) 10 (134) (472) Total Useable Reserves (412) 74 (134) (472) 3. UNUSABLE RESERVES The transactions in the unusable reserve accounts summarised below can be found in more detail on page 25. Balance at 1 April 2015 Movement in Year Balance at 31 March Pensions Reserve Total Unusable Reserves Page 53

54 NOTES TO THE COMPREHENSIVE INCOME & EXPENDITURE STATEMENT 1. REVENUE GRANTS The table below sets out specific grant income from Welsh Government and Other Grant Awarding Bodies subsequently passported to the Member Authorities. 2014/ /16 Total Total Grants Allocated Direct to Authority 2014/15 Grants Held Centrally 2014/15 Grants Allocated Direct to Authority 2015/16 Grants Held Centrally 2015/ Pupil Deprivation Grant (17,648) (17,648) - (21,008) (20,953) (55) School Effectiveness Grant (7,582) (7,200) (382) Learning Pathways (2,797) (2,707) (90) (1) (1) - Welsh in Education Grant (1,779) (1,779) Schools Challenge Cymru Tranche 1 (790) (635) (155) (571) (529) (42) Regional Collaboration Fund (520) (510) (10) (358) (348) (10) GCSE / Milan (360) - (360) (679) - (679) Physical Literacy (230) - (230) Band 4/5 Schools (170) (170) Lead Practitioner & Emerging Schools (162) (162) Consortia Attendance Grant (150) (130) (20) Welsh Baccalaureate (75) - (75) (50) - (50) New Areas of Learning (75) - (75) Learning in Wales Digital CPD (71) - (71) (71) - (71) Pupil Deprivation Cap. Building Grant (50) - (50) GCSE Professional Learning Schools (45) (45) Mentoring for Headteachers (43) - (43) (49) - (49) Literacy, Numeracy & MFL (25) (25) - (255) - (255) Lead Pract. & Emerging Schools - ALN (19) (19) Higher Level Teaching Assistants (17) - (17) (28) - (28) Yr 6 National Numeracy Tests (5) - (5) (5) - (5) Education Improvement Grant (40,419) (39,137) (1,282) Schools Challenge Cymru Tranche (1,455) (1,359) (96) Pioneer Schools (488) (488) - MFL School of Excellence (121) - (121) Learning in Digital Wales Cap. Building (83) - (83) GCSE Yr9 Cross Curricula (70) - (70) Lit. & Numeracy for Special Schools (50) - (50) Mathematics Events (45) - (45) Support for New Headteachers (42) (42) - Securing Teacher Assessment Prog (33) - (33) GCSE Drama & Music (26) (26) - Total Revenue Grants (32,613) (31,030) (1,583) (65,907) (62,883) (3,024) Non SLA grants awarded by WG (7) - (7) (7) (7) Total All Grants Offered to ERW (32,620) (31,030) (1,590) (65,914) (62,883) (3,031) Page 54 26

55 The above revenue grants have been accounted as follows during the year: 2014/15 Grants Directly Allocated to Authority Grants held Centrally 2015/16 Grants Directly Allocated to Authority Grants held Centrally Welsh Government Grants Income (32,390) (31,030) (1,360) (65,829) (62,883) (2,946) Sports Council of Wales Income (230) - (230) Qualifications Wales (50) (50) Education Achievement Service (EAS) (33) (33) Routes into Language (1) - (1) GwE Consortium (1) - (1) Grants Credited As Income in Year (32,620) (31,030) (1,590) (65,914) (62,883) (3,031) 2. PENSION COSTS The ERW Joint Committee participates in two pension schemes: 2.1 The Dyfed Superannuation Scheme, which is administered by Carmarthenshire County Council, is a funded defined benefit scheme to which both employees and the ERW Joint Committee, through Pembrokeshire County Council as employers, pay contributions. The scheme operates under the legislation appertaining to Local Government Pensions. A composite employer s contribution rate used in 2015/16 was calculated by the Fund s actuary based on the valuation as at 31 March 2013 for all employees of the ERW Joint Committee who are members of the scheme. The Fund was valued as at 31 March 2013 & the results of this valuation are reflected in the 2015/16 Accounts. The disclosures set out below are required by International Accounting Standard 19 (IAS 19), which employs slightly different assumptions than those used in the actuarial valuation, are also produced by the Fund s actuary at each financial year end. IAS 19 requires most assets to be valued at realisable values i.e. bid values, as opposed to fair values (in effect, mid-market values). Interest on Assets This is the interest on assets held at the start of the period and cashflows occurring during the period, calculated using the discount rate at the start of the year. The Net Interest Cost is calculated as interest on pension liabilities less the interest on assets. Expenses Administration expenses are recognised as a separate item within the pension cost. Investment expenses are treated as a loss on asset and so recognised via Other Comprehensive Income and Expenditure. 2.2 Teachers Pension Scheme The scheme is administered by the Department for Education. This is an unfunded scheme, meaning that there are no investment assets accumulated to meet pension costs before they arise, and therefore no fund assets or liabilities appearing in the ERW Joint Committee s Balance Sheet. 27 Page 55

56 Revenue Transactions Comprehensive Income And Expenditure Statement Entries included in Net Operating Expenditure 2014/ / Interest on Pension Liabilities Interest on Plan assets (129) - (80) Current Service Cost Statement of Movement on the Council Fund Balance Entries Reversal IAS 19 Entries Above: - (112) - (106) Actual Charges Paid In Year Actual Amount Charged For Period EXCEPTIONAL COSTS There were no exceptional costs incurred in the period (40) - (53) 4. REMUNERATION DETAILS 4.1 The following tables set out the disclosure of remuneration for ERW Joint Committee Senior Staff as follows: Managing Director and Other Senior Staff including pension contributions or equivalent payments. The total contribution rate for employer pension contributions was 15.3% for 2014/15 and 15.4% for 2015/16. Other Employees receiving remuneration of 60,000 or more (not including employer pension contributions) in bands of 5,000. Senior Officers Gross Salary, Fees & Other Emoluments Employer Pension Contributions to Local Government Pension Scheme Benefits in kind Managing Director 2014/15 70,958 10, /16 79,430 12,221 - Other Employees Number Of Employees Remuneration Band 2014/ /16 65,000-69, , , There are other senior officer roles within the ERW South West and Mid Wales Consortium Joint Committee who are not employed by the Consortium and they do not receive any remuneration through the additional roles that they carry out on behalf of the region. They include Lead Chief Executive Lead Director of Education S151 / Chief Finance Officer Monitoring Officer - Carmarthenshire - Ceredigion - Pembrokeshire - Ceredigion Also on the Executive Board are the other five Directors of Education from Carmarthenshire, Neath Port Talbot, Pembrokeshire, Powys and Swansea. Page 56 28

57 For information on the remuneration of the above individuals and seconded staff members, users should refer to the respective Local Authority statement of accounts. 4.2 Termination Benefits The following table identifies payments comprising of statutory and voluntary redundancy costs, pension contributions in respect of added years and pension strain and other ex gratia payments. Redundancy & Other Termination Costs 2014/ /16 No's No's 000 Compulsory Other Total Compulsory Other Total , ,001-40, ,001-60, Total Pension Costs - Capital Settlement (Current Year) 2014/ /16 Band No's 000 No s , ,001-40, Total AUDIT FEES The following amounts are estimated as payable to the Wales Audit Office for the year: Fees payable to Wales Audit Office with regard to external audit services carried out by the Appointed Auditor for the year. 2014/ / Fee payable for the certification of grant claims and returns - - Total RELATED PARTIES Related parties refers to bodies or individuals that have the potential to control or influence the ERW Joint Committee or to be influenced or controlled by the ERW Joint Committee thereby possibly constraining the ability of the ERW Joint Committee or the other party to operate independently. There are other instances where Executive Board Members, lead officers and Members of the ERW Joint Committee may attend meetings of the third party bodies but do not have the direct ability to exercise control, however, the opinions they express may influence decisions and policy. 6.1 Material Relationships The following material relationships have been identified where material influence exists UK and Welsh Government The UK and Welsh Governments, have the responsibility for the statutory framework and provide the majority of the ERW Joint Committees funding, much of which is subject to specific terms and conditions. The bodies can, therefore, exert effective control over the operations of the ERW Joint Committee. Details of grants received are set out on page 26. Grant receipts outstanding at 31 March 2016 are set out on page Page 57

58 7. AMOUNTS REPORTED FOR RESOURCE ALLOCATION DECISIONS The Comprehensive Income and Expenditure Statement is prepared using the accounting policies set out on pages 16 to 19 to meet the requirements of the Code of Practice on Local Authority Accounting. Decisions about resource allocation are taken by the Joint Committee on the basis of budget reports prepared on a different basis using the service groupings set out in SERCOP. In particular: The cost of retirement benefits is based on cash flows (payment of employer s pensions contributions) rather than the current service cost of benefits accrued in the year. 7.1 Net Cost of Services Analysed by Income and Expenditure Type This reconciliation shows how the figures in the Net Revenue Summary (page 4) relate to the amounts included in the Comprehensive Income and Expenditure Statement (page 22). Actual Income & Expenditure 2015/16 ERW Central Team ERW Specific Grants Local Authority Contributions (250) - (250) Government Grants (288) (65,605) (65,893) Other Grant Income (2) (84) (86) Total Income (540) (65,689) (66,229) Total Employee Costs ,199 Other Operating Costs 101 1,956 2,057 Support Services Grants Passported to LA's - 62,883 62,883 Total Costs ,689 66,169 Net Cost of Services (60) - (60) Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure Statement Net Cost of Services (60) Add Financial Adjustments not included in management reports 53 Remove amounts not in Comprehensive Income and Expenditure Statement - Net Cost of Services Comprehensive Income and Expenditure Statement (7) Page 58 30

59 7.1 Net Cost of Services Analysed by Income and Expenditure Type Continued Actual Income & Expenditure 2014/15 ERW Central Team ERW Specific Grants Local Authority Contributions (250) (17) (267) Government Grants (236) (32,154) (32,390) Sports Council of Wales - (230) (230) Total Income (486) (32,401) (32,887) Total Employee Costs Other Operating Costs 113 1,163 1,276 Support Services Grants Passported to LA's - 31,030 31,030 Total Costs ,516 33,056 Net Cost of Services Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure Statement Net Cost of Services 169 Add Financial Adjustments not included in management reports 40 Remove amounts not in Comprehensive Income and Expenditure Statement - Net Cost of Services Comprehensive Income and Expenditure Statement Page 59

60 Page Reconciliation to (Surplus) / Deficit in Comprehensive Income and Expenditure Statement This reconciliation shows how the figures in the preceding table relate to a subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement. Reconciliation to (Surplus) / Deficit in Comprehensive Income and Expenditure Statement Actual Income & Expenditure 2015/16 Service Analysis Financial Adjustments Not In Comp Inc & Exp Alloc n of Recharges Net Cost of Services Corporate Amounts Total Local Authority Contributions (250) (250) - (250) Interest & Investment Income Government Grants and Contributions (65,893) (65,893) - (65,893) Other Grant Income (86) (86) - (86) Total Income (66,229) (66,229) - (66,229) Employee Costs 1, ,234-1,234 Other Operating Costs 2, ,087-2,087 Support Services (30) Grants Passported to LA's 62, ,883-62,883 Interest Paid Total Costs 66, , ,222 (Surplus)/Deficit on Provision of Services (60) (25) 18 (7) 32

61 7.2 Reconciliation to (Surplus) / Deficit in Comprehensive Income and Expenditure Statement Continued Reconciliation to (Surplus) / Deficit in Comprehensive Income and Expenditure Statement Actual Income & Expenditure 2014/15 Service Analysis Financial Adjustments Not In Comp Inc & Exp Alloc n of Recharges Net Cost of Services Corporate Amounts Total Local Authority Contributions (267) (267) - (267) Interest & Investment Income Government Grants and Contributions (32,390) (32,390) - (32,390) Sports Council of Wales (230) (230) - (230) Total Income (32,887) (32,887) - (32,887) Employee Costs Other Operating Costs 1, ,296-1,296 Support Services (20) Grants Passported to LA's 31, ,030-31,030 Interest Paid Total Costs 33, , ,096 (Surplus)/Deficit on Provision of Services Page 61 33

62 8. DEBTORS AND CREDITORS 8.1 Debtors and Prepayments All amounts included as assets are shown at market (fair) value. Net 1 April 2015 Gross 31 March 2016 Impairment Allowance Net 31 March Amounts falling due in one year: Welsh Government 5,336 1,720-1,720 Local Authorities & Schools Other Debtors Total Debtors 5,336 1,720-1, Creditors Amounts falling due in one year: Balance 31 March 2015 Balance 31 March 2016 Short Term Creditors Revenue Grants Receipts in Advance Total Creditors Short Term Creditors Revenue Grants Receipts in Advance Total Creditors Welsh Government Local Authorities & Schools (5,071) - (5,071) (1,298) (6) (1,304) Other Creditors Total Creditors (5,071) - (5,071) (1,298) (6) (1,304) Page 62 34

63 8.3 Further Breakdown of Short-Term Creditor Analysis Grant Payments Owed to Creditors 2014/ / Current Liabilities Welsh in Education Grant 1,779 - School Effectiveness Grant 63 - Learning in Digital Wales CPD Programme Learning Pathways 2,511 3 Regional Collaboration Fund Higher Level Teaching Assistants 6 - Schools Challenge Cymru Mentoring of Headteachers 19 - GCSE / Milan Physical Literacy 64 6 Areas of Learning 31 - Welsh Baccalaureate 36 6 Education Improvement Grant National Professional Qualification of Headteachers - 11 Literacy & Numeracy for Special Schools - 35 Modern Foreign Languages - 10 GCSE Music & Drama - 26 Pupil Deprivation Grant - 5 Total Current Liabilities Revenue Grants 4,990 1,282 Other Creditors Central Team Powys Underspend to go Back to WG 17 - Total Creditors Owed 31 March 5,071 1, CASH AND CASH EQUIVALENTS Balance 31 March 2015 Balance 31 March Cash in Hand Bank Call Accounts - - Cash Overdrawn - - Total Cash and Cash Equivalents Page 63

64 10. PENSIONS RESERVE The Pensions Reserve relates to the Dyfed Pension Scheme (see page 7) and absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. The debit balance on the Pensions Reserve reflects the shortfall at a point in time between the benefits earned by past and current employees and the resources in terms of pension fund assets required to meet them. The statutory arrangements for managing the Fund should ensure that funding will have been set aside by the time the benefits come to be paid. 2014/ / Balance 1 April - 40 Remeasurements of Pension Liabilities and Assets - - Reversal of items chargeable to the surplus/ deficit on the provision of services in the Comprehensive Income and Expenditure Statement Employers pension contributions and other direct payments in the year (72) (53) Balance 31 March Page 64 36

65 Audit of Financial Statements Report Education through Regional Working Joint Committee Audit year: Issued: July 2016 Document reference: 424A2016 Page 65

66 Status of report This document has been prepared as part of work performed in accordance with statutory functions. In the event of receiving a request for information to which this document may be relevant, attention is drawn to the Code of Practice issued under section 45 of the Freedom of Information Act The section 45 Code sets out the practice in the handling of requests that is expected of public authorities, including consultation with relevant third parties. In relation to this document, the Auditor General for Wales and the Wales Audit Office are relevant third parties. Any enquiries regarding disclosure or re-use of this document should be sent to the Wales Audit Office at info.officer@audit.wales. Page 2 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 66

67 Contents The Auditor General intends to issue an unqualified audit report on your financial statements. There are some issues to report to you prior to their approval. Summary report Introduction 4 Status of the audit 4 Proposed audit report 4 Significant issues arising from the audit 5 Independence and objectivity 5 Appendices Final Letter of Representation 6 Proposed audit report of the Auditor General to the Education through Regional Working Joint Committee Summary of corrections made to the draft financial statements which should be drawn to the attention of the Education through Regional Working Joint Committee 9 11 Page 3 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 67

68 Summary report Introduction 1. The Auditor General is responsible for providing an opinion on whether the financial statements give a true and fair view of the financial position of the Education through Regional Working Joint Committee (ERW) at 31 March 2016 and its income and expenditure for the year then ended. 2. We do not try to obtain absolute assurance that the financial statements are correctly stated, but adopt the concept of materiality. In planning and conducting the audit, we seek to identify material misstatements in your financial statements, namely, those that might result in a reader of the accounts being misled. 3. The quantitative levels at which we judge such misstatements to be material for the Education through Regional Working Joint Committee is 1,324,000. Whether an item is judged to be material can also be affected by certain qualitative issues such as legal and regulatory requirements and political sensitivity. This can include remuneration and related parties disclosures. 4. International Standard on Auditing (ISA) 260 requires us to report certain matters arising from the audit of the financial statements to those charged with governance of a body in sufficient time to enable appropriate action. 5. This report sets out for consideration the matters arising from the audit of the financial statements of the Education through Regional Working Joint Committee, for , that require reporting under ISA 260. Status of the audit 6. We received the draft financial statements for the year ended 31 March 2016 on 25 May 2016, six days prior to the agreed date of 31 May 2016 and fully five weeks prior to the statutory deadline. We have now substantially completed the audit work. 7. We are reporting to you the more significant issues arising from the audit, which we believe you must consider prior to approval of the financial statements. The audit team has already discussed these issues with the Joint Committee Chief Finance Officer. Proposed audit report 8. It is the Auditor General s intention to issue an unqualified audit report on the financial statements once you have provided us with a Letter of Representation based on that set out in Appendix The proposed audit report is set out in Appendix 2. Page 4 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 68

69 Significant issues arising from the audit Uncorrected misstatements 10. There are no misstatements identified in the financial statements, which remain uncorrected. Corrected misstatements 11. There are misstatements that have been corrected by management, but which we consider should be drawn to your attention due to their relevance to your responsibilities over the financial reporting process. These are set out with explanations in Appendix 3. Other significant issues arising from the audit 12. In the course of the audit, we consider a number of matters both qualitative and quantitative relating to the accounts and report any significant issues arising to you. There were no issues arising in these areas this year: We have no concerns about the qualitative aspects of your accounting practices and financial reporting. We were impressed with the early receipt of the draft accounts, the quality of supporting working papers and the engagement with auditors to resolve queries. This stands the Joint Committee in good stead for faster closing in future. We did not encounter any significant difficulties during the audit. There were no significant matters discussed and corresponded upon with management which we need to report to you. There are no other matters significant to the oversight of the financial reporting process that we need to report to you. We did not identify any material weaknesses in your internal controls There are no other matters specifically required by auditing standards to be communicated to those charged with governance. Independence and objectivity 13. As part of the finalisation process, we are required to provide you with representations concerning our independence. 14. We have complied with ethical standards and in our professional judgment, we are independent and our objectivity is not compromised. There are no relationships between the Wales Audit Office and the Education through Regional Working Joint Committee that we consider to bear on our objectivity and independence. Page 5 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 69

70 Appendix 1 Final Letter of Representation [Audited body s letterhead] Auditor General for Wales Wales Audit Office 24 Cathedral Road Cardiff CF11 9LJ 15 July 2016 Representations regarding the financial statements This letter is provided in connection with your audit of the financial statements of Education through Regional Working Joint Committee for the year ended 31 March 2016 for the purpose of expressing an opinion on their truth and fairness and their proper preparation. We confirm that to the best of our knowledge and belief, having made enquiries as we consider sufficient, we can make the following representations to you. Management representations Responsibilities We have fulfilled our responsibilities for: the preparation of the financial statements in accordance with legislative requirements and CIPFA Code of Practice on Local Authority Accounting; in particular the financial statements give a true and fair view in accordance therewith; and the design, implementation, maintenance and review of internal control to prevent and detect fraud and error. Information provided We have provided you with: Full access to: all information of which we are aware that is relevant to the preparation of the financial statements such as books of account and supporting documentation, minutes of meetings and other matters; additional information that you have requested from us for the purpose of the audit; and Page 6 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 70

71 unrestricted access to staff from whom you determined it necessary to obtain audit evidence. The results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. Our knowledge of fraud or suspected fraud that we are aware of and that affects Education through Regional Working Joint Committee and involves: management; employees who have significant roles in internal control; or others where the fraud could have a material effect on the financial statements. Our knowledge of any allegations of fraud, or suspected fraud, affecting the financial statements communicated by employees, former employees, regulators or others. Our knowledge of all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing the financial statements. The identity of all related parties and all the related party relationships and transactions of which we are aware. Financial statement representations All transactions, assets and liabilities have been recorded in the accounting records and are reflected in the financial statements. Significant assumptions used in making accounting estimates, including those measured at fair value, are reasonable. Related party relationships and transactions have been appropriately accounted for and disclosed. All events occurring subsequent to the reporting date which require adjustment or disclosure have been adjusted for or disclosed. All known actual or possible litigation and claims whose effects should be considered when preparing the financial statements have been disclosed to the auditor and accounted for and disclosed in accordance with the applicable financial reporting framework. The financial statements are free of material misstatements, including omissions. Representations by Education through Regional Working Joint Committee We acknowledge that the representations made by management, above, have been discussed with us. We acknowledge our responsibility for the preparation of true and fair financial statements in accordance with the applicable financial reporting framework. The financial statements were approved by Education through Regional Working Joint Committee on 15 July Page 7 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 71

72 We confirm that we have taken all the steps that we ought to have taken in order to make ourselves aware of any relevant audit information and to establish that it has been communicated to you. We confirm that, as far as we are aware, there is no relevant audit information of which you are unaware. Signed by: Lead Chief Executive Date: Signed by: Chair of Joint Committee Date: Signed by: Managing Director Date: Page 8 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 72

73 Appendix 2 Proposed audit report of the Auditor General to the Education through Regional Working Joint Committee Auditor General for Wales report to the Members of Education through Regional Working Joint Committee I have audited the accounting statements and related notes of Education through Regional Working Joint Committee for the year ended 31 March 2016 under the Public Audit (Wales) Act Education through Regional Working Joint Committee s accounting statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement. The financial reporting framework that has been applied in their preparation is applicable law and the Code of Practice on Local Authority Accounting in the United Kingdom based on International Financial Reporting Standards (IFRSs). Respective responsibilities of the responsible financial officer and the Auditor General for Wales As explained more fully in the Statement of Responsibilities for the Statement of Accounts set out on page 11, the responsible financial officer is responsible for the preparation of the statement of accounts, which gives a true and fair view. My responsibility is to audit the accounting statements and related notes in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require me to comply with the Financial Reporting Council s Ethical Standards for Auditors. Scope of the audit of the accounting statements An audit involves obtaining evidence about the amounts and disclosures in the accounting statements and related notes sufficient to give reasonable assurance that the accounting statements and related notes are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Education through Regional Working Joint Committee s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the responsible financial officer and the overall presentation of the accounting statements and related notes. In addition, I read all the financial and non-financial information in the Explanatory Foreword to identify material inconsistencies with the audited accounting statements and related notes and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by me in the course of performing the audit. If I become aware of any apparent material misstatements or inconsistencies, I consider the implications for my report. Page 9 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 73

74 Opinion on the accounting statements of Education through Regional Working Joint Committee In my opinion the accounting statements and related notes: give a true and fair view of the financial position of Education through Regional Working Joint Committee as at 31 March 2016 and of its income and expenditure for the year then ended; and have been properly prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom Opinion on other matters In my opinion, the information contained in the Explanatory Foreword is consistent with the accounting statements and related notes. Matters on which I report by exception I have nothing to report in respect of the following matters, which I report to you, if, in my opinion: adequate accounting records have not been kept; the accounting statements are not in agreement with the accounting records and returns; I have not received all the information and explanations I require for my audit; or the Governance Statement does not reflect compliance with guidance. Certificate of completion of audit I certify that I have completed the audit of the accounts of Education through Regional Working Joint Committee in accordance with the requirements of the Public Audit (Wales) Act 2004 and the Auditor General for Wales Code of Audit Practice. For and on behalf of Huw Vaughan Thomas Auditor General for Wales July 2016 Wales Audit Office 24 Cathedral Road Cardiff CF11 9LJ Page 10 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 74

75 Appendix 3 Summary of corrections made to the draft financial statements which should be drawn to the attention of the Education through Regional Working Joint Committee During our audit we identified the following misstatements that have been corrected by management, but which we consider should be drawn to your attention due to their relevance to your responsibilities over the financial reporting process. Value of correction Nature of correction Reason for correction N/A Various Note 4.1 Remuneration Details The banding was incorrectly disclosed for one employee in the employee remuneration note. A number of other minor narrative and presentational amendments were made to the draft financial statements as a result of the audit. To ensure accuracy of remuneration disclosure. To ensure presentational accuracy and compliance with the Local Government Code. Page 11 of 12 - Audit of Financial Statements Report - Education through Regional Working Joint Committee Page 75

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77 Agenda Item 8 AGENDA ITEM NO.8 ERW JOINT COMMITTEE 15 JULY 2016 LEAD DIRECTOR AND MANAGING DIRECTOR UPDATE Purpose: To present documentation to the Joint Committee. RECOMMENDATIONS / KEY DECISIONS REQUIRED: To receive the following documents: Recruitment of Teachers and Headteachers Review of Progress Delivering Self Improving School System REASONS: None for information only Report Author: Designation: Tel No Betsan O Connor ERW Managing Director E. Mail: betsan.oconnor@erw.org.uk Page 77