Agenda item

Going Concern Assessment as at 31 March 2020


The Director: Governance and Partnerships submitted a report that summarised the management assessment of the council as it continued to operate as a going concern for the purposes of producing the Statement of Accounts for 2019/20.


The committee was informed that the council was required to compile its Statement of Accounts in accordance with the Code of Practice for Local Authority Accounting as published by the Chartered Institute of Public Finance and Accountancy (CIPFA).  In accordance with the Code, the Council’s Statement of Accounts was prepared assuming that the Council would continue to operate in the foreseeable future and that it was able to do so within the current and anticipated resources available.  By this, it was meant that the Council would realise its assets and settle its obligations in the normal course of business.  As part of this process the Council’s appointed External Auditor required the Section 151 Officer to undertake a going concern assessment and assert if the Council could operate in the foreseeable future as a going concern.


As requested by the Council’s appointed External Auditor Mazars, and as part of the closure of the 2019/20 financial statements, a going concern assessment as at the Balance Sheet date of 31st March 2020 had been completed.  Considering the Covid-19 outbreak and the significant additional expenditure, and lost income for the Council as well as the financial support provided by Government, this was increasingly important.


The CIPFA Code (para stated “an authority’s financial statements shall be prepared on a going concern basis; that was, the accounts should be prepared on the assumption that the functions of the authority would continue in operational existence for the foreseeable future (see also paragraph for bodies that followed the Code but may be discontinued without statutory prescription).  Transfers of services under combinations of public sector bodies (such as local government reorganisation) did not negate the presumption of going concern”.


The concept of a ‘going concern’ assumed that an authority, its functions, and services would continue in operational existence for the foreseeable future.  This assumption underpins the accounts drawn up under the Local Authority Code of Accounting Practice and was made because local authorities carried out functions essential to the local community and were themselves revenue-raising bodies (with limits on their revenue-raising powers arising only at the discretion of central government).  If an authority were in financial difficulty, the prospects were that alternative arrangements might be made by central government either for the continuation of the services it provided or for assistance with the recovery of a deficit over more than one financial year.


Where the ‘going concern’ concept was not the case, particular care would be needed in the valuation of assets, as inventories and property, plant and equipment may not be realisable at their book values and provisions may be needed for closure costs or redundancies.  An inability to apply the going concern concept would potentially have a fundamental impact on the financial statements.


The Director guided the committee through the council’s revenue monitoring position 2020/21 (attached at appendix 1 of the report) and the going concern assessment attached at appendix 2.


The Director then responded to questions on aspects of her report.


Resolved – That the going concern assessment set out in Appendix 2 of the report be endorsed.

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