Agenda item

The draft Brick by Brick Director’s Report and Financial Statements 2018-19 are attachedat Appendix 1.

The Head of Operations introduced the Brick by Brick Audit Report and informed the meeting that the report was a draft from 2018. The report was in its final stages and was ready to be signed off.

Officers informed the Committee that the Director’s Report on the audit of accounts had two restatements, which covered a fifteen-month period. This was due to the amendment of the financial year. The change helped prepare the group statements in a straightforward manner.

A loss of £744,952 was recognised for the period. This reflected sale revenues and the fact that some properties had not yet reached their completion stages, and therefore their value was not able to be released until all the sales were completed. It was the objective to achieve these sales during 2019/20.

Officers further summarised that all expenditure related to operating expenditure, which was budgeted for and remained variable. This covered the amount reported within the statement. Some expenditure had to be accounted for and it was recognised that the sales revenue was coming through this year.

In response to questions raised by Members, officers clarified that the statement of comprehensive income was an example of the balances, which were all payable to the London Borough of Croydon.

The statement of financial position highlighted the total assets in their current form which represented the working progress and investment that was due to be completed.

With regard to income revenue, officers confirmed that potentially next year the Council would see the true cost and profit achieved through the completion of a single Brick by Brick scheme with a turnover of £10million.

In response to questions raised by Members in relation to their confidence in the independent audit report, officers explained that this was in its draft form. Officers clarified that the Council was 100% the shareholder, and the audit report, which was in draft and formed part of the accounts, would be finalised by the end of the month. The Council Solicitor explained, in relation to the legal sign off, that there would have to be a major relevant impact to be part of Committee consideration; to say there was no legal implication meant there were no major legal factors that the Committee needed to consider. As such, there were no direct implications and the report was signed-off.

In relation to questions from Members in relation to significant penalties on the contracts and how they were reflected in the accounts, officers informed the meeting that material factors relating to each scheme were detailed in  working progress. The evaluation work was completed and the penalty was reduced from when the scheme would be completed. This was reviewed as a bigger profit. Further, officers stated that this was to be clarified in the reported profit against the scheme.

Members asked how depreciation of housing would be measured given the turbulent housing market issues. Officers explained that depreciation related to the buildings that were purchased and recorded as a cost within the sale of completed scheme. Brick by Brick had completed four properties.

Officers explained that uncertainty in the property market had been addressed by taking a conservative approach to values and therefore no impairment strategy was needed. The expectation was to exceed the sale of units as stated in the business plan. To date, there had been a market release of 96 units with 45% shared ownership. More units were scheduled to be released. There were also 40% off-sales reservations- 20% of what had been released had been sold. Officers reported growing interest in Brick by Brick properties.

The committee RESOLVED to:

§  Note the draft Brick by Brick Croydon Ltd Director’s Report and Financial Statements for the period ended 31st March 2019 (Appendix 1).