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Statement of Accounts for the Borough Council
of Wellingborough 2011/12
1
CONTENTS Page
A Forewords
A1 Foreword by the Leader of the Council 3
A2
Foreword by the Director of Resources 4
B Statement of Responsibilities for the Statement of Accounts 15
C Auditor's Report 16
D The Core Financial Statements
D1 Movement in Reserves Statement 19
D2 Comprehensive Income and Expenditure Statement 20
D3 Balance Sheet 21
D4 Cash Flow Statement 22
E Notes to the Core Financial Statements
1 Accounting Policies 23
2 Accounting Standards that have been Issued but Have Not Yet Been Adopted
50
3 Critical Judgements in Applying Accounting Policies 50
4 Assumptions Made about the Future and Other Major Sources of Estimation and Uncertainty
51
5 Material Items of Income and Expense 53
6 Events After the Balance Sheet Date 53
7 Adjustments between Accounting Basis and Funding Basis under
Regulations 53
8 Transfers to/from Earmarked Reserves 56
9 Other Operating Expenditure 58
10 Financing and Investment Income and Expenditure 59
11 Taxation and Non-Specific Grant Income 59
12 Property, Plant and Equipment 60
13 Investment Property 63
14 Intangible Assets 63
15 Financial Instruments 64
16 Inventories 66
17 Debtors 67
18 Cash and Cash Equivalents 67
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19 Assets Held for Sale 68
20 Creditors 68
21 Provisions 68
22 Usable Reserves 69
23 Unusable Reserves 69
24 Cash Flow Statement - Operating Activities 73
25 Cash Flow Statement - Investing Activities 74
26 Cash Flow Statement - Financing Activities 74
27 Amounts Reported for Resource Allocation Decisions 74
28 Trading Operations 77
29 Agency Services 78
30 Members’ Allowances 79
31 Officers’ Remuneration 79
32 External Audit Costs 81
33 Grant Income 81
34 Related Parties 82
35 Capital Expenditure and Capital Financing 83
36 Leases 84
37 Impairment Losses 87
38 Termination Benefits 88
39 Defined Benefit Pension Schemes 88
40 Contingent Liabilities 92
41 Contingent Assets 93
42 Nature and Extent of Risks Arising from Financial Instruments 93
43 Prior period adjustments. 97
44 Heritage Assets 98
45 Group Accounts 100
F Supplementary Financial Statements & Notes
F1 The Collection Fund 101
F2 Notes to the Collection Fund 102
GI Glossary of terms 106
Your Feedback
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I am delighted to introduce the 2011/12 Statement of Accounts for the Borough Council of Wellingborough. As the Leader and Chairman of the Resources Committee part of that responsibility includes the production of the Annual Accounts. The Accounts show the people of Wellingborough the cost of services and how the funding has been provided. The Accounts also help provide reassurance to them of the care we take over the public funds that have been placed at t he disposal of the Council by the local taxpayers and government. Nationally the economy is showing little sign of improving but despite continuing economic difficulties 2011/12 can be seen as another successful financial year for Wellingborough. The Council set a net budget for 2011/12 of £9.9m, with no increase in Council Tax. It was also expected that £0.464m would be drawn from reserves. As the Accounts show through prudent financial management at the end of the year the Council is reporting an underspend for 2011/12 of £0.598m that means reserves have been increased as a result. This prudence has come alongside the re-direction of resources to significant investment in the future improvement of the Town and surrounding areas, as well as continuing to ensure the Council meet improvements highlighted by our external audit, the Audit Commission. The pressures on public sector funding remain with us as do the demands for services. The Council’s medium term financial plan has identified the need to save £755k in 2012/13 and £1.56m in 2013/14 onwards. Whilst year on year the competing demands on resources becomes more difficult to resolve the Council will continue to seek acceptable means to deliver excellent services through sound financial management, reduced bureaucracy and procurement. Feedback from local people will continue to shape services and how we prioritise spending. This is regarded as highly important as many aspects of the quality of people’s lives are significantly affected by what the Borough Council of Wellingborough does. Looking forward we are keen that the Council is not complacent in the way it manages its resources. The financial competence of an organisation is often seen as a key indicator of its overall health and effectiveness. In order to sustain the development and improvement in service levels it is therefore vital that a sound financial function is present. Councillor Paul Bell Leader of the Council June 2012
A1 FOREWORD BY THE LEADER OF THE COUNCIL
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1. Why do we produce the Statement of Accounts?
Like most organisations the Council has a statutory duty to approve and publish a statement of accounts. The accounts usually cover a 12 month reporting position. These Accounts relate to the period 1st April 2011 to 31st March 2012.
2. How have the Statements been produced?
This document has been compiled by officers of the Council using information recorded on its systems, most notably its financial ledger, in line with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the code). To comply with the Accounts and Audit Regulations 2012, the responsible officer of the Council i.e. the Director of Resources, is required to sign and date the Statement of Accounts no later than the 30th June immediately following the end of the year. A glossary of the various terminologies is set out at Section G.
3. What is contained in the accounts?
Auditor’s opinion
Wellingborough’s appointed external auditors are the Audit Commission. The Audit Commission will be carrying out their statutory audit following the Director of Resources signing and dating the Statement of Accounts. They will then issue an opinion as to whether the Accounts need to be qualified or are unqualified. The deadline for this opinion is 30th September following the year end.
Core financial statements and notes
• The Movement in Reserves Statement – This statement shows the movement in year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus or Deficit on the Provision of Services line shows the true economic cost of providing the Council’s services, more details of which are shown in the Comprehensive Income and expenditure Statement. This is different from the statutory amounts required to be charged to the General Fund balance for council tax setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.
A2 FOREWORD TO THE STATEMENT OF ACCOUNTS BY THE DIRECTOR OF RESOURCES
5
• The Comprehensive Income and Expenditure Statement – This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations: this may be different from the accounting cost. The taxation position is show in the Movement in reserves Statement.
• The Balance Sheet - The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains or losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets were sold; and reserves that hold timing differences shown in the Movement of reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’.
• The Cash Flow Statement - The Cash Flow Statement shows the changes in cash and cash equivalents of the authority during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the authority. Investing activities represent the extent to which cash flows have been made for resources that are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council.
• The core financial statements are shown in section D. The core financial statements are supported by detailed disclosure notes (where material) which aim to explain the key figures and to provide the reader with additional information that allows full interpretation of the accounts. The core financial statements disclosure notes are shown in section E.
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Supplementary financial statements and notes
• The Collection Fund (and disclosure notes) - The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority (Borough Council of Wellingborough) in relation to the collection from taxpayers and distribution to local authorities and the Government of council tax and non-domestic rates.
• Group Accounts (and disclosure notes) – Where the Council has a controlling interest and/or significant influence in entities, it is required by the Code to produce Group Accounts (subject to materiality). The Council does have a significant interest in Wellingborough Norse Ltd (see note 45).
The Annual Governance Statement
Statutory regulations require the Council to conduct a review at least once in a year of the effectiveness of its system of internal control. The review of internal controls or internal financial controls provides assurance that the Statement of Accounts gives a true and fair view of the Council’s financial position at the reporting date and its financial performance during the year. The preparation and publication of the Council’s Annual Governance Statement is carried out in accordance with ‘Delivering Good Governance in Local Government’ published by CIPFA and SOLACE. The preparation and publication of an Annual Governance Statement in accordance with ‘Delivering Good Governance in Local Government’ fulfils the Council’s statutory requirement to conduct a review at least once in each financial year of the effectiveness of its system of internal control. The statement relates to the governance system as it applied during the financial year for the accounts that it accompanies. However, (where applicable) significant events or developments relating to the governance system that occur between the reporting date and the date on which the Statement of Accounts is signed by the Director of Resources is also reported. The 2012 Accounts and Audit (England) Regulations state in Regulation 4(4) that the Annual Governance Statement (AGS) now "accompanies" the Statement of Accounts.
4. How well did the Council manage its finances in 2011/12?
Money in
The Council gets its money from a number of sources, principally:
• Government grants;
• Council Tax and NNDR (or Business Rates); and
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• Rent from our investment properties alongside other fees and charges.
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Perc
en
tag
e o
f o
vera
ll i
nco
me
Rents Grants and
Contributions
Business
Rates
Council Tax Fees and
Charges
Revenue
Support Grant
Interest
Type of income
2011/12 2010/11
In 2011/12 the overall split of this income was generally in line with prior years, although there has been a 12% (£0.083m) drop in income from investments with banks and building societies. The collection of fees and charges applies to certain services, such as licensing or bulky waste collection, and is the main source of income that the Council has some element of direct control over through the setting and collecting of fees. At the start of the year the Council estimated how much income it expected to collect based on forecast demand for services and the amount of charge set for certain services. In 2011/12 despite the economic downturn affecting areas such as planning fees, the total income from such fees was £0.032m higher than the previous year.
The Council has a policy to actively pursue all debts. At the end of the year our profile of money owed (debtors), excluding Council Tax and NNDR, was as follows:
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0
100000
200000
300000
400000
500000
600000
700000
Housing Benefit Overpayments Commercial Rents Other Sundry Debt
Type of debt
To
tal
de
bt
£
More than 12 months Less than 12 months
Money spent
The Council originally set a net budget of £9.9m. This required a contribution from the General Fund Reserve of £0.464m.
During the year a number of changes (virements) were reported to and approved by the Resources Committee to produce a revised budget of £9.314m. Overall against the revised budget, after net transfers from earmarked reserves, the Council delivered a surplus of £598k as shown in the following table.
Revised Net
Budget
Actual Net
outturn
Variance
£,000 £,000 £,000
Corporate Management 1,004 1,031 27
Services Directorate 10,857 10,020 -837
Resources Directorate -1,745 -2,241 -496
Parish Precepts 445 445 0
Use of Reserves -1,247 -539 708
Total 9,314 8,716 -598
Directorate
Three significant reasons for the surplus (underspending), reported to Resources Committee on 11th July 2012 in more detail, were:
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� An underspending of £229,000 associated with the Castle Theatre Management
Contract procurement � Connect Law contract savings £74,000 � Additional recycling income £269,000
Council Spending by Services Net Actual
Actual Gross
Expenditure
Actual
Gross
Income Net Actual
2010/11 2011/12 2011/12 2011/12£,000 £,000 £,000 £,000
Central Services to the Public 1,746 6,697 -5,605 1,092
Cultural & related services 1,703 3,686 -1,055 2,631
Environmental services 6,189 5,136 -1,708 3,428
Planning & development services 2,615 2,162 -458 1,704
Highways and Transport services 1,175 1,165 -71 1,094
Housing Services 2,129 23,556 -22,719 837
Adult Social Care 357 363 -111 252
Corporate and Democratic Core 2,237 1808 -110 1,698
Non Distributed Costs 506 1,567 0 1,567Pension- Past Service gains - 6,905 - - -
Net Cost of Services 11,752 46,140 -31,837 14,303
Other Operating Expenditure 2,596- 973 -1,215 -242
Financing and Investment Income and Expenditure 3,334 3,495 -5,352 -1,857Taxation and Non Specific Grant Income - 10,826 - -9,665 -9,665
Surplus (-) or Deficit on Provision of Services 1,664 2,539
Surplus (-) or Deficit on Revaluation of Fixed Assets -213 74
Surplus(-) or Deficit on revaluation available for sale
assets -36 17
Actuarial Gains(-) / Losses on Pension
Assets/Liabilities -10,372 4,469
Comprehensive Income and Expenditure -8,957 7,099
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The money was spent on the following areas:
Employee Costs 20%Premises Costs 3%
Transport 2%
Supplies & Services 13%
Housing/Council Tax Benefits
62%
5. How was money spent on meeting our PRIDE mission?
In 2009 the Council set out its longer term vision for the Borough Council of Wellingborough through its PRIDE statement. This set out our five priorities:
Promoting high quality growth
Reducing crime and anti-social behaviour
Improving life chances for young people
Delivering efficient and responsive services
Enhancing the environment
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Delivering efficient and
responsive services 68% Enhancing the environment
17%
Promoting high quality
growth 10%
Reducing crime and anti-
social behaviour 3% Improving life chances for
young people 2%
6. How well did the Council manage its Assets and Capital programme? The council owns various plots of land and buildings in Wellingborough; the total value of these assets on the balance sheet is in the region of £73m. These assets have been revalued by an increase of £0.343m in the year. The revaluation of other land and buildings consists of various increases and decreases based on the 20% of assets held which are reviewed in year. This reflects the prevailing market conditions. Investment properties are revalued at the 31st March each year with an increase in value of £1.035m in the year.
7. How much money does the Council have in Reserves?
The Council has set up a number of reserves for specific purposes - ‘earmarked reserves’ for events we know are going to happen, i.e. similar to setting up saving accounts for holidays or boilers breaking down. We also have the General Fund which we keep to manage potential risks that we continually assess. If the General Fund reserve is not needed to cover these risks then it is possible to use these as a one off to support spending. The opening and closing balances on our main cash reserves were:
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Balance
1st April
2010
Transfers in
2010/11
Transfers
out 2010/11
Balance
31st March
2011
Transfers in
2011/12
Transfers
out 2011/12
Balance
31st March
2012
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Capital Fund -1,836 1,836 0
Efficiency and Restructuring
Reserve -55 -55 -703 -758
Interest Equalisation Reserve -1,700 256 -1,444 1,444 0
Environmental Impact Reserve -2,000 2,000 0
Housing and Planning Delivery
Grant -632 406 -226 94 -132
S.38 Highways Adoption Grant -137 -3 -140 109 -31
Ward Support -11 11 0
Election Postage -18 -18 -18
VAT Reserve -121 -121 -121
Planning Reserve -100 -100 -33 -133
Revenue Equalisation Reserve -1,565 -1,565 1,565 0
Neighbourhood Development
Reserve -34 -34 34 0
NNDR Reserve 0 0 0
Miscellaneous Revenue Grants
Reserve -71 -70 -141 -123 28 -236
New Burdens Impact Reserve -51 -51 -51
Earmarked Reserves -6,460 -1,944 4,509 -3,895 -859 3,274 -1,480
General Fund -5,557 1,797 -3,760 -4,571 1,303 -7,028 -12,017 -1,944 6,306 -7,655 -5,430 4,577 -8,508
The Council is also required to keep a number of accounting reserves, which whilst being large in value are not related to actual cash sums but are technical accounting requirements, such as the Capital Adjustment Reserve, the Revaluation Reserve, and the Pension Reserve.
8. How did we do managing our investments? The Council is debt free (except for debt inherent in Finance Leases) and, as shown by its level of reserves has a significant sum to invest. We do this to ensure that we are maximising our income by earning interest on our money. However, we fully understand that this is public money and we follow strict national guidelines when deciding where and how much to invest. This process is set out in our Annual Treasury Management Policy. This, for example, restricts the level of individual investment, to spread the risk of who we invest with, and restricts us to only use institutions based in the UK. In 2011/12 we received £589,580 of interest; or a 1.85% return on our investments. This is in line with other public and private sector institutions. At the year end we had £29.6m invested in banks and building societies, compared with £35.1m in 2010/11. Of this, all investments held at the year end are due to mature in the next 12 months.
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The Council’s Treasury Management Strategy restates the aim of the Authority remaining debt free, and as such we did not borrow any money in 2011/12. Further information on the way the Council’s invests its monies, and manages the risks arising, are set out in Note 42.
9. How is our Pension Fund? The Council employees are able to join the Local Government Pension Scheme. This is administered by the County Council in Northamptonshire. The Pension Fund pays the pensions of Council employees upon retirement and receives contributions from employees together with an employer’s contribution from the Council. Every three years the Fund’s actuary assesses how much money is in the fund and whether this is sufficient to meet the potential call from staff as they retire at a future date. The net amount chargeable to the General Fund is that payable for the year in accordance with the statutory requirements governing the Pension Fund. Where this amount does not match the amount charged to the Comprehensive Income and Expenditure Statement any difference is transferred to the pension reserve on the balance sheet via the Movement in Reserves Statement.
There are a range of factors that can affect the financial position of the Fund, most notably the level of income expected to be earned from investing funds. The recent economic downturn has meant that the Fund has experienced a significant drop in the forecast return on its investments. Nevertheless the Fund is reporting at this stage a net liability of £29.404m for 2011/12 (£23.137m in 2010/11). The reasons for this change are set out in Note 39. This is a notional amount as this would only be due if all circumstances remained as they are from now up to when the current contributors retire and the Authority did not seek to address the matter. In reality history shows the level of investment income will improve over time and other factors, such as time in the scheme and levels of contributions will change. Further information on the Council’s Pension Fund is set out in Note 39.
10. What does 2012/13 and beyond look like? The Council has a Medium Term Financial Strategy and Plan that looks at Wellingborough’s financial position over the next five years. This forecasts that, following the Comprehensive Spending Review, and with a reduction in Government funding in both 2011/12 and 2012/13 combined with a nil increase in Council Tax in 2012/13, the Authority needs to save £0.950 million in 2012/13 with further significant savings each year thereafter. This position could see Government funding being reduced even further. Whilst the Council has some monies in reserves the Chief Financial Officer has recommend that they should not be used to fund services from 2011/12 onwards. As such the Council continues its policy of reviewing services and costs.
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The authority at the year end currently holds £15.47m of capital reserves; it does not borrow to fund the capital programme. This level of funding is likely to reduce in future years as income from capital receipts reduces. Wellingborough will continue with a programme of future capital spend, with its focus to be on Disabled Facilities Grant distribution and regeneration of Wellingborough.
11. How can you give us your feedback on the content of these accounts? The Statement of Accounts is intended to give the people, businesses, partners, employees and members of Wellingborough clear information about the Council’s finances. Whilst accounts have to include large elements of technical data to comply with Accounting Standards, we believe that it is vital that we make it as easy as possible for people to read regardless of their background. We have included a feedback questionnaire at the end of the Accounts and would appreciate any comments you may have on the content and quality of these Accounts and your suggestions to improve them in future years. Further information about the accounts is available from the Head of Finance, Swanspool House, Doddington Road, Wellingborough, NN8 1BP, or via email [email protected] The full Statement of Accounts will be made available on the Council website at the beginning of July. A Summary of the Accounts will be circulated after that date. Interested members of the public have a statutory right for 20 working days to inspect the accounts before the audit is completed. For 2011/12 the inspection date will start on the 13th July and the appointed day for raising queries with the External Auditors will be 8th August 2012.
12. Concluding remarks
I would like to take the opportunity to thank all the staff who contributed to the timely completion of the Statement of Accounts. I would also like to extend that to our external auditors for ensuring the audit was completed by the statutory deadline and their helpful recommendations for future improvements.
R Micklewright BA (Hons), CPFA Director of Resources
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The Council’s Responsibilities
The Council is required to:
• make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Authority that officer is Richard Micklewright (Director of Resources);
• manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; and
• approve the Statement of Accounts.
The Director of Resources’ Responsibility
The Director of Resources is responsible for the preparation of the council’s 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 Director of Resources has:
• selected suitable accounting policies and then applied them consistently;
• made judgements and estimates that were reasonable and prudent; and
• complied with the code.
The Director of Resources has also:
• kept proper accounting records which were up to date; and
• taken reasonable steps for the prevention and detection of fraud and other irregularities.
Certification and Approval I certify that this Statement of Accounts shows the true and fair position of the Council at the reporting date and of its income and expenditure for the year ended 31 March 2012.
Richard Micklewright BA (Hons) CPFA Director of Resources
Date:
I confirm that these audited accounts were approved by the Audit Committee at the meeting held on 22nd October 2012
Councillor Jim Bass Chair of meeting approving the accounts
Date:
B STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS
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AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BOROUGH COUNCIL OF WELLINGBOROUGH
Opinion on the financial statements
I have audited the financial statements of the Borough Council of Wellingborough for the year ended 31 March 2012 under the Audit Commission Act 1998. The financial statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement, and the Collection Fund and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12. This report is made solely to the members of the Borough Council of Wellingborough in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March 2010.
Respective responsibilities of the Chief Financial Officer and auditor
As explained more fully in the Statement of the Chief Financial Officer’s Responsibilities, the Chief Financial Officer is responsible for the preparation of the Statement of Accounts, which includes the financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom, and for being satisfied that they give a true and fair view. My responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require me to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Authority and Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Chief Financial Officer; and the overall presentation of the financial statements. In addition, I read all the financial and non-financial information in the explanatory foreword to identify material inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies I consider the implications for my report.
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Opinion on financial statements
In my opinion the financial statements:
• give a true and fair view of the financial position of the Borough Council of Wellingborough as at 31 March 2012 and of its expenditure and income for the year then ended; and
• have been prepared properly in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12.
Opinion on other matters
In my opinion, the information given in the explanatory foreword for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which I report by exception
I report to you if:
• in my opinion the annual governance statement does not reflect compliance with ‘Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007;
• I issue a report in the public interest under section 8 of the Audit Commission Act 1998;
• I designate under section 11 of the Audit Commission Act 1998 any recommendation as one that requires the Authority to consider it at a public meeting and to decide what action to take in response; or
• I exercise any other special powers of the auditor under the Audit Commission Act 1998.
I have nothing to report in these respects.
Conclusion on Authority’s arrangements for securing economy, efficiency and effectiveness in the use of resources
Respective responsibilities of the Authority and the auditor
The Authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements. I am required under Section 5 of the Audit Commission Act 1998 to satisfy myself that the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires me to report to you my conclusion relating to proper arrangements, having regard to relevant criteria specified by the Audit Commission.
I report if significant matters have come to my attention which prevent me from concluding that the Authority has put in place proper arrangements for securing
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economy, efficiency and effectiveness in its use of resources. I am not required to consider, nor have I considered, whether all aspects of the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.
Basis of conclusion
I have undertaken my audit in accordance with the Code of Audit Practice, having regard to the guidance on the specified criteria, published by the Audit Commission in October 2011, as to whether the Authority has proper arrangements for:
• securing financial resilience; and
• challenging how it secures economy, efficiency and effectiveness.
The Audit Commission has determined these two criteria as those necessary for me to consider under the Code of Audit Practice in satisfying myself whether the Authority put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2012.
I planned my work in accordance with the Code of Audit Practice. Based on my risk assessment, I undertook such work as I considered necessary to form a view on whether, in all significant respects, the Authority had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. Conclusion
On the basis of my work, having regard to the guidance on the specified criteria published by the Audit Commission in October 2011, I am satisfied that, in all significant respects, the Borough Council of Wellingborough put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2012. Certificate I certify that I have completed the audit of the accounts of the Borough Council of Wellingborough in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission.
Neil Bellamy District Auditor Audit Practice Audit Commission Unit 10, Whitwick Business Centre Whitwick Business Park Stenson Road Coalville, LE67 4JP 22nd October 2012
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D1 Movement in Reserves Statement
This statement shows the movement in the financial year on the different reserves held by the Council, analysed into “usable reserves” (i.e. those that can be applied to fund expenditure or to reduce local taxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the authority’s services, more details of which are found in the Comprehensive Income and Expenditure Statement. This is different from the statutory amounts required to be charged to the General Fund Balance for council tax setting purposes. The Net Increase/Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council. Movement in Reserves Statement 2011/12
General
Fund
Balance
Earmarked
General Fund
Reserves
Capital
Receipts
Reserve
Capital
Grants
Unapplied
Total Usable
Reserves
Unusable
Reserves
Total
Authority
Reserves
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31st March 2011 (Restated- note43) -3,760 -3,895 -15,929 -628 -24,212 -59,682 -83,894
Movement in Reserves during 2011/12
Surplus (-) or deficit on provision of services 2,539 2,539 2,539
Other Comprehensive Expenditure and Income 0 4,560 4,560
Total Expenditure and Income 2,539 0 0 0 2,539 4,560 7,099
Adjustments between accounting basis and funding
basis under regulations (Note7) -3,392 464 7 -2,921 2,924 3
Net Increase/Decrease before Transfers to
Earmarked Reserves -853 0 464 7 -382 7,484 7,102
Transfers to/from Earmarked Reserves (Note 8) -2,415 2,415 0 0 0Increase(-)/Decrease in 2011/12 -3,268 2,415 464 7 -382 7,484 7,102
Balance at 31st March 2012 carried forward -7,028 -1,480 -15,465 -621 -24,594 -52,198 -76,792
Movement in Reserves Statement Comparative figures for 2010/11
General
Fund
Balance
Earmarked
General Fund
Reserves
Capital
Receipts
Reserve
Capital
Grants
Unapplied
Total Usable
Reserves
Unusable
Reserves
Total
Authority
Reserves
£'000 £'000 £'000 £'000 £'000 £'000 £'000Balance at 31st March 2010 (restated-note43) -5,557 -6,460 -13,615 -383 -26,015 -48,975 -74,990
Movement in Reserves during 2010/11
(restated) 1,664 1,664 1,664
Other Comprehensive Expenditure and Income 0 -10,621 -10,621
Total Expenditure and Income 1,664 0 0 0 1,664 -10,621 -8,957
Adjustments between accounting basis and funding
basis under regulations (Note7) (restated) 2,698 -2,314 -245 139 -86 53
Net Increase/Decrease before Transfers to
Earmarked Reserves 4,362 0 -2,314 -245 1,803 -10,707 -8,904
Transfers to/from Earmarked Reserves (Note 8) -2,565 2,565 0 Increase(-)/Decrease in 2010/11 1,797 2,565 -2,314 -245 1,803 -10,707 -8,904
Balance at 31st March 2011 carried forward -3,760 -3,895 -15,929 -628 -24,212 -59,682 -83,894
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D2 COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT
This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.
Gross
Expenditure
Restated
Gross
income
Net
Expenditure
Restated
Gross
Expenditure
Gross
income
Net
Expenditure
£'000 £'000 £'000 £'000 £'000 £'000
7,372 -5,626 1,746 Central services to the public 6,697 5,605- 1,092
3,068 -1,365 1,703 Cultural and Related Services 3,686 1,055- 2,631
6,912 -723 6,189 Environmental and Regulatory Services 5,136 1,708- 3,428
3,212 -597 2,615 Planning Services 2,162 458- 1,704
1,738 -563 1,175 Highways and transport services 1,165 71- 1,094
23,877 -21,748 2,129 Housing services 23,556 22,719- 837
462 -105 357 Adult social care 363 111- 252
2,296 -59 2,237 Corporate and democratic core 1,808 110- 1,698
719 -213 506 Non distributed costs 1,567 - 1,567
-6,905 0 -6,905 Pension - Past Service Gains - - -
42,751 -30,999 11,752 Cost Of Services 46,140 -31,837 14,303
906 -3,502 -2,596 Other Operating Expenditure (Note 9) 973 -1,215 -242
9,994 -6,660 3,334 Financing and Investment Income and Expenditure (Note 10) 3,495 -5,352 -1,857
0 -10,826 -10,826 Taxation and Non-Specific Grant Income (Note 11) 0 -9,665 -9,665
1,664 Surplus(-) or Deficit on Provision of Services 2,539
-213 Surplus(-) or Deficit on revaluation of fixed assets 74
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Surplus(-) or Deficit on revaluation of available for sale
financial assets 17
-10,372 Actuarial gains(-) / losses on pension assets / liabilities 4,469
-10,621 Other Comprehensive Income and Expenditure 4,560
-8,957 Total Comprehensive Income and Expenditure 7,099
2010/11 2011/12
As a result of changes to the Service Expenditure Analysis introduced by the 2011/12 SeRCOP, the Culture, Environment, Regulatory and Planning Services has been split into three as follows:
• Cultural and Related Services,
• Environmental and Regulatory Services and
• Planning Services
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The Balance Sheet shows the value as at the balance sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the authority. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example, the Capital Receipts Reserve that may be used to fund capital expenditure or to repay debt). The second category of reserves includes reserves that hold unrealised gains or losses for example the Revaluation Reserve) where amounts would only become available to provide services if the assets are sold; and reserves that holds timing differences shown in the Movement in Reserves Statement line “Adjustments between accounting basis and funding basis under regulations”.
31st March
2010 Restated
31st March
2011
Restated Notes
31st March
2012
£'000 £'000 £'000
41,414 39,810 Property, Plant and Equipment 12 37,103
34 34 Heritage Assets 44 304
39,059 34,705 Investment Property 13 35,653
12 0 Intangible Assets 14 0
0 0 Assets Held for Sale 19 0
8,651 6,766 Long Term Investments 15 318
30 22 Long Term Debtors 15 16
89,200 81,337 Long Term Assets 73,394
18,310 26,148 Short Term Investments 15 25,517
0 0 Assets Held for Sale 19 0
101 74 Inventories 16 14
8,085 3,364 Short Term Debtors 15 & 17 6,603
3,037 3,245 Cash and Cash Equivalents 18 4,555
29,533 32,831 Current Assets 36,689
0 0 Short Term Borrowing 15 0
-2,963 -4,787 Short Term Creditors 15 & 20 -2,701
0 -920 Provisions 21 0
-147 -158 Other Short Term Liabilities 15 & 36 -169
-3,110 -5,865 Current Liabilities -2,870
0 0 Provisions 21 0
0 0 Long Term Borrowing 15 0
-475 -318 Other Long Term Liabilities 15 & 36 -148
-39,556 -23,137 Pension Liability 39 -29,404
-602 -954 Capital Grants Received in Advance 33 -869
-40,633 -24,409 Long Term Liabilities -30,421
74,990 83,894 Net Assets 76,792
-26,015 -24,212 Usable Reserves 22 -24,594
-48,975 -59,682 Unusable Reserves 23 -52,198
-74,990 -83,894 Total Reserves -76,792
D3 BALANCE SHEET
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D4 CASHFLOW STATEMENT
The Cash Flow Statement shows the changes in cash and cash equivalents of the authority during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the authority. Investing activities represent the extent to which cash flows have been made for resources that are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council.
2010/11 2011/12
£'000 £'000
664 Net surplus(-) or deficit on the provision of services 2,539
-6,801
Adjustments to net surplus or deficit on the provision of services for non
cash movements
-4,452
10,792
Adjustment for items included in the net surplus or deficit on the provision of
services that are investing and financing activities6,253
4,655 Net cash flows from Operating Activities (Note 24) 4,340
2,320 Investing Activities (Note 25) -8,856
-7,183 Financing Activities (Note 26) 3,206
-208 Net increase(-) or decrease in cash and cash equivalents -1,310
-3,037 Cash and cash equivalents at the beginning of the reporting period -3,245
-3,245 Cash and cash equivalents at the end of the reporting period (Note 18) -4,555
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E NOTES TO THE CORE FINANCIAL STATEMENTS
1. Statement of Accounting Policies
The accounting policies set out below apply to the Financial Statements of the Council. The main changes to the accounting policies are summarised in the foreward by the Director of Resources.
1.1 General Principles
The Statement of Accounts summarises the Council’s transactions for the 2011/12 financial year and its financial position at 31st March 2012. The Authority is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2011, which those regulations require to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (‘’the Code’’) and the Service reporting Code of Practice 2011/12, supported by International Financial Reporting Standards (IFRS). The Code specifies the principles and practices of accounting required to give a “true and fair” view of the financial position and transactions of a local authority, including group financial statements where a local authority has material interests in subsidiaries, associates or joint ventures. The accounts are disclosed in accordance with the historic cost convention except for certain non-current assets, investments and financial assets that are disclosed in accordance with other requirements in the Code.
1.2 Accruals of Income and Expenditure
Activity on items of income and expenditure are accounted for in the year it takes place, not simply when cash payments are made or received. In particular;
• Fees, charges and rents due from residents and customers are accounted for as income at the date the Council provides the relevant goods or services. Where this is before 31 March but income had not been billed, a debtor is recorded in the Balance Sheet (above the de minimis of £100 for individual items). The debtors balance also includes payments in advance made by the Council at the Balance Sheet date representing amounts prepaid to suppliers by the Council that are not due until a subsequent financial year.
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An assessment is made annually as to what levels of debt are outstanding at the end of the financial year. The Council’s debtors are not subject to substantial fluctuations hence the Council does not review all debts and judge the probability of collection of each. Instead past experience is used within material limits to judge the percentages of each type of debt that will not eventually be recovered. A provision is made (the bad debt provision) for those debts for which recovery is deemed doubtful, the provision being recognised in the relevant service(s). This has the effect of reducing the debtors balance shown in the Balance Sheet. Once a debt is deemed irrecoverable it is written off.
• Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption they are carried as inventories on the Balance Sheet (minor items of limited materiality are excluded from this policy).
• Works are charged as expenditure when they are completed, before which they are carried as works in progress on the Balance Sheet.
• Interest received on investments is accounted for on the basis of the effective interest rate for the relevant financial instrument rather than the cash flow fixed or determined by the contract. As the Council is debt free it is not necessary to account for interest on borrowing.
• Where goods or services have been supplied but an invoice has not been processed for payment by 31st March a creditor for the relevant amount is recorded in the Balance Sheet (above the de minimis of £100 for individual items). The creditors balance also includes receipts in advance at the Balance Sheet date representing amounts prepaid to the Council that are not payable until a subsequent financial year.
• The actual cost of employees is recorded in the accounts. Accruals are made for the payment of pension and tax liabilities based on the actual March payments and included as creditors in the Balance Sheet. Accruals are made for salaries and other employee benefits (e.g. annual leave – see separate accounting policy ‘Employee Benefits’) earned but unpaid at the year end.
• Grants and contributions are accounted for on an accruals basis and recognised in the accounting statements when there is reasonable assurance that
i. the conditions for their receipt have been complied with, and ii. the grant or contribution will be received.
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1.3 Cash and Cash Equivalents
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature within 3 months or less from the Balance Sheet and that are readily converted to known amounts of cash with insignificant risk of change in value. Deposits in call accounts are classified as cash equivalents. Bank overdrafts form an integral part of the Authority’s cash managements and as such are classified as cash equivalents.
1.4 Prior Period Adjustments, Changes in Accounting Policies and
Estimates and Errors
The majority of prior period adjustments arise from corrections and adjustments that are accounted for in the year they are identified. Adjustments applicable to prior years arising from changes in accounting policy or correction of material errors are accounted for by restating comparative figures for the preceding year in the Statement of Accounts and notes and adjusting the opening balance of reserves for the cumulative effect. Changes in accounting estimates are accounted for prospectively, i.e. items affected by such a change in the current and future years do not give rise to prior period adjustments. More details and full explanations are given in the individual relevant financial statements where adjustments occur.
1.5 Charges for Revenue for Non current Assets
Services, support services and trading accounts are debited with the following amounts to record the cost of holding fixed assets during the year:
• depreciation attributable to the assets used by the relevant service
• revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off
• amortisation of intangible fixed assets attributable to the service.
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The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement (for the Council this relates to finance leases) equal to an amount calculated on a prudent basis determined by the authority in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance (Minimum Revenue Provision), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. The Council is a debt free authority (excluding finance leases) and is not therefore required to set aside a prudent level of minimum revenue provision for repayment of debt. However, the Council has finance leases (the Council is the lessee) for which it sets aside from General Fund balances annual amounts equal to the repayment of the liability.
1.6 Employee Benefits
Benefits Payable During Employment Short-term employee benefits (those that fall due wholly within 12 months of the year-end), such as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees, are recognised as an expense in the year in which employees render service to the Council. An accrual is made against the service in the Surplus or Deficit on the Provision of Services for the cost of holiday entitlements and flexi-time earned by employees but not taken before the year end and which employees can carry forward into the next financial year. The accrual made is required under statute to be reversed out of the General Fund balance by a credit to the Unusable Reserve - Accumulated Absences Account in the Movement in Reserves Statement. Termination Benefits Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy. These are charged on an accruals basis to the relevant service(s) line within the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Account when the Council is demonstrably committed to either terminating the employment of an officer or group of officers or making an offer to encourage voluntary redundancy.
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Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for termination benefits related to pensions enhancements and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year end. Post Employee Benefits Under the Code the Council is required to account for retirement benefits when it is committed to pay them, even if the actual payment may be many years into the future. The Council participates in the Local Government Pension Scheme (LGPS) for pensions to employees and the scheme is managed by Northamptonshire County Council (NCC). The scheme operates on a defined benefit basis related to pay and service in accordance with International Accounting Standard (IAS) 19. The assets attributable to the scheme are measured at fair value and include current assets and investments. The attributable liabilities are measured on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projections of projected earnings for current employees Contribution rates, which are included in the Accounts, are determined by triennial actuarial valuations. The surplus or deficit on the scheme is the excess or shortfall of the value of the assets in the scheme above or below the present value of the scheme liabilities. The change in the net pension liability is analysed into seven components:
• current service cost – the increase in liabilities as a result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked
• past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus/Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs
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• interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement
• expected return on assets – the annual investment return on the fund assets attributable to the Authority, based on an average of the expected long-term return – credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement
• gains/losses on settlements and curtailments – the result of actions to relieve the Authority of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited/credited to the Surplus/Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs
• actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Pensions Reserve
• contributions paid to the pension fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense
In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Authority to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact on the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits that are earned by employees.
The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.
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1.7 Events after the Balance Sheet Date
Events after the Balance Sheet Date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of event can be identified:
• those that provide evidence of conditions that existed at the end of the reporting period – the accounts are adjusted to reflect such events, and
• those that are indicative of conditions that arose after the reporting period – the accounts are not adjusted to reflect such events, but where such events would have a material effect disclose is made in the notes of the nature of events and their estimated financial effect.
The Statement of Accounts was signed off by the Director of Resources on 30th June 2012. Events taking place after that date are not reflected in the statements or disclosure notes.
1.8 Financial Instruments
Financial instruments are categorised as either financial assets or financial liabilities, and the accounting policies for both are stated below; Financial Assets Financial assets the Council currently holds are divided into the following categories;
• Loans and receivables, and
• Available for sale financial assets
Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available. All financial assets are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of the financial instrument.
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Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade debtors and investments are classified as loans and receivables. Loans and receivables are initially measured at fair value. Subsequent measurement is based on amortised cost. Where a receivable (i.e. debtor) has a maturity of less than 12 months or is a trade or other receivable, the fair value is taken to be the principal outstanding or the billed/invoiced amount. Investments are shown in the Balance Sheet at cost. Where investments are fixed term deposits the accrued interest owing at the Balance Sheet date of 31st March is added to the value of the investment. Annual credits to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. For most of the investments that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable in instrument agreement. In line with regulations, any difference between the interest receivable based on the effective rate of interest and the interest rate in the instrument agreement is transferred to the Financial Instruments Adjustment Account in the Movement in Reserves Statements to negate the impact on the General Fund balance. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The amount of the impairment is determined as the difference between the assets’s carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of debtors is adjusted for bad debts (see separate accounting policy – Accruals of Income and Expenditure). Any gains and losses that arise on derecognition of an asset are credited/debited to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement.
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Soft loans are defined as those loans granted by the Council at an interest rate that is below the prevailing market rate. The calculated market rate of interest is credited to the Comprehensive Income and Expenditure Statement and the difference between the this amount and the interest actually charged to the recipient of the loan is reversed out in the Movement in Reserves Statement to the Financial Instruments Adjustment Account in the Balance Sheet.
Available for Sale Assets
Available for Sale Assets are non-derivative financial assets that do not meet the requirements to be classified as loans and receivables or financial assets at fair value through profit and loss. Available for sale assets are initially measured and carried at fair value. Fair values are based on the following principle:
• Instruments with quoted market prices – the market price.
Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses). Where the asset has fixed or determinable payments, annual credits to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Council. Changes in fair value are balanced by an entry in the Available for Sale Reserve and the gain/loss is recognised in the Surplus/Deficit on Revaluation of Available for Sale Financial Assets in the Comprehensive Income and Expenditure Statement. The exception is where impairment losses have occurred – these are debited to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement, along with any net gain/loss for the asset accumulated in the Available for Sale Reserve.
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Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made (fixed or determinable payments) or fair value falls below cost, the asset is written down and a charge made to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement. If the assets have fixed or determinable payments, the impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Otherwise, the impairment loss is measured as any shortfall of fair value against the acquisition cost of the instruments (net of any principal repayments and amortisation). Any gains and losses that arise on the derecognition of an asset are credited/debited to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement, along with any accumulated gains/losses previously recognised in the Available for Sale Reserve. Financial Liabilities Financial Liabilities are obligations to deliver cash or another financial asset to another entity and are recognised when the Council becomes a party to the contractual provisions of the financial instrument and initially measured at fair value and carried at amortised cost. The Council does not have any borrowings, with the exception of finance leases. Payables (i.e. creditors) are categorised as financial liabilities. Where a payable (i.e. creditor) has a maturity of less than 12 months or is a trade or other payable, the fair value is taken to be the principal outstanding or the billed/invoiced amount. A financial liability is de-recognised only when the obligation is extinguished, i.e. when the obligation is discharged or cancelled or expires.
1.9 Grants and Other Contributions
Whether paid on account, by instalments or in arrears, government grants and third party grants and contributions/donations are recognised as due to the Council when there is reasonable assurance that:
• The Council will comply with the conditions attached to the payments, and
• The grants or contributions will be received.
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Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or condition have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contributions are required to be consumed by the Council as specified or future economic benefits or service potential must be transferred to the transferor. Amounts advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or condition is credited to the relevant service line (revenue grants attributable) or taxations and non-specific grant income line (non-ring-fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. When capital grants or contributions are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund balance in the Movement in Reserves Statement. Where grants or contributions have yet to be used to finance capital expenditure, they are posted to Capital Grants Unapplied Account. Where it has been applied, it is posed to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Account are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure in the Movement in Reserves Statement.
1.10 Heritage Assets
The Code of Practice on Local Authority Accounting in the United kingdom 2011/12 introduced a change in treatment in accounting for heritage assets held by the authority in accordance with FRS 30. Heritage assets are recognised in the balance sheet at valuation. The carrying amounts of heritage assets are reviewed where there is evidence of impairment.
1.11 Intangible Assets
Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council.
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Recognition Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and restricted to that incurred during the development phase (research expenditure is not capitalised). Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. Measurement Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. Amortisation The depreciable amount of an intangible asset is amortised over its useful life (a 3 year useful life is assumed for all intangible assets) to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Amortisation is not permitted to have an impact on the General Fund Balance. The amortisation is therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account Impairment An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Impairment losses are not permitted to have an impact on the General Fund Balance. The losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. Disposal/De-recognition Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement.
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Disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.
1.12 Interest in Companies and Other Entities
The Council is required to comply with the accounting requirements set out in the Code of Practice on Local Authority Accounting in the United Kingdom if it has an interest in subsidiaries, associates and joint ventures (jointly controlled entities) and has an ability, whether used or not, to control or exercise significant influence over the activities of such entities. The Castle (Wellingborough) Limited is responsible for the management of a Council owned theatre and arts complex for the community. The Council has assessed whether the Company is a regulated influenced company under the Local Authorities (Companies) Order 1995 and deemed that it is not, and as a result has concluded that there is no requirement to consolidate The Castle’s Accounts with the Council’s. Whilst Members of the Council are board members, the Council is not an investor as The Castle is a Company Limited by Guarantee and has no share capital. Further details of the accounts for The Castle may be obtained from The Castle (Wellingborough) Limited, Castle Way, Wellingborough, NN8 1XA. The Council transferred its housing stock to Wellingborough Homes, a Registered Social Landlord in 2007. The Council has assessed whether the Company is a regulated influenced company under the Local Authorities (Companies) Order 1995 and deemed that it is not, and as a result have concluded that there is no requirement to consolidate Wellingborough Homes’ Accounts with the Council’s. Whilst Members of the Council are Board Members they act independently of the Council under Wellingborough Homes’ Rules therefore the Council does not have significant control despite holding one third of voting right shares.
At a meeting of the Resources Committee on 25 October 2011, members agreed to recommend to Council to “create a Joint Venture Company, to be known as Wellingborough Norse Ltd, in partnership with Norse Commercial Services” and “transfer the operational management of the services under the current responsibility of the Head of Environment, together with the facilities management of operational properties, to Wellingborough Norse Ltd”. The transfer was completed on the 1st March 2012.
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The agreement to cover the services previously carried out by the ‘environmental’ and ‘facilities management’ sections of the council, covering the following aspects of service:
Waste management and recycling Fleet management Grounds maintenance Maintenance of parks and open spaces Trees Cemeteries and churchyards Street cleansing Public toilets Operation of the town centre marketplace Car parks Winter gritting operations Public halls Use of parks and parks games Environmental education and enforcement Facilities management for operational properties and land
Following a review of the Group Accounting requirements of the Code of Practice on Local Authority Accounting (The Code), and a review of the Wellingborough Norse Ltd Agreement, the Council’s accounting relationship with Wellingborough Norse Ltd has been determined as an Associate. In the Council’s own entity accounts, the interest in Wellingborough Norse Ltd is recorded as a financial asset at cost, less any provision for losses. At transfer date the Council received 2 shares in Wellingborough Norse Ltd (20% of share issue). Further information regarding the agreement is set out in the Notes to the Core Financial Statements.
1.13 Inventories and Long Term Contracts
Stocks are valued at the lower of actual cost or net realisable value. The FIFO (first in, first out) costing methodology is used. The Council does not undertake construction for its customers.
1.14 Investment Property
The Council’s non-current assets that are solely used to generate rental income and/or for capital appreciation in value and which are not used for the provision of services are classified as investment property. Expenditure on the acquisition, creation or enhancement of investment property is capitalised on an accruals basis, provided that it is probable that the future
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economic benefits or service potential associated with the item will flow to the Council and the cost or fair value of the item can be measured reliably. Recognition Expenditure on the acquisition, creation or enhancement of investment property is charged to capital where it is probable that the future economic benefit or service potential associated with the item flows to the Council and the expenditure can be measured reliably, and is greater than the Council’s de minimis level of £10,000. This includes internal staffing costs where they are directly attributable to a capital project. Expenditure that maintains but does not add to a fixed asset’s potential to deliver future economic benefits or service potential (i.e., repairs and maintenance) is charged as an expense when it is incurred. Measurement Investment properties are measured initially at cost and subsequently at their fair value (i.e. market value). Where an Investment property is held under a lease (i.e. the Council is the lessee), the measurement is based on the lease interest. Investment properties are not depreciated but are revalued annually according to market conditions at the year-end by an independent valuer. The valuer is Mr David Wilson, MRICS Dip Rating of Underwoods LLP, Chartered Surveyors and Valuers. This means that a periodic revaluation approach (see accounting policy for Property, Plant and Equipment) is only used where the carrying amount does not differ materially from that which would be determined using fair value at the Balance Sheet date. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. investment properties are not permitted to be reclassified as Assets Held for Sale.
Gains and losses on revaluation are not permitted by statutory arrangements to have an impact on the General Fund balance. The gains and losses are therefore reversed out of the General Fund balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. Income and Expenditure Rentals received in relation to investment property and expenditure are recognised in the Financing and Investment Income line within the Comprehensive Income and Expenditure Statement.
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Components Where part of an Investment property is replaced, the cost of the replacement part is recognised (subject to meeting the capitalisation rules) in the carrying value of the fixed assets and the carrying amount of those parts that are replaced will be de-recognised in the accounts and asset register. Disposal/De-recognition When an Investment property is disposed of or decommissioned the value of the asset in the Balance Sheet is written off to the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. The usable capital receipt from the disposal (if any) is credited to the Comprehensive Income and Expenditure Statement. Capital receipts from the disposal of fixed assets are accounted for on an accrual basis. Any revaluation gains on the asset held in the Revaluation Reserve are transferred to the Capital Adjustment Account. The net gain or loss on the disposal is reversed out of the revenue account as a reconciling item in the Movement in Reserves Statement and transferred to the Capital Adjustment Account. Amounts in excess of £10,000 are classified as capital receipts and are credited initially to the Usable Capital Receipts Reserve. The receipts arising from the disposal of General Fund assets are 100% usable by the Council.
1.15 Jointly Controlled Operations and Assets
Jointly controlled operations are activities undertaken by the Council in conjunction with other venturers that involve the use of the assets and resources of the venturers rather than the establishment of a separate entity. The Council recognises on its Balance Sheet the assets that it controls and the liabilities that it incurs and debits and credits the Comprehensive Income and Expenditure Statement with the expenditure it incurs and the share of income it earns from the activity of the operation. Jointly controlled assets are items of property, plant or equipment that are jointly controlled by the Council and other venturers, with the assets being used to obtain benefits for the venturers. The joint venture does not involve the establishment of a separate entity. The Council does not have any jointly controlled assets, however if it did the Council would only account for its share of the jointly controlled assets, the liabilities and expenses that it incurs on its own behalf or jointly with others in respect of its interest in the joint venture and income that it earns from the venture.
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The Council has jointly controlled operations with a number of local authorities and other organisations in the area:
• District Law (formerly Connect Law) – provides legal services for Wellingborough and Kettering Councils. Kettering acts as the host and Wellingborough pays an annual contribution.
• Joint Planning Unit – provides strategic planning services for Wellingborough, Kettering, Corby, East Northamptonshire and Northamptonshire County Council. Northamptonshire County Council acts as the host and Wellingborough pays an annual contribution.
• IT Services – provides IT services for Wellingborough and East Northants Councils. East Northants acts as the host and Wellingborough pays an annual contribution.
• Wellingborough Town Centre Partnership – aims to improve and promote Wellingborough Town Centre and thereby attract more visitors, support existing businesses and pull in new businesses. Wellingborough pays an annual contribution.
• Northamptonshire Waste Partnership - provides a partnership to ensure continuing cooperation and longer term vision to deliver the Partnership’s vision jointly to implement the policies set out in the ‘Northampton Joint Municipal Waste Management Strategy’. The partners are Northamptonshire Councils. Northamptonshire County Council acts as the host and Wellingborough pays an annual contribution.
1.16 Leases
Leases are classified as finance leases where the terms of the lease transfer most of the risks and rewards incidental to ownership of the asset from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets The Council as Lessee Finance Leases
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Property, plant and equipment or Investment property held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs (if any) of the Authority are added to the carrying amount of the asset. Premiums paid on entry into a lease (if any) are applied to writing down the lease liability. Contingent rents are charged as expenses in the years in which they are incurred. Lease payments are apportioned between:
• a charge for the acquisition of the interest in the property, plant or equipment or investment property – applied to write down the lease liability, and
• a finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).
Property, Plant and Equipment and Investment property recognised under finance leases is accounted for using the policies applied generally to such assets, for Property, Plant and Equipment subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life. The Council is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual provision is made from revenue towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore replaced by revenue provision (MRP) in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. Operating Leases Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefiting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g., there is a rent-free period at the commencement of the lease).
An Investment property held under an operating lease is accounted for as if it was a finance lease.
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The Authority as Lessor Finance Leases The Council currently does not have any finance leases where it is the lessor. Operating Leases Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g., there is a premium paid at the commencement of the lease). Initial direct costs incurred (if any) in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income.
Lease Type Arrangements
Where the Council enters into an arrangement, comprising a transaction or a series of related transactions, that does not take the legal form of a lease but conveys a right to use an asset (e.g. an item of property, plant or equipment) in return for a payment or series of payments, the arrangement is accounted for as a lease as detailed above. The Council currently does not have any lease type arrangements
1.17 Overheads and Support Services
The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2011/12 (SERCOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:
• Corporate and Democratic Core – costs relating to the Council’s status as a multi-functional, democratic organisation.
• Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early and any depreciation and impairment losses chargeable on surplus assets in Property, Plant and Equipment.
These two cost categories are defined in SERCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement.
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1.18 Property, Plant and Equipment (PPE)
Property, Plant and Equipment assets are tangible assets that have physical substance and are held for use in the provision of goods or services or for administering purposes and that are expected to be used during more than one financial year. Recognition Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Authority and the cost of the item can be measured reliably. Expenditure on the acquisition, creation or enhancement of fixed assets is charged to capital where it is probable that the future economic benefit or service potential associated with the item flows to the Council and the expenditure can be measured reliably, and is greater than the Council’s de minimis level of £10,000. This includes internal staffing costs where they are directly attributable to a capital project. Expenditure that maintains but does not add to a fixed asset’s potential to deliver future economic benefits or service potential (i.e., repairs and maintenance) is charged as an expense when it is incurred. Measurement Assets are initially measured at cost, comprising:
• the purchase price, and
• any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management
PPE are then carried in the Balance Sheet using the following measurement bases:
• infrastructure, community assets and assets under construction – depreciated historical cost
• dwellings – fair value, determined using the basis of existing use value for social housing (EUV-SH)
• all other assets – fair value, determined the amount that would be paid for the asset in its existing use (existing use value – EUV)
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Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value. Where non-property assets (i.e. Vehicles, Plant and Equipment) that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value. The valuation of land and buildings (which are recorded separately) is undertaken by a professionally qualified valuer. The valuer is Mr David Wilson, MRICS Dip Rating of Underwoods LLP, Chartered Surveyors and Valuers. Valuations of Property, Plant and Equipment assets are subject to review within a rolling 5 year programme of revaluations. The residual lives and estimated useful lives of asset, together with their depreciation policies, are reviewed on an annual basis. Revaluation gains on PPE assets are posted to the Revaluation Reserve. Gains are credited to the appropriate line(s) in the Surplus or Deficit on Provision of Services (up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised) where they arise from the reversal of a revaluation loss previously charged to the same asset. Where decreases in value are identified, the revaluation loss is accounted for by:
• where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)
• where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Surplus or Deficit on Provision of Services
Revaluation gains and revaluation losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. The Revaluation Reserve contains revaluation gains recognised since 1st April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. Where Property, Plant and Equipment meet the criteria for investment property, the asset is reclassified to Investment Property. The asset is revalued immediately before reclassification to Investment Property with any remaining balance on the Revaluation Reserve ‘frozen’ until such time as it is reclassified.
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Those fixed assets that are surplus to requirements (i.e. are not supporting services) but which do not meet the criteria to be classified as Assets Held for Sale or Investment Property are classified as Surplus in the Property, Plant and Equipment section of the Balance Sheet. Depreciation The value of fixed assets is recognised in the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement in the form of a depreciation charge using the straight-line method. Variations to the above periods may occur if appropriate evidence is provided by a suitably qualified professional officer or external valuer. Depreciation is not permitted to have an impact on the General Fund balance. The depreciation is therefore reversed out of the General Fund balance in the Movement in Reserve Statement and posted to the Capital Adjustment Account. Depreciation is charged on all assets except for Investment Property, Community Assets and Assets Held for Sale; land assets that have an indefinite useful life are not depreciated. Newly acquired assets are not depreciated in the year of acquisition and assets under construction are not depreciated until they are brought into operational use. Revaluation gains are also depreciated, with an amount equal to the difference between the current value depreciation charged on fixed assets and the depreciation that would have been chargeable on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account. Impairment Property, Plant and Equipment, are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for by:
• Where there is a balance of revaluation gains for the assets in the Revaluation Reserve, the carrying amount of the assets is written down against that balance (i.e. up to the amount of any accumulated gains)
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• Where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement.
In exceptional cases where an impairment loss is reversed (by a revaluation gain) subsequently on the same asset, the reversal is credited to the relevant service line(s) in the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss (adjusted for depreciation that would have been charged if the loss had not been recognised). Impairments loss and reversals are not permitted to have an impact on the General Fund balance. The loss and reversals are therefore reversed out of the General Fund balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. Components Component parts of the Council’s PPE assets that are considered to be material and are above a de minimis level of 20% (based on cost of the component compared to the asset) have been separately identified and accounted for in the accounts with effect from 1st April 2010 and recorded in the Council’s asset register in accordance with the Code, where the component’s useful life is different from that of the other components of the fixed asset. A maximum of four components will be identified for a primary asset:
• Structure (Main shell of the building)
• Roof
• Lifts
• Services (Electrical, Plumbing, Heating)
Componentisation is applicable to enhancement and acquisition expenditure incurred, and revaluations carried out from 1st April 2010. Each material component will be separately depreciated over its useful life. Where separate components have the same useful life, these components will be grouped together. On componentisation the balances on the Revaluation Reserve for the total asset will be allocated to the structure (host) (whether the asset is treated as a single component or a number of components) because the structure will principally
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give rise to the revaluation gains or losses. As a result the other components will be valued at cost. Where part of a Property, Plant and Equipment item is replaced, the cost of the replacement part is recognised (subject to meeting the capitalisation rules) in the carrying value of the fixed assets and the carrying amount of those parts that are replaced will be de-recognised in the accounts and asset register. The recognition and de-recognition of components takes place regardless of whether the replaced part had been depreciated separately.
Disposals/De-recognition The fixed asset disposal procedures followed by the Council mean that no PPE met the strict definition to be reclassified as held for sale, before being disposed of (see separate accounting policy – Assets Held for Sale). When a PPE asset is disposed of or decommissioned the value of the asset in the Balance Sheet is written off to the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. The usable capital receipt from the disposal (if any) is credited to the Comprehensive Income and Expenditure Statement. Capital receipts from the disposal of fixed assets are accounted for on an accrual basis. Any revaluation gains on the asset held in the Revaluation Reserve are transferred to the Capital Adjustment Account. The net gain or loss on the disposal is reversed out of the revenue account as a reconciling item in the Movement in Reserves Statement and transferred to the Capital Adjustment Account. Amounts in excess of £10,000 are classified as capital receipts and are credited initially to the Usable Capital Receipts Reserve. The receipts arising from the disposal of General Fund assets are 100% usable by the Council
1.19 Assets Held for Sale
Fixed Assets (excluding Investment Property) that have been declared surplus by the Council are classified as Assets Held for Sale in the Balance Sheet if they meet the meet strict criteria set out in the Code of Practice on Local Authority Accounting in the United Kingdom. Assets held for sale are valued at the lower of their carrying value and fair value less costs to sell and they are not depreciated. The fixed asset disposal procedures followed by the Council mean that no fixed assets met the strict definition to be reclassified as Held for Sale.
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1.20 Provisions, Contingent Liabilities and Contingent Assets
Provisions Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation, and measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Provisions are classified on the Balance Sheet as short term (due to be settled within 12 months of the financial year end) or long term (due to be settled over 12 months of the financial year end). For long term provisions where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. The unwinding of the discount due to the passage of time is recognised as interest within Surplus or Deficit on the Provision of services. Contingent Liabilities Where the Council has an event that has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain events not wholly within the control of the Council, a disclosure note is included in the accounts. Contingent Assets Where the Council has an event that has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain events not wholly within the control of the Council, a disclosure note is included in the accounts.
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1.21 Reserves
The Council sets aside specific amounts as revenue or capital reserves, as appropriate, for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts in the Movement in Reserves Statement from General Fund balances. For each reserve established the purpose, usage and basis of transactions are identified in the notes to the financial statements.
Expenditure is charged to service revenue accounts and not directly to any reserve. The reserve is then appropriated back in the Movement in Reserves Statement so that there is no net charge against Council Tax for the expenditure. The Capital Receipts Reserve is not available for revenue purposes and some of the reserves can only be used for statutory purposes. The reserves in the Balance Sheet at the end of the financial year are classified between usable reserves and non-usable reserves. Certain reserves in the Balance Sheet are kept to manage the accounting processes for certain transactions, these are grouped under Unusable Reserves in the Balance Sheet. These are detailed in the notes to the financial statements. The General Fund Reserve is not earmarked and is to allow for any future unknown contingencies that may arise. This reserve is recommended by the Council’s Chief Financial Officer at what is deemed to be a prudent level and in accordance with the reserves policy agreed at Full Council. In accordance with the Council’s current Medium Term Financial Strategy, as a minimum, the level of the General Fund working balance should not fall below £3m.
1.22 Revenue Expenditure Funded from Capital under Statute (REFCUS)
Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement in the year. Where the Authority has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax.
1.23 Value Added Tax
All income and expenditure in the financial statements excludes amounts related to VAT. VAT collected is payable to HM Revenue and Customs and VAT paid is recoverable from it.
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VAT will only be included in the Comprehensive Income and Expenditure Statement when it is irrecoverable from HM Revenue and Customs. Any net sum recoverable from HMRC at the end of the financial year is included in the Balance Sheet as a debtor at the Balance Sheet date.
1.24 Council Tax
The Council is the billing agent for Council Tax and is responsible for the collection and distribution of council tax including precepts from other organisations. The Council acts as the agent of the preceptors and only includes its own element of any council tax due as a debtor in its Balance Sheet at the end of the financial year. The difference between the council tax income credited to the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement on an accruals basis and the amount required by Regulation to be credited to the General Fund is taken to the Collection Fund Adjustment Account in the Balance Sheet and included as a reconciling item in the Movement in Reserves Statement.
1.25 National Non-Domestic Rates
The Council acts as the agent of the Government in collecting National Non-Domestic Rates (NNDR). The Council does not recognise NNDR debtors in its Balance Sheet at the end of the financial year but recognises a debtor or creditor for cash collected from the NNDR debtors as agent of the Government but not paid to the Government at that date.
1.26 Deferred Capital Receipts
The Council in the past issued advances in the form of a mortgage to the purchaser of Council Dwellings, the outstanding mortgage is shown in the Balance Sheet as a long-term debt and an equal amount is shown as an unusable reserve - deferred capital receipt. The long-term debt and deferred capital receipt are both written down as the principal sum is repaid by mortgagees (with the corresponding entry in usable reserve – Capital Receipts Reserve).
1.27. Exceptional Items
Where income and expenditure transactions are material, their nature and amount are disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending
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on how significant the items are to an understanding of the Authority’s financial performance.
2. Accounting Standards that have been issued but have not yet been adopted –
IFRS 7 The Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 (the Code) has introduced a change in accounting policy in relation to the treatment of Financial instruments (IFRS 7): disclosures (transfer of financial assets) held by the Council, which will need to be adopted fully by the Council in the 2012/13 financial statements. The Council is required to disclose information relating to the impact of the accounting change on the financial statements as a result of the adoption by the Code of a new standard that been issued, but is not yet required to be adopted by the Council, in this case, transfer of financial assets. Full adoption of the standard will be required for the 2012/13 financial statements. However, the Council is required to make disclosure of the estimated effect of the new standard in these (2011/12) financial statements. The new standard will require that there is no adjustment required in the 2011/12 financial statements. Relevant circumstances would arise where an authority retains ownership of a financial asset but contracts to reassign or otherwise pay over the cash flows generated by the instrument, at the same time retaining substantially all the risks and rewards of ownership. There is unlikely to be any financial implications for the Council in respect of this change in respect of Financial Instruments.
3. Critical Judgements in Applying Accounting Policies
In applying the accounting policies set out on pages 24 to 51, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:
• The going concern assumption is a fundamental principle in the preparation of
financial statements, under which an entity is ordinarily viewed as continuing in business for the foreseeable future and able to realise its assets and discharge its liabilities in the normal course of business. There is a high degree of uncertainty about future levels of funding for local government. As part of the closure of accounts process the Council has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the
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Authority might be impaired as a result of a need to close facilities and reduce levels of service provision. The principal assumption is that the Council will experience no significant changes in its operating levels beyond those approved as part of the budget setting process.
• On the 1st March 2012 the authority entered into an agreement with Wellingborough Norse Ltd relating to services previously carried out by the ‘environmental’ and ‘facilities management’ sections of the council. Following a review of the ‘Group Accounting’ requirements of the Code of Practice on Local Authority Accounting (The Code), and a review of the Wellingborough Norse Ltd Agreement, the Council’s accounting relationship with Wellingborough Norse Ltd has been determined as an ‘Associate’. This decision infers that in future the statement of accounts will be required to show a set of ‘group accounts’ detailing the financial activities of both the Council and Wellingborough Norse Ltd. The agreement was operational for only one month during the year 2011/12. Wellingborough Norse Ltd will not be preparing accounts to the 31st March 2012 and it has therefore, in accessing the impact on the 2011/12 accounts, been deemed immaterial and no group accounts have been prepared for 2011/12. Group accounts will be prepared for the year 2012/13 onwards.
4. Assumptions made about the Future and Other Major Sources of Estimation Certainty The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the Council’s Balance Sheet at 31 March 2012 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:
Item Uncertainties Effect if Actual Results Differ from Assumptions
Property Plant and Equipment
Assets are depreciated over useful lives that are dependant on assumptions about the level of repairs and maintenance that will be incurred in relation to the individual asset. The current economic climate makes it uncertain that the Authority will be able to sustain its current spending on
If the useful life of an asset is reduced, depreciation increases and the ‘carrying amount’ of the asset falls.
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repairs and maintenance, bringing into doubt the useful lives assigned to assets.
Arrears
At 31 March 2012, the Authority had a balance for sundry debtors of £3.314m. A review of significant balances indicated that an impairment of doubtful debts of £0.805m was appropriate. However, in the current economic climate it is not certain that such an allowance would be sufficient.
If collection rates were to deteriorate, a doubling of the amount of the impairment of doubtful debts would require an additional £0.805m to set aside as an allowance.
Pensions Liability
Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries (Hymans Robertson LLP) is engaged to provide the Council with expert advice about the assumptions to be applied.
The effects on the net pension’s liability of changes in individual assumptions can be measured. For instance, a 0.5% decrease in the discount rate assumption (used for discounting the scheme liabilities) would result in an increase in the pension liability of £5.255m. During 2011/12, the Council’s actuaries advised that the net pension’s liability had increased by £6.267m partly as a result of estimates being corrected as a result of experience (i.e. the effects of differences between the previous actuarial assumptions and what has actually occurred). This estimate adjustment accounts for £4.469m of the net pension liability increase.
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5. Material Items of Income and Expense
The Council has a number of jointly controlled operations as detailed in Accounting Policy No. 15 'Jointly Controlled Operations and Assets'. Included in the 2011/12 Cost of Services in the Comprehensive income and Expenditure Statement, the Council has made the following material annual contributions:
• District Law - £155k (£226k in 2010/11)
• Joint Planning Unit £114k (£94k in 2010/11)
• IT Services - £373k (£501k in 2010/11) A total of £1.877m has been recognised in the Surplus or Deficit on Provision of Services in 2011/12 (£2,498k in 2010/11) in respect of termination benefits. Further details are shown in note 38 Termination Benefits.
Changes in the valuations of investment property has resulted in a revaluation of £1.035m recognised in Financing and Investment Income and Expenditure line within the Surplus or Deficit on Provision of Services. The £1.035m is not permitted to have an impact on the General Fund Balance. The losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. The council paid a total sum of £26.655m in Housing Benefit payments to Wellingborough residents to meet the cost of rent, mortgage payments and council tax. The Council received Housing Benefit Grant of £27.041m from central government to defray the cost.
6. Events After the Balance Sheet Date
The Statement of Accounts was authorised for audit by the Director of Resources on 29thJune 2012. There were no events taking place after the 31st March 2012 and before the 30th June 2012 that need to be reflected in the financial statements or notes.
7. Adjustments between Accounting Basis and Funding Basis Under Regulations
This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure.
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2011/12
General
Fund
Balance
Capital
Receipts
Reserve
Capital
Grants
Unapplied
Movement in
Unusable
Reserves
£'000 £'000 £'000 £'000
Adjustments involving the Capital Adjustment Account
Reversal of items debited or credited to the Comprehensive Income and
Expenditure statement
Depreciation, Revaluation Losses and Impairment of non-current assets -2,222 2,222
Movement in market value of investment property 1,035 -1,035
Capital Grants and Contributions credited to the Comprehensive Income and
Expenditure Statement (if applied credit to Capital Adjustment Account, if unapplied
credit to Capital Grants Unapplied Account) 391 -391
Revenue expenditure funded from capital under statute -1,731 0 9 1,722
Amounts of non-current assets written off on disposal or sale as part of the gain/loss
on disposal to the Comprehensive Income and Expenditure Statement 639 -1,668 -17 1,046
Insertion of items nor debited or credited to the Comprehensive Income and
Expenditure Statement
Capital expenditure charged to the General Fund balance
Statutory Repayment of debt. (Finance Lease Liabilities) 158 -158
Adjustments involving the Capital Grants Unapplied Account
Application of grants unapplied to capital financing transferred to the Capital
Adjustment Account 0Adjustments involving the Capital Receipts Reserve
Capital receipts applied to fund capital expenditure (i.e. transferred to the Capital
Adjustment Account 0 2,132 14 -2,146
Contributions from the Capital Receipts Reserve towards administrative costs of non
current asset disposals
Transfer from Capital Receipts Deferred to Capital Receipts Reserve 0Adjustments involving the Collection Fund adjustment Account
Amounts by which council Tax income and residual community charge adjustments
included in the Comprehensive Income and Expenditure Statement is different from
the amount taken to the General Fund in accordance with regulation. 80 -80
Adjustments involving the Pension Reserve
Reversal of items relating to retirement benefits debited or credited to the
Comprehensive Income and Expenditure Statement -3,432 3,432
Employers pension contributions and direct payments to pensioners payable in year 1,634 -1,634 Adjustments involving the Accumulated Absences Account
Amount by which the officer remuneration charge to the Comprehensive Income and
Expenditure Statement on an accruals basis is different from remunerations
chargeable in year in line with statutory requirements 56 -56
Other Adjustments
Other balancing adjustments required to reconcile proper accounting practice with the
resources specified in statutory provisions 1 2
Total Adjustments -3,392 464 7 2,924
55
Comparative figures for 2010/11
General
Fund
Balance
Capital
Receipts
Reserve
Capital
Grants
Unapplied
Movement in
Unusable
Reserves
£'000 £'000 £'000 £'000
Adjustments involving the Capital Adjustment Account
Reversal of items debited or credited to the Comprehensive Income and
Expenditure statement
Depreciation, Revaluation Losses and Impairment of non-current assets -2,328 2,328
Movement in market value of investment property -3,134 3,134
Capital Grants and Contributions credited to the Comprehensive Income and
Expenditure Statement (if applied credit to Capital Adjustment Account, if unapplied
credit to Capital Grants Unapplied Account) 1,225 -456 -769
Revenue expenditure funded from capital under statute -1,448 1,448
Amounts of non-current assets written off on disposal or sale as part of the gain/loss
on disposal to the Comprehensive Income and Expenditure Statement 3,272 -4,036 764
Insertion of items nor debited or credited to the Comprehensive Income and
Expenditure Statement
Capital expenditure charged to the General Fund balance
Statutory Repayment of debt. (Finance Lease Liabilities) 147 -147 Adjustments involving the Capital Grants Unapplied Account
Application of grants unapplied to capital financing transferred to the Capital
Adjustment Account -188 211 -23
Adjustments involving the Capital Receipts Reserve
Capital receipts applied to fund capital expenditure (i.e. transferred to the Capital
Adjustment Account 1,720 -1,720
Contributions from the Capital Receipts Reserve towards administrative costs of non
current asset disposals -10 10
Transfer from Capital Receipts Deferred to Capital Receipts Reserve -8 8Adjustments involving the Collection Fund adjustment Account
Amounts by which council Tax income and residual community charge adjustments
included in the Comprehensive Income and Expenditure Statement is different from
the amount taken to the General Fund in accordance with regulation. 93 -93
Adjustments involving the Pension Reserve
Reversal of items relating to retirement benefits debited or credited to the
Comprehensive Income and Expenditure Statement 4,250 -4,250
Employers pension contributions and direct payments to pensioners payable in year 1,796 -1,796
Adjustments involving the Accumulated Absences Account
Amount by which the officer remunerations charge to the Comprehensive Income and
Expenditure Statement on an accruals basis is different from remunerations
chargeable in year in line with statutory requirements -7 7
Other Adjustments
Other balancing adjustments required to reconcile proper accounting practice with the
resources specified in statutory provisions 30 23
Total Adjustments 3,698 -2,314 -245 -1,086
56
8. Transfers to/from Earmarked Reserves This note sets out the amounts set aside from the General Fund balances in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund expenditure in 2010/11 and 2011/12.
Balance
1st April
2010
Transfers in
2010/11
Transfers
out 2010/11
Balance
31st March
2011
Transfers in
2011/12
Transfers
out 2011/12
Balance
31st March
2012
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Capital Fund -1,836 1,836 0
Efficiency and Restructuring
Reserve -55 -55 -703 -758
Interest Equalisation Reserve -1,700 256 -1,444 1,444 0
Environmental Impact Reserve -2,000 2,000 0
Housing and Planning Delivery
Grant -632 406 -226 94 -132
S.38 Highways Adoption Grant -137 -3 -140 109 -31
Ward Support -11 11 0
Election Postage -18 -18 -18
VAT Reserve -121 -121 -121
Planning Reserve -100 -100 -33 -133
Revenue Equalisation Reserve -1,565 -1,565 1,565 0
Neighbourhood Development
Reserve -34 -34 34 0
NNDR Reserve 0 0 0
Miscellaneous Revenue Grants
Reserve -71 -70 -141 -123 28 -236
New Burdens Impact Reserve -51 -51 -51
Earmarked Reserves -6,460 -1,944 4,509 -3,895 -859 3,274 -1,480
General Fund -5,557 1,797 -3,760 -4,571 1,303 -7,028 -12,017 -1,944 6,306 -7,655 -5,430 4,577 -8,508
The nature and purpose of each reserve is shown below:
• Capital Fund - This fund was closed in 2010/11.
• Efficiency and Restructuring Reserve - provided to accommodate management restructuring and pump prime expenditure required to produce future savings.
57
• Interest Equalisation Reserve - this reserve was created in January 2009 to meet the impact of interest rate fluctuations on investment income. £300k was utilised in 2011/12 to meet the deficit in the budgeted investment income within Surplus or Deficit on Provision of Services. The balance has subsequently been transferred to the General Fund Balance as part of a rationalisation of reserves.
• Environmental Impact Reserve - at the time of the housing stock transfer to Wellingborough Homes a reserve previously established for repairs and maintenance purposes was converted to an 'Environmental Impact' Reserve in the sum of £2m to provide for any costs arising after the Stock transfer. The Reserve was transferred back to General Fund balances in 2010/11.
• Housing and Planning Delivery Grant (HPDG) - the HPDG was a Government grant to allow local authorities to bring forward housing schemes and prepare the ground for increased delivery. In setting the budget for 2011/12 it was assumed that this grant could be abolished and it was agreed by Council to set up an earmarked reserve for the unspent balance at 31st March 2010 to fund ongoing works, whilst reviewing future service funding and provision. In 2011/12 £94k was utilised to fund expenditure.
• S.38 Highway Adoption Grants- The Council has powers under the Highways Act of 1980 to enter into agreements with developers or other persons to adopt highways for future maintenance provided they are constructed to the Council’s specification. Developers may enter into an Agreement under Section 38 of the Highways Act with the Council to ensure that the highways are adopted. This reserve represents the fees paid in advance to cover the Council’s costs in preparing the Agreement and inspecting the work during construction and the bond deposited to cover the cost of bringing the road up to an adoptable standard should the developer become insolvent or is unable to meet their obligation. In 2011/12 a payment of £109k was made from the Reserve.
• Ward Support – This reserve was fully utilised in 2010/11.
• Election Postage - The allocation for postage in relation to expenses necessary to run elections varies from year to year depending on the number and type of elections, for example local and national elections. To ensure that this budget is better managed a reserve has been set up to transfer underspends to, in order to fund any shortfalls in future years.
58
• VAT Reserve – The Authority received £213k in 2010/11 as the result of a successful appeal to Her Majesty’s Revenues and Customs (HMRC) for a VAT refund including interest. This income was recognised in Surplus or Deficit on Provision of Services and used partially to fund specialist advice in respect of the VAT refund and within financial services.
• Planning Reserve - A Planning Inquiry was budgeted for in the 2010/11 financial year at a total cost of £100,000. However, it was realised that this would not go ahead as planned in 2010/11 so the £100,000 was transferred to an earmarked Planning Reserve, for use in future financial years. An additional £33,000 was added in 2011/12.
• Revenue Equalisation Reserve – This reserve, set up in 2010/11 has subsequently been transferred to the General Fund Balance as part of a rationalisation of reserves.
• Neighbourhood Development Reserve - This reserve was created from grant income in 2010/11 to fund Youth opportunity projects.
• Miscellaneous Revenue Grants Reserve – Created in 2010/11 it reflects grants received for which there are no conditions to repay but have not yet been spent.
• New Burdens Impact Reserve – Created in 2010/11 this fund relates to resources set aside to fund the costs associated with recent planning strategies.
9. Other Operating Expenditure
2010/11 2011/12
£'000 £'000
446 Parish Council Precepts 445
-3,042 Gains(-)/losses on the disposal of non current assets -687
-2,596 -242
59
10. Financing and Investment Income and Expenditure
2010/11 2011/12
£'000 £'000
33 Interest payable and similar charges 22
1,208
Pensions interest cost and expected return on pensions
assets 776
-689 Interest receivable and similar income -606
3,052
Income and expenditure, changes in their fair value and
gains(-)/losses in respect of Investment Property -2,049
-270 Other Investment income and expenditure
3,334 -1,857
11. Taxation and Non-Specific Grant Income
2010/11 2011/12
£'000 £'000
-3,623 Council Tax Income -3,751
-6,098 Non Domestic Rates -4,269
-886 Non ring fenced Government grants -1,320
0 New Homes Bonus -245
0 Council Tax Freeze Grant -80
-219 Capital grants and contributions 0
-10,826 -9,665
60
12. Property, Plant and Equipment
Movement in Balances
Movement in Balances 2011/12
Other Land
and
Buildings
Vehicles
Plant and
Equipment
Infrastructure
Assets
Community
Assets
Assets under
Construction
Total
Propery
Plant and
Equipment
£'000 £'000 £'000 £'000 £'000 £'000
Cost or Valuation
At 1st April 2011 (restated) 33,412 3,148 2,138 2,617 2,510 43,825
Additions / Donations 123 94 217 434
Revaluation increases /
decreases(-) recognised in the
Revaluation Reserve -343 -343
Revaluation increases /
decreases(-) recognised in the
Surplus/Deficit on the Provision
of Services -1,890 -1,890
Derecognition - Disposals -423 -208 -631
Assets reclassified within PPE 16 1,386 -1,386 -16 0
Assets reclassified to(-) / from
Investment Property 0
Other movements in cost or
valuation 115 -174 -59
At 31st March 2012 30,879 3,050 3,524 1,346 2,537 41,336
Accumulated Depreciation and
Impairment
At 1st April 2011 2,072 1,407 536 4,015
Depreciation Charge 1,174 496 155 104 1,929
Depreciation written out to
Revaluation Reserve -409 -6 -415
Depreciation written out to the
Surplus/Deficit on the Provision
of Services -1,209 -1,209
Derecognition - disposals -57 -145 -202
Impairment losses / reversals(-)
recognised in the Revaluation
Reserve 0
Impairment losses / reversals(-)
recognised in the Surplus/ deficit
on the Provision of Service 0
Assets reclassified within PPE 219 -219 0
Other movements in depreciation
and impairment 115 115
At 31st March 2012 1,571 1,758 904 0 4,233
Net Book Value
Net Book Value at 31st March
2011 31,340 1,741 1,602 2,617 2,510 39,810
Net Book Value at 31st March
2012 29,308 1,292 2,620 1,346 2,537 37,103
61
Movement in Balances comparative figures for 2010/11
Movement in Balances
comparative figures for
2010/11 (Restated)
Other Land
and
Buildings
Vehicles
Plant and
Equipment
Infrastructure
Assets
Community
Assets
Assets under
Construction
Total
Propery
Plant and
Equipment
£'000 £'000 £'000 £'000 £'000 £'000
Cost or Valuation
At 1st April 2010 (Restated) 33,460 2,675 2,302 2,313 3,276 44,026
Additions / Donations 40 434 317 791
Revaluation increases /
decreases(-) recognised in the
Revaluation Reserve 213 213
Revaluation increases /
decreases(-) recognised in the
Surplus/Deficit on the Provision
of Services -913 -913
Derecognition - Disposals -409 -110 -519
Assets reclassified within PPE 1,021 120 -164 286 -874 389
Assets reclassified to(-) / from
Investment Property or Intangible
Assets 29 -209 -180
Other movements in cost or
valuation 18 18
At 31st March 2011 (Restated) 33,412 3,148 2,138 2,617 2,510 43,825
Accumulated Depreciation and
Impairment
At 1st April 2010 1,068 1,095 449 2,612
Depreciation Charge 1,112 361 148 1,621
Depreciation written out to
Revaluation Reserve 0
Depreciation written out to the
Surplus/Deficit on the Provision
of Services -187 -187
Derecognition - disposals -65 -65
Assets reclassified within PPE 79 -61 18
Other movements in depreciation
and impairment 16 16
At 31st March 2011 2,072 1,407 536 4,015
Net Book Value
Net Book Value at 31st March
2010 32,392 1,580 1,853 2,313 3,276 41,414
Net Book Value at 31st March
2011 (Restated) 31,340 1,741 1,602 2,617 2,510 39,810
62
Depreciation The following useful lives have been used in the calculation of depreciation:
Property, Plant and Equipment: Vehicles, plant and equipment 0 – 10 years Infrastructure assets 5 - 36 years Buildings 0 - 60 years In respect of components the elements identified are, in addition to the structure:- Roof 20 - 40 years Lifts 10-20 years Services (electrical, plumbing, heating) 15-25 years
Capital Commitments At 31 March 2012, the Council has no significant capital commitments.
Revaluations The Council carries out a rolling programme that ensures that all Property, Plant and Equipment required to be measured at fair value is revalued at least every five years. All valuations are carried out externally. Valuations of land and buildings are carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. Valuations of vehicles, plant, furniture and equipment are based on current prices where there is an active second-hand market or latest list prices adjusted for the condition of the asset.
Other Land
and
Buildings
Community
Assets
Vehicles
Plant and
Equipment
Infrastructure
Assets
Assets under
Construction Total
£'000 £'000 £'000 £'000 £'000 £'000
Carried at historical cost 1,346 3,050 2,537 6,933
Valued at fair value as
at: 0
2011/12 6,448 6,448
2010/11 7,850 7,850
2009/10 16,220 488 16,708
2008/09 361 3,036 3,397
Total Cost or
Valuation 30,879 1,346 3,050 3,524 2,537 41,336
63
13. Investment Property
The following items of income and expense have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement:
2010/11 2011/12
£'000 £'000
Rental income from Investment Property -2,621 -2,386
Direct operating expenses arising from investment
property 1,758 1,324
Net Gain(-)/Loss -863 -1,062
There are no restrictions on the Council’s ability to realise the value inherent in its investment property or on the Council’s right to the remittance of income and the proceeds of disposal. The Council has no contractual obligations to purchase, construct or develop investment property or to repair, maintain or enhancement such property. The following table summarises the movement in the fair value of investment property in 2010/11 and 2011/12:
2010/11 2011/12
£'000 £'000
Balance at start of year(Restated) 39,059 34,705
Additions:
Subsequent Expenditure 273 431
Disposals -1,312 -518
Net gains/losses from fair value adjustments -3,134 1,035
Transfers:
to/from Property, Plant and Equipment -181 0
Balance at year end 34,705 35,653
14. Intangible Assets The Council accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets are purchased licenses. A 3 year useful life is assumed for all intangible assets.
64
In 2010/11 the balance on Intangible Assets was reclassified to Vehicles, Plant & Equipment within Property, Plant and Equipment (see note 12) and as a result the authority has no intangible assets to declare in 2011/12. The movement on Intangible Asset balances during 2010/11 and 2011/12 is as follows:
2010/11 2011/12
£'000 £'000
Balance at start of year:
Gross carrying amounts 29 0
Accumulated amortisation -17 0
Net carrying amount at start of
year. 12 0
Additions:
Purchases
Other changes -12 0
Net carrying amount at end of
year. 0 0
Comprising
Gross carrying amounts
Accumulated amortisation
0 0
15. Financial Instruments Categories of Financial Instruments The following categories of financial instrument are carried in the Balance Sheet:
31st March
2011
31st March
2012
31st March
2011
31st March
2012
£'000 £'000 £'000 £'000
Investments and Bank Deposits
Loans and Receivables 6,427 0 29,393 30,072
Available-for-sale financial assets 339 318 0 0
Total Investments 6,766 318 29,393 30,072
Debtors
Loans and Receivables 22 16 1,449 1,441
Total Debtors 22 16 1,449 1,441
Other Long Term Liabilities
Finance lease liabilities -318 -148 -158 -169
Total other long term liabilities -318 -148 -158 -169
Creditors
Financial liabilities carried at contract amount 0 0 -1,250 -1,537
Total creditors 0 0 -1,250 -1,537
Long Term Current
65
Reclassifications of Financial Instruments In 2011/12 the Council did not reclassify any financial instruments. Income, Expense, Gains or Losses
Financial
liabilities
Finance
Lease
Liabilities
Loans and
receivables
Financial
assets
carried at
contract
amounts
Available for
sale assets Total
£'000 £'000 £'000 £'000 £'000
Interest expense 22 22
Impairment gains -95 -95
Total expense in Surplus or deficit on
the Provision of services 22 0 -95 0 -73
Interest Income -606 -606 Total income in Surplus or Deficit on
the Provision of Services 0 -606 0 0 -606
Gains/ losses on revaluation 17 17
Surplus/deficit arising on revaluation
of financial assets in Other
Comprehensive Income and
Expenditure 0 0 0 17 17
Net gain or loss(-) for the year. 22 -606 -95 17 -662
Financial Assets
Financial
liabilities
Finance
Lease
Liabilities
Loans and
receivables
Financial
assets
carried at
contract
amounts
Available for
sale assets Total
£'000 £'000 £'000 £'000 £'000
Interest expense 33 33
Impairment losses 338 338
Total expense in Surplus or deficit on
the Provision of services 33 338 371
Interest Income -689 -689
Total income in Surplus or Deficit on
the Provision of Services -689 -689
Gains on revaluation -36 -36 Surplus/deficit arining on revaluation
of financial assets in Other
Comprehensive Income and
Expenditure -36 -36
Net gain or loss(-) for the year. 33 -689 338 -36 -354
Financial Assets
Income, Expense Gains or Losses
Comparable figures for 2010/11
66
Fair Values of Assets and Liabilities Financial liabilities, financial assets represented by loans and receivables and long-term debtors and creditors are carried in the Balance Sheet at contracted amounts (the Council does not have any financial instruments that are carried at amortised cost). As a result of financial instruments being carried at contracted amounts there is no difference between the fair value and carrying amount on the Balance Sheet. The Council does not have any borrowings with the exception of finance leases. Available for sale assets (quoted securities) are carried in the Balance Sheet at their fair value. These fair values are based on public price quotations where there is an active market for the instrument. The gains or losses arising on changes to the fair value of available for sale assets are recognised in the Available for Sale Financial Instruments Reserve (Unusable Reserve). The two tables below illustrate the carrying amount and fair value of the Council’s financial liabilities and assets:
Carrying
Amount Fair Value
Carrying
Amount Fair Value
£'000 £'000 £'000 £'000
Financial Liabilities -1,726 -1,726 -1,854 -1,854
Carrying
Amount Fair Value
Carrying
Amount Fair Value
£'000 £'000 £'000 £'000
Loans and receivables 37,608 37,608 31,831 31,831
Long term debtors 22 22 16 16
31st March 2011 31st March 2012
31st March 2011 31st March 2012
16. Inventories
2011/12
Amenities
Stores
Amenities Diesel and
Gas Oil
Waendel
Walk Medals
Bus
Tokens
Electricity
Cards
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance outstanding at
start of year 24 24 8 17 0 1 74
Purchases 4 0 8 2 0 0 14
Recognised as an
expense in the year 0 -9 -11 -6 0 -1 -27
Written off balances 0 0 0 -4 0 0 -4
Stock tfrd to Well Norse -28 -10 -5 0 0 0 -43
Balance Outstanding to
end of year. 0 5 0 9 0 0 14
67
Comparative figures for
2010/11
Amenities
Stores
Amenities Diesel and
Gas Oil
Waendel
Walk Medals
Bus
Tokens
Electricity
Cards
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance outstanding at
start of year 42 19 6 19 10 5 101
Purchases -18 5 2 -2 -10 -4 -27
Recognised as an
expense in the year 0
Written off balances
Balance Outstanding to
end of year. 24 24 8 17 0 1 74
17. Debtors The analysis of short-term debtors held on the Balance Sheet is shown in the table below:
31 March 2011 31 March 2012
£000 £000
Central government bodies 324 4,015
Bad debt provision - 145
324 3,870
Other local authorities 1,513 918
Bad debt provision -157 - 205
1,356 713
Public corporations and trading funds 717 372
Bad debt provision -
717 372
Other entities and individuals 1,870 2,453
Bad debt provision -903 - 805
967 1,648
Total 3,364 6,603
18. Cash and Cash Equivalents The balance of Cash and Cash Equivalents held on the Balance Sheet is made up of the following elements:
31st
March
2011
31st
March
2012
£'000 £'000
1 Cash and Deposits on Demand 1
688 Current Bank Accounts 524
2,556 Other demand deposits 4,030
3,245 Total Cash and Cash equivalents 4,555
68
19. Assets Held for Sale The Council has not classified any Property, Plant and Equipment assets as Held for Sale in 2010/11 or 2011/12 (see accounting policy number 19).
20. Creditors The analysis of short-term creditors held on the Balance Sheet is shown in the table below:
31st March
2011
31st March
2012
£'000 £'000
Central Government bodies -860 -102
Other local authorities -197 -205
NHS bodies 0 0
Public corporations and trading funds 0 -119
Other entities and individuals -3,730 -2,275
Total -4,787 -2,701
21. Provisions The Council committed to making redundancies in 2011/12 as part of its overall saving initiatives. The actual costs of these redundancies amounted to £1.288m (excluding pension costs). The Council applied for capitalisation direction to cover part of these amounts. In year we were able to capitalise £518k, £217k came from the provision and the balance had been accrued in 2010/11. The used amount has been transferred back to undistributed cost in the Comprehensive Income and Expenditure Statement
Redundancy and
Restructuring
£'000
Balance at 1st April 2011 -920
Additional provisions made in 2011/12
Amounts used in 2011/12 217
Unused amounts reversed in 2011/12 703
Balance at 31st March 2012 0
69
22. Usable Reserves
Movement in the Council’s Usable Reserves are detailed in the Movement in Reserves Statement (see page 19), and the disclosure notes 7 and 8 relating to Adjustments between Accounting Basis and Funding Basis Under Regulations and Transfer to/from Earmarked Reserves, respectively. The balance on the reserves as at 31st March 2012 was £24,594m.
23. Unusable Reserves The Council holds a number of Unusable Reserves on the Balance Sheet. The table below shows a summary of the balances.
2009/10
Restated
2010/11
Restated
31st March
2012
£'000 £'000 £'000
-11,784 -11,527 Revaluation Reserve Note 23a -10,942
-143 -179 Available for Sale Financial Instruments Reserve Note 23b -162
-76,803 -71,234 Capital Adjustment Account Note 23c -70,489
-30 23,137 Pensions Reserve Note 23d 29,404
39,556 -22 Deferred Capital Receipts Reserve Note 23e -16
76 -17 Collection Fund Adjustment Account Note 23f -97 153 160 Accumulated Absences account Note 23g 104
-48,975 -59,682 -52,198
23a Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant and Equipment and Intangible Assets. The balance is reduced when assets with accumulated gains are:
• revalued downwards or impaired and the gains are lost
• used in the provision of services and the gains are consumed through depreciation, or
• disposed of and the gains are realised.
The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.
70
2009/10
Restated
2010/11
Restated
£'000 £'000
-2,805 -11,784 Balance at 1st April -11,527
-10,520 -348 Upward revaluation of assets -373
238 135
Downward revaluation of assets and impairment losses not charged to
the Surplus/Deficit on the Provision of Services 447
-13,087 -11,997
Surplus or deficit on revaluation of non-current assets not posted to the
Surplus/Deficit on the Provision of Services 74
416 381
Difference between fair value depreciation and historic cost
depreciation. 540
887 89 Accumulated gains on assets sold or scrapped -29
1,303 470 Amount written off to the Capital Adjustment Account 511 -11,784 -11,527 Balance at 31st March -10,942
2011/12
£'000
23b Available for Sale Financial Instruments Reserve The Available for Sale Financial Instruments Reserve contains the gains made by the Council arising from increases in the value of its investments that have quoted market prices or otherwise do not have fixed or determinable payments. The balance is reduced when investments with accumulated gains are:
• revalued downwards or impaired and the gains are lost
• disposed of and the gains are realised.
2010/11
£'000
-143 Balance at 1st April -179
Upward revaluation of investments 0
-36
Downward revaluation of investments not charged to the
Surplus/Deficit on the Provision of Services 17
-179 17
0
Accumulated gains on assets sold and maturing assets written out of
the Comprehensive Income and Expenditure statement as part of
Other Investment Income 0
-179 Balance at 31st March -162
2011/12
£'000
23c Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations which are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement.
71
The Account contains accumulated gains and losses on Investment Property. The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 7 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.
2009/10
Restated
2010/11
Restated
£'000 £'000
-83,446 -76,803 Balance at 1st April -71,234
Reversal of items relating to capital expenditure debited and credited
to the Comprehensive Income and Expenditure Statement
1,873 1,621 Charges for depreciation and impairment of non-current assets 1,908
4,961 726 Revaluation losses on Property, Plant and Equipment 313
8 0 Amortisation of Intangible assets 0
1,897 1,448 Revenue expenditure funded from capital under statute. 1,730
119 1,680
Amounts of non-current assets written off on disposal or sale as part
of the gain/loss on disposal to the Comprehensive Income and
Expenditure Statement 1,073
2,313 0 Amount of non current assets written off to the CIES 0
11,171 5,475 5,024
-331 -381 Adjusting amounts written out to the Revaluation Reserve -540
10,840 5,094
Net written out amount of the cost of non-current assets consumed in
the year 4,484
Capital financing applied in the year:
-3,037 -1,720
Use of the Capital Receipts reserve to finance new capital
expenditure -2,132
-1,196 -769
Capital grants and contributions credited to the Comprehensive
Income and Expenditure Statement that have been applied to capital
financing -391
-42 -23
Application of grants to capital financing from the Capital Grants
Unapplied Account -23
149 0 Capital financing adjustment to Capital Receipts Reserve 0
-137 -147
Statutory provision for the financing of capital investment charged
against the General Fund Balance -158
-205 0 Capital expenditure charged against the General Fund
-4,468 -2,659 -2,704
271 3,134
Movements in the market value of Investment Properties debited or
credited to the Comprehensive Income and Expenditure Statement -1,035
-76,803 -71,234 Balance at 31st March -70,489
2011/12
£'000
Note: REFCUS figure of £1,730k included £50k relating to previous years 23d Pension Reserve The Pensions Reserve 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 Council accounts for post employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to
72
pension funds or when it eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.
2010/11 2011/12
£'000 £'000
39,556 Balance at 1st April 23,137
-10,372 Actuarial gains or losses on pensions assets and liabilities 4,469
-4,250
Reversal of items relating to retirement benefits debited or credited to
the Surplus/Deficit on the Provision of Services in the Comprehensive
Income and Expenditure Statement 3,430
-1,797
Employer's pensions contributions and direct payments to pensioners
payable in the year -1,632
23,137 Balance at 31st March 29,404
23e Deferred Capital Receipts The Council holds a balance of Long Term Debtors and a matching balance relating to Deferred Capital Receipts. These balances relate to Mortgages arising from the sale of Council houses which are not immediately payable, but are repayable over a longer period. When principal payments are received the Long Term Debtor is reduced and a matching amount is transferred from Deferred Capital Receipts to Capital Receipts Reserve.
2010/11 2011/12
£'000 £'000
-30 Balance at 1st April -22
0
Transfer of deferred sale proceeds credited as part of the gain/loss on
disposal to the Comprehensive Income and Expenditure Statement
8 Transfer to Capital receipts reserve upon receipt of cash 6
-22 Balance at 31st March -16
23f Collection Fund Adjustment Account The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.
73
2010/11 2011/12
£'000 £'000
76 Balance at 1st April -17
-93
Amount by which council tax income credited to the Comprehensive
Income and Expenditure Statement is different from council tax income
calculated for the year in accordance with statutory requirements -80
-17 Balance at 31st March -97
23g Accumulated Absences Account The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account.
2010/11
£'000
153 Balance at 1st April 160
-153
Settlement or cancellation of accrual made at the end of the preceding
year -160
160 Amounts accrued at the end of the current year 104
7
Amount by which officer remuneration charged to the Comprehensive
Income and Expenditure Statement on an accruals basis is different from
the remuneration chargeable in the year in accordance with statutory
requirements -56
160 Balance at 31st March 104
2011/12
£'000
24. Cash Flow Statement – Operating Activities
The cash flows for operating activities include the following items:
2010/11 2011/12
£'000 £'000
-700 Interest Received -591
33 Interest paid 22
-16 Dividends received -15
-683 Net cash flows from operating activities -584
74
25. Cash Flow Statement – Investing Activities
2010/11 2011/12
£'000 £'000
1,022 Purchase of property, plant and equipment, investment property and intangible assets 1,136
60,500 Purchase of short-term and long-term investments 51,000
0 Other payments for investing activities 0
-4,036 Proceeds from the sale of property, plant and equipment, investment property and intangible
assets
-1,685
-54,500 Proceeds from short-term and long-term investments -59,000
-666 Other receipts from investing activities (including capital grants) -307
2,320 Net cash flows from investing activities -8,856
26. Cash Flow Statement – Financing Activities
2010/11 2011/12
£'000 £'000
0 Cash receipts of short and long-term borrowing 0
-11,138 Other receipts from financing activities -940
147 Cash payments for the reduction of the outstanding liabilities relating to finance leases 158
0 Repayments of short- and long-term borrowing 0
3,808 Other payments for financing activities 3,988
-7,183 Net cash flows from financing activities 3,206
27. Amounts Reported for Resource Allocation Decisions The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Best Value Accounting Code of Practice. However, decisions about resource allocation are taken by the Council’s Resources Committee on the basis of budget reports analysed across Services. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular:
• no charges are made in relation to capital expenditure (whereas depreciation, revaluation and impairment losses in excess of the balance on the Revaluation Reserve and amortisations are charged to services in the Comprehensive Income and Expenditure Statement).
• the cost of retirement benefits is based on cash flows (payment of employer’s pensions contributions) rather than current service cost of benefits accrued in the year
• expenditure on support services is budgeted for centrally and not charged to services.
The income and expenditure of the Council’s principal services recorded in the budget outturn reports for the years 2010/11 and 2011/12 are as follows:
75
Service Income and
Expenditure
2011/12
Corporate
Management
Services
Directorate
Resources
Directorate
Total
£'000 £'000 £'000 £'000
Fees, charges and other
service income 0 -5,459 -7,982 -13,441
Government Grants 0 0 -26,754 -26,754
Total Income 0 -5,459 -34,736 -40,195
0
Employee Expenses 465 4,391 3,934 8,790
Other service expenses 83 5,886 27,279 33,248
Support service recharges 483 5,202 1,188 6,873
Total Expenditure 1,031 15,479 32,401 48,911
0 Net Expenditure 1,031 10,020 -2,335 8,716
Service Income and
Expenditure
Comparative figures for
2010/11
Chief Executive Community Development Resources Total
£'000 £'000 £'000 £'000 £'000
Fees, charges and other
service income 0 -2,323 -5,182 -10,125 -17,630
Government Grants -52 -474 -97 -25,857 -26,480
Total Income -52 -2,797 -5,279 -35,982 -44,110
Employee Expenses 709 2,193 4,999 2,920 10,821
Other service expenses 167 3,514 8,925 26,865 39,471
Support service recharges 401 1,014 3,393 1,449 6,257
Total Expenditure 1,277 6,721 17,317 31,234 56,549
Net Expenditure 1,225 3,924 12,038 -4,748 12,439
Reconciliation of Service Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement This reconciliation shows how the figures in the analysis of Service income and expenditure for 2010/11 and 2011/12 relate to the cost of services included in the Comprehensive Income and Expenditure Statement.
76
2010/11 2011/12
£'000 £'000
Net Expenditure in the Service Analysis 12,439 8,716
Net expenditure of services and support services not included in the Analysis 0 0
Amounts in the Comprehensive Income and Expenditure Statement not reported to
management in the Analysis -578 1,569
Amounts included in the Analysis not included in the Comprehensive Income and
Expenditure Statement -109 4,018
Cost of Services in Comprehensive Income and Expenditure Statement 11,752 14,303
Reconciliation of Service Income and Expenditure to Cost of Services in the
Comprehensive Income and Expenditure Statement
Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis of Service income and expenditure for 2010/11 and 2011/12 relate to a subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.
2011/12
Service
Analysis
Services and
Support
Services not
in Analysis
Amounts not
reported to
management
for decision
making
Amounts
not
included in
I and E
Allocation
of
recharges
Cost of
Services
Corporate
Amounts
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Fees, charges and other
service income -12,835 -763 2,125 -11,473 -2,097 -13,570
Interest and investment
income -606 606 0 -606 -606
Income from council tax 0 -3,751 -3,751
Government grants and
contributions -26,754 325 -26,429 -5,914 -32,343
Total Income -40,195 0 -763 3,056 0 -37,902 -12,368 -50,270
0
Employee expenses 8,790 -663 -3 8,124 8,124
Other service expenses 32,781 95 -287 32,589 824 33,413
Support Service recharges 6,873 -94 6,779 6,779
Depreciation, amortisation
and impairment 0 2,994 1,719 4,713 4,713
Interest Payments 22 -22 0 22 22
Precepts and Levies 445 -445 0 445 445
Gain or Loss on Disposal of
Fixed Assets 0 -687 -687
Total Expenditure 48,911 0 2,332 962 0 52,205 604 52,809
Surplus or deficit on the
provision of services 8,716 0 1,569 4,018 0 14,303 -11,764 2,539
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Comparative figures for
2010/11 (Restated)
Service
Analysis
Services and
Support
Services not
in Analysis
Amounts not
reported to
management
for decision
making
Amounts
not
included in
I and E
Allocation
of
recharges
Cost of
Services
Corporate
Amounts
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Fees, charges and other
service income -16,941 6,877 -10,064 -9,467 -19,531
Interest and investment
income -689 689 0 -689 -689
Income from council tax 0 0 -3,663 -3,663
Government grants and
contributions -26,480 -228 -50 -26,758 -7,165 -33,923
Total Income -44,110 0 -228 7,516 0 -36,822 -20,984 -57,806
Employee expenses 10,821 2,039 -2 12,858 2 12,860
Other service expenses 36,783 -6,068 1,322 32,037 9,769 41,806
Support Service recharges 8,912 -8,912 0 0 0
Depreciation, amortisation
and impairment 0 3,679 3,679 -665 3,014
Interest Payments 33 -33 0 33 33
Precepts and Levies 0 0 446 446
Gain or Loss on Disposal of
Fixed Assets (restated) 0 0 1,311 1,311
Total Expenditure 56,549 0 -350 -7,625 0 48,574 10,896 59,470
Restated Surplus or deficit
on the provision of services 12,439 0 -578 -109 0 11,752 -10,088 1,664
28. Trading Operations
The Council holds Investment Property for the purposes of rental income. The Authority’s Investment property portfolio consists of:
• Industrial Estates: This is a group of industrial retail units that the authority owns and lets out to a variety of users
• Town centre: This is a mixture of Retail units in and around the town centre including the shopping mall
• Market: Market stalls and other properties on market square
• Other: This consists of empty land and Garages owned by the Authority.
Details of trading position for Investment Property and the Market are shown in the table below:
78
£'000 £'000 £'000 £'000
Investment Property
Turnover -2,621 -2,386
Expenditure 5,616 1,324
Surplus(-)/ Deficit 2,995 -1,062
Market
Turnover -93 -87
Expenditure 160 118
Surplus(-)/ Deficit 67 30
Net surplus(-) / deficit on trading
operations 3,062 -1,032
2010/11 2011/12
Trading operations are incorporated into the Comprehensive Income and Expenditure Statement. The Market is an integral part of one of the Council’s services to the public. The expenditure of these operations is allocated or recharged to headings in the Net Operating Expenditure of Continuing Operations. Only the net surplus in relation to Investment Property is charged as Financing and Investment Income and Expenditure (see Note 10).
2010/11 2011/12
£'000 £'000
Net surplus(-) / deficit on trading
operations 3,062 -1,032
Services to the public included in
expenditure of continuing Operations -67 -30
Net surplus(-) / deficit credited /
debited to Financing and Investment
Income and expenditure. 2,995 -1,062
29. Agency Services
The Council carries out cyclic highway maintenance on behalf of Northamptonshire County Council; this includes grass cutting, weed control and tree and hedge care. Cyclical Maintenance 2010/11 2011/12
£'000 £'000
Cyclic Maintenance Expenditure 122 75
Ccyclic maintenance fee from
Northamptonshire County Council. -111 -71
Net surplus (-)/deficit 11 4
79
The Council acted as the host authority in providing a Consortium Internal Audit service with Kettering Borough Council. Consortium Audit 2010/11 2011/12
£'000 £'000
Consortium Audit Expenditure 251 219
Consortium Audit Income -251 -219
Net surplus (-)/deficit 0 0
30. Members Allowances
The Authority paid the following amounts to members of the council during 2010/11 and 2011/12.
2010/11 2011/12
£000 £000
Salaries 124 125
Mayor/Deputy Mayor allowances 13 13
Special responsibility allowances 54 44
Expenses 5 5
Total 196 186
Expenditure
31. Officers’ Remuneration The remuneration paid to the Council’s senior employees is as follows:
Salary, Fees
and
Allowances
Expenses
Allowances
Employer
Pension
contribution
Total Notes
£ £ £ £
2011/12 9,938 1,381 11,319
2010/11 31,111 378 8,369 39,858
2011/12 95,203 1,200 13,233 109,636
2010/11 77,819 1,141 20,933 99,893 1
2011/12 7,950 1,105 9,055 2
2010/11 21,617 85 5,815 27,517
2011/12 69,392 129 9,645 79,166 3
2010/11 68,590 127 18,451 87,168
2011/12 6,012 35 835 6,882 4
2010/11 56,772 498 15,271 72,541
2011/12 62,255 41 8,653 70,949 3
2010/11 57,229 17 15,395 72,641
2011/12 59,476 79 8,267 67,822 5
Head of Community 2010/11
2011/12 51,197 7,116 58,313 3
2010/11 8,610 2,316 10,926
2011/12 50,988 120 7,087 58,195 6
Head of Resources 2010/11
2011/12 50,841 231 7,066 58,138 6
2010/11
2011/12 47,479 304 6,599 54,382 6
2010/11
2011/12 0 5
2010/11 61,878 14 16,645 78,537
Total in 2011/12 510,731 2,139 70,987 583,857
Total in 2010/11 383,626 2,260 103,195 489,081
Corporate Director (Development)
Chief Executive (started March 2012)
Acting Chief Executive
Deputy Chief Executive
Director of Resources Corporate
Director (Resources)
Chief Executive (left June 2010)
Director of Services Corporate
Director (Community)
Head of Financial Services
Head of Policy, Property and
Partnerships
Head of Planning and Local
Development
Head of Environmental Services (left
29/02/12)
80
The Council has recently undergone a major restructuring exercise. This has resulted in a number of changes to the senior management team which are reflected in the above table.
1. The post of interim Chief Executive was operative from 1st July 2010 to 26th February 2012.
2. The post of Deputy Chief Executive remained unfilled from the 1st July 2010 to 26th February 2012.
3. Redesignation of posts. 4. Post made redundant as of 8th May 2011. 5. Head of Policy, Property and Partnerships became Head of Community on
the 14th March 2011. 6. Posts became effective from 14th March 2011
The Authority’s other employees receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were paid the following amounts:
2010/11 2011/12
£ £
Number of
Employees
Number of
Employees
50,000 54,999 2
55,000 59,999 1 1
60,000 64,999 1
65,000 69,999
70,000 74,999 3
75,000 79,999 1 1
80,000 84,999
Remuneration Band
The remuneration paid to the employees shown here includes redundancy payments paid to those employees who left the Council as a result of restructuring. The number of exit packages with total cost per band and total cost of the compulsory and other redundancies are set out in the table below: Exit package cost
band (including
special payments)
2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12
£0 - £20,000 6 13 4 40 10 53 66,115£ 461,505£
£20,001- £40,000 2 1 22 2 23 71,237£ 616,503£
£40,001 - £60,000 2 3 5 210,363£
£60,001 - £80,000
£80,001 - £100,000
£100,001 - £150,000
Total 8 16 4 65 12 81 137,352£ 1,288,371£
Total cost of exit packages
in each band
Number of complusory
redundancies
Number of other
departures agreed
Total number of exit
packages by cost band
81
32. External Audit Costs
The Council has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by the Council’s external auditors:
2010/11 2011/12
£'000 £'000
Fees payable to the Audit Commission with regard to
external audit serrvices carried out by the appointed auditor
for the year 111 97
Fees payable to the Audit Commission for the certification of
grant claims and returns for the year 21 23
132 120
33. Grant Income
The Council credited the following grants and contributions to the Comprehensive Income and Expenditure Statement in 2010/11 and 2011/12:
2010/11
£000
2011/12
£'000
Credited to Taxation and Non Specific Grant Income
New Burdens Grant - Habitats/Climate Change -51 0
Public Realm -38 0
Section 106 - Contributions -130 0
Total -219 0
Credited to Services
Disabled Facilities Grant -191 -299
Decent Homes Grant -292 0
Improvement Grant -2 0
Heritage Lottery -25 -17
S106 Contributions -548 -126
Housing Benefit Administration -728 -675
Housing Benefit Rent Allowances -19,571 -21,038
Housing Benefit Council Tax -5,023 -5,066
Housing Benefit HRA Rent Rebates 7 7
Housing Benefit Non HRA Rent Rebates -256 -278
New Homes Bonus 0 -245
Council Tax Freeze -80
Concessionary Fares for the Elderly -347 0
Homelessness Prevention Grants -112 -51
Local Services Support Grant -57
Anti Social Behaviour Victims and Witness Grant -10
Disabled Peoples Employment Allowance -5 -4
County Council Youth programme funding -85 0
Lottery funding re Hemingwell play area development -80 0
Total -27,258 -27,939
82
The Council has received a number of grants and contributions that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver. The balances at the year-end are as follows:
31st March
2011
31st March
2012
Capital Grants Received in Advance
Disabled Facilitiers and regional Housing Pot Grant -65 0
Section 106 contributions -889 -869
Total -954 -869
Section 106 contributions in year with conditions attached have been treated as income in advance until its purpose has been decided.
34. Related Parties The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. Central Government Central government has effective control over the general operations of the Authority – it is responsible for providing the statutory frame work within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the subjective analysis in Note 27 on reporting for resources allocation decisions. Grant receipts outstanding at 31 March 2012 are shown in Note 33. Members Members of the Council have direct control over the council’s financial and operating policies. The total of members’ allowances paid in 2011/12 is shown in Note 30. During 2011/12, no works or services were commissioned from companies in which any members had an interest. However, the Cultural Services Committee paid grants totalling £251,945 to several voluntary organisations in which four members or their spouses had positions on the governing bodies. In all instances, the grants were made with proper consideration of declarations of interest. The relevant members did not take part in any discussion or decision relating to the grants.
83
A number of Councillors are board members of The Castle (Wellingborough) Limited. This organisation is responsible for the management of a Council owned theatre and arts complex for the community. The Council has assessed whether the Company is a regulated influenced company under the Local Authorities (Companies) Order 1995 and deemed that it is not, and as a result has concluded that there is no requirement to consolidate The Castle’s accounts with the Council’s. Whilst Members of the Council are board members, the Council is not an investor as The Castle is a Company Limited by Guarantee and has no share capital. The Council paid this organisation a management fee of £355,860 in 2011/12. Further details of the accounts for The Castle may be obtained from The Castle (Wellingborough) Limited, Castle Way, Wellingborough, NN8 1XA. The Council transferred its housing stock to Wellingborough Homes, a Registered Social Landlord in 2009. The Council has assessed whether the Company is a regulated influenced company under the Local Authorities (Companies) Order 1995 and deemed that it is not, and as a result have concluded that there is no requirement to consolidate Wellingborough Homes’ Accounts with the Council’s. Whilst Members of the Council are Board Members they act independently of the Council under Wellingborough Homes’ Rules therefore the Council does not have significant control despite holding one third of shares with voting right shares. Officers Chief Officers were asked at the end of the year to disclose whether they, or any member of their immediate family, had any significant financial dealings with the Authority during the year. Their replies were reviewed and no material transactions existed. Other Public Bodies / Entities Controlled or Significantly Influenced by the Council Wellingborough Norse Ltd. The Authority entered into a contractual arrangement with Wellingborough Norse Ltd from 1st March 2012 details of which are included in the notes relating to Group Accounts. There were no other Public Bodies or Entities that were controlled or significantly influenced by the council during 2011/12.
35. Capital Expenditure and Financing The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a
84
measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed in the second part of this note.
2010/11 2011/12
£'000 £'000
Opening Capital Financing Requirement -8,066 -8,213
Capital Investment
Property Plant and equipment 791 434
Investment Properties 273 431
Revenue Expenditure Funded from Capital under Statute 1,448 1,680
Total Capital Investment 2,512 2,545
Sources of Finance
Capital receipts -1,720 -2,132
Government grants and other contributions -792 -413
Sums set aside from revenue:
Direct revenue contribution
Minimum revenue provision -147 -158
Closing Capital Financing Requirement -8,213 -8,371
Explanation of movements in year
Assets acquired under finance leases -147 -158
Increase/Decrease(-) in Capital Financing Requirement -147 -158
36. Leases
Authority as Lessee Finance Leases The Council has acquired Booth Drive and Faraday Court business units under finance leases. The valuation of the assets acquired under the Faraday Court lease is nil (based on the lease interest). As a result no asset or long-term liability has been recorded on the Council’s balance sheet. The assets acquired under the Booth Drive leases are carried as Investment Property in the Balance Sheet at the following net amounts:
31st March
2011
31st March
2012
£'000 £'000
Investment (Property Booth Drive) 1,430 1,680
1,430 1,680
The Council is committed to making minimum payments under the Booth Drive lease comprising settlement of the long-term liability for the interest in the property acquired by the Council and finance costs that will be payable by the Council in
85
future years while the liability remains outstanding. The minimum lease payments are made up of the following amounts:
31st March
2011
31st March
2012
£'000 £'000
Finance Lease liabilities (net present value of
minimum lease payments):
Current -158 -169
Non current -318 -148
Finance Costs payable in future years -33 -11
Minimum lease payments -509 -328
The minimum lease payments will be payable over the following periods:
31st March 2011 31st March 2012 31st March 2011 31st March 2012
£'000 £'000 £'000 £'000
Not later than one year 180 180 -158 -169
Later than one year and
not later than five years 328 149 -317 -148
Later than five years 1 0 -1 0
509 329 -476 -317
Minimum Lease Payments Finance Lease Liabilities
The minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. The lease payments made for the Faraday Court lease have been classified as contingent rent, because as indicated above there is no long-term liability for the interest in the property. In 2011/12 £261,644 contingent rents were payable by the Council (2010/11 £303,193). The Booth Drive lease does not have any contingent rent payments. The Council has sub-let the Booth Drive and Faraday Court business units held under these finance leases. At 31st March 2012 the minimum payments expected to be received under non-cancellable sub-leases was £504,354 (£511,861 at 31st March 2011). Operating Leases The Council acquired its use of street sweepers and refuse freighters by entering into operating leases, with typical lives of 5 years. These leases were novated in favour of Wellingborough Norse Ltd as from the 1st March 2012 as part of the transfer of services to that company. Therefore the council has no future minimum
86
lease payments due. The following table therefore only indicates the situation as it stood at the end of the previous year.
31st March 2011 31st March 2012
£'000 £'000
Not later than one year 350 0
Later than one year and not later than five years 1,108 0
Later than five years
1,458 0
The expenditure charged to the cultural, environmental, regulatory & planning services line in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:
2010/11 2011/12
£'000 £'000
Minimum Lease Payments 350 350
Contingent rents 0 0
350 350
Authority as Lessor Finance Leases The Council does not hold any finance lease where it acts as lessor. Operating Leases
The Council leases out property (classified as Investment Property) under operating leases for the following purposes:
• to generate income (as opposed to supporting service delivery).
The Council also leases out Trafalgar House (included under PPE in the balance sheet) to Wellingborough Norse Ltd as part of the agreement for the transfer of services from the 1st March 2012 (as detailed in Note 45 – Group Accounts) and the income received for 2011/12 was £7,500.
87
Trafalgar House
31st March 2011 31st March 2012
£'000 £'000
Not later than one year 0 98
Later than one year and not later than five
years 0 360
Later than five years 0 540
0 998 The future minimum lease payments receivable under non-cancellable leases in future years are:
Investment Property 31st March 2011 31st March 2012
£'000 £'000
Not later than one year -2,516 -2,381
Later than one year and not later than five
years -1,874 -1,434
Later than five years -70,186 -65,244
-74,576 -69,059
The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. Contingent rents are considered immaterial and have therefore been included in the amounts in the table above. With effect from the 1st March 2012 Wellingborough Norse Ltd lease those vehicles previously employed as part of the service which they now operate under contract. The value of the lease payment for March 2012 was £7,685. Vehicles
31st March 2011 31st March 2012
£'000 £'000
Not later than one year 0 442
Later than one year and not later than five
years 0 183
Later than five years 0 21
0 647
37. Impairment Losses
At the end of 31 March 2012 the Council has undertaken an assessment as to whether there is any indication that an asset may be impaired. No events have been identified and as such there are no impairments in 2011/12 (this was also the case in 2010/11).
88
38. Termination Benefits
The Council has paid out £1,877k in termination costs, which have been funded by the following means:
o £518k capitalisation directive approved in year o £235k redundancy and restructuring provision o £1,124k 2010/11 creditor accrual
39. Defined Benefit Pension Schemes
Participation in Pension Schemes As part of the terms and conditions of employment of its officers, the Council makes contributions towards the cost of post employment benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that needs to be disclosed at the time that employees earn their future entitlement. The Council participates in two post employment schemes:
• The Local Government Pension Scheme, administered locally by Northamptonshire County Council – this is a funded defined benefit final salary scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pensions liabilities with investment assets.
• Arrangements for the award of discretionary post retirement benefits upon early retirement – this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet these pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due.
Transactions Relating to Post-employment Benefits The Council recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge the Council is required to make against council tax is based on the cash payable in the year, so the real cost of post employment/retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year:
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Restated
Comprehensive Income and Expenditure Statement 2010/11 2011/12
£'000 £'000
Cost of Services:
current service costs 1,447 1,029
past service costs/gains(-) -6,905 0
losses / (Gains) on Curtailments 1,625
Financing and investment Income and Expenditure
interest costs 4,024 3,445
expected return on scheme assets -2,816 -2,669
Total Post-employment Benefit Charged to the Surplur or deficit on
the provision of services -4,250 3,430
Other Post-employment Benefit Charged to the Comprehensive
Income and Expenditure Statement
actuarial gains (-) and losses -10,372 4,469
Total Post-employment Benefit Charged to the Comprehensive
Income and Expenditure Statement -14,622 7,899
Movement in Reserves Statement
reversal of net charges made to the Surplus or Deficit for the
Provision of servives for post emplyment benefits in accordance with
the Code 4,250 -3,430
Actual amount charged against the General Fund Balance for
pensions in the year
employers' contributions payable to scheme 1,796 1,585
retirement benefits payable to pensioners 47 49
Restated Local
Government Pension
Scheme
The cumulative amount of actuarial gains and losses recognised in the Comprehensive Income and Expenditure Statement to the 31 March 2012 is a loss of £20.073m. Assets and Liabilities in Relation to Post-employment Benefits Reconciliation of present value of the scheme liabilities (defined benefit obligation):
2010/11 2011/12
£'000 £'000
Opening balance as 1st April -79,020 -63,778
Current service cost -1,447 -1,029
Interest cost -4,024 -3,445
Contributions by scheme participants -420 -336
Actuarial gains and losses 11,348 -2,460
Past service costs / gains 6,905
Losses / (Gains) on Curtailments 0 -878
Liabilities Extinguished on Settlements 5,352
Benefits paid 2,880 2,852
Closing balance at 31st March -63,778 -63,722
Funded Liabilities: Local
Government Pension
Scheme
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Reconciliation of fair value of the scheme (plan) assets:
2010/11 2011/12
£'000 £'000
Opening balance as 1st April 39,464 40,641
Expected rate of return 2,816 2,669
Actuarial gains and losses -976 -2,009
Employer contributions 1,797 1,632
Contributions by scheme participants 420 336
Assets distributed on settlements -6,099
Benefits paid -2,880 -2,852
Closing balance at 31st March 40,641 34,318
Local Government
Pension Scheme
The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets. The actual return on scheme assets in the year was £0.668m (2010/11: £2.675m). Scheme History
2007/08 2008/09 2009/10 2010/11 2011/12
£'000 £'000 £'000 £'000 £'000
Present value of liabilities
Local Government Pension Scheme -60,127 -51,465 -78,190 -63,076 -62,980
Discretionary Benefits -974 -704 -830 -702 -742
Fair value of assets in the Local
Government Pension Scheme 37,536 29,004 39,464 40,641 34,318
-23,565 -23,165 -39,556 -23,137 -29,404
Surplus/Deficit(-) in the scheme:
Local Government Pension Scheme -22,591 -22,461 -38,726 -22,435 -28,662
Discretionary Benefits -974 -704 -830 -702 -742
Total -23,565 -23,165 -39,556 -23,137 -29,404
The liabilities show the underlying commitments that the authority has in the long run to pay post employment (retirement) benefits. The total liability of £63.772m has a substantial impact on the net worth of the authority as recorded in the Balance Sheet, resulting in a negative overall balance of £29.404m. However, statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy:
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• the deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees (i.e. before payments fall due), as assessed by the scheme actuary
• finance is only required to be raised to cover discretionary benefits when the pensions are actually paid.
The total contributions expected to be made to the Local Government Pension Scheme by the Council in the year to 31 March 2013 is £1.555m. There is expected to be contributions of £49k for the Discretionary Benefits scheme in the year to 31 March 2013.The net liability as at 31 March 2012 (£29.404m) has substantially increased from 31 March 2011 (£23.137m) principally as a result of negative asset returns and long term inflation expectations
Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. Both the Local Government Pension Scheme and Discretionary Benefits liabilities have been assessed by Hymans Robertson LLP, an independent firm of actuaries, estimates for the County Council Fund being based on the latest full valuation of the scheme as at 31 March 2011. The principal assumptions used by the actuary have been:
2010/11 2011/12
Long-term expected rate of return on assets in
the scheme 7.50% 6.20%
Equity Investments 4.90% 3.50%
Bonds 5.50% 4.40%
Cash 4.60% 3.50%
Mortality assumptions
Longevity at 65 for current pensioners:
Men 21.4 years 21.4 years
Women 23.3 years 23.3 years
Longevity at 65 for future pensioners:
Men 23.4 years 23.4 years
Women 25.5 years 25.5 years
Rate of inflation (CPI) 2.80% 2.50%
Rate of increase in salaries 5.10% 4.80%
Rate of increase in pensions 2.80% 2.50%
Expected return on Assets 6.80% 5.50%
Rate of discounting scheme liabilities 5.50% 4.80%
Take up of option to convert annual pension
into retirement lump sum
Pre Aprl 2008 Service 50% 50%
Post April 2008 Service 75% 75%
Local Government Pension
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The Discretionary Benefits arrangements have no assets to cover its liabilities. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:
31st March
2011
31st March
2012
% %
Equity investments 72 71
Bonds 20 21
Property 6 6
Cash 2 2
100 100
History of Gains and Losses
The actuarial gains/losses identified as movements on the Pensions net liability in 2007/08 - 2011/12 can be analysed into the following categories, measured as a percentage of assets or liabilities at 31March 2012 (and the respective financial years:
2007/08 2008/09 2009/10 2010/11 2011/12
% % % % %
Differences between expected and actual
return on assets -23.52% -37.83% 22.20% -2.40% -5.85%
Experience gains and losses on liabilities 0.82% -23.22% 30.75% -17.79% 1.47%
40. Contingent Liabilities
At 31 March 2012, the Council had the following material contingent liabilities:
• It anticipated that further restructuring may be required and as a result a reduction in staffing numbers may result. As a consequence there may be a lower number of active members in the Local Government Pension Scheme in relation to inactive members, thus giving the potential for higher employer pension contributions to fund the pension liability.
• The Council has a contingent liability in respect of capital works required to bring some unadopted roads up to the required standard before adoption by the County Council. At present the total value is not known.
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41. Contingent Assets
• At 31 March 2012, the Council had no known Contingent Assets
42. Nature and Extent of Risks arising from Financial Instruments
The Council’s activities expose it to a variety of financial risks:
• credit risk – the possibility that other parties might fail to pay amounts due to the Council
• liquidity risk – the possibility that the Authority might not have funds available to meet its commitments to make payments
• market risk – the possibility that financial loss might arise for the Authority as a result of changes in such measures as interest rates and stock market movements.
The Council’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. Risk management is carried out by a central treasury team, under policies stated within the annual Treasury Management Strategy, approved by the Council in March 2011. This document provides written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk and the investment of surplus cash. Credit Risk
Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the authority’s customers. This risk is minimised through the Annual Investment Strategy, which requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria, as laid down by Fitch and Moody’s and Standard and Poor’s Ratings Services. The Annual Treasury Management Strategy also imposes a maximum sum to be invested with a financial institution located within each category. The credit criteria in respect of financial assets held by the Council are as detailed below:
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Financial Asset Category Criteria Maximum Investment
Deposits with Banks As assessed by our treasury
management advisors: £
High rating 5m
Medium rating 3m
Subsidiaries 2m
Deposits with building societies Only the top 30 Building Societies,
assessed by their asset base are
used, together with recognised
ratings:
High rating 5m
Medium rating 3m
Lower rating: 2m
With assets exceeding £1bn The Council does not rely solely on the current credit ratings of counterparties but also uses the following as overlays:
• credit watches and credit outlooks from credit rating agencies
• Certificates of Deposit (CDS) spreads to give early warning of likely changes
in credit ratings
• sovereign ratings to select counterparties from only the most creditworthy countries
Customers for goods and services are assessed, taking into account their financial position, past experience and other factors. The Council’s maximum exposure to credit risk in relation to its investments in banks and building societies of £29.647m cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. A risk of irrecoverability applies to all of the Authority’s deposits, but there was no evidence at the 31 March 2012 that this was likely to crystallise.
The following analysis summarises the Council’s potential maximum exposure to credit risk on other financial assets, based on experience of default and uncollectability over the last three financial years, adjusted to reflect current market conditions:
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Amount at
31st March
2012
Historical
experience of
default
Historical
experience
adjusted for
market
conditions at
31st March
2012
Estimated
maximum
exposure to
default and
uncollectability
as at 31st
March 2012
Estimated
maximum
exposure at
31st March
2011
£'000 % % £'000 £'000
A B C (A x C)
Customers 4,300 3.63 5.09 219 153 The Council does not generally allow credit for customers, such that £327,671 of the £649,448 balance is past its due date for payment. The past due but not impaired amount can be analysed by age as follows:
31st March 2011 31st March 2012
£'000 £'000
Less than three months 599 535
Three to six months 34 75
six months to one year 23 31
More than one year 49 8
705 649
Liquidity Risk The Council is a debt free authority, which means it has no borrowings to finance capital expenditure. The Council is also required to provide a balanced budget through the Local Government Finance Act 1992, which ensures sufficient monies are raised to cover annual expenditure. There is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. The Council manages its liquidity position through risk management procedures such as the setting and approval of prudential indicators and the approval of the treasury and investment strategy reports. It also maintains detailed cash flow planning to manage its day to day liquidity. The Authority has an overdraft facility, has ready access to borrowings from the Money Markets to cover any day to day cash flow need, and the Public Works Loan Board (PWLB) also acts as a lender of last resort to councils.
All trade and other payables are due to be paid in less than one year.
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Market Risk Interest Rate Risk The Council is exposed to risk in terms of its exposure to interest rate movements on its investments only, as it has no borrowings. Movements in interest rates have a complex impact on the authority. For instance, a rise in interest rates would have the following effects:
• investments at variable rates – the interest income credited to the Surplus or Deficit on the Provision of Services will rise
• investments at fixed rates – the fair value of the assets will fall.
Changes in interest receivable on variable rate investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure. Local Authorities should have due regard for the risks associated with the financial instruments that they hold. The procedures for risk management are set out through a legal framework in the Local Government Act 2003 and the associated regulations. These require the Council to comply with the CIPFA Prudential Code, the CIPFA Treasury Management in the Public Services Code of Practice and Investment Guidance issued through the Act. Active treasury management allows continual re-assessment of the impact that movements in interest rates have both in respect of feeding into the setting of the annual budget and also used to update the budget quarterly during the year. This allows any adverse changes to be accommodated. According to this assessment strategy, at 31 March 2012, if interest rates had been 1% higher with all other variables held constant, the financial effect would be:
£'000
Increase in interest receivable on variable rate investments 60
Impact on Surplus or Deficit on the Provision of Services 60
Decrease in fair value of fixed rate investment assets 260
Impact on Other Comprehensive Income and Expenditure 260
Decrease in fair value of fixed rate borrowings liabilities (no impact
on the Surplus or Deficit on the Provision of Services or Other
Comprehensive Income and Expenditure) 0
The impact of a 1% fall in interest rates would be the reverse of the above.
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Price Risk
The Council does not generally invest in equity shares but does have shareholdings to the value of £317,000 in British Assets plc as at the 31st March 2012 (£334,375 at 31st March 2011). Consequently, the Council is exposed to losses or surpluses arising from movements in the prices of these shares. These shares are classified as ‘available for sale’, meaning that all movements in price will impact on gains and losses recognised in Other Comprehensive Income and Expenditure. This represented an overall loss of 5.2%. Foreign Exchange Risk The Council has no financial exposure to loss arising from movements in exchange rates.
43. Prior Period Adjustment
A prior period adjustment has been made with regards to the 2009/10 and 2010/11 financial years to reflect corrections to the Council’s Fixed Asset Register. Table a) below shows the effect on 2009/10 and table b) the effect on 2010/11. a)
Description
2009/10
Original Adjustment
2009/10
Restated
£,000 £,000 £,000
Property Plant and Equipment 42,420 -1,006 41,414
Heritage Assets 0 34 34
Investment Property 39,464 -405 39,059
Revaluation Reserve -12,331 547 -11,784
Capital Adjustment Account -77,633 830 -76,803
Adjustment relates to an asset which was duplicated on the asset register which was identified through the revaluation process in 2011/12 and to the requirements relating to Heritage assets as set out in note 44 below.
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b)
Description 2010/11 Original
Adjustment 2009/10
Adjustment 2010/11
2010/11 Restated
£,000 £,000 £,000 £,000
Property Plant and Equipment 40,816 -1,006 39,810
Heritage Assets 0 34 34
Investment Property 36,110 -405 -1,000 34,705
Revaluation Reserve -12,074 547 -11,527
Capital Adjustment Account -73,064 830 1,000 -71,234
Comprehensive I and E Financing and Investment Income end Exp 2,334 1,000 3,334
MIRS Adj between accounting basis and funding basis under regs 3,698 -1,000 2,698
The further adjustment relating to 2010/11 was in respect of an Investment property sold in 2010/11 but not deleted from the Asset Register.
44. Heritage Assets
For 2011/12 the Council is required to change its accounting policy for heritage assets and recognise them at valuation. Previously, heritage assets were either recognised as community assets in the property, plant and equipment classification in the Balance Sheet or were not recognised in the Balance Sheet as it was not possible to obtain cost information on assets. Heritage assets are those assets that are intended to be preserved in trust for future generations because of their cultural, environmental or historical associations. They are held by the reporting entity in pursuit of its overall objectives in relation to the maintenance of heritage. Heritage assets include historical buildings, archaeological sites, military and scientific equipment of historical importance, historic motor vehicles, civic regalia, orders and decorations (medals), museum and gallery collections and works of art.
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In applying the new accounting policy, the Council has identified that the assets that were previously held as community assets and measured at £34,278 should now be recognised as heritage assets. The Council will also recognise an additional £270,000 for the recognition of heritage assets that were not previously included in the Balance Sheet. These items also require recognition in the Revaluation Reserve. A table of Heritage Assets is set out below with comparative figures for 2010/11 purely for clarification purposes. Those heritage assets shown as present as at the 1st April 2011 have been part of the Asset register of the Council for a number of years and, given the de minimus value involved no further analysis has been provided.
Other Land
and
Buildings
Art Works
and
Historic
Documents
Civic
Regalia
£ £ £
Cost or valuation
1st April 2011 21,746 12,532
Additions 160,000 110,000
Disposals
Revaluations
Impairment Losses /(reversals)
recognised in the Revaluation Reserve
Impairment Losses /(reversals)
recognised in surplus or Deficit on the
Provision of Services
31st March 2012 21,746 172,532 110,000
Comparative figures for prior periods 2007/08 2008/09 2009/10 2010/11
£ £ £ £
Cost or valuation
1st April brought forward 34,278 34,278 34,278 34,278
31st March carried forward 34,278 34,278 34,278 34,278
The above variances to assets held by the Council result in a requirement to restate the appropriate values in the balance sheet for prior periods 2009/10 and 2010/11. The relevant items (£34,278) are shown in note 43 above.
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45. Group Accounts On the 1st March 2012 the authority entered into an agreement with Wellingborough Norse Ltd relating to services previously carried out by the ‘environmental’ and ‘facilities management’ sections of the council. Following a review of the ‘Group Accounting’ requirements of the Code of Practice on Local Authority Accounting (The Code), and a review of the Wellingborough Norse Ltd Agreement, the Council’s accounting relationship with Wellingborough Norse Ltd has been determined as an ‘Associate’. This decision infers that in future the statement of accounts will be required to show a set of ‘group accounts’ detailing the financial activities of both the Council and Wellingborough Norse Ltd. The agreement was operational for only one month during the year 2011/12. Wellingborough Norse Ltd will not be preparing accounts to the 31st March 2012 and it has therefore, in accessing the impact on the 2011/12 accounts, been deemed immaterial and no group accounts have been prepared for 2011/12. Group accounts will be prepared for the year 2012/13 onwards.
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F1 THE COLLECTION FUND
Income and Expenditure Account
The Collection Fund account reflects the statutory requirement for billing Authorities to establish and maintain a separate fund for the collection and distribution of amounts due in respect of Council Tax and National Non-Domestic Rates (NNDR).
2010/11
2011/12 Note Ref.
£000 £000
INCOME
29,099
Council Tax (net of benefits, discounts and transitional relief) 29,267 4
Transfers from General Fund:
4,983 - Council Tax benefits 5,030
27,574 Income collectable from business ratepayers 25,994 1
597 Prior year Collection Fund deficit 574 5
62,253 60,865
EXPENDITURE
Precepts and demands:
25,189 - Northamptonshire County Council 25,240 3
4,733 - Northamptonshire Police Authority 4,743 3
3,592 - Wellingborough Borough Council 3,574 3
Business Rate:
27,459 - Payments to National Pool 25,880 1
115 - Cost of Collection 114 1
181 Write offs – Council Tax 50
141
Movement in Provision for Bad/Doubtful debts – Council Tax 501
Contributions:
0 - From previous years Collection Fund surplus 0 5
61,410 60,102
-843 (-Surplus)/Deficit in the year -763
699 Fund Balance b/f -144
-144 Fund Balance c/f -907 6
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F2 NOTES TO THE COLLECTION FUND
1. National Non Domestic Rates (NNDR)
The Council collects non-domestic rates for its area which are based on local rateable values multiplied by a uniform rate in the pound. The total amount, less certain reliefs and other deductions, is paid to a central pool (the NNDR pool) managed by Central Government, which in turn pays back to Councils a standard amount per head of the local adult population.
The total non-domestic rateable value as at 31 March 2012 was £72,373,134 and the equivalent figure for 31 March 2011 was £72,193,551.
The National Domestic Rate multiplier for 2011/12 was 43.3p with the equivalent figure for 2010/11 of 41.4p. The small business rate multiplier for 2011/12 was 42.6p, the equivalent figure for 2010/11 was 40.7p
2. Council Tax
The Council's tax base i.e. the number of chargeable dwellings in each valuation band (adjusted for dwellings where discounts apply) converted to an equivalent number of band D dwellings for 2011/12 and 2010/11 is calculated as follows:
2010/11 2011/12
Band D
Equivalents Band
Estimated number of taxable properties after effect of discounts Ratio
Band D Equivalents
11 A(-) 20 5/9 11
5,829 A 8,741 6/9 5,827
6,452 B 8,320 7/9 6,471
5,236 C 5,902 8/9 5,246
3,354 D 3,352 9/9 3,352
2,392 E 1,965 11/9 2,402
1,031 F 713 13/9 1,030
650 G 397 15/9 661
50 H 25 18/9 50
25,005 25,050
(500)
Non-Collection Provision (2011/12 2.0%)
-500
24,505 Council Tax Base 24,550
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3. Precepts and Demands
Northamptonshire County Council and Northamptonshire Police Authority issue precepts to the Council that must be collected as part of the overall Council Tax. The Council itself also "demands" an amount to be collected. The amounts paid in 2010/11 and 2011/12 were as follows:
2010/11 2011/12
£000 Precepts and Demands £000
3,592 Borough Council of Wellingborough 3,574
25,189 Northamptonshire County Council 25,240
4,733 Northamptonshire Police Authority 4,743
33,514 Total Precepts and Demands 33,557
4. Council Tax Income
2010/11 2011/12
£000 Council Tax Income £000
33,207 Collectable Debit 33,351
Less:
-3,021 Tax Discounts -3,072
-1,053 Tax Exemptions -980
-34 Tax Disabled Relief -32
29,099 Total Income 29,267
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5. Collection Fund Balances
The precepts detailed at note 3 are shown net of the previous year’s deficit/surplus. The Council estimates the year end Collection Fund balance in January each year. The estimated balance is distributed in the following financial year between Northamptonshire County Council, Northamptonshire Police Authority and the Borough Council of Wellingborough in proportion to the value of the respective precepts and demands made by the three authorities on the Collection Fund. The estimated deficit were distributed as follows:
2010/11 2011/12
£000 Collection Fund deficit £000
Payment of deficit:
446 Northamptonshire County Council 429
87 Northamptonshire Police Authority 82
63 Borough Council of Wellingborough 63
596 Total Deficit 574
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6. Collection Fund Balance
As a result of the 2009 SORP it is a requirement for the billing authority to show only the Collection Fund balance which is attributable to the billing authority in the balance sheet and for the amounts to be distributed or charged back to both Northamptonshire County Council and Northamptonshire Police Authority as creditors where there is a surplus or debtors where there is a deficit. Previously there was no requirement to disaggregate the Collection Fund Balance.
The surplus at 31st March 2012 was estimated at £1,177,000 and was notified to the major preceptors by 15 January 2012, which is an annual requirement and is charged in the following financial year (2012/13), based on the precepts levied in 2011/12.
The surplus for the 2011/12 financial year has been allocated based on the level of precepts levied for 2011/12. However, this value will be dependent on the transactions that occur during 2011/12.
Collection Fund Balance 2010/11 2011/12 Total
£000 £000 £000
Deficit Balances:
Northamptonshire County Council -108 -574 -682
Northamptonshire Police Authority -20 -108 -128
Wellingborough Borough Council -16 -81 -97
Total Deficit -144 -763 -907
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G GLOSSARY OF TERMS Accounting Period This is the period of time covered by the accounts. For The Borough Council of Wellingborough
this is a period of twelve months commencing on 1st April. The end of the accounting period is the balance sheet date that being 31st March.
Accrual This is the concept that Income or expenditure relating to goods or services during the
accounting period as they are received / provided, not as money is paid in or out. So if we received goods in March, but do not pay for them until April we accrue for that cost at the 31st March so we record expenditure and identify a payment as being due for the same amount (i.e. a creditor).
Actuarial Valuation The Council’s pension fund is administered by the County Council. They employ an actuary to
undertake a valuation of the fund for each employer, by comparing the value of the pension scheme’s assets with its liabilities. The actuary then calculates how much needs to be paid into the scheme by the employer and members to ensure there will be adequate funds to pay the pensions when they become due. This valuation is carried out every three years, the next being due in 2013.
Actuarial Gains and Losses Wellingborough’s pension fund experiences annual changes in what the actuary calculates its
assets and liabilities are, and as such what deficit or surplus arises. This tends to be because events have not coincided with the actuarial assumptions made at the last valuation, such as the number of staff employed by the Authority or the life expectancy of former employees; or the actuarial assumptions have changed such as the likely interest to be earned from invested funds.
Agency Arrangements Services performed by, or for another Authority or public body, where the agent is reimbursed
for the cost of the work done. Asset An asset is something the Council owns. The Asset may be a physical one, such as a building or
an intangible one, such as a software licence. Assets are also classed as either current or long term:
o A current asset is one that will be used or cease to have a material value by the end of the next financial year.
o A long term asset provides a benefit to the Council for a period greater than one year.
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Balance Sheet A statement summarising the Council’s financial position at the end of the accounting period. The statement shows the Council’s assets and liabilities.
Billing Council Wellingborough Borough Council is classed as a billing Council as it has the responsibility of collecting the Council tax and non-domestic rates. It collects the Council tax on behalf of the County Council and Police Authority and the non-domestic rates on behalf of central government. Budget A statement defining in financial terms the Authority’s plans to spend over a specified period, normally the accounting period. The budget is prepared as part of the process of setting the Council Tax.
Capital Expenditure & Financing Expenditure on the acquisition, or enhancement of a fixed asset, which adds to and not merely maintains the value of existing assets. This is not the same as revenue expenditure that is normally spent on assets consumed in the financial year. Capital spend is funded from various sources of money, including revenue, capital receipts, capital grants, and reserves
Capital Financing Costs Each service is charged with an annual capital charge to reflect the cost of using fixed assets (e.g. buildings or vehicles) in pursuit of providing services.
Capital Receipts This is money received from the sale of a capital fixed asset, such as land, buildings and vehicles. The Council can use the proceeds from the disposal of fixed assets to finance new capital investments, but the proceeds cannot be used to finance revenue expenditure. In certain cases the Government has set out rules that govern when a receipt can or cannot be used and these are referred to as usable and non-usable receipts (set aside receipts).
Capital Adjustment Account This account contains the amount that was required to be set aside from the capital receipts and the amount of capital expenditure financed from revenue and capital receipts. It also contains the difference between amounts provided for depreciation and the statutory minimum amount that must be set aside from revenue for the repayment of external debt.
Capital Grants Unapplied These are capital grants that the Council has received, that have not yet been used to finance capital expenditure.
Capital Programme
The planned capital schemes the Council intends to carry out over a specified period of time.
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Carrying Amount
The net cost of an asset as shown in the balance sheet.
Chartered Institute of Public Finance and Accountancy (CIPFA)
Professional accountancy body specialising in the public sector.
Collection Fund A separate statutory fund to detail the transactions in relation to income and expenditure relating to Council Tax, National Non-Domestic Rates (NNDR or Business Rates as they are often referred to) and the residual Community Charge.
Commutation Amount of money that must be set aside at 31st March at the current interest rates to provide for sums such as the pension funds on a future date. The lower the interest rates higher the amount required, and vice versa.
Contingent Liabilities / Assets
A contingent liability / asset is either:
o a possible obligation arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the Council’s control, or
o a present obligation arising from past events where it is not probable that a transfer of economic benefits will be required or the amount cannot be measured with sufficient reliability.
Council Tax This is the banded property tax levied on domestic properties in the Borough. The banding is based on estimated property values.
Corporate / Democratic Core The corporate and democratic core comprises all activities which local authorities engage in specifically because they are elected, multi purpose authorities. These are concerned with the costs of corporate policy making and member based activities. Other costs relate to the general running of the Authority including corporate management, public accountability and treasury management. The cost of these activities are thus over and above those which would be incurred by a series of independent, single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services.
Creditor
Amounts owed by the Council for goods or services they have received for which payment has not been made.
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Current Service Cost (Pensions)
The increase in the present value of the pension schemes liabilities.
Code The Code is a code of practice that has been developed by the CIPFA/LASAAC Joint Committee in accordance with the IFRS, as adapted and interpreted for local authorities. (This Code has been replaced the SORP).
Debtor
Amounts owed to the Council for goods or services the Council has provided for before 31st March but for which payment has not been received by 31st March. Deferred Liabilities These are liabilities that are payable beyond the next year; they are primarily for mortgage payments.
Depreciation
This is a charge made to the service revenue accounts each year to reflect the reduction in the value of the asset used in the delivery of services. Fair Value This is the amount that an asset could be bought or sold for between parties; the current market value of an asset can be evidence that the asset has been valued fairly. Financial Instruments This is any contract that gives rise to a financial asset of one entity and a financial liability or equity of another. The term covers both financial assets (e.g. loans receivable) and financial liabilities (e.g. borrowings).
Finance Lease
A lease which transfers substantially all of the risks and rewards of ownership of a fixed asset to the lessee. International Financial Reporting Standards (IFRS) The accounting standards issued by the International Accounting Standards Board setting out the approved accounting treatment.
Government Grants
Grants made by the government towards either revenue or capital expenditure to support the cost of the provision of services. These grants may be specifically towards the cost of particular schemes or to support the revenue spend of the Council.
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Gross Book Value
The historical cost or the revalued amount of the asset before depreciation.
Historical Cost Adjustment
This is the difference between Historical Cost Depreciation and the actual depreciation charged ( Current Cost) calculated on revalued assets.
Impairment Where the value (based on the asset’s recoverable amount) of the fixed asset reduces below its carrying amount on the balance sheet.
Liability
A liability is where the Council owes payment to an individual or an organisation.
Minimum Revenue Provision (MRP) The minimum amount which must be charged to a Council’s revenue account each year to provide for future debt repayments. As Wellingborough is debt free the MRP is zero.
Net Book Value
This is the value of an asset that is counted in the balance sheet. It represents its historical or re-valued cost less the accumulated depreciation of the asset.
Net Realisable Value The market value of the asset in its existing use (or open-market value in the case of a non-operational asset), less any expenses incurred in realising the asset.
Net Worth
The total value of an organisation expressed as total assets less total liabilities.
Non-Domestic Rate (NNDR)
A levy on businesses, based on a national rate in the pound set by the government multiplied by the rateable value of the premises they occupy. NNDR is collected by billing authorities on behalf of central government and paid to central government who then redistribute among all local authorities and police authorities on the basis of population.
Non Operational Asset
Fixed assets held by the Council but are not directly occupied used or consumed in the delivery of services.
Operating Lease
A lease where the ownership of the asset remains with the lessor.
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Operational Asset
Fixed assets held and occupied, used or consumed by the Council in the direct delivery of services.
Precept
The levy made by precepting authorities on billing authorities, requiring the latter to collect income from taxpayers on their behalf.
Provision
Provisions are for liabilities or losses which are likely or certain to be incurred, but the amounts or the dates on which they will arise are uncertain.
Rateable Value (RV)
The annual assumed rental value of a property that is used for business purposes.
Realised Valuations
Any revaluations in the Revaluation Reserve relating to individual assets when they are disposed of are transferred to the Capital Adjustment Account this transfer is referred to as Realised Valuation. This ensures the Revaluation Reserves balance represents revaluations on assets that the Council still holds.
Revenue Funded from Capital Under Statute (REFCUS)
Capital expenditure for which no capital asset is created, but which may properly be financed over a period of years. They include private sector renewal grants and advances to other parties to finance capital investment.
Related Parties
The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council.
Reserves
Funds set aside for expenditure in future years. Certain reserves (earmarked) have constraints on how they can be spent.
Revaluation Reserve
This reserve records unrealised revaluation gains / losses from holding fixed assets.
Revenue Expenditure
Expenditure on the day-to-day costs of providing services.
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Revenue Support Grant (RSG)
Grant from Central Government towards the cost of service provision. Society of Local Authority Chief Executives (SOLACE) The membership body for Local Authority Chief Executives.
Stocks
Items bought for consumption or resale, or raw materials, currently being held.
Trading Accounts Trading accounts exist where the service manager is required to operate in a commercial environment and balance their budget by generating income from other parts of the authority or from other organisations.
Transfer Payments Relates to payments for which no goods or services are received by the Council e.g. Rent Allowances.
Valuation Loss A downward movement in the valuation of an asset.
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J YOUR FEEDBACK
2011/12 Statement of Accounts – Feedback Questionnaire
At The Borough Council of Wellingborough we value the input and views of our local residents, businesses and partners. Having read our 2011/12 Statement of Accounts we would be extremely grateful if you could spare a few moments to complete and return your feedback questionnaire. Your views are valuable in assisting us to improve the content, language and format used in the production of the 2011/12 Accounts.
Please tick the appropriate box and place any comments on the dotted lines provided below.
1.
Did you find the information contained within the Statement of Accounts easy to understand?
Yes � No �
If no, please state why
2.
Was there a sufficient level of detailed information to allow you the user to assess the financial performance of the Borough Council of Wellingborough?
Yes � No �
If no, please state why
3.
Did you find the financial information contained was presented in a clear and easy to understand format?
Yes � No �
If no, please state why
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4. Did you find the notes to the Accounts added value to the financial statements?
Yes � No �
If no, please state why
5.
Overall, has the Statement of Accounts been of value in helping you to assess the Borough Council of Wellingborough’s financial position and performance?
Yes � No �
If no, please state why
6.
Do you think there is anything that should be added to the Statement of Accounts to provide you as user with a more complete view of the financial position and performance of the Borough Council of Wellingborough?
Yes � No �
If yes, please state why
7.
Please state below any further comments or suggested improvements you may have regarding the Statement of Accounts.
8. Which of the following best describes you?
An employee or elected member of the authority �
A member of the public �
A member of another organisation / interested party �
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Thank you for taking the time to complete this questionnaire
Please return your completed feedback questionnaire to: Head of Finance, Borough Council of Wellingborough, Swanspool House
Doddington Road, Wellingborough NN8 1BP
If you require any further information please do not hesitate to contact us on 01933 231679
