democratic.lincoln.gov.uk · 1 s t a t e m e n t o f a c c o u n t s 2 0 1 0 / 1 1 contents page...

STATEMENT OF ACCOUNTS

FOR THE

YEAR ENDED 31 MARCH 2011

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S T A T E M E N T O F A C C O U N T S

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CONTENTS

P A G E

Explanatory Foreword 1

Council Approval 1 4

Statement of Responsibilities for the Statement of Accounts 1 5

Movement in Reserves Statement 1 6

Comprehensive Income and Expenditure Statement 1 9

Balance Sheet 2 0

Cash Flow Statement 2 2

Notes to the Accounts 2 3

Housing Revenue Account Income and Expenditure Statement 1 0 6

Movement on the Housing Revenue Account Statement 1 0 7

Notes to the Housing Revenue Account 1 0 8

Collection Fund 1 2 1

Notes to the Collection Fund 1 2 2

Independent Audit Opinion and Certificate 1 2 5

Glossary 1 2 6

1

E X P LA N A T O R Y F O R E W O R D

The Statement of Accounts

The purpose of the Accounts, which follow, are to give electors, those subject to

locally levied taxes and charges, Members of the Council, employees and other

interested parties clear information about the Council‟s finances. The Accounts

show the financial performance for 2010/11 and the financial position at 31 March

2011. The Accounts present expenditure and income incurred by the Council in the

financial year 2010/11 and highlight changes in the financial position of the Council

over the course of the year.

The financial statements have been prepared in accordance with the Code of

Practice on Local Authority Accounting in the UK (the code) published by the

Chartered Institute of Public Finance and Accountancy (CIPFA).

The Statement of Accounts comprise of various sections and statements, which are

briefly explained below:

An Explanatory Foreword – this provides information on the format of this Statement

of Accounts as well as a review of the financial position of the Council for the

financial year.

The Statement of Responsibilities – this details the responsibilities of the Council and

the S151 Officer concerning the Council‟s financial affairs and the actual Statement

of Accounts.

The Audit Opinion and Certificate – this is provided by the Audit Commission

following the completion of the annual audit.

The Accounting Policies – this statement explains the basis for the recognition,

measurement and disclosure of transaction and other events in the accounts.

The Core Financial Statements, comprising:

The Movements in Reserves Statement – this statement shows the movement

in year on the different reserves held by the Council, analysed into „usable‟

(i.e. those that can be applied to fund expenditure or reduce local taxation)

and other reserves.

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

funded from taxation. The Council raises taxation to cover the cost of

expenditure in accordance with regulations; this may be different from the

accounting cost. The taxation position is shown 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 authority. The net

assets of the Council are (assets less liabilities) matched by the reserves held

by the Council.

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The Cash Flow Statement – this statement shows the changes in cash and

cash equivalents of the Council during the year. It shows how the Council

generates and uses cash and cash equivalents by classifying cash flows as

operating, investing and financing activities.

The Supplementary Statements, comprising:

The Housing Revenue Income and Expenditure Statement - this statement

shows the economic cost in the year of providing housing services in

accordance with generally accepted accounting practices, rather than the

amount to be funded from rents and government grants. The Council

charges rents to cover expenditure in accordance with regulations, this may

be different from the accounting cost. The increase or decrease in the year,

on the basis of which rents are raised, is shown in the Movement on the HRA

Statement

The Movement on the HRA Statement – this statement takes the outturn on the

HRA Income and Expenditure Statement and reconciles it to the surplus or

deficit for the year on the HRA Balance, calculated in accordance with the

requirements of the Local Government and Housing Act 1989.

The Collection Fund Statement- this statement is an agents statement that

reflects the statutory obligation for billing authorities to maintain a separate

Collection Fund. The statement shows the transactions of the Council in

relation to the collection from taxpayers and distribution to Lincolnshire

County Council, Lincolnshire Police Authority and Government of council tax

and non-domestic rates.

The Notes to the Financial Statements – these provide supporting and explanatory

information on the Financial Statements Financial Summary 2010/11

2010/11 has been another challenging year financially as the economic climate

remained largely unchanged from the previous and so continued to present difficult

circumstances with regards to the financial management of the Council. Despite

early growth in the UK economy during 2010 the overall recovery remains weak and

made no significant improvements to the performance of the financial and property

markets. Hence, the most challenging areas continued to be treasury management,

asset values and the use of, and demand for, Council services, coupled with a real

terms decrease in Central Government funding

The continued difficult condition in the economy gave risk to a number of specific

issues for the Council, as follows;

Lower interest rates by the Bank of England to combat the liquidity crisis have

had a significant effect on the Council‟s income from investments.

Investment counterparty risk remained higher than normal so that

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there continues to be a very limited range of counterparties available to the

Council for investment purposes.

The continuing poor performance of the property market has resulted in a

further reduction in the market value of the Council‟s property holdings. In

2010/11 there were downward revaluations of £88.680m, of which £87.994m

was required to be charged to the Comprehensive Income and Expenditure

Statement, with £87.051m relating to HRA assets (primarily Council Houses).

Council houses are valued by applying a Social Housing discount factor to

the market valuation of the properties. The discount factor decreased from

50% in 2009/10 to 34% in 2010/11 resulting in a large decrease in valuation of

£79.476m.

The poor performance of the property market has also reduced the Council‟s

ability to generate capital receipts affecting the affordability of the

Investment Programmes with the financing of schemes being reliant on the

sales of Council assets.

Demand for services such as Council tax and Housing Benefits has continued

to increase, with currently 11,500 household (27%) in the City in receipt of

Housing and/or Council Tax Benefit. Services including Council Housing and

Customer Services are also continuing to experience high levels of demand.

Income has continued to remain at historically low levels in a number of areas

e.g. planning regulation fees, local land charges and car parking.

In spite of the challenges the Council has faced it has maintained sound financial

management and has delivered spending within budget in both the General Fund

and the Housing Revenue Account, whilst over achieving its target for the delivery of

revenue savings; and has delivered over £16.8m of capital investment. Revenue Income and Expenditure General Fund

The General Fund account covers all net spending by the Council on services other

than those accounted for in the Housing Revenue Account. General Fund services

are partly paid for by Government Grants and contributions from Business Rates, with

the balance being funded from Council Tax.

For 2010/11, the approved net expenditure budget for General Fund services was

£16.931m. After allowing for planned contributions of £0.99m from non-earmarked

general reserves the total Net General Fund Budget for 2010/11 was £16.832m.

The Net General Fund Budget of £16.832m assumed the achievement of a £1.7m

savings target to be delivered as part of the Council‟s Service Review Programme,

which was launched in 2008/09. The Programme has been successful in delivering

the required savings with £2.168m secured in 2010/11, an overachievement of the

target by £0.468m. The target for savings increases to £2m in 2011/12 and £2.5m

2012/13 ongoing, this will be achieved by the implementation of the remaining

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reviews which are estimated to deliver a further £0.192m pa in 2011/12 and £0.236m

from 2012/13.

The table below provides a summary of the final outturn position for the General

Fund, against the net budget.

This has been prepared after applying International Financial Reporting Standards

(IFRS), which are applicable for the first time this financial year. The impact of IFRS is

that there are a number of adjustments of a technical nature which has resulted in

significant variances in individual service lines. These adjustments are however, in

line with IFRS, reversed out so that there is a nil impact on the Council tax payer.

ACTUAL

2010/11

£’000

BUDGET

2010/11

£’000

VARIANCE

2010/11

£’000

Chief Executive & Town Clerk 255 242 13

Directorate of Development &

Environmental Sustainability

5,353 5,122 231

Directorate of Resources 2,476 2,965 (489)

Directorate of Housing 10,201 10,846 (645)

Corporate (12,717) 2,828 (15,545)

Net Operational Expenditure 5,568 22,003 (16,435)

IAS 19 Pension & Compensated

Absences

11,598 0 11,598

Capital Financing 941 (3,003) 3,944

Contingencies 0 384 (384)

Earmarked Reserves (1,335) (2,453) 1,118

CMS Repatriation 14 0 14

Total Expenditure 16,786 16,931 (145)

Contribution to general reserves 46 (99) 145

Total Net Budget 16,832 16,832 0

Council Tax Payer 6,223 6,223 0

Council Tax Surplus 20 20

RSG & NNDR 10,589 10,589 0

Total Resources 16,832 16,832 0

The outturn position for the general Fund is better than expected due to a

combination of management actions to control potential overspends,

overachievement of the Service Review Programme savings and one off corporate

windfalls. Actual service costs for the financial year 2010/11 were £16.786m

compared to the equivalent approved budget of £16.931m, resulting in an under

spend of £0.145m, or 2.76%.

This overall under spend of £0.145m for the year includes the following major

variances:

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£’000

Increased Income

Rental Income - City Hall (56)

Local Public Service Agreement reward grant (60)

Reduced Income

Car Parking Fees and Charges 290

Reduced Expenditure

Collaborative Central Lincolnshire Joint Planning Unit (116)

Industrial Promotions (90)

Corporate Repair and Maintenance (62)

IT Management/Projects (50)

Capital financing costs (60)

Increased Expenditure

Bad debt provision 112

In addition to the variances analysed In the table above, the variance of £15.545m

on Corporate includes a credit adjustment for the IAS 19 past service cost (the

effect of future pension increases being linked to CPI as opposed to RPI) of

£11.465m.

As at 31 March 2011, the Council held £8.087m General Fund revenue reserves,

comprising £6.302m earmarked reserves (to cover specific or potential financial risks

and liabilities) and £1.785m non-earmarked general reserves. This latter balance

represents 12.3% of the 2011/12 annual net service budget and provides an

adequate level of reserves to cover for unforeseen financial risks.

Housing Revenue Account

The Housing Revenue Account, which has to be kept as a separate account for all

the expenditure and income relating to the landlord functions associated with the

provision, management and maintenance of Council owned dwellings.

For 2010/11, the approved net operating surplus for the Housing Revenue Account

was £0.001m. Actual net expenditure for 2010/11 showed a surplus of £0.183m, a

variance of £0.182m.

The table below provides a summary of the final outturn position for the Housing

Revenue Account, against the net budget.

ACTUAL

2010/11

£’000

BUDGET

2010/11

£’000

VARIANCE

2010/11

£’000

Operational Expenditure

Repairs & Maintenance 6,967 7,292 (325)

Supervision & Management 3,061 6,810 (3,749)

Provisions (incl Bad Debt) 105 175 (70)

Capital Financing 91,167 4,977 86,190

Sub Total 101,300 19,254 82,046

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ACTUAL

2010/11

£’000

BUDGET

2010/11

£’000

VARIANCE

2010/11

£’000

Add:

Subsidy Limitation Transfer 366 394 (28)

CMS Repatriation (IAS 19 & Insurance Fund) 115 0 115

Interest Payable & Similar Charges 1,442 1,359 83

Amortisation of Premiums & Discounts 231 231 0

Total Expenditure

103,454 21,238 82,216

Income

Rents & Service Charges (23,900) (23,978) 78

Interest (38) (26) (12)

Net Expenditure 79,516 (2,766) 82,282

Less:

Direct Revenue Financing 1,546 1,546 0

Capital Accounting Adjustment (86,581) 0 (86,581)

Appropriation to/(from) Major Repairs Reserve 623 84 539

Appropriation to/(from) Pension Fund Liability 3,114 0 3,114

Appropriations to/(from) Earmarked Reserves 1,599 1,135 464

Net HRA (Surplus)/Deficit* (183) (1) (182)

The variance of £3.749m on Supervision and Management includes a credit

adjustment for the IAS 19 past service cost (the effect of future pension increases

being linked to CPI as opposed to RPI) of £2.866m in addition the variance of

£86.581m on the Capital Accounting Adjustment includes downward revaluations of

which £87.050m relating to HRA assets (primarily Council Dwellings). This is as a

consequence of the Social Housing discount factor applied to the market value

decreasing from 50% in 2009/10 to 34% in 2010/11resulting in a large decrease in

valuation.

The overall under spend of £0.182 m for the year includes the following major

variances:

£’000

Reduced Income

Dwelling Rents 50

Reduced Expenditure

Utility costs (64)

Negative HRA Subsidy (65)

Bad Debt Provision (70)

Increased Expenditure

Loan Charges Interest 83

As at 31 March 2011, the Council held £6.114m HRA revenue reserves, comprising

£4.931m earmarked reserves (to cover identified specific, potential financial risks

and liabilities) and £1.183m non-earmarked general reserves.

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Capital Expenditure

Capital expenditure on the provision of new or enhanced assets is largely met from

capital receipts, government grants, contributions from third parties and revenue

contributions.

The Council‟s capital spending in the year was £16.834m compared to the revised

programme budget of £16.654m, representing a net variance of £(0.180)m. The

main reason for the variance in 2010/11 was mainly due to underspends on

renovation grants and private sector decent homes grants, offset by the settlement

payment for the Public Realm programme. The 2010/11 capital spending and

funding position is summarised as follows:

ACTUAL

2010/11

£’000

BUDGET

2010/11

£’000

VARIANCE

2010/11

£’000

Capital Expenditure

General Fund (GIP) 6,506 6,402 (104)

Housing Revenue (HIP) 10,328 10,252 (76)

Total Expenditure 16,834 16,654 (180)

Financed by:

Supported Borrowing 1,020 1,020 0

Unsupported Borrowing 760 866 106

Capital receipts 3,861 4,072 211

Capital Grants and

Contributions

4,076 3,862 (214)

Major Repairs Reserve 4,983 4,983 0

Revenue Contributions 2,134 1,851 (283)

Total Financing 16,834 16,654 (180)

Major Capital works carried out during 2010/11 are set out in the following table:

£’000

Housing

Decent Homes Improvements 8,060

Other Major Works 2,192

General Fund

Planned capitalised works – Health & Safety etc 279

Usher Gallery improvements 1,094

Customer Access strategy works 187

Improvement & Renovation Grants 1,387

Pathways Centre 1,006

Children‟s Play areas – new equipment 128

Yarborough LC Pavilion 885

Yarborough LC Car Parking 220

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Other Schemes 1,396

Total 16,834

In June 2011 the Council reached a settlement in respect of a dispute with the

contractor of the „Public Realm‟ capital improvement programme to the City‟s

streets, which had been ongoing since 2007/08. The settlement figure represented a

full and final settlement and resulted in an additional liability of £0.337m being

incurred by the Council. As final agreement of the settlement was not reached until

June 2011 it has been treated as a post balance sheet event and the Accounts

have been adjusted to reflect this fact. Long Term Borrowing

The Council undertakes long term borrowing, for periods in excess of one year, in

order to finance capital expenditure. The Council satisfies its borrowing requirement

for this purpose by securing external loans. This borrowing takes the form of being

either supported or unsupported.

Supported borrowing levels are issued annually by Central Government (£1.020m in

2010/11), which give the Council authority to borrow monies to cover capital

expenditure, the costs of which will be funded by Central Government. Any other

borrowing that the Council undertakes is unsupported borrowing, the costs of which

must be funded by the Council itself.

Although the Council requires long term borrowing in order to finance capital

expenditure, it is able to temporarily defer the need to borrow externally by using

the cash it has set aside for longer term purposes; this practice means that there is

no immediate link between the need to borrow to pay for capital spend and the

level of external borrowing. The effect of using the cash set aside for longer term

purposes to temporarily defer external borrowing is to reduce the level of cash that

the Council has available for investment.

The Council‟s level of total debt outstanding, as at 31 March 2011 increased by £34k

to £50.457m, which was due to interest-free Salix loans to fund energy-efficient

projects.

Total Outstanding

Source of loan

31/03/11

£’000

31/03/10

£’000

PWLB - Maturity 33,862 33,862

Money Market 16,000 16,000

Other 595 561

Total 50,457 50,423

No other long-term borrowing was undertaken during 2010/11 and the Council

remains under borrowed by £5.219m i.e. the Council‟s actual borrowing is £5.219m

less than the Capital Financing Requirement (CFR) at 31 March 2011.

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Additional long-term borrowing will be taken in 2011/12 or future years to bring levels

up to the Capital Financing Requirement, subject to liquidity requirements, if

preferential interest rates are available. Pension Costs

The Council accounts for retirement benefits when it is committed to give them,

even if the actual giving will be many years into the future. This means that:

The financial statements reflect the liabilities arising from the Council‟s

retirement obligations.

The costs of providing retirement benefits to employees are recognised in the

accounting period in which the benefits are earned by employees, and the

related finance costs and any other changes in value of assets and liabilities

are recognised in the accounting periods in which they arise.

The financial statements disclose the cost of providing retirement benefits

and related gains, losses, assets and liabilities

The Balance Sheet presents a significant reduction in the estimated Pension Fund

Reserve net liability over the 2009/10 year of £38.95m, down from £78.277m at 1 April

2010 to £39.327m at 31 March 2011. This reduction in the Pension Fund deficit

resulted from the move to up-rate pensions from April 2011 by reference to CPI

instead of RPI, the impact of the pay freeze for local authority employers, offset by

more favourable assumptions about life expectancy.

The statutory arrangements for funding the remaining liability of £39.327m means

that this deficit will be made good by the increased level of annual employer

contributions payable to the Pension Fund over the remaining estimated average

working life of our employees in the Pension Scheme. The latest triennial review of

the Pension Fund was completed as at 31 March 2010 and although the results

identified that there had been a deterioration in the funding position from a 83%

funding level to 72%, this review did not indicate that any immediate changes in the

annual contributions were required. The next triennial review is due as at 31 March

2013, when a stabilisation approach will be implemented so that in any three year

period rates will only be increased or decreased by a maximum of 1%, thus avoiding

any unaffordable increases in employer contributions. Any changes identified as a

result of the next triennial review will be effective from 1 April 2014.

Future Plans

General Fund

The Council, along with all other public sector bodies, will continue to face an

unprecedented and extremely challenging short and medium term financial

environment as it responds to; the Coalition Government‟s Spending Review,

announced in October 2010; existing financial pressures, principally the current

economic climate; and the new requirements and burdens resulting from

implementation of the Government‟s Programme for Government.

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The most significant impact has been the unprecedented reductions in Central

Government funding, the toughest Local Government Finance Settlement for a

generation, which has seen the Council‟s grant funding reduced by 24.4% over the

period 2011/12 – 2012/13, equating to a loss of funding of £1.25m in 2011/12 and a

further £0.92m in 2012/13. As a result the Council will have to reduce revenue

spending by £0.750m in 2011/12 and currently anticipates the need to increase this

to £2.75m pa over the following four financial years.

This challenge is not new to the Council and it has in recent years already become

accustomed to working within tight budgets and has demonstrated excellent

progress in the delivery of its Service Review Programme, already securing £2.3m pa

and on track to achieve the target of £2.5m during 2011/12. Because of the

responsible action taken in managing its budget the Council is in a strong position to

ensure any new savings are achieved in a considered way.

However, it should be made clear that, as a result of the level of spending reduction

the Council is going to have to make it will go beyond anything that conventional

efficiency drives, such as collaboration and transactional system reviews, can alone

achieve. The fact is that, given the level of grant reduction imposed by the Coalition

Government, there will inevitably be cuts in services.

The delivery of the spending reductions required will be achieved through the

Council‟s „Next Steps Programme‟ which brings together into a co-ordinated

programme a single unified approach, focussing on four core strands:

Lean Systems Interventions

Collaborative Working

Income Generation

Cost Reductions

By bringing together these four core strands into a single unified programme, the

outcome should result in those services that are provided directly by, or

commissioned by, the Council remaining „lean and fit‟, achieving the standards

agreed with customers and delivering the best possible value for money to the

taxpayer.

Housing Revenue Account

The HRA self financing system is due for implementation in April 2012. In return for

abolition of the HRA subsidy system the Council will be required to „buy itself out‟ of

the current system by making a capital payment to the Government. The precise

impact is not yet known but it is expected that the HRA debt will increase by

approximately £19m. The Council is currently developing a 30-year Housing Business

Plan and will revise its Medium Term Financial Strategy in response.

Capital Expenditure

The Council‟s capital programmes will deliver projects to the value of £62.6m over

the next five years, with £17m estimated to be spent in 2011/12. This

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includes significant investment and improvement to Council dwellings, and Council

buildings, completion of the Pathways Centre (emergency homeless

accommodation), housing assistance grant aid and further improvements to leisure

facilities.

Capital resources for the next five years include capital receipts, government grants,

contributions from third parties and revenue contributions.

The General Fund element of the programme is heavily reliant upon capital receipts

with a target of £9.5m over the period, 70% of the overall programme. The

continued poor performance of property markets increases the risk to the Council of

not generating the required level of capital receipts. In response to this the

Council‟s Asset Management Plan includes a major review programme of assets to

identify potential disposals. Additionally, ongoing capital commitments will be

reviewed regularly to ensure that the capital programme remains affordable. This

will require strong integration of the Council‟s Capital Strategy, Asset Management

Plan, Treasury Management Strategy and balancing the impact of any changes on

the revenue position.

The Housing element of the capital programme is predominately reliant upon

revenue contributions from the Housing Revenue Account. This places enormous

pressure on the revenue budget and will require careful consideration in the

development of the 30-year business plan, responding to the introduction of the HRA

self financing system in April 2012, if both the revenue and capital budgets are to

remain sustainable.

Summary

Despite the challenging financial environment the Council has continued to

maintain sound, prudent financial management and remains in a good financial

position, balances remain at prudent levels and the necessary provisions have been

set aside for future liabilities or losses. However due to the level of uncertainty and

risks facing the Council, particularly the significant reductions in Central Government

funding, it needs to continue to respond positively to these challenges and continue

to manage its affairs in such a way as to ensure the economic, efficient and

effective use of its resources, and to safeguard its assets for the future.

Group Accounts

The increasing scope and scale of local authorities moving away from traditional

ways of providing services makes it increasingly difficult for the Council‟s own

financial statements to present fairly all the aspects of control over service provision

and accountability for all resources and exposure to risks that the Council has taken

on. A consolidated set of group accounts can make a vital contribution towards

giving users a full picture of the Council‟s sphere of control and influence.

The Council has identified that the interest that it holds in Investors in Lincoln Ltd

meets the test of „joint control‟ and as such should be accounted for as a Joint

Venture. However, after assessing the criteria for materiality, has concluded that

the amounts are not material to the fair presentation of the financial position

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and transactions of the Council and to the understanding of the Statement of

Accounts by a reader. Investors in Lincoln Ltd has therefore not been consolidated

into the Council‟s accounts. Details of transactions and relevant balances with

Investors in Lincoln Ltd can be found in note 37 (related parties) on pages 86.

Additionally during 2010/11 the Council entered into a collaborative arrangement

with North Kesteven and West Lindsey District Councils to establish the Central

Lincolnshire Joint Planning Unit. This arrangement is hosted by North Kesteven District

Council and is governed through a Joint Committee representing each of the

partner authorities. This arrangement is considered as a Jointly Controlled

Operation, where ventures use their own resources to undertake an activity subject

to joint control, and as such does not require consolidation into the Council‟s

accounts. The Council‟s proportion of activity is accounted for separately within the

Core Financial Statements.

Changes in Accounting Policies

The 2010/11 Statement of Accounts is now based on International Financial

Reporting Standards (IFRS) and therefore there have been fundamental changes to

the format of the accounts. The key changes are as follows:

Grants and contributions for capital purposes will be recognised as income

immediately rather than being deferred and released to revenue to match

depreciation.

The main financial statements have changed, and there are additional

requirements regarding segmental reporting.

There is a greater emphasis on component accounting, and a greater

emphasis on de-recognising parts of an asset that are replaced.

Property leases are classified and accounted for as separate leases of land

and buildings.

Local authorities will also need to assess whether other arrangements contain

the substance of a lease.

Investment properties are measured at fair value, with gains and losses

recognised in the Comprehensive Income and Expenditure Statement rather

than through the revaluation reserve.

Impairment losses will be taken initially to the revaluation reserve to the extent

that there is a balance on that reserve relating to the specific asset.

The Code introduces a new classification of non-current assets held for sale.

Specific criteria apply to this classification.

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All employee benefits are accounted for as they are earned by the

employee. This will require accruals for items such as holiday pay.

The definition of associates is based on the ability to control rather than

actual control, and may lead to a change in the group boundary.

Further Information

Further information about the accounts is available on request from the Directorate

of Resources, City Hall, Beaumont Fee Lincoln LN1 1DB. In addition, local electors

have a statutory right to inspect the accounts before the audit is completed. The

availability of the accounts for inspection is advertised in the local press and on the

Council‟s website.

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C O U N C I L A P P R O V A L The Statement of Accounts for the year 1 April 2010 to 31 March 2011 has been

prepared and I confirm that these Accounts were approved by the City of Lincoln

Council, at the meeting held on 27 September 2011.

Councillor Kathleen Brothwell

Chairman of Council

Date:

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E M E N T O F R E S P O N S I B I L I T I E S F O R T H E S T A T E M E N T O F A C C O U N T S

The Authority’s Responsibilities

The Authority is required:

to make arrangements for the proper administration of its financial affairs and to

ensure that one of its officers has the responsibility for the administration of those

affairs. In this Authority, that officer is the Director of Resources;

to manage its affairs to ensure economic, efficient and effective use of resources

and safeguard its assets;

to approve the Statement of Accounts.

The Director of Resources Responsibilities

The Director of Resources is responsible for the preparation of the Authority‟s

Statement of Accounts in accordance with proper practices as set out in the Code

of Practice on Local Authority Accounting in the UK („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;

complied with the Code of Practice.

The Director of Resources has also:

kept proper accounting records which were up to date;

taken reasonable steps for the prevention and detection of fraud and other

irregularities.

The Accounts present a true and fair view of the financial position of the Authority at

31 March 2011 and its income and expenditure for the year ended on that date.

SIGNED ANGELA ANDREWS

A ANDREWS, CPFA,

Director of Resources

DATE: 27 SEPTEMBER 2011

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M O V E M E N T I N R E S E R V E S S T A T E M E N T T I N S E R V E S S T A T E M E N T General Earmarked Housing CMS Major Capital Capital Total Unusable Total

Fund Revenue Repair Receipts Grants Usable Reserves Authority Balance Account Reserve Reserve Unapplied Reserves Reserves

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Balance at 31 March 2009 2,135 11,064 2,408 0 0 9,752 530 25,889 279,903 305,792

Movement in reserves during 2009/10

Surplus or (deficit) on provision of services (1,431) 0 (34,368) 0 0 0 (35,799) 0 (35,799)

Other Comprehensive Income and Expenditure 0 0 0 0 0 0 0 (48,582) (48,582)

Total Comprehensive Expenditure and Income (1,431) 0 (34,368) 0 0 0 0 (35,799) (48,582) (84,381)

Adjustments between accounting basis & funding basis under regulations (Note 8) 1,751 0 31,885 0 0 (3,116) 65 30,585 (30,535) 50 Net Increase/Decrease before Transfers to Earmarked Reserves 320 0 (2,483) 0 (3,116) 65 (5,214) (79,117) (84,331)

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£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Transfers to/from Earmarked

Reserves (716) (97) 1,075 (262) 0 0 0 0 0 0

Increase/Decrease (movement) in 2009/10 (396) (97) (1,408) (262) 0 (3,116) 65 (5,214) (79,117) (84,331)

Balance at 31 March 2010 carried forward 1,739 10,967 1,000 (262) 0 6,636 595 20,675 200,787 221,462

Movement in reserves during 2010/11

Surplus or (deficit) on provision of

services 8,363 0 (79,805) 0 0 0 (71,442) 0 (71,442) Other Comprehensive Expenditure and Income 0 0 0 0 0 0 0 25,172 25,172

Total Comprehensive Expenditure and Income 8,363 0 (79,805) 0 0 0 0 (71,442) 25,172 (46,270)

Adjustments between accounting basis & funding basis under regulations (note 8) (9,596) 0 81,587 0 (3,237) 823 69,577 (69,586) (9)

Other adjustments 0 9 9

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£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Net Increase/Decrease before

Transfers to Earmarked Reserves (1,233) 0 1,782 0 0 (3,237) 823 (1,865) (44,405) (46,270)

Transfers to/from Earmarked Reserves

1,279 266 (1,599) 55 0 0 0 0 0 0

Increase/Decrease in Year 46 266 183 55 0 (3,237) 823 (1,864) (44,405) (46,270)

Balance at 31 March 2011 carried forward 1,785 11,233 1,183 (207) 0 3,399 1,418 18,811 156,382 175,193

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C O M P R E H E N S I V E I N C O M E A N D E X P E N D I T U R E S T A T E M E N T 2 0 1 0 / 1 1

31 March 2010 Note 31 March 2011

Gross Gross Net Gross Gross Net

Expenditure Income Expenditure Expenditure Income Expenditure

£'000 £'000 £'000 £'000 £'000 £'000

9,263 (8,293) 970 Central services to the public 1 9,621 (8,698) 923

20,220 (7,569) 12,651

Cultural, environmental, regulatory

and planning services

1 20,232 (4,758) 15,474

4,498 (5,053) (555) Highways and transport services 1 4,597 (5,225) (628)

55,344 (22,618) 32,726 Local authority housing (HRA) 1 24,689 (23,533) 1,156

0 0 0

Local authority housing –

exceptional item, decrease in Social

Housing discount factor applied to

asset valuations

6 79,476 0 79,476

30,356 (28,275) 2,082 Other housing services 1 34,411 (30,101) 4,310

1,766 0 1,766 Corporate and democratic core 1,33,35 1,772 0 1,772

10 0 10 Non distributed costs 1,43 43 0 43

0 0 0

Non distributed costs – exceptional

item, negative pension past service

cost

6 (14,331) 0 (14,331)

121,457 (71,807) 49,650 Cost Of Services 30 160,510 (72,315) 88,195

785 Other Operating Expenditure 10 773

4,282

Financing and Investment Income

and Expenditure 1,11,16

4,574

(762) Surplus/deficit on trading accounts

(not applicable to a service)

1,31 (541)

0

Surplus or deficit of Discontinued

Operations

0

(18,156)

Taxation and Non-Specific Grant

Income 1,12

(21,559)

35,799

(Surplus) or Deficit on Provision of

Services

71,442

7,158 Surplus or deficit on revaluation of

non current assets

1,362

(430) Surplus or deficit on revaluation of

available for sale financial assets

0

41,853 Actuarial gains / losses on pension

assets / liabilities

43 (26,534)

48,581 Other Comprehensive Income and

Expenditure

(25,172)

84,380 Total Comprehensive Income and

Expenditure

46,270

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B A LA N C E S H E E T A S A T 3 1 M A R C H 2 0 1 1

1 April

2009

31 March

2010 Notes

31 March

2011

£'000 £'000 £'000

334,845 306,427 Property, Plant & Equipment 1,5,6,13,

38,40 223,698

24,936 29,032 Investment Property 1,

7,13,38 29,276

587 536 Intangible Assets 13,38 451

420 311 Assets held for sale (> 1yr) 1,13 65

5,019 1,449 Long Term Investments 16,46 449

181 165 Long Term Debtors 156

365,988 337,920 Long Term Assets 254,095

14,129 15,744 Short Term Investments 16,46 15,579

0 0 Assets held for sale (<1yr) 0

149 183 Inventories 17 140

12,285 9,916 Short Term Debtors 16,18,46 7,191

591 0 Cash and Cash Equivalents 19 396

27,154 25,843 Current Assets 23,306

0 (978) Cash and Cash Equivalents 0

(686) (868) Short Term Borrowing (965)

(9,706) (9,466) Short Term Creditors 1,5,16,21 (9,582)

0 0 Liabilities in disposal groups 0

(10,392) (11,312) Current Liabilities (10,547)

(2,909) (1,376) Long Term Creditors 1 (1,342)

(368) (476) Provisions 1,22 (545)

(37,923) (50,423) Long Term Borrowing 16 (50,447)

(35,758) (78,714) Other Long Term Liabilities 1,5,43 (39,327)

0 0 Donated Assets Account 0

0 0 Capital Grants Receipts in Advance 0

(76,958) (130,989) Long Term Liabilities (91,661)

305,792 221,462 Net Assets 175,193

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B A LA N C E S H E E T A S A T 3 1 M A R C H 2 0 1 1

1 April

2009

31 March

2010 Notes

31 March

2011

£'000 £'000 £'000

25,889 20,675 Usable reserves 18,811

2,135 1,739 General Fund 8 1,785

9,371 8,878 Earmarked reserves 1,9 9,289

2,408 1,000 Housing Revenue Account 8 1,183

0 (262) CMS (207)

0 0 Major Repairs Reserve 8 0

9,752 6,636 Capital Receipts Reserve 8 3,399

530 595 Capital Grants Unapplied 1,8 1,418

1,693 2,089 Insurance Fund 9 1,944

279,903 200,787 Unusable Reserves 8 156,382

19,971 12,290 Revaluation Reserve 1,24 10,647

(35,740) (78,277) Pensions Reserve 24,43 (39,327)

296,860 267,134 Capital Adjustment Account 1,24 185,289

81 66 Deferred Capital Receipts 1 57

(1,053) (739) Financial Instruments Adjustment Account 24 (505)

0 430 Available-for-Sale Financial Instruments Reserve 1,24 430

(20) 86 Collection Fund Adjustment Account 24 65

(196) (203) Accumulated Absences Account 1,24 (274)

305,792 221,462 Total Reserves 175,193

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C A S H F LO W S T A T E M E N T

31 March

2010

Notes

31 March

2011

£'000 £'000

35,800 Net (surplus) or deficit on the provision of services 71,442

(46,152)

Adjustments to net surplus or deficit on the provision of

services for non-cash movements 26 (90,301)

(242)

Adjustments for items included in the net surplus or deficit

on the provision of services that are investing and

financing activities 27 5,028

(10,594) Net cash flows from Operating Activities 25 (13,831)

24,096 Investing Activities 28 11,974

(11,933) Financing Activities 29 483

1,569 Net (increase) or decrease in cash and cash equivalents (1,374)

591

Cash and cash equivalents at the beginning of the

reporting period (978)

(978)

Cash and cash equivalents at the end of the reporting

period 19 396

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N O T E S T O T H E A C C O U N T S

Note 1 – First Time Adoption of International Financial Reporting Standards (IFRS)

The Statement of Accounts for 2010/11 is the first to be prepared on an IFRS basis.

Adoption of the IFRS based code has resulted in the restatement of various

balances and transactions, with the result that some amounts presented in the

financial statements are different from the equivalent figures presented in the

Statement of Accounts for 2009/10.

The following tables explain the material differences between the amounts

presented in the 2009/10 financial statements and the equivalent amounts

presented in the 2010/11 financial statements.

Comprehensive Income and Expenditure Statement

2009/10 UK

GAAP 2009/10 IFRS

Net

Expenditure

Accumulated

Short Term

Absences

Capital

&

Revenue

Grants

Capital

Charges

and

Leasing

Net

Expenditure

£'000 £'000 £'000 £'000 £'000

Central services to the

public

967 (6) 9 0 970

Cultural, environmental,

regulatory and planning

services

12,747 11 298 (405) 12,651

Highways and transport

services

(615) 0 63 (3) (555)

Local authority housing

(HRA)

32,601 1 304 (180) 32,726

Other housing services 2,235 (13) (140) 0 2,082

Corporate and

democratic core

1,765 1 0 0 1,766

Non distributed costs 10 0 0 0 10

Net Cost of Services 49,710 (6) 534 (588) 49,650

Other Operating Income

and Expenditure 785 0 0 0 785

Financing and Investment

Income and Expenditure 4,135 0 0 147 4,282

Surplus/ deficit on trading

accounts (not applicable

to a service)

(448) 13 0 (327) (762)

Taxation and Non Specific

Grant Income (17,323) 0 (833) 0 (18,156)

(Surplus) or Deficit on

Provision of Services

36,859 7 (299) (768) 35,799

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Balance Sheet

2009/10 UK

GAAP 2009/10 IFRS

Accumulated

Short Term

Absences

Capital

&

Revenue

Grants

Capital

Charges

and

Leasing

£'000 £'000 £'000 £'000 £'000

Property Plant &

Equipment

300,980 0 0 5,447 306,427

Investment Property 29,810 0 0 (778) 29,032

Intangible Assets 536 0 0 0 536

Assets Held for Sale 1,271 0 0 (960) 311

Long Term Investments 1,449 0 0 0 1,449

Long Term Debtors 165 0 0 0 165

Long Term Assets 334,211 0 0 3,709 337,920

Short Term Investments 15,744 0 0 0 15,744

Inventories 183 0 0 0 183

Short Term Debtors 9,916 0 0 0 9,916

Cash and Cash

Equivalents

0 0 0 0 0

Current Assets 25,843 0 0 0 25,843

Cash and Cash

Equivalents

(978) 0 0 0 (978)

Short Term Borrowing (868) 0 0 0 (868)

Short Term Creditors (9,982) 0 1,052 (536) (9,466)

Current Liabilities (11,828) 0 1,052 (536) (11,312)

Long Term Creditors 0 0 0 (1,376) (1,376)

Provisions (273) (203) 0 0 (476)

Long Term Borrowing (50,423) 0 0 0 (50,423)

Other Long Term Liabilities (78,277) 0 0 (437) (78,714)

Government Grants

Deferred

(14,870) 0 14,870 0 0

Deferred Capital Receipts (66) 0 0 66 0

Usable Capital Grants (595) 0 0 595 0

Long Term Liabilities (144,504) (203) 14,870 (1,152) (130,989)

Net Assets 203,722 (203) 15,922 2,021 221,462

Usable Reserves 19,028 0 1,052 595 20,675

General Fund 1,739 0 0 0 1,739

Earmarked Reserves 7,826 0 1,052 0 8,878

Housing Revenue Account 1,000 0 0 0 1,000

CMS (262) 0 0 0 (262)

Major Repairs Reserve 0 0 0 0 0

Capital Receipts Reserve 6,636 0 0 0 6,636

Capital Grants Unapplied 0 0 0 595 595

Insurance Fund 2,089 0 0 0 2,089

25


2 0 1 0 / 1 1

2009/10 UK

GAAP 2009/10 IFRS

Accumulated

Short Term

Absences

Capital

&

Revenue

Grants

Capital

Charges

and

Leasing

£'000 £'000 £'000 £'000 £'000

Unusable Reserves 184,694 (203) 14,870 1,426 200,787

Revaluation Reserve 14,989 0 0 (2,699) 12,290

Pensions Reserve (78,277) 0 0 0 (78,277)

Capital Adjustment

Account

248,206 0 14,870 4,058 267,134

Deferred Capital Receipts 0 0 0 66 66

Financial Instruments

Adjustment Account

(739) 0 0 0 (739)

Available for Sale

Financial Instruments

Reserve

429 0 0 1 430

Collection Fund

Adjustment Account

86 0 0 0 86

Accumulated Absences

Account

0 (203) 0 0 (203)

Total Reserves 203,722 (203) 15,922 2,021 221,462

Note 2 – Accounting Policies 1. General Principles

The Statement of Accounts summarises the Council‟s transactions for the 2010/11

financial year and its position at the year-end of 31 March 2011. The Statement of

Accounts have been prepared in accordance with proper accounting practices.

These practices primarily comprise the Code of Practice on Local Authority

Accounting in the United Kingdom 2010/11 (the Code) and the Best Value

Accounting Code of Practice 2010/11, supported by International Financial

Reporting Standards (IFRS) and statutory guidance issued under section 7 of the

Accounts and Audit Regulations 2011.

These are the first set of accounts prepared under the Code, based on International

Financial Reporting Standards. Comparative figures for the year ended 31 March

2010 have been restated to comply with the Code and the balance sheet as at 1

April 2009 has also been restated on this basis for the purposes of transition.

The accounting convention adopted in the Statement of Accounts is historic cost,

modified by the revaluation of certain categories of non-current assets and financial

instruments 2. Accruals of Income and Expenditure

The revenue accounts of the Council are maintained on an accruals basis

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meaning that activity is accounted for in the year that it takes place, not simply

when cash payments are made or received. In particular:

Revenue from the sale of assets is recognised when the Council transfers the

significant risks and rewards of ownership to the purchaser and it is probable

that economic benefits or service potential associated with the transaction

will flow to the Authority.

Revenue from the provision of services is recognised when the Council can

measure reliably the percentage of completion of the transaction and it is

probable that economic benefits or service potential associated with the

transaction will flow to the Authority.

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.

Expenses in relation to services received (including services provided by

employees) are recorded as expenditure when the services are received

rather than when payments are made.

Interest receivable on investments and payable on borrowings is accounted

for respectively as income and expenditure on the basis of the effective

interest rate for the relevant financial instrument rather than the cash flows

fixed or determined by the contract.

Where revenue and expenditure have been recognised but cash has not

been received or paid, a debtor or creditor for the relevant amount is

recorded in the Balance Sheet. Where debts may not be settled, the balance

of debtors is written down and a charge made to revenue for the income

that might not be collected.

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 three months or less from the date of acquisition

and that are readily convertible to known amounts of cash with insignificant risk of

change in value.

In the Cash Flow Statement, cash and cash equivalents are shown net of bank

overdrafts that are repayable on demand and form an integral part of the

Authority‟s cash management.

4. Exceptional Items

When items of income and expense are material, their nature and amount is

disclosed separately, either on the face of the Comprehensive Income and

Expenditure Statement or in the notes to the accounts, depending on how

significant the items are to an understanding of the Council‟s financial

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performance. 5. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors

Prior period adjustments may arise as a result of a change in accounting policies or

to correct a material error. Changes in accounting estimates are accounted for

prospectively i.e. in the current and future years affected by the change and do not

give rise to prior period adjustment.

Changes in accounting policies are only made when required by proper

accounting practices or the change provides more reliable or relevant information

about the effect of transactions, other events and conditions on the Council‟s

financial position or financial performance. Where a change is made, it is applied

retrospectively (unless stated otherwise) by adjusting opening balances and

comparative amounts for the prior period as if the new policy had always been

applied.

Material errors discovered in prior period figures are corrected retrospectively by

amending opening balances and comparative amounts for the prior period. 6. Charges to Revenue for Non-Current Assets

Service revenue accounts, central support services and trading accounts are

charged with the following amounts to reflect the cost of holding fixed assets during

the year:

depreciation of the assets used by the service

revaluation and impairment losses on assets used by the service where there

are no accumulated gains in the Revaluation Reserve against which losses

can be written off

amortisation of intangible fixed assets used by the service.

The Council is not required to raise Council Tax to fund depreciation, revaluation

and impairment losses or amortisation. However, it is required to make an annual

contribution from revenue towards the reduction in its overall borrowing requirement

equal to an amount calculated on a prudent basis determined by the Council in

accordance with statutory guidance. This is referred to as the Minimum Revenue

Provision (MRP) and Voluntary Revenue Provision (VRP). The Council‟s policy on MRP

is:

For capital expenditure incurred before 1 April 2009, or which from 1 April 2009

is supported borrowing, the MRP is based on 4% of the opening capital

financing requirement (with adjustments allowed for in DCLG Regulations).

For all unsupported borrowing from 1 April 2009, the MRP is based on the

estimated life of the asset which the borrowing has been used to

fund.

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VRP will be charged if considered prudent for individual asset financing.

Depreciation, revaluation and impairment losses and amortisation are replaced by

the MRP and VRP, by way of an adjusting transaction between the Capital

Adjustment Account and the General Fund Balance in the Movement in Reserves

Statement, for the differences between the two. 7. Employee Benefits Benefits payable during employment

Short-term employee benefits are those due to be settled within 12 months of the

year-end. They include such benefits as wages and salaries, paid annual leave and

paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current

employees and are recognised as an expense for services in the year in which

employees render service to the Council. An accrual is made for the cost of holiday

entitlements or time off in lieu, earned by employees but not taken before the year-

end, which employees can carry forward into the next financial year. The accrual is

made at the wage and salary rates applicable in the following accounting year,

being the period in which employee take the benefit. The accrual is charged to

Surplus or Deficit on the Provision of Services, but then reversed out through the

Movement in Reserves Statement so that holiday benefits are charged to revenue in

the financial year in which the holiday absence occurs.

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 and are charged on an accruals basis to

the Non Distributed Costs line in the Comprehensive Income and Expenditure

Statement when the Council is demonstrably committed to the termination of the

employment of an officer or group of officers or making an offer to encourage

voluntary redundancy.

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 relevant accounting standards. In the Movement in

Reserves Statement, transfers are required to and from the Pensions Reserve to

remove notional debits and credits for pension enhancement termination 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.

Post Employment Benefits

Employees of the Council are members of the Local Government Pension Scheme,

administered by Lincolnshire County Council. This scheme provides defined benefits

to members (retirement lump sums and pensions), earned as employees worked for

the Council.

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The Local Government Pension Scheme

The Local Government Scheme is accounted for as a defined benefits scheme:

The liabilities of the Lincolnshire County Council pension fund attributable to the

Council are included in the Balance Sheet on an actuarial basis using the protected

unit method – i.e. an assessment of the future payments that will be made in relation

of retirement benefits earned to date by employees, based on assumptions about

morality rates, employee turnover rates, etc, and projections of projected earnings

for current employees.

Liabilities are discounted to their value at current prices, using a discount rate of

5.4% (based on the indicative rate of return on high quality corporate bond (iBoxx

Sterling Corporates AA over 15 year Index).

The assets of the Lincolnshire County Council pension fund attributable to the

Council are included in the Balance Sheet at their fair value:

Quoted securities – current bid price

Unquoted securities – professional estimate

Unitised securities – current bid price

Property – market value.

The change in the net pensions 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 or Deficit on the Provision of Services in the Comprehensive

Income and Expenditure Statement as part of Non Distributed Costs

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


Expected return on assets – the annual investment return on the fund assets

attributable to the Council, 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 or losses on settlements and curtailments – the result of actions to

relieve the Council of liabilities or events that reduce the expected future

service or accrual of benefits of employees – debited or credited to the

Surplus or Deficit on the Provision of Services in the Comprehensive

Income and Expenditure Statement as part of Non Distributed

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2 0 1 0 / 1 1

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 and the actuaries have updated their

assumptions – debited to the Pensions Reserve

Contributions paid to the Lincolnshire County Council 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 Council 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 transfers 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 Pension

Reserve thereby measures the beneficial impact to the General Fund of being

required to account for retirement benefits on the basis of cash flows rather than as

benefits are earned by employees.

Discretionary Benefits

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 decision to make the

award and accounted for using the same policies as are applied to the Local

Government Pension Scheme. 8. 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 reporting period and the date when

the Statement of Accounts is authorised for issue. Two types of events can be

identified:

Those that provide evidence of conditions that existed at the end of the

reporting period – the Statement of Accounts is adjusted to reflect such

events

Those that are indicative of conditions that arose after the reporting period –

the Statement of Accounts is not adjusted to reflect such events, but where

category of events would have a material effect, disclosure is made in the

notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the

Statement of Accounts.

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9. Financial Instruments Financial Liabilities

Financial liabilities are recognised on the Balance Sheet when the Council becomes

a party to the contractual provisions of a financial instrument. They are initially

measured at fair value and carried at their amortised cost. Annual charges for

interest payable are shown in the Financing and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement, and are

based on the carrying amount of the liability, multiplied by the effective rate of

interest for the instrument. The effective interest rate is the rate that exactly discounts

estimated future cash payments over the life of the instrument to the amount at

which it was originally recognised.

For most of the borrowings that the Council has, this means that the amount

presented in the Balance Sheet is the outstanding principal repayable, with

accrued interest due within one year shown under short term borrowings; and

interest charged to the Comprehensive Income and Expenditure Statement is the

amount payable for the year according to the loan agreement.

Gains and losses on the repurchase or early settlement of borrowing are credited

and debited to the Financing and Investment Income and Expenditure line in the

Comprehensive Income and Expenditure Statement in the year of

repurchase/settlement. However, where repurchase has taken place as part of a

restructuring of the loan portfolio that involves the modification or exchange of

existing instruments, any premium or discount is respectively deducted from or

added to the amortised cost of the new or modified loan and the write-down to the

Comprehensive Income and Expenditure Statement is spread over the life of the

loan by an adjustment to the effective interest rate.

Where premiums and discounts have been charged to the Comprehensive Income

and Expenditure Statement, regulations allow the impact on the General Fund

Balance to be spread over future years. The Council has a policy of spreading the

gain or loss over the unexpired life of the original loan. The reconciliation of amounts

charged to the Comprehensive Income and Expenditure Statement to the net

charge required against the General Fund Balance is managed by a transfer to or

from the Financial Instruments Adjustment Account in the Movement in Reserves

Statement.

Financial Assets

Financial assets are classified into two types:

Loans and receivables – assets that have fixed or determinable payments but

are not quoted in an active market

Available for sale assets – assets that have a quoted market price and/or do

not have fixed or determinable payments.

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Loans and receivables

Loans and receivables are recognised on the Balance Sheet when the Council

becomes a party to the contractual provisions of a financial instrument. They are

initially measured at fair value and carried at their amortised cost. Annual credits to

the Financing and Investment and Expenditure line in the Comprehensive Income

and Expenditure Statement for interest receivable are based on the carrying

amount of the asset multiplied by the effective rate of interest for the instrument. For

most of the loans that the Council has made, this means that the amount presented

in the Balance Sheet is the outstanding principal receivable, with interest receivable

within one year shown under short term investments and interest credited to the

Comprehensive Income and Expenditure Statement is the amount receivable for

the year in the loan agreement.

However, occasionally the Council may make loans to other parties (e.g. voluntary

organisations) at less than market rates (soft loans). When soft loans are made, a loss

is recorded in the Comprehensive Income and Expenditure Statement for the

present value of the interest that will be foregone over the life of the instrument,

resulting in a lower amortised cost than the outstanding principal. Interest is credited

to the Financing and Investment Income and Expenditure line in the Comprehensive

Income and Expenditure Statement at a marginally higher effective rate of interest

than the rate receivable, with the difference serving to increase the amortised cost

of the loan in the Balance Sheet. Statutory provisions require that the impact of soft

loans on the General Fund Balance is the interest receivable for the financial year –

the reconciliation of amounts debited and credited to the Comprehensive Income

and Expenditure Statement to the net gain required against the General Fund

Balance as managed by a transfer to or from the Financial Instruments Adjustment

Account in the Movement in the Reserves Statement.

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 Financing and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement. 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.

Any gains and losses that arise on the de-recognition of an asset are credited or

debited to the Financial and Investment Income Expenditure line in the

Comprehensive Income and Expenditure Statement.

Available-for-Sale Assets

Available-for-sale assets are recognised on the Balance Sheet when the Council

becomes a party to the contractual provisions of a financial instrument and are

initially measured and carried at fair value. 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

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determinable payments, income (e.g. dividends) is credited to the Comprehensive

Income and Expenditure Statement when it becomes receivable by the Council.

Assets are maintained in the Balance Sheet at fair value. Values are based on the

following principles:

Instruments with the quoted market prices – the market price

Other instruments with fixed and determinable payments – discounted cash

flow analysis

Equity shares with no quoted market prices – independent appraisal of

company valuation or most recent price at which the shares changed hands.

Changes in fair value are balanced by an entry in the Available-for-Sale Reserve

and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available

for Sale Financial Assets. The exception is where impairment losses have been

incurred – these are debited to the Financial and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement, along

with any net gain or loss for the asset accumulated in the Available-for-Sale Reserve.

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 asset has 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

instrument (net of any principal repayment and amortisation).

Any gains and losses that arise on de-recognition of the asset are credited or

debited to the Financing and Investment Income and Expenditure line in the

Comprehensive Income and Expenditure Statement, along with any accumulated

gains or losses previously recognised in the Available-for-Sale Reserve.

Where fair value cannot be measured reliably, the instrument is carried at cost (less

any impairment losses).

10. Foreign Currency Translation

Where the Council has entered into a transaction denominated in a foreign

currency, the transaction is converted into sterling at the exchange rate applicable

on the date the transaction was effective. Where material amounts in foreign

currency are outstanding at the year-end, they are reconverted at the spot

exchange rate at 31 March. Resulting gains or losses, if material, are recognised in

the Financing and Investment Income and Expenditure line in the Comprehensive

Income and Expenditure Statement.

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11. Government Grants and Contributions

Whether paid on account, by instalments or in arrears, government grants and the

third party contributions and 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.

Amounts recognised as due to the Council are not credited to the Comprehensive

Income and Expenditure Statement until conditions attached to the grant or

contribution 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 contribution are required to be consumed by the recipient as specified,

or future economic benefits or service potential must be returned to the transferor.

Monies 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 contribution is credited to the relevant service line (attributable revenue

grants and contributions) or Taxation and Non-Specific Grant Income (non ring-

fenced revenue grants and all capital grants) in the Comprehensive Income and

Expenditure Statement.

Where capital grants 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 the grant has yet to be used to finance capital

expenditure, it is posted to the Capital Grants Unapplied reserve. Where it has been

applied, it is posted to the Capital Adjustment Account. Amounts in the Capital

Grants Unapplied reserve are transferred to the Capital Adjustment Account once

they have been applied to fund capital expenditure.

Area Based Grant

Area Based Grant (ABG) is a general grant allocated by central government directly

to local authorities as additional revenue funding. ABG is non-ringfenced and is

credited to Taxation and Non-Specific Grant Income in the Comprehensive Income

and Expenditure Statement.

Business Improvement Districts

A Business Improvement District (BID) scheme applies across the whole of the

Council. The scheme is funded by BID levy paid by non-domestic ratepayers. The

Council acts as a principal under the scheme, and accounts for income received

and expenditure incurred (including contributions to the BID project) within the

relevant services within the Comprehensive Income and Expenditure Statement. 12. Intangible Assets

Intangible assets are assets that do not have physical substance but are identifiable

and controlled by the Council (e.g. software licences). Expenditure on

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intangible assets is capitalised when it is expected that future economic benefits or

service potential will flow from the intangible asset to the Council for a period of

more than one year.

Internally generated intangible assets are capitalised where it is demonstrable that

the project is technically feasible and is intended to be completed 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 is restricted to that incurred during

the development phase (research expenditure cannot be capitalised).

Expenditure on the development of the Council‟s website is not capitalised as the

website is primarily intended to promote or advertise the Council‟s services.

Intangible assets are measured initially at cost. Amounts are only re-valued where

the fair value of the assets can be determined by reference to an active market. In

practice, no intangible asset held by the Council meets this criterion, and they are

therefore carried at amortised cost.

Intangible assets are amortised over their useful life and charged to the relevant

service lines in the Comprehensive Income and Expenditure Statement and are

subject to impairment reviews. 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.

Where expenditure on intangible assets qualifies as capital expenditure for statutory

purposes, amortisation, impairment losses and 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. 13. Interests in Companies and other Entities

Councils are required to produce Group Accounts to include services offered to

Council Tax payers by organisations other than the Council itself but in which the

Council has an interest. There are a number of criteria set out by which the Council

must determine whether the value of the company and the Council‟s interest is

significant enough for Group Accounts to be produced. The Council has complied

with the Code of Practice on Local Authority Accounting, and while it has identified

a company over which it has joint control, it has concluded that the company does

not meet the criteria that would require consolidation into the Council‟s accounts. 14. Inventories and Long Term Contracts

Inventories are included in the Balance Sheet at the lower of cost and net realisable

value. The cost of inventories is assigned using either the FIFO or weighted average

costing formula.

Long term contracts are accounted for on the basis of charging the Surplus and

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Deficit on the Provision of Services with the value of works and services received

under the contract during the financial year. 15. Investment Property

Investment properties are those that are used solely to earn rentals and/or for

capital appreciation. The definition is not met if the property is used in any way to

facilitate the delivery of services or is held for sale.

Investment properties are measured initially at cost and subsequently at fair value,

based on the amount at which the asset could be exchanged between

knowledgeable parties at arm‟s-length. Properties are not depreciated but are re-

valued annually according to market conditions at year-end. 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.

Rentals received in relation to investment properties are credited to the Financing

and Investment Income line and result in a gain for the General Fund Balance.

However, revaluation and disposal gains and losses 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 and (for any

sale proceeds greater than £10,000) the Capital Receipts Reserve. 16. Jointly Controlled Operations and Jointly Controlled Assets

Jointly controlled operations are activities undertaken by the Council in conjunction

with other ventures that involve the use of the assets and resources of the ventures

rather than the establishment of a separate entity. If and when these exist 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 ventures, with the assets being used to obtain

benefits for the ventures. The joint venture does not involve the establishment of a

separate entity. The Council accounts for only 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. 17. Leases

Leases are classified as finance leases where the terms of the lease transfer

substantially all the risks and rewards incidental to ownership of the property, plant or

equipment from the lessor to the lessee. All other leases are classified as operating

leases.

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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 dependant on the use of specific assets.

The Council as Lessee Finance Leases

Property, plant and equipment 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 of the Council are added to the carrying amount of the asset. Premiums

paid on entry into a lease are applied to writing down the lease liability. Contingent

rents are charged as expenses in the periods in which they are incurred.

Lease payments are apportioned between:

A charge for the acquisition of the interest in the property, plant or equipment

– applied to write down the lease liability, and

A financing charge (debited to the Financing and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement).

Property, Plant and Equipment recognised under finance leases is accounted for

using the policies applied generally to such assets, subject to depreciation being

charged over the lease term if this is shorter than the asset‟s estimated useful life

(where ownership of the asset does not transfer to the Council at the end of the

lease period).

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

contribution (Voluntary Revenue Provision - VRP) is made from revenue funds

towards the deemed capital investment in accordance with statutory requirements.

Depreciation and revaluation and impairment losses are therefore substituted by the

VRP 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 service benefiting from use of the

leased asset. Charges are made on a straight-line basis over the term of the lease.

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The Council as Lessor Finance Leases

Where the Council grants a finance lease over a property or an item of plant or

equipment, the relevant asset is written out of the Balance Sheet as a disposal. At

the commencement of the lease, the carrying amount of the asset in the Balance

Sheet is written off to the Other Operating Expenditure line in the Comprehensive

Income and Expenditure Statement as part of the gain and loss on disposal. A gain,

representing the Council‟s net investment in the lease, is credited to the same line in

the Comprehensive Income and Expenditure Statement also as part of the gain or

loss on disposal (i.e. netted off against the carrying value of the asset at the time of

disposal), matched by a long-term lease debtor in the Balance Sheet.

Lease rentals receivable are apportioned between:

A charge for the acquisition of the interest in the property – applied to write

down the lease debtor (together with any premiums received), and

Finance income (credited to the Financing and Investment Income and

Expenditure line in the Comprehensive Income and Expenditure Statement).

The gain credited to the Comprehensive Income and Expenditure Statement on

disposal is not permitted by statute to increase the General Fund Balance and is

required to be treated as a capital receipt. Where a premium has been received,

this is posted out of the General Fund Balance to the Capital Receipt Reserve in the

Movement in Reserves Statement. Where the amount due in relation to the leased

asset is to be settled by the payment of rentals in future financial years, this is posted

out of the General Fund Balance to the Deferred Capital Receipts Reserve in the

Movement in Reserves Statement. When the future rentals are received, the

element for the capital receipt for the disposal of the asset is used to write down the

lease debtor. At this point, the deferred capital receipts are transferred to the

Capital Receipts Reserve.

The written-off value of disposals is not a charge against council tax, as the cost of

fixed assets is fully provided for under separate arrangements for capital financing.

Amounts are therefore appropriated to the Capital Adjustment Account from the

General Fund Balance in the Movement in Reserve Statement.

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. Initially direct costs incurred 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.

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18. Overheads and Support Services

The costs of overheads support services are charged to those that benefit from the

supply or service in accordance with the costing principles of the CIPFA Best Value

Accounting Code of Practice 2010/11 (BVACOP). 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 Authority‟s status as a

multi-functional, democratic organisation.

Non Distributed Costs – the cost of discretionary benefits awarded to

employees retiring early and impairment losses chargeable on Assets Held for

Sale.

These two cost categories are defined in BVACOP and accounted for as separate

headings in the Comprehensive Income and Expenditure Statement, as part of Net

Expenditure on Continuing Services. 19. Non-Current Assets - Property, Plant and Equipment

Assets that have physical substance and are held for use in the supply of services,

for rental to others, or for administrative purposes and that are expected to be used

during more than one financial year are classified as Property, Plant and Equipment.

Recognition

Expenditure on the acquisition, creation or enhancement of Property, Plant or

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 Council and the cost of the item can be measured reliably. Expenditure that

maintains but does not add to an 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

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

The initial estimate of the costs of dismantling and removing the item and

restoring the site on which it is located.

The Council does not capitalise borrowing costs incurred whilst assets are under

construction.

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The cost of assets acquired other than by purchase is deemed to be its fair value,

unless the acquisition does not have commercial substance (i.e. it will not lead to a

variation in the cash flows of the Council). In the latter case, where an asset is

acquired via an exchange, the cost of the acquisition is the carrying amount of the

asset given up by the Council.

Donated assets are measured initially at fair value. The difference between fair

value and any consideration paid is credited to the Taxation and Non-Specific

Grant Income line of the Comprehensive Income and Expenditure Statement, unless

the donation has been made conditionally. Until conditions are satisfied, the gain is

held in the Donated Assets Account. Where gains are credited to the

Comprehensive Income and Expenditure Statement, they are reversed out of the

General Fund Balance to the Capital Adjustment Account in the Movement in

Reserves Statement.

Assets 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 as the amount that would be paid for

the asset in its existing use (existing use value – EUV).

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.

For non-property assets that have short useful lives or low values (or both),

depreciated historical cost basis is used as a proxy for fair value.

Assets included in the Balance Sheet at fair value are re-valued sufficiently regularly

to ensure that their carrying amount is not materially different from their fair value at

the year-end, but as a minimum every five years. Increases in valuations are

matched by credits to the Revaluation Reserve to recognise unrealised gains.

However, in exceptional circumstances, gains may be credited to the

Comprehensive Income and Expenditure Statement where they arise from the

reversal of a loss previously charged to services.

When decreases in value are identified, they are accounted for as follows:

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 an insufficient

balance, the carrying amount of the asset is written down against

the relevant service lines in the Comprehensive Income and

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Expenditure Statement.

The Revaluation Reserve contains revaluation gains recognised since 1 April 2007

only, the date of its formal implementation. Gains arising before that date have

been consolidated into the Capital Adjustment Account.

Impairment

Assets are reviewed at each year-end for evidence of reductions in value i.e.

impairment. Where impairment is identified, 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.

When impairment losses are identified, they are accounted for as follows:

Where there is a balance in the 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 an insufficient

balance, the carrying amount of the asset is written down against the

relevant service line(s) in the Comprehensive Income and Expenditure

Statement.

Where an impairment loss is reversed subsequently, the reversal is credited to the

relevant service line 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.

Depreciation

Depreciation is provided for on all Property, Plant and Equipment assets by the

systematic allocation of their depreciable amounts over their useful lives. An

exception is made for assets without a determinable finite useful life (i.e. freehold

land and certain Community Assets) and assets that are not yet available for use

(i.e. assets under construction).

Depreciation is calculated on the following bases:

Dwellings and other buildings – straight-line allocation over the useful life of

the property as estimated by the Valuer

Vehicles, plant, furniture and equipment – straight-line allocation over the

useful life of each class of asset, as advised by a suitably qualified officer

Where an item of Property, Plant of Equipment asset has major components whose

cost is significant in relation to the total cost of the item, the components are

depreciated separately. A major component is defined as comprising at least 20%

of the value and having a useful life of 50% or less of that of the parent asset.

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Revaluation gains are also depreciated, with an amount equal to the difference

between the current value depreciation charge on assets and the depreciation

that would have been charged based on their historical cost, being transferred

each year from the Revaluation Reserve to the Capital Adjustment Account. 20. Disposals and Non-current Assets Held for Sale

When it becomes probable that the carrying amount of an asset will be recovered

principally through a sale transaction rather than through its continuing use, it is

reclassified as an Asset Held for Sale. The asset is re-valued immediately before

reclassification and then carried at the lower of this amount and fair value less costs

to sell. Where there is subsequent decrease to fair value less costs to sell, the loss is

posted to the Other Operating Expenditure line in the Comprehensive Income and

Expenditure Statement. Gains in fair value are recognised only up to the amount of

any previously losses recognised in the Surplus and Deficit on Provision of Services.

Depreciation is not charged on Assets Held for Sale.

If assets no longer meet the criteria to be classified as Assets Held for Sale, they are

reclassified back to non-current assets and valued at the lower of their carrying

amount before they were classified as held for sale; adjusted for depreciation,

amortisation or revaluations that would have been recognised had they not been

classified as Held for Sale, and their recoverable amount at the date of the decision

not to sell.

Assets that are abandoned or scrapped are reclassified as Assets Held for Sale.

When an asset is disposed of or decommissioned, the carrying amount of the asset

in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale)

is written off to the Other Operating Expenditure line in the Comprehensive Income

and Expenditure Statement as part of the gain or loss on disposal. Receipts from the

disposal (if any) are credited to the same line in the Comprehensive Income and

Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off

against the carrying value of the asset at the time of disposal). Any revaluation

gains accumulated for the asset in the Revaluation Reserve are transferred to the

Capital Adjustment Account.

Amounts received for a disposal in excess of £10,000 are categorised as capital

receipts. A proportion of receipts relating to housing disposals (75% for dwellings, 50%

for land and other assets, net of statutory deductions and allowances) is payable to

the Government. The balance of receipts is required to be credited to the Capital

Receipts Reserve, and can then only be used for new capital investment or set aside

to reduce the Council‟s underlying need to borrow. Receipts are transferred to the

Reserve from the General Fund Balance in the Movement in Reserves Statement.

The written-off value of disposals is not a charge against council tax, as the cost of

fixed assets is fully provided under separate arrangements for capital financing.

Amounts are transferred to the Capital Adjustment Account in the General Fund

Balance in the Movement in Reserves Statement.

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21. 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, and reliable estimate can be made of the amount of the

obligation. For instance, the Council may be involved in a court case that could

eventually result in the making of a settlement or the payment of compensation.

Provisions are charged as an expense to the appropriate service line in the

Comprehensive Income and Expenditure Statement in the year that the authority

becomes aware of the obligation, and are 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

not now be required (or a lower settlement than anticipated is made), the provision

is reversed and credited back to the relevant service.

Where some or all of the payment required to settle a provision is expected to be

recovered from another party (e.g. from an insurance claim), this is only recognised

as income for the relevant service if it is virtually certain that the reimbursement will

be received if the Council settles the obligation.

Contingent Liabilities

A contingent liability arises where an event has taken place that gives the Council a

possible obligation whose existence will only be confirmed by the occurrence or

otherwise of uncertain future events not wholly within the control of the Council.

Contingent liabilities also arise in circumstances where a provision would otherwise

be made but either it is not probable that an outflow of resources will be required or

the amount of the obligation cannot be measured reliably.

Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note

to the accounts.

Contingent Assets

A contingent asset arises where an event has taken place that gives the Council a

possible asset whose existence will only be confirmed by the occurrence or

otherwise of uncertain future events not wholly within the control of the Council.

Contingent assets are not recognised in the Balance Sheet but disclosed in a note

to the accounts where it is probable that there will be an inflow of economic

benefits. 22. Reserves

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The Council sets aside specific amounts as reserves for future policy purposes or to

cover contingencies. Reserves are created by transferring amounts out of the

General Fund Balance in the Movement in Reserves Statement. When expenditure

to be financed from a reserve is incurred, it is charged to the appropriate service in

that year to score against the Surplus or Deficit on the Provision of Services in the

Comprehensive Income and Expenditure Statement. The reserve is then

appropriated back into the General Fund Balance in the Movement in Reserves

Statement so that there is no net charge against council tax for the expenditure.

Certain reserves are kept to manage the accounting processes for non-current

assets, financial instruments, and retirement and employee benefits and do not

represent usable resources for the Council – these reserves are explained in the

relevant policies. 23. Revenue Expenditure Funded from Capital under Statute

Expenditure incurred during the year that may be capitalised under statutory

provisions but that 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 Council 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. 24. VAT

VAT payable is included as an expense only to the extent that it is not recoverable

from HM Revenue and Customs. VAT receivable is excluded from income.

Note 3 – Accounting Standards Issued, Not Adopted

Heritage Assets

Heritage Assets will be required to be recognised as a separate class of assets for

the first time in the 2011/12 financial statements in accordance with FRS 30. It is not

possible to make a reasonable estimate of the value of heritage assets held by the

Council at the current date, as the majority of these assets are not currently

recorded in the Balance Sheet. The Council will carry out a full review of potential

heritage assets during 2011/12, however, examples of known heritage assets held at

present are as follows:

Civic regalia

Monks Abbey ruins Note 4 – Critical Judgements in Applying Accounting Policies

In applying the accounting policies in Note 2, the Council has had to make certain

judgements about complex transactions or those involving uncertainty about future

events.

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The critical judgements made in the Statement of Accounts are:

There is a high degree of uncertainty about the future levels of funding for

local government. However, the Council has determined that this uncertainty

is not yet sufficient to provide an indication that the assets of the Council

might be impaired as a result of a need to close facilities or reduce levels of

service provision.

The Council has previously recognised a contingent liability in respect of a

dispute with the contractor of the „Public Realm‟ capital improvement

programme to the City‟s streets. A settlement agreement on the main

contract costs was reached in June 2011 and the Accounts have been

adjusted to reflect this. Despite resolution of the main contract cost there

remains a dispute with the contractor in relation to scheme defects.

Following an adjudication decision it has been found that no liability rests with

the Council. On this basis the Council has made no financial provision for the

costs required to rectify the scheme defects, neither has it recognised a

contingent liability in the Accounts.

In May 2011 the Council entered into a collaborative arrangement with North

Kesteven and West Lindsey District Councils to establish the Central

Lincolnshire Joint Planning Unit. This arrangement is hosted by North Kesteven

District Council and is governed through a Joint Committee representing

each of the partner authorities. The Council has therefore determined that

this arrangement is classified as a Jointly Controlled Operation, and as such

does not require consolidation into the Council‟s accounts. The Council‟s

proportion of activity remains to be accounted for separately within the Core

Financial Statements. Note 5 – Assumptions Made about the Future and Other Major Sources of Estimation Uncertainty

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 as at 31 March 2011 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

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Item Uncertainties Effect if Actual Results Differ

from Assumptions

Property, Plant and

Equipment

Assets are depreciated over

useful lives that are

dependent on assumptions

about the levels of repairs

and maintenance that will

be incurred in relation to

individual assets. The current

economic climate makes it

uncertain that the Council

will be able to sustain it‟s

current spending on repairs

and maintenance, bringing

doubt the useful lives

assigned to the assets

If the useful lives of the assets

reduce, depreciation

increases and the carrying

amount of the assets falls. It is

estimated that the annual

depreciation charge for

buildings would increase by

£0.64m for every year that

the useful lives had to be

reduced.

Pension 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 the

expected return 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.

For more information on the

Defined Benefit Pension

Scheme please refer to note

43 on page 93

The effects on the net

pensions liability of changes

in individual assumptions can

be measured. For instance, a

0.5% increase in the discount

rate assumption would result

in a decrease in the pension

liability of £11.515m

A 1 year increase in member

life expectancy would results

in an increased liability of

£3.854m

Arrears As at 31 March 2011, the

Council had a balance on

sundry debtors of £2.459m. A

review of significant

balances suggested that an

impairment of doubtful debts

of £1.191m was required.

If collection rates were to

deteriorate by 5% the

amount of the impairment of

doubtful debts would require

an additional £0.123m to be

set aside as an allowance.

Note 6 – Material Items of Income and Expense

The following items of income and expense within the Comprehensive Income and

Expenditure Statement that require separate disclosure are set out in the following

table:

47


2 0 1 0 / 1 1

Item

Value £’000

IAS 19 Past Service Cost in respect of changes to pension increases

introduced in the Chancellor‟s budget statement (Future pension increases

being linked to Consumer Price Index (CPI) and not Retail Prices Index (RPI).

The effect of this comes through as a negative past service cost within Non

Distributed Costs

14,331

In 2010/11 there were downward revaluations charged to the

Comprehensive Income and Expenditure of which £87.051m relates to HRA

assets (primarily Council Dwellings). Of this, £79.476m is as a consequence of

the Social Housing discount factor applied to the market value decreasing

from 50% in 2009/10 to 34% in 2010/11, with the remainder resulting from

further falls in property market prices.

87,994

Note 7 – Events after the Balance Sheet Date

The Statement of Accounts was authorised for issue by the Director of Resources on

27th September 2011. Events taking place after this date are not reflected in the

financial statements or notes. Where events taking place before this date provided

information about conditions existing at 31st March 2011, the figures in the financial

statements and notes have been adjusted in all material respects to reflect the

impact of this information.

The financial statements and notes have not been adjusted for the following events

which took place after 31 March 2011 as they provide information that is relevant to

an understanding of the Council‟s financial position but do not relate to conditions

at that date:

The Investment Property line in the Balances Sheet contains valuations

totalling £2.536m for a number shops and land holdings in the Lindongate

development area of the City. On 12 April 2011 the Council disposed of these

assets, including all of the freeholds, leaseholds and all other interests, to the

Lincolnshire Co-Operative in exchange for a capital receipt of £3.55m. The

subsequent loss of revenue income associated with these investment

properties is £0.170m pa.

Note 8 – Adjustment 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 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.

48


2 0 1 0 / 1 1

2010/11 Usable Reserves

Unusable

Reserves

General Housing CMS Major Capital Capital Total Total

Fund Revenue Repair Receipts Grants

Balance Account Reserve Reserve Unapplied

£000 £000 £000 £000 £000 £000 £000 £000

Reversal of items debited or credited to the Comprehensive Income and

Expenditure Statement

Depreciation (excl HRA depreciation) 1,674 0 0 0 0 0 1,674 (1,674)

Amortisation of intangible assets (excl HRA ) 164 164 (164)

HRA Depreciation 0 0 0 4,341 0 0 4,341 (4,341)

HRA amortisation of intangible assets 19 19 (19)

Impairment/revaluation losses (charged to I&E) 1,103 87,063 0 0 0 0 88,166 (88,166)

Capital grant and contributions applied 0 0 0 0 0 0 0 0

Donated assets fair value less consideration 0 0 0 0 0 0 0 0

Revenue Expenditure Funded from Capital under Statute 3,478 0 0 0 0 0 3,478 (3,478)

Movement in market value of investment property (160) (12) 0 0 0 0 (172) 172

Movement in value of held for sale assets 0 0 0 0 0 0 0 0

Amounts of non current assets written off on disposal or sale as part of the

gain/loss on disposal to the CIES

388 304 0 0 0 0 692 (692)

Capital grant and contributions unapplied credited to I&E (4,592) (307) 0 0 0 4,899 0 0

Use of capital grants and contributions to finance capital expenditure 0 0 0 (4,076) (4,076) 4,076

Transfer of sale proceeds credited as part of the gain/loss on disposal to the

CIES

(391) (625) 0 0 1,016 0 0 (9)

Use of capital receipts reserve to finance capital expenditure 0 0 (3,861) 0 (3,861) 3,861

Reversal of items relating to retirement benefits debited or credited to the


(8,047) (1,118) 0 0 0 0 (9,165) 9,165

49


2 0 1 0 / 1 1


Unusable

Reserves




£000 £000 £000 £000 £000 £000 £000 £000

Differences between statutory debits/credits and amounts recognised as

income and

expenditure in relation to financial instruments e.g. Soft loans

(2) (231) 0 0 0 0 (233) 233

Gain/loss on revaluation of Available for sale Financial Instruments 0 0 0 0 0 0 0 0

Amount by which council tax income and residual community charge

adjustment included in the Comprehensive Income and Expenditure

Statement is different from the amount taken to the General Fund in

accordance with regulation

21 0 0 0 0 21 (21)

Amount by which officer remuneration charged to the CIES on an accruals

basis is different from remuneration chargeable in the year in accordance

with statutory requirements

70 0 0 0 0 0 70 (70)

(Amounts excluded in I&E to be included for determining movement in

general fund)

Statutory Provision for the repayment of debt - (MRP) (631) 0 0 0 0 0 (631) 631

Statutory Repayment of Debt (Finance Lease Liabilities) 0 0 0 0 0 0 0 0

Voluntary provision above MRP (379) (163) 0 0 0 0 (542) 542

Contribution to disposal costs of capital sales 0 0 0 0 0 0 0 0

HRA capital receipts to housing central pool 392 0 0 0 (392) 0 0 0

Revenue contribution to finance capital (588) (1,546) 0 0 0 0 (2,134) 2,134

Employers contributions to pension schemes (2,096) (1,155) 0 0 0 0 (3,251) 3,251

Reversal of Major Repairs Allowance credited to the HRA 0 (623) 0 623 0 0 0 0

Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 (4,983) 0 0 (4,983) 4,983

Total Adjustments (9,596) 81,587 0 0 (3,237) 823 69,577 (69,586)

50


2 0 1 0 / 1 1


Unusable

Reserves




£000 £000 £000 £000 £000 £000 £000 £000

Reversal of items debited or credited to the Comprehensive Income and


Depreciation/amortisation (excl HRA depreciation) 2,415 0 0 0 0 0 2,415 (2,415)

HRA Depreciation/amortisation 0 22 0 6,214 0 0 6,236 (6,236)

Impairment/revaluation losses (charged to I&E) (509) 35,918 0 0 0 0 35,409 (35,409)

Capital grant and contributions applied (20) 20 0 0 0 0 0 0

Donated assets fair value less consideration 0 0 0 0 0 0 0 0

Revenue Expenditure Funded from Capital under Statute 1,059 0 0 0 0 0 1,059 (1,059)

Movement in market value of investment property (402) 39 0 0 0 0 (363) 363

Movement in value of held for sale assets 0 0 0 0 0 0 0 0

Amounts of non current assets written off on disposal or sale as part of the

gain/loss on disposal to the CIES

157 689 0 0 0 0 846 (846)

Capital grant and contributions unapplied credited to I&E (558) (275) 0 0 0 833 0 0

Use of capital grants and contributions to finance capital expenditure 0 0 0 0 0 (768) (768) 833

Transfer of sale proceeds credited as part of the gain/loss on disposal to the

CIES

(209) (784) 0 0 993 0 0 (15)

Use of capital receipts reserve to finance capital expenditure 0 0 0 0 (3,868) 0 (3,868) 3,868

Reversal of items relating to retirement benefits debited or credited to the


3,027 1,251 0 0 0 0 4,278 (4,278)

Differences between statutory debits/credits and amounts recognised as

income and

expenditure in relation to financial instruments e.g. Soft loans

(2) (311) 0 0 0 0 (313) 314

51


2 0 1 0 / 1 1


Unusable

Reserves




£000 £000 £000 £000 £000 £000 £000 £000

Gain/loss on revaluation of Available for sale Financial Instruments 0 0 0 0 0 0 0 0

Amount by which council tax income and residual community charge

adjustment included in the Comprehensive Income and Expenditure

Statement is different from the amount taken to the General Fund in

accordance with regulation

(106) 0 0 0 0 0 (106) 106

Amount by which officer remuneration charged to the CIES on an accruals

basis is different from remuneration chargeable in the year in accordance

with statutory requirements

(6) 13 0 0 0 0 7 (7)

(Amounts excluded in I&E to be included for determining movement in

general fund)

Statutory Provision for the repayment of debt - (MRP) (359) 0 0 0 0 0 (359) 359

Statutory Repayment of Debt (Finance Lease Liabilities) (380) 0 0 0 0 0 (380) 380

Voluntary provision above MRP (16) (201) 0 0 0 0 (217) 217

Contribution to disposal costs of capital sales 0 0 0 0 0 0 0 0

HRA capital receipts to housing central pool 241 0 0 0 (241) 0 0 0

Revenue contribution to finance capital (156) (4,598) 0 0 0 0 (4,754) 4,754

Employers contributions to pension schemes (2,425) (1,169) 0 0 0 0 (3,594) 3,594

Reversal of Major Repairs Allowance credited to the HRA 0 1,271 0 (1,271) 0 0 0 0

Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 (4,943) 0 0 (4,943) 4,943

Total Adjustments 1,751 31,885 0 0 (3,116) 65 30,585 (30,535)

52


2 0 1 0 / 1 1

Note 9 – Transfers to/from Earmarked Reserves

These amounts are held to meet expenditure in future financial years. The

movement on these Reserve Accounts during the year have been as follows:

Balance Appropriations Balance

@ 31.03.10 To Reserve From Reserve @ 31.03.11

£'000 £'000 £'000 £'000

General Fund

Western Growth Corridor 76 48 (121) 3

2007/08 Carry Forwards 135 0 (111) 24

CMT Contingency 24 10 (34) 0

Concessionary Fares 387 192 (545) 34

Unused DRF 534 17 (291) 260

IT Security Reserve 307 100 (210) 197

Invest to Save 1,324 1,437 (321) 2,440

Maternity/Staff Advertising 114 0 (114) 0

Mayoral car 28 4 (16) 16

Member training 6 0 0 6

Managed Workspace 70 0 0 70

Office Moves 17 0 (17) 0

Car Parking Strategy 25 0 0 25

Planning Delivery Grant 52 0 0 52

Private Sector Stock

Condition Survey

61 0 0 61

Strategic Plan 7 Approved

Bids

1,331 0 (657) 674

Stronger, Safer Communities

Fund

293 73 (168) 198

Uphill/ Downhill Bus 44 19 0 63

Mercury Abatement 72 74 0 146

2008/09 Carry Forwards 155 0 (65) 90

2009/10 Carry Forwards 86 0 (67) 19

Homelessness Case Worker 0 12 0 12

Empty Shops Revival Fund 53 0 (53) 0

Boston Audit Contract 5 5 (8) 2

Think Tank 239 0 (239) 0

Commons Parking 4 2 0 6

Violent Crime 20 0 (20) 0

Backdated pay claim 135 50 (35) 150

Loss of income on asset

Sales

0 123 0 123

Grants & Contributions

Cemeteries Request 8 0 (8) 0

CCTV Maintenance 7 0 (7) 0

Supporting People 36 0 0 36

Communities Against Drugs 14 0 0 14

Empty Homes 38 0 (7) 31

Handy Persons Scheme 10 0 (5) 5

Eurosocial 52 0 (52) 0

53


2 0 1 0 / 1 1

Balance Appropriations Balance

@ 31.03.10 To Reserve From Reserve @ 31.03.11

£'000 £'000 £'000 £'000

NRF Administration 26 0 (16) 10

Local Enterprise Growth

Initiative

14 0 (12) 2

Neighbourhood Renewals

Fund

25 0 (18) 7

Safer Communities 8 0 0 8

Single Pot 17 0 (17) 0

Single Regeneration Budget 23 0 (23) 0

Department of Health 304 0 (165) 139

Planning Delivery Grant 76 0 (4) 72

Horticultural Apprenticeship 12 0 (10) 2

Court Desk Advocacy 15 20 (10) 25

Gypsy Traveller 8 0 0 8

Homelessness 27 0 0 27

Local Crime Reduction 1 0 0 1

Mortgage Rescue 29 0 (2) 27

Smokefree 169 0 (165) 4

Free Swimming (DCMS) 12 0 0 12

Free Swimming (LSP) 26 5 0 31

Choice Based Lettings 94 0 0 94

Revenues & Benefits shared

service

0 42 0 42

Recycling Reserve 0 25 (10) 15

Tree Risk Assessment 0 90 0 90

Olympic Event - 2012 0 50 0 50

2010/11 Budget Carry

Forwards

0 169 (45) 124

6,648 2,567 (3,668) 5,547

HRA

Unused DRF 1,987 850 0 2,837

Office Moves - HRA 66 0 (66) 0

HRA Repairs Account 17 7,700 (6,967) 750

HRA Survey Works 139 3 (9) 133

Stock Retention 22 0 0 22

2,231 8,553 (7,042) 3,742

Insurance Fund 2,088 334 (478) 1,944

Total Earmarked Reserves 10,967 11,454 (11,188) 11,233

Insurance Reserve

The insurance fund has been set up to ensure adequate funding for the insurance

risk covered by the City of Lincoln Council. In 2010/11 the risk in respect of Public

Liability Insurance had an excess of £100,000 (per claim) with no cap ceiling. The

movements on the fund are as follows:

54


2 0 1 0 / 1 1

2009/10 2010/11

£'000 £'000

1,693 Opening Balance 2,088

(180) Funding of claims/losses (478)

575 Contributions from revenue 334

0 Release of reserve 0

2,088 Closing Balance 1,944

Note 10 – Other Operating Expenditure

2009/10 2010/11

£'000 £'000

690 Levies 705

241

Payments to the Government Housing Capital

Receipts Pool

392

(146) Gains/ losses on the disposal of non-current assets (324)

785 Total 773

Note 11 - Financing and Investment Income and Expenditure

2009/10 2010/11

£'000 £'000

1,976 Interest payable and similar charges 2,449

2,738

Pensions interest cost and expected return on pension

assets

2,366

(432) Interest Receivable and similar income (241)

0

Income and expenditure in relation to investment

properties and changes in their fair value

0

4,282 Total 4,574

Note 12 – Taxation and Non-Specific Grant Income

2009/10 2010/11

£'000 £'000

(6,004) Council tax income (6,222)

(8,561) Non domestic rates (9,247)

(2,758) Non ring-fenced government grants (1,499)

(833) Capital grants and contributions (4,591)

(18,156) Total (21,559)

55


2 0 1 0 / 1 1

Note 13 – Non Current Assets including Property, Plant and Equipment, Investment Properties, Intangible Assets and Non Current Assets Held for Sale

The movement in the Council‟s Fixed Assets during the year was as follows:

Movements in 2010/11

Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets Surplus Assets

Assets Under

Construction

Property Plant

& Equipment

Investment

Property

Intangible

Assets

Non

Current

Assets Held

for Sale TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2010 246,785 54,908 7,992 543 635 1,032 311,895 29,032 855 311 342,093

Additions 10,236 1,531 368 159 0 1,206 13,500 72 98 0 13,670

Donations 0 0 0 0 0 0 0 0 0 0 0

Revaluation

increases/(decreases)

recognised in the

Revaluation Reserve

(799) 723 0 0 (500) 0 (576) 0 0 0 (576)

56


2 0 1 0 / 1 1


Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community


Assets Under

Construction

Property Plant

& Equipment

Investment

Property

Intangible

Assets

Non

Current

Assets Held

for Sale TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Revaluation


recognised in the

Surplus/Deficit on the


(91,741) (1,379) 0 0 0 0 (93,120) 172 0 29 (92,919)

De-recognition-

disposals (311) (121) (308) 0 0 0 (740) 0 0 (275) (1,015)

De-recognition- other 0 0 0 0 0 (313) (313) 0 0 0 (313)

Other movements in

cost or valuation 0 0 64 9 0 0 73 140 0 (140) 73

At 31 March 2011 164,170 55,662 8,116 711 135 1,925 230,719 29,276 953 65 261,013

Depreciation &

Impairments

At 1 April 2010 (1,259) (858) (3,351) 0 0 0 (5,468) 0 (319) 0 (5,787)

57


2 0 1 0 / 1 1


Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community


Assets Under

Construction

Property Plant

& Equipment

Investment

Property

Intangible

Assets

Non

Current

Assets Held

for Sale TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Depreciation for year (3,998) (913) (1,104) 0 0 0 (6,015) 0 (183) 0 (6,198)

0

Depreciation written out

to the Revaluation Reserve 0 614 0 0 0 0 614 0 0 0 614

Depreciation written out

to the Surplus/Deficit on

the Provision of Services

3,987 214 0 0 0 0 4,201 0 0 0 4,201

Impairment

losses/(reversals)

recognised in the

Revaluation Reserve

0 (1,400) 0 0 0 0 (1,400) 0 0 0 (1,400)

Impairment

losses/(reversals)

recognised in the

Surplus/Deficit on the


724 0 0 0 0 0 724 0 0 0 724

De-recognition -

disposals 7 8 308 0 0 0 323 0 0 0 323

At 31 March 2011 (539) (2,335) (4,147) 0 (7,021) 0 (502) 0 (7,523)

58


2 0 1 0 / 1 1


Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community


Assets Under

Construction

Property Plant

& Equipment

Investment

Property

Intangible

Assets

Non

Current

Assets Held

for Sale TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Net book value of assets

at 31.03.11 163,631 53,327 3,969 711 135 1,925 223,698 29,276 451 65 253,490

Net book value of assets

at 31.03.10 245,526 54,050 4,641 543 635 1,032 306,427 29,032 536 311 336,306

Nature of asset holding

Owned 163,631 48,734 2,416 711 135 1,925 217,552 29,276 451 65 247,344

Finance lease 4,593 1,553 6,146 6,146

59


2 0 1 0 / 1 1

Comparative movements in 2009/10

Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community


Assets Under

Construction

Property Plant

& Equipment

Investment

Property

Intangible

Assets

Non

Current

Assets Held

for Sale TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2009 276,952 54,238 7,195 357 150 707 339,599 24,995 750 420 365,764

Additions 13,066 12,634 776 135 0 620 27,231 6 105 0 27,342

Revaluation increases/(decreases)

recognised in the Revaluation

Reserve (2,238) (7,854) 0 0 485 0 (9,607) 0 0 0 (9,607)

Revaluation increases/(decreases)

recognised in the Surplus/Deficit on

the Provision of Services (40,648) (39) 0 0 0 0 (40,687) 326 (45) (40,406)

De-recognition - disposals (347) 0 (30) 0 0 0 (377) (400) 0 (100) (877)

60


2 0 1 0 / 1 1


Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community


Assets Under

Construction

Property Plant

& Equipment

Investment

Property

Intangible

Assets

Non

Current

Assets Held

for Sale TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

De-recognition - other 0 0 0 0 0 (123) (123) 0 0 0 (123)

Other movements in cost or

valuation 0 (4,070) 51 51 0 (172) (4,140) 4,104 0 36 0

At 31 March 2010 246,785 54,909 7,992 543 635 1,032 311,896 29,032 855 311 342,093

Depreciation & Impairments

At 1 April 2009 (2,235) (195) (2,324) (4,754) (58) (163) (4,975)

Depreciation for year (5,940) (958) (1,051) (7,949) (3) (156) (8,108)

Depreciation written out to the

Revaluation Reserve 2,154 295 2,449 2,449

Depreciation written out to the

Surplus/Deficit on the Provision of

Services 3,778 3,778 61 3,839

61


2 0 1 0 / 1 1


Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community


Assets Under

Construction

Property Plant

& Equipment

Investment

Property

Intangible

Assets

Non

Current

Assets Held

for Sale TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Impairment losses/(reversals)


Reserve 0 0


recognised in the Surplus/Deficit on

the Provision of Services 978 978 978

De-recognition - disposals 7 24 31 31

De-recognition - other 0 0

At 31 March 2010 (1,258) (858) (3,351) 0 0 0 (5,467) 0 (319) 0 (5,786)

Net book value of assets at

31.03.10 245,527 54,051 4,641 543 635 1,032 306,427 29,032 536 311 336,307


31.03.09 274,717 54,043 4,871 357 150 707 334,845 24,936 587 420 360,789

62


2 0 1 0 / 1 1

Fixed Asset Valuation

The Authority carries out a rolling programme that ensures that all Property, Plant

and Equipment and Investment Properties required to be measured at fair value are

re-valued at least every five years. The statement below shows the progress of the

Council‟s rolling programme of fixed asset revaluations.

Council

Dwellings

Operational

Land &

Buildings

Vehicles Plant

& Equip.

Investment

Properties

£'000 £'000 £'000 £'000

Valuation at historical cost 8,534

Valued at current value as at:

01/04/10 169,280 55,755 29,032

01/04/09 247,721 43,418 26,982

01/04/08 291,936 39,471 31,320

01/04/07 295,046 33,945 26,764

01/04/06 300,251 33,116 27,874

The valuations of the Council‟s freehold and leasehold properties have been carried

out in accordance with the Statements of Asset Valuation Practice and Guidance

Notes of the Royal Institute of Chartered Surveyors. All valuations are either

undertaken by the following Council Officers, or by the District Valuer.

Principal Property Surveyor Mr P Clifton MRICS

Senior Property Surveyor Mr A Wiswould MRICS

Property Surveyor Mrs L A East MRICS Fixed Assets Depreciation

Tangible Fixed Assets

Depreciation, as stated in the Accounting Policies, is calculated on a straight-line

basis. Non-operational assets are treated as investment properties and as such are

not depreciated. The standard useful lives of assets, used for depreciation purposes

(unless overwritten by asset valuations), are as follows:

Category Of Asset Useful Economic Life

Council Dwellings 34 years

Other Land & Buildings

- Council Buildings 50 years

- Car Parks 100 years

- Cemeteries 50 years

63


2 0 1 0 / 1 1

- Crematorium 100 years

- Community Centres 50 years

- Offices 50 years

- Depots & Workshops 50 years

- Public Conveniences 50 years

- Recreation Grounds 50 years

- Sports Centres 50 years

Vehicles, Plant & Equipment

- Computers 5 years

- Equipment 10 years

- Fixtures and Fittings 5 years

- Plant 7/10 years

- Vehicles 5/7 years

Intangible Assets

Intangible fixed assets are amortised in the Income and Expenditure Account on a

straight-line basis, as stated in the Accounting Policies. The standard useful life, used

for amortisation purposes is:

Category Of Asset Useful Economic Life

Intangible Asset

- Software 5 years

Note 14 – Investment Properties

Movements in Investment Properties are shown in note 13, page 55.

The following items of income and expenditure have been accounted for in the

Comprehensive Income and Expenditure Statement:

2009/10 2010/11

£'000 £'000

1,123 Rental income from investment property 1,077

(412)

Direct operating expenses arising from investment

property

(452)

711 Net gain/(loss) 625

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 repairs, maintenance or enhancement. Note 15 – Intangible Assets

Movements in Intangible Assets are shown in note 13, page 55. Note 16 – Financial Instruments

64


2 0 1 0 / 1 1

The borrowings and investments disclosed in the Balance Sheet are made up of the

following categories of financial instruments:

Long-Term Current

31/03/11 31/03/10 31/03/11 31/03/10

£’000 £’000 £’000 £’000

Financial Liabilities (principal amount)* 50,447 50,423 43 33

Accrued Interest due within 12 months 0 0 922 835

Financial Liabilities at Amortised Cost 50,447 50,423 43 33

Financial Liabilities at Fair Value through

the CIES**

0 0 0 0

Total Borrowings 50,447 50,423 965 868

Financial Assets (principal amount)* 449 1,449 15,297 15,111

Accrued Interest due within 12 months 0 0 282 633

Loans and Receivables 0 1,000 15,297 15,111

Available-for-Sale Financial Assets 449 449 0 0

Financial Assets at Fair Value through the

CIES

0 0 0 0

Total Investments 449 1,449 15,579 15,744

* This is the actual principal value of loans/investments not arising from any adjustments. From

1st April 2009 the carrying amounts of liabilities and assets in the Balance Sheet exclude

accrued interest due within the next 12 months i.e. principal +/- adjustments for breakage

costs or stepped rates if applicable. Accrued interest is shown separately under short-term

investments/borrowing if due within one year.

** Fair value has been measured by direct reference to published price quotations in an

active market; and/or estimated using a valuation technique.

Financial Instrument Gains/Losses

The gains and losses recognised in the Comprehensive Income and Expenditure

Statement in relation to financial instruments are made up as follows:

2010/11 Financial

Liabilities

Financial Assets Total

65


2 0 1 0 / 1 1

Liabilities

measured

at

amortised

cost

Loans and

Receivables

Available-

for-Sale

Assets

Fair

Value

through

the CIES

£’000 £’000 £’000 £’000 £’000

Comprehensive Income &


Interest expense 2,449 0 0 0 2,449

Impairment losses 0 0 0 0 0

Interest payable and similar

charges

2,449 0 0 0 2,449

Interest income 0 (265) (14) 0 (279)

Interest and investment income 0 (265) (14) 0 (279)

Gains on revaluation 0 0 0 0 0

Surplus arising on revaluation of

Financial assets

0 0 0 0 0

Net (gain)/loss for the year 2,449 (265) (14) 0 2,170

2009/10 Financial

Liabilities

Financial Assets Total

Liabilities

measured

at

amortised

cost

Loans and

Receivables

Available-

for-Sale

Assets

Fair

Value

through

the CIES

£’000 £’000 £’000 £’000 £’000

Comprehensive Income &


Interest expense 1,976 0 0 0 1,976

Impairment losses 0 0 0 0 0

Interest payable and similar

charges

1,976 0 0 0 1,976

Interest income 0 (434) (14) 0 (448)

Interest and investment income 0 (434) (14) 0 (448)

Gains on revaluation (429) (429)

Surplus arising on revaluation of

Financial assets

0 0 (429) 0 (429)

Net gain/loss for the year 1,976 (434) (443) 0 1,099

Fair Value of Assets and Liabilities carried at Amortised Cost

66


2 0 1 0 / 1 1

Financial liabilities and financial assets represented by loans and receivables are

carried on the Balance Sheet at amortised cost. Their fair value can be assessed by

calculating the present value of the cash flows that take place over the remaining

life of the instruments, using the following assumptions:

For loans from the Public Works Loan Board (PWLB) and other loans payable,

premature repayments rates from the PWLB have been applied to provide

the fair value under PWLB debt redemption procedures;

For loans receivable prevailing benchmark market rates have been used to

provide the fair value;

No early repayment or impairment is recognised;

Where an instrument 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 amount;

The fair value of trade and other receivables is taken to be the invoiced or

billed amount.

The fair values calculated are as follows: Financial Liabilities

31/03/10 31/03/11

Carrying

Amount

Fair Value Carrying

Amount

Fair Value

£’000 £’000 £’000 £’000

33,862 35,158 PWLB Debt 33,862 36,482

16,000 17,139 Money Market Debt 16,000 19,162

561 353 Stock 561 369

33 33 Other 57 57

50,456 52,683 Total Debt 50,490 56,070

9,324 9,324 Creditors 9,095 9,095

59,780 62,007 Total Financial Liabilities 59,585 65,165

The fair value is greater than the carrying amount because the Council‟s portfolio of

loans includes a number of fixed rate loans where the interest rate payable is higher

than the rates available for similar loans in the market at the Balance Sheet date.

This is to be expected given that the current rates of interest are at a historically low

level.

Financial Assets

31/03/10 31/03/11

67


2 0 1 0 / 1 1

Carrying

Amount

Fair

Value Carrying

Amount

Fair

Value

£’000 £’000 £’000 £’000

15,111 15,553 Money Market Investments <1 year 15,297 15,579

1,000 1,257 Money Market Investments >1 year 0 0

16,111 16,810 Total Investments 15,297 15,579

7,492 7,492 Debtors 6,358 6,358

23,603 24,302 Total Loans and receivables 21,655 21,937

The differences are attributable to fixed interest instruments payable being held by

the Authority, whose interest rate is higher than the prevailing rate estimated to be

available at 31 March. This increases the fair value of financial assets and raises the

value of loans and receivables.

The fair values for financial liabilities have been determined by reference to the

(PWLB) redemption rules and prevailing PWLB redemption rates as at each Balance

Sheet date, and include accrued interest. The fair values for non-PWLB debt have

also been calculated using the same procedures and interest rates and this

provides a sound approximation for fair value for these instruments.

Similarly, the fair values for loans and receivables have also been determined by

reference to the PWLB redemption rules, which provide a good approximation for

the fair value of a financial instrument and includes accrued interest. The

comparator market rates prevailing have been taken from indicative investment

rates at each Balance Sheet date. In practice, rates will be determined by the size

of the transaction and the counterparty, but it is impractical to use these figures,

and the difference is likely to be immaterial. Note 17 – Inventories

In undertaking its work the Council holds reserves of inventories together with

amounts of uncompleted work (work in progress). The figure shown in the Balance

Sheet may be subdivided as follows:

Consumable

Stores

City Maintenance

Services Materials

City Maintenance

Services Work in

Progress Total

2010/11 2009/10 2010/11 2009/10 2010/11 2009/10 2010/11 2009/10

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance

outstanding at

the start of the

year 55 52 87 52 41 45 183 149

Purchases 4 16 0 37 0 0 4 53

68


2 0 1 0 / 1 1

Consumable

Stores

City Maintenance

Services Materials

City Maintenance

Services Work in

Progress Total

2010/11 2009/10 2010/11 2009/10 2010/11 2009/10 2010/11 2009/10

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Recognised as

an expense in

the year (6) (14) (19) (1) (22) (4) (47) (19)

Written off

balances 0 0 0 0 0 0 0 0

Balance

outstanding at

the year-end 53 54 68 88 19 41 140 183

Note 18 – Debtors

Debtors listed under current assets are monies due which the Council expects to

collect within one year of the Balance Sheet date and are analysed as follows:

31/03/10 31/03/11

£’000 £’000

4,642 Central Government Bodies 2,190

997 Other Local Authorities 1,015

40 NHS Bodies 65

0 Public Corporations and Trading Funds 0

6,400 Other Entities and Individuals 6,068

12,079 Total 9,338

Debtors balances are shown gross of impairment of doubtful debts (£2.147m in

2010/11, £2.163m in 2009/10) Note 19 – Cash and Cash Equivalents

The balance of Cash and Cash Equivalents is made up of the following elements:

31/03/10 31/03/11

£’000

£’000

0 Cash held by the Council 1

(978) Bank Current accounts 395

(978) 396

Note 20 – Assets Held for Sale

Movements in Assets Held for Sale are shown in note 13, page 55. Note 21 – Creditors

Creditors shown as current liabilities are amounts payable by the Council within one

year of the Balance Sheet date and are analysed as follows:

69


2 0 1 0 / 1 1

31/03/10 31/03/11

£’000 £’000

(1,069) Central Government Bodies (1,371)

(541) Other Local Authorities (426)

(5) NHS Bodies 0

(83) Public Corporations and Trading Funds (30)

(7,768) Other Entities and Individuals (7,755)

(9,466) Total (9,582)

Note 22 – Provisions

These amounts are set aside to provide for potential liabilities relating to specific

occurrences and comprise the following balances:

Balance

31/03/10

£’000

Transfers

(From)

£’000

Transfers

To

£’000

Balance

31/03/11

£’000

Cory Pension (165) 0 0 (165)

CLAU Legacy Work (7) 0 0 (7)

Licensing Application Fee (9) 0 0 (9)

Environmental Searches (20) 0 0 (20)

CoLC Legal Dispute (37) 37 0 0

Asbestos Claims (35) 22 0 (13)

Business Rates Rateable

Value reduction

– Think Tank

0 0 (23) (23)

Business Rates Rateable

Value reduction

– The Terrace

0 0 (35) (35)

Accumulated Absences (203) 203 (274) (274)

Total (476) 262 (332) (545)

Note 23 – Usable Reserves

Movements in the Councils usable reserves are detailed in the Movement in

Reserves Statement and Note 9. Note 24 – Unusable Reserves

The Council keeps a number of unusable reserves in the Balance Sheet. Some are

required to be held for statutory reasons; some are needed to comply with proper

accounting practice.

70


2 0 1 0 / 1 1

Reserve Balance

31/03/10

Net

Movement

in Year

Balance

31/03/11

Purpose of Reserve Further Details of

Movements

£'000 £'000 £'000

Revaluation

Reserve 12,290 (1,643) 10,647 Store of gains on

revaluation of fixed

assets

a) below

Capital Adjustment

Account

267,134 (81,845) 185,289 Store of capital

resources set aside to

meet past

expenditure

b) below

Financial

Instruments

Adjustment

Account

(739) 234 (505) Balancing

mechanism between

the rates at which

gains and losses are

recognised under the

Code of Practice

c) below

Deferred Capital

Receipts

66 (9) 57 Expected future

repayments from

sales of assets

received in

instalments

h) below

Available for Sale

Financial

Instruments

Account

430 0 430 Store of gains on

revaluation of

investments not yet

realised through sales

d) below

Collection Fund

Adjustment

Account

86 (21) 65

Store of Council‟s

share of

accumulated

surpluses and deficits

on the Collection

Fund

e) below

Pensions Reserve (78,277) 38,950 (39,327) Balancing account

to allow inclusion of

Pensions Liability in

the Balance Sheet

Note 43 to the

financial

statements

71


2 0 1 0 / 1 1

Reserve Balance

31/03/10

Net

Movement

in Year

Balance

31/03/11

Purpose of Reserve Further Details of

Movements

£'000 £'000 £'000

Accumulated

Absences Account

(203) (71) (274) Absorbs the

differences that

would otherwise arise

on the General Fund

balance from

accruing for

compensated

absences earned but

not taken in the year

(i.e. annual leave

entitlement carried

forward at 31 March

200,787 (44,405) 156,382

a) Revaluation Reserve

The Revaluation Reserve contains the gains made by the Authority 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:

re-valued 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.

2009/10

£’000

2010/11

£’000

(19,971) Balance 1 April (12,290)

(1,920) Upward Revaluation of assets (1,337)

9,079 Downward revaluation of assets and impairment losses

not charged to the Surplus/Deficit on Provision of

Services

2,699

7,159 Surplus or deficit on revaluation of non-current assets not

posted to the Surplus or Deficit on the Provision of

Services

1,362

463 Difference between fair value depreciation and

historical cost depreciation

281

72


2 0 1 0 / 1 1

59 Accumulated gains on assets sold or scrapped

0

522 Amount written off to the Capital Adjustment Account

281

(12,290) Balance 31 March

(10,647)

b) 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

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

Authority as finance for the costs of acquisition, construction and enhancement.

The Account contains accumulated gains and losses on Investment Properties and

gains recognised on donated assets that have yet to be consumed by the Authority.

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

£’000

2010/11

£’000

(296,861) Balance 1 April (267,134)

Reversal of items relating to capital expenditure

debited or credited to the Comprehensive Income

and Expenditure Statement:

8,108 - Charges for depreciation and amortisation of non-

current assets

6,198

35,588 - Revaluation losses and impairments on Property,

Plant and Equipment

87,993

1,059 - Revenue expenditure funded from capital under

statute

3,478

910 - 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

693

73


2 0 1 0 / 1 1

2009/10

£’000

2010/11

£’000

1 Other adjustments

(9)

45,666

98,353

(463) Adjusting amounts written out of the Revaluation

Reserve

(281)

45,203 Net written out amount of the cost of non-current

assets consumed in the year

98,072

Capital Financing applied in year:

(3,990) Use of Capital Receipts to finance new capital

expenditure

(3,861)

(4,943) Use of the Major Repairs Reserve to finance new

capital expenditure

(4,983)

(4,754) Capital expenditure charged against the General

Fund and HRA balances

(2,134)

(833) Application of Capital Grants to finance new capital

expenditure

(4,076)

(956) Statutory Provision for the financing of capital

investment charged against the General Fund and

HRA balances (MRP/VRP)

(1,173)

(15,476) (16,227)

(267,134) Balance 31 March

(185,289)

c) Financial Instruments Adjustment Account

The Financial Instruments Adjustment Account provides a balancing mechanism

between the rates at which gains and losses (such as premiums on the early

repayment of debt) are recognised under the Code of Practice and are required by

statute to be met from the General Fund and HRA balances.

2009/10

£’000

2010/11

£ ’000

1,052 Balance 1 April 739

58 Proportion of discounts incurred in previous financial

years to be credited to the General fund Balance in

accordance with statutory requirements

51

74


2 0 1 0 / 1 1

(371) Proportion of premiums incurred in previous financial

years to be charged against the General fund Balance

in accordance with statutory requirements

(285)

739 Balance 31 March 505

d) Available for Sale Financial Instruments Account

The Available for Sale Financial Instruments Account contains the gains and losses

arising from movements in fair value of Available for Sale investments, which are

recognised in the Comprehensive Income and Expenditure Statement.

2009/10

£’000

2010/11

£’000

0 Balance 1 April (430)

430 Gain on revaluations in year 0

(430) Balance 31 March (430)

e) Collection Fund Adjustment Account

The Collection Fund Adjustment Account was introduced on 1 April 2009 to comply

with the new accounting requirements for the Collection Fund contained within the

Statement of Recommended Practice 2009/10 (SORP 2009). The difference between

accrued income for the year as shown in the Income and Expenditure Account and

the amount required to be credited to the General Fund is taken to the Collection

Fund Adjustment Account. The balance on the account represents the Council‟s

share of the accumulated surpluses and deficits on the Collection fund at the

Balance Sheet date.

2009/10

£’000

2010/11

£’000

20 Balance 1 April (86)

(106) Council‟s share of (surplus)/deficit for the year 21


f) Usable Capital Receipts

These are cash receipts from the sale of Council assets, which have not yet been

used to finance capital expenditure.

2009/10

£’000 2010/11

£’000

(9,753) Balance 1 April (6,636)

(993) Capital Receipts in year (1,017)

(10,746) (7,653)

75


2 0 1 0 / 1 1

Less:

241 Capital Receipts Pooled 392

3,991 Capital Receipts used for financing 3,861

(122) Capital Receipts previously used for financing released 0

(6,636) Balance 31 March (3,400)

g) Accumulated Absences Account

The Accumulated Absences Account absorbs differences that would otherwise arise

on the General Fund Balance from accruing for compensated absences earned

but not taken in year, e.g. annual leave entitlement carried forward at 31 March.

Statutory arrangements require that the impact on General Fund Balance is

neutralised by transfers to or from this account.

2009/10

£’000

2010/10

£’000

(196) Balance 1 April (203)

196 Settlement or cancellation of accrual made at the end

of the preceding year

203

(203) Amounts accrued at the end of the current year (274)

7 Amount by which officer remuneration charged in the

Comprehensive Income and Expenditure Statement on

an accruals basis is different from remuneration

chargeable in the year in accordance with statutory

requirements

71


h) Deferred Capital Receipts

This account contains the expected future repayments of capital from sales of

assets which will be received in instalments over an agreed period of time. They

arise principally from mortgages on sold Council Houses. When made, these

payments are regarded as being of a capital nature and transactions during the

year were as follows:

2009/10

£’000

2010/11

£’000

(81) Balance 1 April (66)

15 Council‟s share of (surplus)/deficit for the year 9


76


2 0 1 0 / 1 1

Note 25 – Cash Flow Statement - Operating Activities The cash flows for operating activities include the following items:

2009/10 2010/11

£'000 £'000

(726) Interest received (592)

1,825 Interest paid 2,353

Note 26 – Cash Flow Statement – Adjustment to surplus or deficit on provision of services for non-cash movements 2009/10 2010/11

£'000 £'000

(8,109) Depreciation (6,198)

(35,952)

Revaluation losses and impairments recognised in

Comp I&E

(88,883)

363

Revaluation gains and reversal of impairments

recognised in Comp I&ES

888

(101)

Contribution (to)/from provisions

(69)

(685) Movement on Pension Reserve 5,914

(13)

RTB admin charges deducted for purposes of pooling

(19)

(847)

Carrying amount of non-current assets sold

(692)

134 Other non-cash transactions (983)

(1,485) (Decrease)/increase in debtors (1,456)

1,213 (Increase)/decrease in creditors 2,860

34 (Decrease)/increase in stock (43)

(462) Movement in Collection Fund balances (1,228)

(241) Housing pooled capital receipts (392)

(46,151) (90,301)

77


2 0 1 0 / 1 1

Note 27 – Cash Flow Statement – Adjustment to surplus or deficit on provision of services for non-cash movements 2009/10 2010/11

£'000 £'000

1918 Increase in short term investments 186

(3,999) Decrease in long term investments (1,000)

1,007

Proceeds from sale of PPE, investment property and

intangible assets

1,040

833 Capital Grants recognised in CI&ES 4,899

(1) (Increase)/decrease in short term borrowing (97)

(242) 5,028

Note 28 – Cash Flow Statement - Investing Activities 2009/10 2010/11

£'000 £'000

27,673

Purchase of property, plant and equipment, investment

property and intangible assets

13,774

(991) Proceeds from sale of non-current assets (1,040)

(2,586) Other receipts from investing activities (760)

24,096 Net cash flows from investing activities 11,974

Note 29 – Cash Flow Statement - Financing Activities 2009/10 2010/11

£'000 £'000

(12,500) Cash receipts of short-term and long-term borrowing

(39)

0 Repayments of short and long-term borrowing 5

567

Cash payments for the reduction of outstanding

liabilities relating to finance leases

517

(11,933) Net cash flows from investing activities 483

78


2 0 1 0 / 1 1

Note 30 – Amounts Reported for Resource Allocation Decisions 2010/11

Service Information

Corporate

Chief

Executive

Directorate of

Development &

Environmental

Services

Directorate of

Housing &

Community

Services

Directorate of

Resources HRA Total

£000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income 0 (2,161) (6,617) (10,835) (13,231) (23,899) (56,743)

Government grants (4,749) 0 (43) (121) (38,505) (307) (43,725)

Total Income (4,749) (2,161) (6,660) (10,956) (51,736) (24,206) (100,468)

Employee expenses 437 1,273 3,660 3,800 5,212 3,148 17,530

Other operating expenses (8,623) 516 2,655 13,592 42,504 97,055 147,699

Support Service Recharges 218 627 5,698 3,765 6,496 1,769 18,573

Total operating expenses (7,968) 2,416 12,013 21,157 54,212 101,972 183,802

Net Cost of Services (12,717) 255 5,353 10,201 2,476 77,766 83,334

Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure

Statement

£000s

Cost of Services in Service Analysis 83,334

Add amounts not reported in service

management accounts 4,861

Net Cost of Services in Comprehensive

Income and Expenditure Statement 88,195

79


2 0 1 0 / 1 1

Reconciliation to Subjective Analysis

Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c's

Not included

in CIES

Allocation of

recharges

Net Cost of

Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income (56,743) 0 1,392 0 22,012 (33,339) 0 (33,339)

Surplus or deficit on associates and joint

ventures 0 0 0 0 0 0 (540) (540)

Interest and investment income 0 0 0 0 0 0 (241) (241)

Income from council tax 0 0 0 0 0 0 (6,222) (6,222)

Government grants and contributions (43,725) 0 4,749 0 0 (38,976) (15,338) (54,314)

Pension - expected return on assets 0 0 0 0 0 0 (6,137) (6,137)

Total Income (100,468) 0 6,141 0 22,012 (72,315) (28,478) (100,793)

Employee expenses 17,530 0 (54) 0 0 17,476 0 17,476

Other service expenses 147,699 0 (1,053) 0 (16,668) 129,978 0 129,978

Support Service recharges 18,573 0 (321) 0 (5,344) 12,908 0 12,908

Depreciation, amortisation and

impairment 0 0 148 0 0 148 0 148

Interest Payments 0 0 0 0 0 0 2,449 2,449

Precepts & Levies 0 0 0 0 0 0 705 705

Payments to Housing Capital Receipts Pool 0 0 0 0 0 0 392 392

Gain or Loss on Disposal of Fixed Assets 0 0 0 0 0 0 (324) (324)

Pension - interest on pension liabilities 0 0 0 0 0 0 8,503 8,503

Total operating expenses 183,802 0 (1,280) 0 (22,012) 160,510 11,725 172,235

Surplus or deficit on the provision of

services 83,334 0 4,861 0 0 88,195 (16,753) 71,442

80


2 0 1 0 / 1 1

2009/10 comparator figures

Service Information

Corporate

Chief

Executive

Directorate of

Development &

Environmental

Services

Directorate of

Housing &

Community

Services

Directorate of

Resources HRA Total

£000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income (887) (2,012) (8,956) (9,402) (15,093) (23,419) (59,769)

Government grants (1,266) 0 (313) (535) (35,931) 0 (38,045)

Total Income (2,153) (2,012) (9,269) (9,937) (51,024) (23,419) (97,814)

Employee expenses 381 1,294 3,719 3,506 5,182 3,008 17,090

Other operating expenses 1,256 296 3,815 10,488 41,193 48,675 105,723

Support Service Recharges 1,007 653 5,931 3,776 6,629 4,496 22,492

Total operating expenses 2,644 2,243 13,465 17,770 53,004 56,179 145,305

Net Cost of Services 491 231 4,196 7,833 1,980 32,760 47,491

Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure

Statement

£000s

Cost of Services in Service Analysis 47,491

Add amounts not reported in service

management accounts 2,159

Net Cost of Services in Comprehensive

Income and Expenditure Statement 49,650

81


2 0 1 0 / 1 1

Reconciliation to Subjective Analysis

Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c'

Not included

in CIES

Allocation of

recharges

Net Cost

of Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income (59,769) 0 1,707 0 22,685 (35,377) (35,377)

Surplus or deficit on associates and joint

ventures 0 0 0 0 0 0 (762) (762)

Interest and investment income 0 0 0 0 0 0 (432) (432)

Income from council tax 0 0 0 0 0 0 (6,004) (6,004)

Government grants and contributions (38,045) 0 1,615 0 0 (36,430) (12,153) (48,583)

Pension - expected return on assets 0 0 0 0 0 0 (4,374) (4,374)

Total Income (97,814) 0 3,322 0 22,685 (71,807) (23,724) (95,531)

Employee expenses 17,090 0 (79) 0 0 17,011 0 17,011

Other service expenses 105,723 0 (1,171) 0 (17,160) 87,392 0 87,392

Support Service recharges 22,492 0 (270) 0 (5,525) 16,697 0 16,697

Depreciation, amortisation and

impairment 0 0 357 0 0 357 0 357

Interest Payments 0 0 0 0 0 0 1,976 1,976

Precepts & Levies 0 0 0 0 0 0 690 690

Payments to Housing Capital Receipts Pool 0 0 0 0 0 0 241 241

Gain or Loss on Disposal of Fixed Assets 0 0 0 0 0 0 (146) (146)

Pension - interest on pension liabilities 0 0 0 0 0 0 7,112 7,112

Total operating expenses 145,305 0 (1,163) 0 (22,685) 121,457 9,873 131,330

Surplus or deficit on the provision of

services 47,491 0 2,159 0 0 49,650 (13,851) 35,799

82


2 0 1 0 / 1 1

Note 31 – Trading Operations

The Council operates City Maintenance Services (CMS), which carries out day to

day maintenance on Council Housing and other public buildings as well as

environmental works, street furniture etc. The Council also owns and manages a

fruit, vegetable and retail market situated within the City Centre and also operates

and manages a bus station and several car parks located throughout the city. It

also manages a number of industrial estates and commercial properties. The Printing

Unit provided graphic design, general printing and duplicating to both internal and

external clients.

2010/11 2009/10

Exp. Inc. Net Exp. Inc. Net

£'000 £'000 £'000 £'000 £'000 £'000

Markets * 224 (277) (53) 254 (262) (8)

Car Parks ** 1,790 (3,979) (2,189) 1,799 (3,938) (2,139)

(Surplus)/ Deficit

applicable to a service

2,014 (4,256) (2,242) 2,053 (4,200) (2,147)

CMS 5,496 (5,422) 74 5,606 (5,464) 142

City Bus Station 176 (78) 98 177 (73) 104

Industrial Estates 259 (383) (124) (73) (437) (510)

Lincoln Properties 290 (882) (592) 176 (700) (524)

Printing Unit *** 3 0 3 191 (165) 26

(Surplus)/ Deficit not

applicable to a service

6,224 (6,765) (541) 6,077 (6,839) (762)

Total (Surplus)/Deficit 8,238 (11,021) (2,783) 8,130 (11,039) (2,909)

2009/10 comparator figures have been restated under IFRS

* Trading Operations included within Cultural, Environmental and Planning Services

* * Trading Operations included within Highways, Roads and Transport Services

* * * Service discontinued at the end of 2009/10, residual costs only in 2010/11

Note 32 – Agency Services

In accordance with the Code of Practice on Local Authority Accounting in the UK,

the collection and distribution of National Non-Domestic Rates (NNDR) and Council

Tax is deemed to be an agency arrangement. The cost of collection of NNDR and

the surplus or deficit on the Collection Fund for the year, are shown in the Collection

Fund Statement on page 121. Note 33 – Members Allowances

The Local Authorities (Members‟ Allowances)(Amendment) Regulations 1995 requires

local authorities to publish the amounts paid to members made under the members‟

allowance scheme.

The payments made to the City Council members during 2010/11 totalled £215,516

(£213,767 in 2009/10).

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Payments are defined as:

i. Basic Allowance

ii. Special Responsibility Allowance. Note 34 – Officers Remuneration

The Accounts and Audit Regulations 2011 requires the Council to disclose

remuneration paid to senior employees.

For the purposes of the regulation senior employees are persons whose salary is in

excess of £150,000 per year or whose salary is £50,000 or more and is deemed to

have responsibility for the management of the Council to the extent that they have

the power to direct or control the major activities. The remuneration paid to the

Council‟s senior employees is as follows:

Officers’ Emoluments – Senior Employees

2010/11

Post Title Salary Bonuses

Expense

Allowances

Benefits in

Kind

Total

Remuneration

excluding

Pension

Contributions

2010/11

Pension

Contributions

Total

Remuneration

including

Pension

Contributions

2009/10

£ £ £ £ £ £ £

Chief Executive 118,911 0 2,590 0 121,501 27,944 149,445

Director of Housing

& Community

Services 86,235 0 1,669 0 87,904 20,265 108,169

Director of

Development &

Environmental

Services 86,235 0 1,813 0 88,048 20,265 108,313

Director of

Resources 86,235 0 2,434 0 88,669 20,265 108,934

Total 377,616 0 8,506 0 386,122 88,739 474,861

2009/10


Expense

Allowances

Benefits in

Kind

Total

Remuneration

excluding

Pension

Contributions

2009/10

Pension

Contributions

Total

Remuneration

including

Pension

Contributions

2009/10

£ £ £ £ £ £ £

Chief Executive 117,674 0 1,502 0 119,176 26,977 146,153

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2009/10


Expense

Allowances

Benefits in

Kind

Total

Remuneration

excluding

Pension

Contributions

2009/10

Pension

Contributions

Total

Remuneration

including

Pension

Contributions

2009/10

£ £ £ £ £ £ £

Director of Housing

& Community

Services 86,235 0 2,116 0 88,351 20,265 108,616

Director of

Development &

Environmental

Services 86,235 0 1,966 0 88,201 20,265 108,466

Director of

Resources 86,235 0 1,170 0 87,405 20,265 107,670

Total 376,379 0 6,754 0 383,133 87,772 470,905

The number of Council employees, inclusive of the senior employees in the table

above, receiving more than £50,000 remuneration for the year (excluding

employer‟s pension contributions) were paid the following amounts:

Remuneration Band Number of

£ Employees

2010/11 2009/10

50,000 - 54,999 3 4

55,000 - 59,999 4 5

60,000 - 64,999 5 3

65,000 – 69,999 1 0

70,000 – 74,999 0 0

75,000 – 79,999 0 0

80,000 – 84,999 0 1

85,000 – 89,999 3 3

90,000 – 94,999 0 0

95,000 – 99,999 0 0

100,000 – 104,999 1 0

105,000 – 109,999 0 0

110,000 – 114,999 0 0

115,000 – 119,999 0 1

120,000 – 124,999 1 0

Note 35 – External Audit Costs

In 2010/11 the following fees relating to External Audit and Inspection were incurred

and paid to the Audit Commission:

2009/10 2010/11

£'000 £'000

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101 Fees Payable with regard to external audit services

carried out by the appointed auditor

99

8 Fees payable in respect of statutory inspection 0

23 Fees payable for the certification of grant claims and

returns

25

0 Fees payable for other services 0

132 Total 124

Note: the fees relating to grant claims can vary from year to year depending on the

number of claims to be audited. The figure for 2010/11 is an estimate, as the work will

be carried out in the period August to December 2011. Note 36 – Grant Income

The Council credited the following grants, contributions and donations to the

Comprehensive Income and Expenditure Statement in 2010/11.

Credited to Taxation and Non Specific Grant Income

2009/10 2010/11

£'000 £'000

(1,976) Revenue Support Grant (1,343)

(258) Safer Stronger Communities 0

0 LPSA2 performance grant (60)

(49) Cohesion (57)

(22) Climate Change Levy (23)

(55) Local Area Business Growth Incentive 0

(398) Housing and Planning Delivery Grant 0

0 Other Government Grants (16)

0 Pathways Centre for the homeless (1,960)

0 Private Sector Decent Homes (563)

0 Disabled Facilities Grants (252)

0 Energy efficiency grants (36)

(42) Sports Facilities & play areas (443)

0 Affordable Housing (70)

0 Usher Gallery (1,094)

0 Public Realm Contribution (111)

0 Natural England - Open spaces & parks (62)

(274) Decent Homes 0

(142) Innovation Centre 0

(95) SDO Creative Industries/Terrace 0

(19) CCTV and security schemes 0

(113) Telephone and IT systems 0

(44) DEFRA Green Waste (GE0153) 0

(25) Uphill Down Hill Link (GT0853) 0

(28) Walk & Ride Vehicle 0

(26) Brayford Moorings 0

(25) Other capital grants 0

(3,591) Total (6,090)

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2009/10 Credited to Services 2010/11

£'000 £'000

(12,483) Rent Allowances (14,216)

(7,370) Council Tax Benefit (7,803)

(13,707) Rent Rebates (14,163)

(55) Discretionary Housing Payments (35)

(998) Housing Benefit Administration (907)

(155) Business Rates Administration (153)

(398) Housing & Planning Delivery Grant 0

(554) Concessionary Fares (766)

(175) Communities for Health 0

(152) Homelessness (93)

(200) Smokefree 0

(53) Empty Shops 0

0 New Burdens Grant Determination (34)

(123) Innovation Lincolnshire (41)

(100) DCLG - Outreach 0

(220) Interreg IIC 0

(94) Choice Based Lettings 0

(103)

Department for Culture, Media & Sport - Free

Swimming Grant (25)

(69) Lincolnshire Sports Partnership - Free Swimming Grant (20)

(29) Mortgage Rescue Scheme 0

(70) English Heritage 0

(42) Supporting People (42)

0 UK Parliamentary Elections (90)

0 Decent Homes (307)

(128) Other Grants (115)

(37,278) Total (38,810)

2009/10 2010/11

£'000 Revenue Grants Received in Advance £'000

0 Innovation Lincolnshire (130)

0 Discretionary Housing Payments (24)

0 Rent Rebates (320)

0 Total (474)

There were no capital grants received in advance in 2010/11.

Note 37 – Related Parties

It is a requirement for the Council to disclose any transactions with a related party,

including non-financial transactions. A „related party‟ is defined as being an

organisation with which the Council has dealings and where Officers or

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Members of the Council have a controlling interest or influence in the activities of

that organisation. The „Code of Practice on Local Authority Accounting in the UK‟

requires local authorities to disclose material transactions with „related parties‟. The

disclosure is required in order that the true and fairness of the accounts can be

understood by the reader of the accounts having knowledge of any „related

parties‟ of the authority.

Members/Officers - For 2010/11 the Council sent a letter, dated 1 April 2011, to all

Members, Chief Officers and Heads of Service, requesting disclosure of any „related

party transactions‟. All letters were returned, no Members or Officers declared

pecuniary interests in accordance with section 117 of the Local Government Act

1972.

Members/Officers - For 2010/11 the Council sent a letter, dated 1 April 2011, to all

Members, Chief Officers and Heads of Service, requesting disclosure of any „related

party transactions‟. All letters were returned, no Members or Officers declared

pecuniary interests in accordance with section 117 of the Local Government Act

1972.

In addition, the table below details both Member and Officer representation on the

boards of levying bodies, assisted organisations with which the Council makes

material financial assistance and Joint Ventures.

Name of Organisation Member

Representative

Officer Representative

Upper Witham – Drainage Board Cllr Kirby, Cllr Hills, Cllr

Jones

N/A

Witham Third – Drainage Board Cllr Clark N/A

Lincoln Arts Trust Leader of Council N/A

Lincoln Dial-a-Ride Cllr Clark Director of Resources

Citizens Advice Board Cllr Bodger N/A

Investors in Lincoln Cllr Grice, Cllr Jones N/A

None of the above Members or Officers took part in the decision making of any

financial assistance awarded to any of the organisations.

Central Government - has effective control over the general operations of the

Council. It is responsible for providing the statutory framework within which the

Council operates, provides the majority of it‟s funding in the form of grants and

prescribes the terms of many of the transactions that the Council has with other

parties (e.g. housing benefits).

Details of transactions with government departments are set out in note 36.

Other Bodies - transactions with other bodies levying demands on the Council Tax -

Levying bodies in 2010/11 were as follows:

2009/10 2010/11

£'000 £'000

366 Upper Witham Drainage Board 373

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110 Witham 1st Drainage Board 113

214 Witham 3rd Drainage Board 219

690 Total 705

Assisted Organisations - the Council made material financial assistance to the

following organisations during the year:-

2009/10 2010/11

£'000 £'000

275 Lincoln Arts Trust 303

45 Lincoln Dial-a-Ride 46

70 Citizens Advice Bureau 48

Joint Ventures – The Council holds 5.6% (£14,000) of the ordinary share capital of

£250,000 of Investors in Lincoln Ltd. (IIL)

The principal activity of the company is the promotion of economic regeneration

and the development and expansion of industry, commerce and enterprise of all

forms for the benefit of the community in and around the City of Lincoln. Investors in

Lincoln Ltd grants the Council the sole and exclusive right to licence and manage its

managed workspace development at Greetwell Place.

The company's accounting year-end is 31st March and the latest (audited)

accounts are for the year ended 31st March 2010, showing net assets of £3,647,516

and a profit of £243,214 before taxation, £188,697 after tax (£148,324 before tax and

£112,078 after tax in 2008/09).

The Council is fully responsible for meeting the first £100,000 of any cumulative deficit

on operating the managed workspace units. In the event that the cumulative

deficiency exceeds £100,000 the Council shall meet 75% of the deficiency. In

2010/11 a surplus on the managed workspace units of £162 was attributable to the

Council.

Details of amounts received from IIL during 2010/11 are shown below:

2009/10 2010/11

£'000 £'000

185 Property Management costs 179

90 Facility Fee 90

13 Management Fee 0

An amount of £26,243 was owed to IIL at 31st March 2011 in respect of property

management costs, facility fees and management fees. This is included in the

creditors balance in the Council‟s Balance Sheet on page 20.

The accounts of the company may be obtained from The Company Secretary, 5

Beck Hall, Welton, LN2 3LJ.

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Joint Venture - the Council has a joint venture with North Kesteven District Council

and West Lindsey District Council, Joint Planning Unit, which is a Jointly Controlled

Operation and accounts for its proportion of the activity within the Cultural,

Environmental, Regulatory and Planning services.

Note 38 – Capital Expenditure and Capital 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 Authority,

the expenditure results in an increase in the Capital Financing Requirement (CFR).

The Capital Financing Requirement (CFR) is a measure of the capital expenditure

incurred historically that has yet to be financed. The CFR is analysed in the second

part of this note.

Total Capital expenditure and financing during the year:

2009/10 2010/11

£’000 £’000

Capital investment

27,721 Property, Plant and Equipment 13,500

6 Investment Properties 72

105 Intangible Assets 97

1,730 Revenue Expenditure Funded from Capital under Statute** 3,165

29,562 16,834

Sources of finance

(3,990) Capital Receipts (3,861)

(1,504) Government grants and other contributions (4,076)

(4,754) Revenue Contributions (2,134)

(4,943) Major Repairs Reserve (4,983)

14,371 Capital Financing Requirement 1,780

Capital Financing Requirement - Funded by:

1,020 Supported Borrowing 1,020

13,351 Unsupported Borrowing 760

14,371 1,780

Analysis of movements in the Capital Financing Requirement

in Year:

43,131 Opening CFR 56,882

1,020 Supported borrowing 1,020

13,351 Unsupported borrowing 760

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2009/10 2010/11

£’000 £’000

336 Adjustments in respect of embedded leases reflected within

non-current assets

65

(956) Minimum Revenue Provision/Voluntary Revenue Provision (1,173)

56,882 Closing CFR 57,554

**Revenue Expenditure Funded from Capital under Statute £3,478K less £313K relating to prior years

balances written off, funded in previous years = £3,165K.

The Council has a five-year Housing Investment programme, of which £3.818m is

contractually committed. This is for a period of investment of three years and relates

to a partnership arrangement to ensure that all our properties continue to meet

Decent Homes Standard.

In addition, the Council also has a five-year General Investment programme, of

which £0.401m is contractually committed.

£ 000

Allotments Asbestos Works 86

Land for the Provision of Burial Space 315

Total 401

Note 39 – Leases Authority as Lessee Finance Leases

The implementation of IFRS in 2010/11 has resulted in a substantial increase in the

number and value of leases classified as finance leases and therefore, carried on

the balance sheet. The lease of Broadgate Car Park, previously accounted for as an

operating lease, has been reclassified as a finance lease at an asset valuation of

£1.750m at the IFRS transition date of 1 April 2009, with an associated lease liability of

£0.463m. In addition, vehicles, plant and equipment contained within embedded

leases under service contracts, have been brought on to the balance sheet at 1

April 2009 at a value of £2.243m and with an associated lease liability of £2.132m.

The Council has acquired two car parks and the Bus Station and fleet vehicles under

finance leases. The assets acquired under these leases are carried as Property, Plant

and Equipment in the Balance Sheet at the following amounts:

1/04/2009 31/03/2010 31/03/2011

£000 £000 £000

5,245 5,187 Other Land and Buildings 4,593

2,243 2,067 Vehicles, Plant and Equipment 1,553

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7,488 7,254 6,146

The Council is committed to making minimum payments under these leases

comprising settlement of the long term liability for the interest in the property

acquired and finance costs that will be payable by the Council in future years while

the liability remains outstanding. The minimum lease payments are made up of the

following amounts:

1/04/2009 31/03/2010 31/03/2011

£000 £000 £000

Finance lease liabilities (net present value of

minimum lease payments)

512 522 current 536

2,084 1,829 non-current 1,342

864 787 Finance costs payable in future years 614

3,460 3,138 Minimum lease payments 2,492

Minimum Lease Payments Finance Lease Liabilities

31/03/2011 31/03/2010 31/03/2011 31/03/2010

£000 £000 £000 £000

Not later than one year 693 708 536 522

Later than one year and not later

than five years

1,257 1,815 994 1,443

Later than five years 542 615 348 386

2,492 3,138 1,878 2,351

Operating leases

The Council has acquired the use of a number of assets, such as vehicles and

buildings, under operating leases.

The future minimum lease payments due under non-cancellable leases in future

years are:

31/03/2010

31/03/2011

£000 £000

127 Not later than one year 125

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484

Later than one year and not later than

five years 484

311 Later than five years 190

922 799

The expenditure charged to the Comprehensive Income and Expenditure

Statement during the year in relation to these leases was:

2009/10 2010/11

£000 £000

5 Vehicles Plant & Equipment 5

146 Land and Buildings 146

151 Minimum lease payments 151

Authority as Lessor

Finance Leases

The Council has granted a long-term lease to Lincolnshire County Council for the use

of The Collection (City and County Museum) accounted for as a finance lease.

Rental is at a peppercorn, meaning no rentals are receivable. There was no net

investment in this asset in 2010/11.

Operating Leases

The Authority leases out property under operating leases for the following purposes:

for the provision of community services, such as sports facilities and

community centres

for economic development purposes to provide suitable affordable

accommodation for local businesses

for income generation purposes (investment properties)

The future minimum lease payments receivable under non-cancellable leases in

future years are:

2009/10 2010/11

£000 £000

217 Not later than one year

502

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1,707

Later than one year and not later than

five years 1,510

3,712 Later than five years 3,354

5,636 5,366

The minimum lease payments do not include rents that are contingent on events

taking place after the lease was entered in to, such as rent reviews. In 2010/11,

£0.217m contingent rents were received by the Authority (2009/10 £0.139m).

Note 40 – Impairment Losses

During 2010/11, the Council has recognised impairment losses on two assets as

shown below:

Lucy Tower Street Car Park £0.9m

Thornbridge Car Park £0.5m

The car parks are in urgent need of extensive restoration works to maintain full

capacity usage and hence income generating potential. The values of the car

parks have been revised to reflect this impairment of their service potential and the

impairments have been charged to the Revaluation Reserve, reducing the balance

of previous accumulated gains in respect of these assets. The value of the

impairments were determined by consideration of the value of the capital works

required to restore full service potential. Note 41 – Capitalisation of Borrowing Costs

As permitted by the Code of Practice 2010/11, the Council has adopted a policy of

accounting for borrowing costs in the Comprehensive Income and Expenditure

Statement as they arise. No borrowing costs are capitalised. Note 42 – Termination Benefits

The Council terminated the contracts of a number of employees in 2010/11,

incurring the following liabilities.

2009/10 2010/11

£'000

£'000

34 Payment in Lieu of Notice 109

189 Redundancy Pay 135

185 Pension Enhancements 33

408 277

Note 43 – Defined Benefit Pension Scheme Participation in Pension Schemes

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As part of the terms and conditions of employment of its officers and other

employees, the Council offers retirement 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.

The Authority participates in the Local Government Pension Scheme, administered

by Lincolnshire County Council. This is a funded scheme, meaning that the Council

and employees pay contributions into a fund, calculated at a level intended to

balance the pensions liability with investment assets.

Transactions Relating to Retirement Benefits

We recognise the cost retirement benefits in the Net Cost of Services when they are

earned by employees, rather than when the benefits are eventually paid as

pensions. However, the charge that is required to go against Council Tax is based on

the cash payable in the year, so the real cost of retirement benefits is reversed out in

the Movement in Reserves Statement. The following transactions have been made

in the Comprehensive Income & Expenditure Statement and the General Fund

Balance via the Movement in Reserves Statement during the year:

31/03/10

31/03/11

£’000 £’000

Comprehensive Income & Expenditure Statement

Net Cost of Services:

1,530 Current Service Cost 2,757

0 Past Service Costs* (14,331)

10 Curtailment and Settlements (NDC) 43

Decrease in irrecoverable surplus

Net Operating Expenditure:

(4,374) Expected Return on Employer Assets (6,137)

7,112 Interest on Pension Scheme Liabilities 8,503

4,278 Net Charge to the Comprehensive Income & Expenditure

Statement

(9,165)

Movement in Reserves Statement

(4,278) Reversal of net charges made for retirement benefits in

accordance with IAS 19

(9,165)

3,594 Actual amount charged against the General Fund Balance

for pensions in year

3,252

* The past service cost in 2010/11 includes £14.331m, in respect of changes to pension increases introduced in the

Chancellor‟s budget statement (future pension increases are linked to CPI and not RPI). The effect is shown as a

negative past service cost in the Comprehensive Income & Expenditure Statement.

In addition to the recognised gains and losses included in the Income & Expenditure

Account, actuarial gain of £26.534m where included in the Comprehensive Income

& Expenditure Statement.

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Assets and Liabilities in Relation to Retirement Benefits

Reconciliation of present value of scheme liabilities:

2009/10 2010/11

£'000 £'000

(104,294) 1 April (166,460)

(1,530) Current Service Cost (2,757)

(7,112) Interest Cost (8,503)

(884) Contributions by Members (852)

(57,528) Actuarial Losses/Gains 30,786

0) Past Service Costs/Gains 14,331

(10) Losses/Gains on Curtailments (43)

228 Estimated Unfunded Benefits Paid 223

4,670 Estimated Benefits Paid

4,813

(166,460) 31 March (128,461)

Reconciliation of fair value of the of the scheme assets:

2009/10 2010/11

£'000 £'000

68,554 1 April 88,183

4,374 Expected rate of return 6,137

884 Contributions by scheme participants 852

3,352 Employer contributions 3,031

228 Contributions in respect of Unfunded Benefits 223

15,689 Actuarial Gains/Losses (4,255)

(228) Unfunded Benefits Paid (223)

(4,670) Benefits paid

(4,813)

88,183 31 March 89,135

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. Scheme History

2010/11 2009/10 2008/09 2007/08 2006/07

£'000 £'000 £'000 £'000 £'000

Fair value of employer

assets

89,135 88,183 68,554 85,298 95,535

Present value liabilities (128,461) (166,460) (104,293) (107,602) (122,526)

Surplus/(Deficit) (39,327) (78,277) (35,740) (22,304) (26,991)

The total liability of £39.327m has a substantial impact on the net worth of the

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Council as recorded in the Balance Sheet, resulting in an overall balance of

£175.530m. However, statutory arrangements for funding the deficit mean that the

financial position of the Council remains healthy. The deficit on the scheme will be

made good by increased contributions over the remaining working life of

employees, as assessed by the scheme‟s actuary.

The total contributions expected to be made to the Local Government Pension

Scheme by the Council in the year to 31 March 2012 is £2.828m Basis for estimating assets and liabilities

Liabilities have been assessed on an actuarial basis using the projected unit method,

an estimate of the pensions that will be payable in future years dependent on

assumptions about mortality rates, salary levels etc. The liabilities have been

assessed by Hymans Robertson, an independent firm of actuaries.

The principal assumptions used by the actuary have been:

2009/10 2010/11

Long-term expected rate of return on assets in the scheme:

7.8% Equity Investments 7.5%

5.0% Bonds 4.9%

5.8% Property 5.5%

4.8% Cash 4.6%

Mortality Assumptions:

Longevity at 65 for current pensioners:

20.8 yrs Men 21.2 yrs

24.1 yrs Women 23.4 yrs

Longevity at 65 for future pensioners:

22.3 yrs Men 23.7 yrs

25.7 yrs Women 25.7 yrs

3.8% Rate of inflation (CPI) 2.8%

5.3% Rate of increase in salaries 5.1%

3.8% Rate of increase in pensions 2.8%

5.5% Rate of discounting scheme liabilities 5.5%

Take-up of option to convert annual pension into retirement

lump sum:

25.0% Membership prior to 1 April 25.0%

63.0% Membership post 1 April 63.0%

The pension scheme‟s assets consist of the following categories, by proportion of the

total assets held:

2009/10 2010/11

70% Equities 76%

18% Bonds 12%

11% Property 11%

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2009/10 2010/11

1% Cash 1%

History of experience gains and losses

The actuarial gains identified as movements on the Pension Reserve can be

analysed into the following categories, measured as a percentage of assets or

liabilities:

2010/11 2009/10 2008/09 2007/08 2006/07

% % % % %

Differences between the

expected and actual

return on assets

(4.77) 17.79 (32.52) (19.89) 0.27

Experience gains and

losses on liabilities

(8.96) 0.08 0.01 (2.49) 0.04

Further information can be found in the County Council‟s Superannuation Fund

Annual Report which is available on request from the County Treasurer‟s

Department, County Offices, Newland, Lincoln LN1 1YG. Note 44 – Contingent Liabilities

A contingent liability is a possible liability 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. Where a material loss can be estimated with

reasonable accuracy a provision is accrued within the financial statements. If,

however a loss cannot be accurately estimated or the event is not considered

sufficiently certain, a contingent liability will be disclosed in a note to the Balance

Sheet.

Concerns exist around the application of the Council‟s current employment terms

and conditions and their impact on equality legislation. If it is determined that the

terms and conditions have not been applied correctly there will be an obligation on

the Council to correct these. The amount of liability is not known and cannot be

estimated at this time with any reliability. The Council has however set aside an

earmarked reserve of £0.150m to meet such future costs.

The Council currently has a claim pending against it in respect of the application of

equality legislation. The Council does not accept the extent of the claimant‟s

assertions and disputes the claim. If the claimant is successful in this claim then the

amount of damages awarded will be limited to a maximum of £0.002m, however

the cost of legal expenses to be met by the Council are unlimited. It is therefore not

possible to ascertain the cost of any settlement at this time. Note 45 – Contingent Assets

The Council has no Contingent Assets as at 31st March 2011 Note 46 – Nature and Extent of Risks Arising from Financial Instruments

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The Council‟s activities expose it to a variety of financial risks. The key risks are:

Credit risk – the possibility that other parties might fail to pay amounts due to

the Council.

Liquidity risk – the possibility that the Council might not have funds available

to meet its commitments to make payments.

Re-financing risk – the possibility that the Council might be requiring to renew

a financial instrument on maturity at disadvantageous interest rates or terms.

Market risk - the possibility that financial loss might arise for the Council as a

result of changes in such measures as interest rates movements.

Overall Procedures for Managing Risk

The Council‟s overall risk management procedures focus on the unpredictability of

financial markets, and implementing restrictions to minimise these risks. The

procedures for risk management are set out through a legal framework set out 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. Overall these procedures require the Council to manage risk in the

following ways:

by formally adopting the requirements of the Code of Practice;

by the adoption of a Treasury Management Policy Statement and treasury

management clauses within its standing orders;

by approving, annually in advance, prudential indicators for the following

three years limiting:

o The Council‟s overall borrowing;

o Its maximum and minimum exposures to fixed and variable rates;

o Its maximum and minimum limits on the maturity structure of its debt;

o Its maximum annual exposures to investments maturing beyond a year.

by approving an investment strategy for the forthcoming year setting out its

criteria for both investing and selecting investment counterparties in

compliance with the Government Guidance;

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These are required to be reported and approved at or before the Council‟s annual

Council Tax setting budget. These items are reported with the annual Treasury

Management Strategy, which outlines the detailed approach to managing risk in

relation to the Council‟s financial instrument exposure. Actual performance is also

reported semi-annually to Members.

The annual Treasury Management Strategy which incorporates the prudential

indicators was approved by Council on 2nd March 2010 and the prudential

indicators were revised on 2nd March 2010 and is available on the Council‟s website

(www.lincoln.gov.uk). The key issues within the strategy were:

The Authorised Limit for 2010/11 was set at £55.5m. This is the maximum limit of

external borrowings or other long term liabilities during the year.

The Operational Boundary was expected to be £53.4m. This is the expected

level of debt and other long term liabilities during the year.

The maximum amounts of fixed and variable interest rate exposure were set

at £52.6m and £22.3m based on the Council‟s net debt.

The maximum and minimum exposures to the maturity structure of debt are

shown within this note.

These policies are implemented by the Treasury team in Financial Services. The

Council maintains 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 through Treasury Management Practices (TMPs). These

TMPs are a requirement of the Code of Practice and are reviewed regularly.

Credit risk

Credit risk arises from deposits with banks and financial institutions, as well as credit

exposures to the Council‟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, in accordance with

the Fitch, Moody‟s and Standard & Poors Ratings Services. The Annual Investment

Strategy also imposes maximum amounts and time limits in respect of each

financial institution. Deposits are not made with banks and financial institutions

unless they meet the minimum requirements of the investment criteria outlined

above. Details of the Investment Strategy can be found on the Council‟s website

(www.lincoln.gov.uk). The key areas are that the minimum criteria for investment

counterparties in 2010/11 included:

Credit ratings of Short Term of F1, Long Term AA, Support 2 and Individual B

(Fitch or equivalent rating), with the lowest available rating being applied to

the criteria.

Top 30 UK Building Societies ranked by asset size.

http://www.lincoln.gov.uk/

http://www.lincoln.gov.uk/

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The full Investment Strategy for 2010/11 was approved by full Council on 2nd March

2010 and is available on the Council‟s website.

The following analysis summarises the Authority‟s potential maximum exposure to

credit risk, based on experience of default assessed by Fitch credit rating agency

(based on details of global corporate finance average cumulative default rates

(including financial organisations) for the period 1990-2009 on investments out to 5

years) and the Council‟s experience of its customer collection levels over the last

five financial years, adjusted to reflect current market conditions:

Amount at

31/03/11

Historical

experience of

default**

Adjustment for

market

conditions at

31/03/11

Estimated

maximum

exposure to

default

£’000 % % £’000

a b c (a * c)

Deposits with banks and financial

institutions

AAA* rated counterparties

(investments up to 1 year) 8,197 0.00 0.00 0

AA* rated counterparties

(investments up to 1 year) 6,100 0.0030 0.03 2

A* rated counterparties (investments

1-2 years) 0 0.80 0.08 0

BBB rated counterparties

(investments up to one year) 1,000 0.24 0.24 2

Other Investments 449 9.87 9.87 44

Debtors 7,191 7.17 7.17 516

22,848 564

*See Glossary for a definition of AAA, AA and A ratings

No breaches of the Council‟s counterparty criteria occurred during the reporting

period and the Council does not expect any losses from non-performance by any of

its counterparties in relation to deposits and bonds.

Whilst the current credit crisis in international markets has raised the overall possibility

of default, the Council maintains strict credit criteria for investment counterparties.

As a result of these high credit criteria, historical default rates have been used as a

good indicator under these current conditions.

Analysis of Investments by country of origin

Short term Long term

Principal

invested

Fixed

rate

Variable

rate

Fixed

rate

Variable

rate

£’000 £’000 £’000 £’000 £’000

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Short term Long term

Principal

invested

Fixed

rate

Variable

rate

Fixed

rate

Variable

rate

£’000 £’000 £’000 £’000 £’000

UK Banks & Building Societies

Coventry Building Society 1,000 1,000 0 0 0

Bank of Scotland Call Account 100 100 0 0 0

Santander Call Account 3,000 3,000 0 0 0

Natwest Call Account 3,000 3,000 0 0 0

UK Money Market Funds

Black rock MMF 100 0 100 0 0

Standard Life Investments MMF 100 0 100 0 0

Ignis MMF 832 0 832 0 0

Prime Rate MMF 2,065 0 2,065 0 0

Goldman Sachs MMF 100 0 100 0 0

UK Local Authorities

Northamptonshire County Council 2,000 2,000 0 0 0

Newcastle City Council 2,000 2,000 0 0 0

Aberdeen City Council 1,000 1,000 0 0 0

15,297 12,100 3,197 0 0

The Council allows credit for its trade debtors, an age analysis of those debtors as at

31 March 2011 is as follows:

31/03/09

£’000

31/03/10

£’000

564 Less than one month 290

209 One to three months 136

125 Three to six months 68

327 Six months to one year 111

102


2 0 1 0 / 1 1

672 More than one year 881

1,897 Total 1,486

Collateral – During the reporting period the Council held no collateral as security.

Liquidity risk

The Council manages its liquidity position through the risk management procedures

above (the setting and approval of prudential indicators and the approval of the

Treasury Management and Investment Strategy reports), as well as through a

comprehensive cash flow management system, as required by the Code of

Practice. This seeks to ensure that cash is available when it is needed.

The Council has ready access to borrowings from the Money Markets to cover any

day to day cash flow need, and whilst the PWLB provides access to longer term

funds, it also acts as a lender of last resort to councils (although it will not provide

funding to a council whose actions are unlawful). 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

therefore no significant risk that it will be unable to raise finance to meet its

commitments under financial instruments.

Refinancing and Maturity Risk

The Council maintains a significant debt and investment portfolio. Whilst the cash

flow procedures above are considered against the refinancing risk procedures,

longer term risk to the Council relates to managing the exposure to replacing

financial instruments as they mature. This risk relates to both the maturing of longer

term financial liabilities and longer term financial assets.

The approved prudential indicator limits for the maturity structure of debt and the

limits placed on investments placed for greater than one year in duration are the

key parameters used to address this risk. The Council approved treasury and

investment strategies address the main risks and the central treasury team addresses

the operational risks within the approved parameters. This includes:

monitoring the maturity profile of financial liabilities and amending the profile

through either new borrowing or the rescheduling of the existing debt; and

monitoring the maturity profile of investments to ensure sufficient liquidity is

available for the Council‟s day to day cash flow needs, and the spread of

longer term investments provide stability of maturities and returns in relation to

the longer term cash flow needs.

The maturity analysis of financial liabilities (principal amount) is as follows:

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31/03/10 31/03/11

£’000 £’000

33 Less than one year 43

0 Between one and two years 10

0 Between two and seven years 14

7,500 Between seven and 15 years 8,397

42,923 More than fifteen years 42,026

50,456 Total borrowing 50,490

The maturity analysis of financial assets (principal amount) is as follows:

All trade and other payables that are due to be paid in less than one year of

£9.582m and trade and other debtors of £7.191m are not shown in the table above.

Market risk

Interest rate risk - The Council is exposed to interest rate movements on its

borrowings and investments. Movements in interest rates have a complex impact

on the Council, depending on how variable and fixed interest rates move across

differing financial instrument periods. For instance, a rise in variable and fixed

interest rates would have the following effects:

borrowings at variable rates – the interest expense charged to the Income

and Expenditure Account will rise;

borrowings at fixed rates – the fair value of the borrowing liability will fall;

investments at variable rates – the interest income credited to the Income

and Expenditure Account will rise; and

investments at fixed rates – the fair value of the assets will fall.

Borrowings are not carried at fair value on the Balance Sheet, so nominal gains and

losses on fixed rate borrowings would not impact on the Comprehensive Income

and Expenditure Statement. However, changes in interest payable and receivable

on variable rate borrowings and investments will be posted to the

31/03/10 31/03/11

£’000 £’000

15,111 Less than one year 15,297

1,000 Between one and two years 0

0 Between two and three years 0

449 More than three years 449

16,560 Total Investments 15,746

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Comprehensive Income and Expenditure Statement and affect the General Fund

Balance, subject to influences from Government grants. Movements in the fair

value of fixed rate investments will be reflected in other Comprehensive Income

and Expenditure, unless the investments have been designated as Fair Value

through the Income and Expenditure Account, in which case gains and losses will

be posted to the Surplus/Deficit on Provision of Services.

The Council has a number of strategies for managing interest rate risk. The Annual

Treasury Management Strategy draws together the Council‟s prudential indicators

and its expected treasury operations, including an expectation of interest rate

movements. From this Strategy a prudential indicator is set which provides

maximum and minimum limits for fixed and variable interest rate exposure. The

central treasury team will monitor market and forecast interest rates within the year

to adjust exposures appropriately. For instance, during periods of falling interest

rates, and where economic circumstances make it favourable, fixed rate

investments may be taken for longer periods to secure better long term returns,

similarly the drawing of longer term fixed rate borrowing would be postponed.

In the HRA the risk of interest rate loss is partially mitigated by Government grant

payable on financing costs.

If all interest rates had been 1% higher with all other variables held constant the

financial effect would be:

2009/10 2010/11

£’000 £’000

0 Increase in interest payable on variable rate borrowings 0

(134) Increase in interest receivable on variable rate

investments

(157)

(134) Impact on Income and Expenditure Account (157)

0 Increase in Government grant receivable for financing

costs

0

(30) Share of overall impact credited to the HRA (22)

(104) Share of overall impact credited to the General Fund (135)

(134) Total (157)

The approximate impact of a 1% fall in interest rates would be as above but with the

movements being reversed. These assumptions are based on the same

methodology as used for Fair Value of Assets and liabilities carried at Amortised

Cost.

Price risk - The Council does not generally invest in equity shares but does have

shareholdings to the value of £0.449m in a number of joint ventures and in local

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industry. Whilst these holdings are generally illiquid, the Council is exposed to losses

arising from movements in the prices of the shares.

As the shareholdings have arisen in the acquisition of specific interests, the Council is

not in a position to limit its exposure to price movements by diversifying its portfolio.

The majority of the shareholdings are in the Dunham Bridge Company (£0.430m) and

Investors in Lincoln (£0.014m). A representative of the Council sits on the Investors in

Lincoln Board, enabling the Council to monitor factors that might cause a fall in the

value of specific shareholdings.

The shares are all classified as Available-for-Sale, meaning that all movements in

price will impact on gains and losses recognised in Other Comprehensive Income

and Expenditure.

Foreign exchange risk - The Council has no financial assets or liabilities denominated

in foreign currencies. It therefore has no exposure to loss arising from movements in

exchange rates.

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H R A I N C O M E A N D E X P E N D I T U R E S T A T E M E N T F O R T H E Y E A R E N D I N G 3 1 M A R C H 2 0 1 1

2009/10

Notes 2010/11 2010/11

£’000 £’000 £’000

Expenditure

(12,193) Management and Maintenance 3 (14,843)

0 Management and Maintenance – exceptional

item, negative pension past service cost

2,866

(37) Rents, rate, taxes and other charges (20)

(1,058) Negative HRA Subsidy payable 6 (1,058)

(497) Negative HRA subsidy transferable to the General

Fund

(366)

(41,899) Depreciation and impairment of non-current

assets

(11,465)

0 Exceptional item, decrease in Social Housing

discount factor applied to asset valuations

(79,476)

(54) Debt management costs (64)

(186) Movement in the allowance for bad debts (105)

(55,924) Total Expenditure (104,531)

Income

22,409 Dwelling rents 7 22,961

464 Non-dwelling rents 461

546 Charges for services and facilities 477

23,419 Total Income 23,899

(32,505) Net Cost of HRA Services as included in the

Comprehensive Income and Expenditure

Statement

(80,632)

0 HRA Services‟ share of Corporate and

Democratic Core

0

0 HRA share of other amounts included in the

whole authority Net Cost of Services but not

allocated to specific services

2,866

85 Transfer from CMS (115)

(32,420) Net Cost for HRA Services (77,881)

HRA share of the operating income and

expenditure included in the Comprehensive

Income and Expenditure Statement

95 Gain or loss on the sale of HRA assets 321

(1,252) Interest payable and similar charges (1,442)

100 Interest and investment income 38

(891) Pensions interest cost and expected return on

pensions assets

8 (841)

(34,368) Surplus or (deficit) for the year on HRA services (79,805)

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M O V E M E N T O N T H E H O U S I N G R E V E N U E A C C O U N T S T A T E M E N T

2009/10 2010/11

£'000 £'000

2,408 Balance on the HRA at the end of the previous year 1,000

(34,368) Surplus or (deficit) for year on the HRA Income and Expenditure

Statement

(79,805)

31,885 Adjustments between accounting basis and funding basis under

statute

81,587

(2,483) Net increase or (decrease) before transfers to or from reserves 1,782

1,075 Transfers (to) or from reserves (1,599)

(1,408) Increase or (decrease) in year on the HRA 183

1,000 Balance on the HRA at the end of the current year 1,183

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N O T E S T O T H E H O U S I N G R E V E N U E A C C O U N T

Note 1 – Fixed Assets

The number of dwellings in the Authority‟s housing stock, as at 31 March 2011,

totalled 7,932 properties. The type of properties and the period in which they were

built, were as follows:

<1945 1945-64 1965-74 >1974 TOTAL

No. No. No. No. No.

Property Type

Low Rise Flats

(Blocks up to 2 Storeys)

1 Bed 44 663 379 361 1,447

2 Bed 6 98 35 42 181

3 Bed 0 - 13 1 14

Sub-Total 50 761 427 404 1,642

Medium Rise Flats

(Blocks of 3 up to 5 Storeys)

1 Bed 2 299 464 383 1,148

2 Bed - 29 161 163 353

3 Bed - 1 1 3 5

Sub-Total 2 329 626 549 1,506

High Rise Flats

(Blocks of 6 Storeys or more)

1 Bed - 58 138 0 196

2 Bed - 30 74 0 104

Sub-Total 0 88 212 0 300

Houses / Bungalows

1 Bed 159 146 32 9 346

2 Bed 768 1061 112 268 2,209

3 Bed 874 621 82 225 1,802

4 or more Beds 101 21 0 5 127

Sub-Total 1,902 1,849 226 507 4,484

Total Dwellings 31 March 2011 1,954 3,027 1,491 1,460 7,932

The Council‟s in-house Valuation Officers, and the District Valuer, have undertaken

the valuations of HRA dwellings, land, and other property in accordance with Royal

Institute of Chartered Surveyor guidelines.

The balance sheet value of council dwellings is calculated by applying a Social

Housing discount factor (currently 34%) to the open market or vacant possession

value as determined by the District Valuer, as shown below:

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£ 000

Vacant possession value of council dwellings at 31 March 2011 481,679

Balance sheet valuation applying the Social Housing discount factor (34%) 163,772

The movement in fixed assets during the year was as follows:

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HRA

Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Property

Plant &

Equipment

Investment

Properties

Non

current

assets

held for

sale

Intangible

assets TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2010 246,392 6,062 983 135 253,572 6,202 0 84 259,858

Additions 10,231 23 4 0 10,258 0 0 65 10,323

Donations 0 0 0 0 0 0 0 0 0

Revaluation



Reserve (799) 87 0 0 (712) 0 0 0 (712)

Revaluation


recognised in the

Surplus/Deficit on the Provision

of Services (91,741) (39) 0 0 (91,780) 12 0 0 (91,768)

De-recognition - disposals (311) 0 0 0 (311) 0 0 0 (311)

111


2 0 1 0 / 1 1


HRA

Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Property

Plant &

Equipment

Investment

Properties

Non

current

assets

held for

sale

Intangible

assets TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000

De-recognition - other 0 0 0 0 0 0 0 0 0


valuation 0 0 55 0 55 0 0 0 55

At 31 March 2011 163,772 6,133 1,042 135 171,082 6,214 0 149 177,445


At 1 April 2010 (1,258) (206) (239) 0 (1,703) 0 0 (8) (1,711)

Depreciation for year (3,994) (156) (192) 0 (4,342) 0 0 (19) (4,361)

Depreciation written out to

the Revaluation Reserve 0 55 0 0 55 0 0 0 55


the Surplus/Deficit on the

Provision of Services 3,987 7 0 0 3,994 0 0 0 3,994

112


2 0 1 0 / 1 1


HRA

Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Property

Plant &

Equipment

Investment

Properties

Non

current

assets

held for

sale

Intangible

assets TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000



Reserve 0 0 0 0 0 0 0 0 0


recognised in the


of Services 724 0 0 0 724 0 0 0 724

De-recognition - disposals 7 0 0 0 7 0 0 0 7


At 31 March 2011 (534) (300) (431) 0 (1,265) 0 0 (27) (1,292)


31.03.11 163,238 5,833 611 135 169,817 6,214 0 122 176,153


31.03.10 245,134 5,856 744 135 251,869 6,202 0 76 258,147

113


2 0 1 0 / 1 1

Comparative movements in

2009/10

HRA

Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Property

Plant &

Equipment

Investment

Properties

Non

current

assets

held for

sale

Intangible

assets TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2009 276,507 5,954 683 150 283,294 6,223 0 43 289,560

Additions 13,062 19 300 0 13,381 0 0 41 13,422

Donations 0 0 0 0 0 0 0 0 0

Revaluation



Reserve (2,238) 89 0 (15) (2,164) 0 0 0 (2,164)

Revaluation


recognised in the


of Services (40,644) 0 0 0 (40,644) (21) 0 0 (40,665)

114


2 0 1 0 / 1 1


2009/10

HRA

Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Property

Plant &

Equipment

Investment

Properties

Non

current

assets

held for

sale

Intangible

assets TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000

De-recognition - disposals (295) 0 0 0 (295) (400) 0 0 (695)



valuation 0 0 0 0 0 400 0 0 400

At 31 March 2010 246,392 6,062 983 135 253,572 6,202 0 84 259,858


At 1 April 2009 (2,235) (56) (108) 0 (2,399) 0 0 0 (2,399)

Depreciation for year (5,935) (161) (131) 0 (6,227) 0 0 (9) (6,236)


the Revaluation Reserve 2,153 11 0 0 2,164 0 0 0 2,164


the Surplus/Deficit on the

Provision of Services 3,776 0 0 0 3,776 0 0 0 3,776

115


2 0 1 0 / 1 1


2009/10

HRA

Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Property

Plant &

Equipment

Investment

Properties

Non

current

assets

held for

sale

Intangible

assets TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000



Reserve 0 0 0 0 0 0 0 0 0


recognised in the


of Services 978 0 0 0 978 0 0 0 978

De-recognition - disposals 6 0 0 0 6 0 0 0 6


At 31 March 2010 (1,257) (206) (239) 0 (1,702) 0 0 (9) (1,711)


31.03.10 245,135 5,856 744 135 251,870 6,202 0 75 258,147

116


2 0 1 0 / 1 1


2009/10

HRA

Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Property

Plant &

Equipment

Investment

Properties

Non

current

assets

held for

sale

Intangible

assets TOTAL

Subtotal

£000 £000 £000 £000 £000 £000 £000 £000 £000


31.03.09 274,272 5,898 575 150 280,895 6,223 0 43 287,161

117


2 0 1 0 / 1 1

Note 2 – Major Repairs Reserve

The Major Repairs Reserve details the Major Repairs Allowance (MRA) received by

the Council. The MRA is based on national average unit costs for each of the

property types and represents the estimated long-term average amount of capital

spending required to maintain a local authority‟s stock in its current condition. The

MRA received in the year totalled £4,983,161 all of which was used to finance

capital spend in the Housing Investment Programme in 2010/11.

2009/10 2010/11

£’000 £’000

0 Balance on 1 April 0

Amount transferred from the HRA

- Depreciation

(5,935) Dwellings (3,994)

(153) Other Assets (366)

0 - Appropriations from HRA (623)

(6,088) (4,983)

4,943 - HRA Capital Expenditure 4,983

1,145 - Appropriations to HRA 0

6,088 4,983

0 Balance on 31 March 0

Note 3 – Housing Repairs Account

The Housing Repairs Account was set up on 1 April 2001 in order to assist with the

longer term planning of repairs and maintenance expenditure. The following

analysis details the movement on the Housing Repairs Account during the year.

2009/10 2010/11

£’000 £’000

(102) Balance on 1 April (17)

Expenditure in year

3,982 Tenant Notified Repairs 3,622

1,477 Void Repairs 1,276

1,479 Servicing Contracts 1,476

138 Painting Programme 93

0 Asbestos Removal/Surveys 178

448 Aids & adaptations 278

30 Decoration Grants 20

32 Other Expenditure 24

48 Contribution to HRA 0

7,634 6,967 Income in year

(7,490) Contribution from HRA (7,677)

(55) Contribution from Insurance Reserve (18)

0 Contribution from Leaseholders (2)

118


2 0 1 0 / 1 1

(4) Interest Received in year (3)

(7,549) (7,700)

(17) Surplus Balance on 31 March (750)

Note 4 – Capital Expenditure in the year

The Housing Revenue Account capital expenditure and sources of funding during

the financial year are detailed in the following table:

2009/10 2010/11

£’000 £’000

Capital investment

13,099 Property, Plant and Equipment 10,263

0 Investment Properties 0

42 Intangible Assets 65

6 Revenue Expenditure funded from Capital

under Statute

0

13,147 10,328

Sources of funding

(1,020) Supported Borrowing (1,020)

(2,312) Capital Receipts (2,443)

(4,943) Major Repairs Reserve (4,983)

(274) Government grants and other contributions (336)

(4,598) Revenue Contributions (1,546)

(13,147) (10,328)

0 Balance unfunded at 31 March 0

Supported borrowing levels are issued annually by Central Government, authorising

the Council to borrow monies, which will be funded by Central Government to

cover capital expenditure. Additionally, the Council is able to take out unsupported

borrowing which must be financed from its own resources. In 2010/11 however, no

such borrowing was undertaken by the HRA.

Note 5 - Capital Receipts

The cash receipts from the disposal of land, houses and other property within the

HRA in the year are summarised as follows:

2009/10 2010/11

£’000 £’000

Council dwellings -

(338) - Right to Buy (612)

(8) - Discounts repaid (6)

0 - Non-Right to Buy 0

Other Receipts -

0 - Land sales 0

(425) - Other property sales 0

(13) - Mortgage Property (7)

119


2 0 1 0 / 1 1

(784) (625)

241 Less Pooled (Paid to Central Government) 392

(543) Total (233)

Note 6 - Housing Subsidy

The Government (CLG) bases this subsidy entitlement on a notional account

representing their assessment of what the Council should be collecting and

spending. In 2010/11 the Council continued in a „negative‟ Housing Subsidy position

and the amount payable in respect of the financial year amounted to £1.078m as

detailed below:

2009/10 2010/11

£’000 £’000

Housing Subsidy

(13,374) Management & Maintenance (13,797)

(4,943) Major Repairs Allowance (4,983)

(1,915) Capital Charges (2,041)

2 Interest on Receipts 1

21,334 Guideline Rent Income 21,898

1,104 Total in-year HRA Subsidy Payable 1,078

(46) Previous year(s) Subsidy adjustments (20)

1,058 Total HRA Subsidy due to/(from) CLG 1,058

Note 7 - Rent Arrears

During the year 2010/11 total rent arrears decreased by £0.097m or 6.7%, to £1.36m.

A summary of rent arrears and prepayments is shown in the following table:

2009/10 2010/11

£’000 £’000

571 Current Tenant Arrears @ 31 March 558

887 Former Tenant Arrears @ 31March 802

1,458 Total Rent Arrears 1,360

(227) Prepayments @ 31 March (228)

1,231 Net Rent Arrears 1,132

A bad debt provision of £0.105m has been made in this year‟s accounts in respect of

potentially non-collectable rent arrears, as detailed above, and associated

miscellaneous debts. The value of the bad debt provision held on the Balance Sheet

at 31 March 2011 is £1.230m (£1.296m at 31 March 2010).

Note 8 - Pension Costs

In line with the full adoption of IAS 19 „Employee Benefits‟ the Net Cost of Services

includes the cost of retirement benefits when they are earned by employees, rather

than when the benefits are eventually paid as pensions. However, the charge that

is required when determining the movement on the HRA Balance for the year

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is based on the cash payable in the year, so the real cost of retirement benefits is

reversed out of the HRA in the Movement on the Housing Revenue Account

Statement. The following transactions have been made in the HRA during the year:

2009/10

2010/11

£’000 £’000

HRA Income & Expenditure Statement

360 Current Service Cost 907

0 Past Service Costs (2,866)

(1,423) Expected Return on Employer Assets (2,181)

2,314 Interest on Pension Scheme Liabilities 3,021

1,251 Total

(1,119)

(1,169) Amount to be met from HRA

(1,155)

82 Movement on Pension Reserve (2,274)

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T H E C O LLE C T I O N F U N D S T A T E M E N T F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 1 1

This account reflects the statutory requirements for all Billing Authorities, such as the

City Council, to maintain a separate Collection Fund Account. This shows the

transactions of the Billing Authority in relation to Non-Domestic Rates and the

Council Tax, and illustrates the way in which these have been distributed to

preceptors (Lincolnshire County Council & Lincolnshire Police Authority) and the

General Fund.

Notes

2010/11

£’000

2009/10

£’000

Income

Council Tax Income 4 (31,557) (30,647)

Transfers from General Fund:

Council Tax Benefit 4 (7,739) (7,252)

Pensioners Discount Contribution 4 (66) (66)

Transitional Relief 4 0 0

Income collectable from Business Ratepayers 5 (35,412) (36,183)

Total Income (74,774) (74,148)

Expenditure

Precepts 6 39,016 36,958

Business Rates:

Payment to National Pool 5 35,259 36,028

Cost of Collection 153 155

Provision for Bad & Doubtful Debts:

Council Tax/Community Charge 4 353 341

Contributions:

Community Charge Surplus 0 0

Council Tax Surplus 1(c) & 6 124 0

Adjustment of Previous Year Community Charge:

CC Payers A/c 4 0 0

Total Expenditure 74,905 73,482

Movement on Fund Balance 131 (666)

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N O T E S T O T H E C O LLE C T I O N F U N D

Note 1 - Council Tax

The introduction of Council Tax on 1 April 1993 revised the method of accounting for

the Council‟s Collection Fund. The main features of the arrangements may be

summarised as follows:

a) Revenue Support Grant and amounts for distribution from the NNDR National Pool

are paid directly to all Billing and Precepting Authorities and are disclosed in the

Collection Fund Statement on page 116.

b) Interest is no longer payable between the General Fund and the Collection Fund

on cash-flow deficits/surpluses. All interest is now payable directly to the General

Fund, as shown on the Collection Fund Statement page 116.

c) The year-end surplus or deficit on the Collection Fund is to be distributed between

Billing and Precepting Authorities on the basis of estimates, made in January of

each year-end balance. For 2010/11, the amount outstanding in January 2011 in

respect of Council Tax when compared with the provision made by the Council

for non-payment, was above the level anticipated and therefore a surplus was

declared.

Note 2 - Council Tax Valuation Bands

Most domestic Dwellings (including flats) whether rented or owned, occupied or not,

are subject to Council Tax. Each Dwelling is allocated to one of eight bands

according to their open market capital value at 1 April 1991.

Valuation Band Range of Values (£)

A Up to & including £40,000

B £40,001 - £52,000

C £52,001 - £68,000

D £68,001 - £88,000

E £88,001 to £120,000

F £120,001 - £160,000

G £160,001 - £320,000

H More than £320,001

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Note 3 - Council Tax Income

The amount of Council Tax payable is calculated by establishing a „Council Tax

Base‟. This is the Council‟s estimated number of chargeable dwellings expressed in

relation to those dwellings in Band D. Once this has been determined, the Council

Tax payable for each band is established as follows:

(The actual amount payable for each property is also subject to discounts where

applicable.)

Band Calculated

number of

dwell ings

Ratio to

Band D

Equated

number of

dwell ings

Council

Tax

Payable

Z 84 5/9 47 825.43

A 20,310 6/9 13,540 990.52

B 6,867 7/9 5,341 1,155.61

C 4,027 8/9 3,580 1,320.69

D 2,104 9/9 2,104 1,485.78

E 881 11/9 1,077 1,815.95

F 314 13/9 454 2,146.13

G 109 15/9 182 2,476.30

H 9 18/9 18 2,971.56

26,343

Note 4 - Council Tax Required

The amount of Council Tax required for Band D was calculated on the following

basis:

(i) Preceptor‟s Council Tax Requirements £39,139,975

(ii) Number of Band D equivalent Dwellings 26,343

Band D ( i divided by ii ) £1,485.78

The Council Tax required then forms part of Collection Fund Statement as detailed in

the following table:

2009/10 2010/11

£’000 £’000

30,647 Net Amount 31,557

7,252 Benefits 7,739

66 Pensioners Discount Contribution 66

(341) Use of Provision for Doubtful Debts (353)

(666) Balance carried forward 131

36,958 Council Tax Requirement 39,140

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Note 5 – Non-Domestic Rates

Non-Domestic Rates are organised on a national basis. The Government specifies

an amount and subject to the effects of transitional arrangements, local businesses

pay rates calculated by multiplying their rateable value by that amount. In 2010/11

the amount was 41.4p (48.5p = 2009/10). The Council is responsible for collecting

rates due from the ratepayers in its area but pays the proceeds into an NNDR Pool

administered by the Government.

The Government redistributes the sums paid into the Pool back to local authorities

on the basis of a fixed amount per head of population. This is shown in the

Collection Fund Statement on page 116.

The total rateable value @ 31 March 2011 was £102,771,442 (31 March 2010 =

£89,007,759).

Note 6 - Precepts & Demands

The following amounts were paid from the fund:

2009/10

£’000

2010/11

£’000

5,898 City of Lincoln Council 6,243

26,606 Lincolnshire County Council 28,160

4,454 Lincolnshire Police Authority 4,737

36,958 Total 39,140

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INDEPENDENT AUDITORS’ REPORT TO CITY OF LINCOLN COUNCIL

TO BE INSTERTED POST AUDIT

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GLOSSARY

AAA FITCH RATING

Highest credit quality - „AAA‟ ratings denote the lowest expectation of credit risk.

They are assigned only in case of exceptionally strong capacity for timely payment

of financial commitments. This capacity is highly unlikely to be adversely affected by

foreseeable events.

AA FITCH RATING

Very high credit quality - „AA‟ ratings denote a very low expectation of credit risk.

They indicate very strong capacity for timely payment of financial commitments. This

capacity is not significantly vulnerable to foreseeable events.

A FITCH RATING

High credit quality - „A‟ ratings denote a low expectation of credit risk. The capacity

for timely payment of financial commitments is considered strong. This capacity

may, nevertheless, be more vulnerable to changes in circumstances or in economic

conditions than is the case for higher ratings.

ACCOUNTING PERIOD

The period of time covered by the accounts, normally a period of twelve months

commencing on 1 April. The end of the accounting period is the Balance Sheet

date.

ACCRUALS

Sums included in the final accounts to recognise revenue and capital income and

expenditure earned or incurred in the financial year, but for which actual payment

had not been received or made as at 31 March.

ACTUARIAL GAINS AND LOSSES

For a defined benefit pension scheme, the changes in actuarial surpluses or deficits

that arise because:

Events have not coincided with the actuarial assumptions made for the last

valuation (experience gains and losses); or

The actuarial assumptions have changed

ASSET

An item having value to the authority in monetary terms. Assets are categorised as

either current or fixed:

A current asset will be consumed or cease to have material value within the

next financial year (e.g. cash and stock);

A fixed asset provides benefits to the Authority and to the services it provides

for a period of more than one year and may be tangible e.g. a community

centre, or intangible, e.g. computer software licences.

AUDIT OF ACCOUNTS

An independent examination of the Authority‟s financial affairs.

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BALANCE SHEET

A statement of the recorded assets, liabilities and other balances at the end of the

accounting period.

BORROWING

Government support for capital investment is described as either Supported Capital

Expenditure (Revenue) known as SCE(R) or Supported Capital Expenditure (Capital

Grant) known as SCE(C). SCE can be further classified as either Single Capital Pot

(SCP) or ring-fenced. BUDGET

The forecast of net revenue and capital expenditure over the accounting period.

CAPITAL EXPENDITURE

Expenditure on the acquisition of a fixed asset, which will be used in providing

services beyond the current accounting period, or expenditure which adds to and

not merely maintains the value of an existing fixed asset.

CAPITAL FINANCING

Funds raised to pay for capital expenditure. There are various methods of financing

capital expenditure including borrowing, leasing, direct revenue financing, usable

capital receipts, capital grants, capital contributions, revenue reserves and

earmarked reserves.

CAPITAL PROGRAMME

The capital schemes the Authority intends to carry out over a specific period of time.

CAPITAL RECEIPT

The proceeds from the disposal of land or other fixed assets. Proportions of capital

receipts can be used to finance new capital expenditure, within rules set down by

the government but they cannot be used to finance revenue expenditure.

CLAW-BACK

Where average council house rents are set higher than the government‟s

prescribed average limit rent, used in the calculation of rent rebates, the

percentage difference reduces the amount of rent rebate subsidy due to the

authority, i.e. it is “clawed-back” by the government.

CIPFA

The Chartered Institute of Public Finance and Accountancy

COLLECTION FUND

A separate fund that records the income and expenditure relating to Council Tax

and non-domestic rates.

COMMUNITY ASSETS

Assets that the Authority intends to hold in perpetuity, that have no determinable

useful life and that may have restrictions on their disposal. Examples of community

assets are parks and historical buildings.

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CONSISTENCY

The concept that the accounting treatment of like items within an accounting

period and from one period to the next are the same.

CONTINGENT ASSET

A contingent asset is a possible asset arising from past events whose existence will

be confirmed only by the occurrence of one or more uncertain future events not

wholly within the Authority‟s accounts.

CONTINGENT LIABILITY

A contingent liability is either:

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 Authority‟s control; or

A present obligation arising from past events where it is not probable that a

transfer of economic benefits will be required, or the amount of the obligation

cannot be measured with sufficient reliability.

CORPORATE AND DEMOCRATIC CORE

The corporate and democratic core comprises all activities that local authorities

engage in specifically because they are elected, multi-purpose authorities. 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

Amount owed by the Authority for work done, goods received or services rendered

within the accounting period, but for which payment has not been made by the

end of that accounting period.

CURRENT SERVICE COST (PENSIONS)

The increase in the present value of a defined benefits pension scheme‟s liabilities,

expected to arise from employee service in the current period.

DEBTOR

Amount owed to the Authority for works done, goods received or services rendered

within the accounting period, but for which payment has not been received by the

end of that accounting period.

DEFERRED CHARGES

Expenditure which can be properly deferred (i.e. treated as capital in nature), but

which does not result in, or remain matched with, a tangible asset. Examples of

deferred charges are grants of a capital nature to voluntary organisations.

DEFINED BENEFIT PENSION SCHEME

Pension schemes in which the benefits received by the participants are

independent of the contributions paid and are not directly related to the

investments of the scheme.

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DEPRECIATION

The measure of the cost of wearing out, consumption or other reduction in the useful

economic life of the Authority‟s fixed assets during the accounting period, whether

from use, the passage of time or obsolescence through technical or other changes.

DISCRETIONARY BENEFITS (PENSIONS)

Retirement benefits, which the employer has no legal, contractual or constructive

obligation to award and are awarded under the Authority‟s discretionary powers

such as the Local Government (Discretionary Payments) Regulations 1996.

EQUITY

The Authority‟s value of total assets less total liabilities.

EVENTS AFTER THE BALANCE SHEET DATE

Events after the Balance Sheet date are those events, favourable or unfavourable,

that occur between the Balance Sheet date and the date when the Statement of

Accounts is authorised for issue.

EXCEPTIONAL ITEMS

Material items which derive from events or transactions that fall within the ordinary

activities of the Authority and which need to be disclosed separately by virtue of

their size or incidence to give fair presentation of the accounts.

EXPECTED RETURN ON PENSION ASSETS

For a funded defined benefit scheme, this is the average rate of return, including

both income and changes in fair value but net of scheme expenses, which is

expected over the remaining life of the related obligation on the actual assets held

by the scheme.

EXTRAORDINARY ITEMS

Material items, possessing a high degree of abnormality, which derive from events or

transactions that fall outside the ordinary activities of the Authority and which are

not expected to recur. They do not include exceptional items, nor do they include

prior period items merely because they relate to a prior period. FAIR VALUE

The fair value of an asset is the price at which it could be exchanged in an arm‟s

length transaction less, where applicable, any grants receivable towards the

purchase or use of the asset.

FINANCE LEASE

A lease that transfers substantially all of the risks and rewards of ownership of a fixed

asset to the lessee.

GOING CONCERN

The concept that the Statement of Accounts is prepared on the assumption that the

Authority will continue in operational existence for the foreseeable future.

GOVERNMENT GRANTS

Grants made by the government towards either revenue or capital

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expenditure in return for past or future compliance with certain conditions relating to

the activities of the Authority. These grants may be specific to a particular scheme or

may support the revenue spend of the Authority in general.

HOUSING BENEFITS

A system of financial assistance to individuals towards certain housing costs

administered by authorities and subsidised by central government.

HOUSING REVENUE ACCOUNT (HRA)

A separate account to the General Fund, which includes the income and

expenditure arising from the provision of housing accommodation by the Authority.

IMPAIRMENT

A reduction in the value of a fixed asset to below its carrying amount on the

Balance Sheet.

INCOME AND EXPENDITURE ACCOUNT

The revenue account of the Authority that reports the net cost for the year of the

functions for which it is responsible and demonstrates how that cost has been

financed from precepts, grants and other income.

INFRASTRUCTURE ASSETS

Fixed assets belonging to the Authority that cannot be transferred or sold, on which

expenditure is only recoverable by the continued use of the asset created.

Examples are highways, footpaths and bridges. INTANGIBLE ASSETS

An intangible (non-physical) item may be defined as an asset when access to the

future economic benefits it represents is controlled by the reporting entity. This

Authority‟s intangible assets comprise computer software licences.

INTEREST COST (PENSIONS)

For a defined benefit scheme, the expected increase during the period of the

present value of the scheme liabilities because the benefits are one period closer to

settlement.

INVESTMENTS (PENSION FUND)

The investments of the Pension Fund will be accounted for in the statements of that

fund. However, authorities are also required to disclose, as part of the disclosure

requirements relating to retirement benefits, the attributable share of the pension

scheme assets associated with their underlying obligations.

LIABILITY

A liability is where the Authority owes payment to an individual or another

organisation.

A current liability is an amount which will become payable or could be called

in within the next accounting period, e.g. creditors or cash overdrawn.

A deferred liability is an amount which by arrangement is payable beyond

the next year at some point in the future or to be paid off by an annual sum

over a period of time.

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LIQUID RESOURCES

Current asset investments that are readily disposable by the Authority without

disrupting its business and are either:

Readily convertible to known amounts of cash at or close to the carrying

amount; or

Traded in an active market

LONG-TERM CONTRACT

A contract entered into for the design, manufacture or construction of a single

substantial asset or the provision of a service (or a combination of assets or services

which together constitute a single project), where the time taken to substantially

complete the contract is such that the contract activity falls into more than one

accounting period.

MATERIALITY

The concept that the Statement of Accounts should include all amounts which, if

omitted, or mis-stated, could be expected to lead to a distortion of the financial

statements and ultimately mislead a user of the accounts.

MINIMUM REVENUE PROVISION (MRP)

The minimum amount which must be charged to the revenue account each year in

order to provide for the repayment of loans and other amounts borrowed by the

Authority.

NEGATIVE SUBSIDY

If the Subsidy Housing Revenue Account produces a result, which assumes that the

Authority‟s income is higher than its expenditure, a “negative subsidy” situation

arises. In this case the Authority must pay an amount equivalent to the deficit, from

its Housing Revenue Account to the government.

NET BOOK VALUE

The amount at which fixed assets are included in the Balance Sheet, i.e. their

historical costs or current value less the cumulative amounts provided for

depreciation.

NET DEBT

The Authority‟s borrowings less cash and liquid resources.

NON-DISTRIBUTED COSTS

These are overheads for which no user now benefits and as such are not

apportioned to services

NATIONAL NON-DOMESTIC RATES (NNDR)

The National Non-Domestic Rate is a levy on businesses, based on a national rate in

the pound set by the government and multiplied by the assessed rateable value of

the premises they occupy. It is collected by the Authority on behalf of central

government and then redistributed back to support the cost of services.

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NON-OPERATIONAL ASSETS

Fixed assets held by the Authority but not directly occupied, used or consumed in

the delivery of services. Examples are investment properties, assets under

construction or assets surplus to requirements pending sale or redevelopment.

OPERATING LEASE

A lease where the ownership of the fixed asset remains with the lessor.

OPERATIONAL ASSETS

Fixed assets held and occupied, used or consumed by the Authority in the pursuit of

its strategy and in the direct delivery of those services for which it has either a

statutory or discretionary responsibility.

PAST SERVICE COST (PENSIONS)

For a defined benefit pension scheme, the increase in the present value of the

scheme liabilities related to employee service in prior periods arising in the current

period as a result of the introduction of, or improvement to retirement benefits.

PENSION SCHEME LIABILITIES

The liabilities of a defined benefit pension scheme for outgoings due after the

valuation date. Scheme liabilities measured during the projected unit method

reflect the benefits that the employer is committed to provide for service up to the

valuation date.

PRECEPT

The levy made by precepting authorities by billing authorities, requiring the latter to

collect income from Council Tax on their behalf.

PRIOR YEAR ADJUSTMENT

Material adjustments applicable to previous years arising from changes in

accounting polices or from the correction of fundamental errors. This does not

include normal recurring corrections or adjustments of accounting estimates made

in prior years.

PROVISION

An amount put aside in the accounts for future liabilities or losses which are certain

or very likely to occur but the amounts or dates of when they will arise are uncertain.

PUBLIC WORKS LOAN BOARD (PWLB)

A Central Government Agency, which provides loans for one year and above to

authorities at interest rates only slightly higher than those at which the government

can borrow itself.

RATEABLE VALUE

The annual assumed rental of a hereditament, which is used for NNDR purposes.

RELATED PARTIES

There is a detailed definition of related parties in FRS 8. For the Council‟s purposes

related parties are deemed to include the Authority‟s members, the Chief Executive,

its Directors and their close family and household members.

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RELATED PARTY TRANSACTIONS

The Statement Of Recommended Practice requires the disclosure of any material

transactions between the Authority and related parties to ensure that stakeholders

are aware when these transactions occur and the amount and implications of such.

REMUNERATION

All sums paid to or receivable by an employee and sums due by way of expenses

allowances (as far as those sums are chargeable to UK income tax) and the money

value of any other benefits. Received other than in cash. Pension contributions

payable by the employer are excluded.

RESERVES

The accumulation of surpluses, deficits and appropriations over past years. Reserves

of a revenue nature are available and can be spent or earmarked at the discretion

of the Authority. Some capital reserves such as the fixed asset restatement account

cannot be used to meet current expenditure.

RESIDUAL VALUE

The net realisable value of an asset at the end of its useful life.

RETIREMENT BENEFITS

All forms of consideration given by an employer in exchange for services rendered

by employees that are payable after the completion of employment.

REVENUE EXPENDITURE

The day-to-day expenses of providing services.

REVENUE SUPPORT GRANT

A grant paid by Central Government to authorities, contributing towards the general

cost of their services.

STOCKS

Items of raw materials and stores an authority has procured and holds in

expectation of future use. Examples are consumable stores, raw materials and

products and services in intermediate stages of completion.

TEMPORARY BORROWING

Money borrowed for a period of less than one year.

TRUST FUNDS

Funds administered by the Authority for such purposes as prizes, charities, specific

projects and on behalf of minors.

USEFUL ECONOMIC LIFE (UEL)

The period over which the Authority will derive benefits form the use of a fixed asset. WORK IN PROGRESS (WIP)

The cost of work performed on an uncompleted project at the Balance Sheet date,

which should be accounted for.

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