2011/2012 audited statement of accounts · 2016-08-17 · page explanatory foreword 3 statement of...

2011/2012AUDITED STATEMENT OF

ACCOUNTS

Page

Explanatory Foreword 3

Statement of Responsibilities for the Statement of Accounts 14

Movement in Reserves Statement 15

Comprehensive Income and Expenditure Statement - Group 18

Comprehensive Income and Expenditure Statement - Council 19

Balance Sheet - Group 20

Balance Sheet - Council 22

Cash Flow Statement - Group 24

Cash Flow Statement - Council 25

Notes to the Financial Statements 26

Housing Revenue Account 123

Council Tax Income Account 126

Non-Domestic Rates Income Account 127

Common Good Fund 128

- Movement in Reserves Statement 128

- Comprehensive Income and Expenditure Statement 129

- Balance Sheet 130

- Notes to the Common Good Fund Financial Statements 131

Annual Governance Statement 135

Remuneration Report 139

Independent Auditor's Report 150

The City of Edinburgh Council

Statement of Accounts

Year to 31 March 2012

CONTENTS

1

EXPLANATORY FOREWORD

Introduction

● Financial Statements and their purpose

- Movement in Reserves Statement - Comprehensive Income and Expenditure Statement - Balance Sheet - Cash Flow Statement.

● Statement of Responsibilities for the Statement of Accounts

● Movement in Reserves Statement

● Comprehensive Income and Expenditure Statement

● Balance Sheet

This statement sets out the respective responsibilities of the Authority and the Chief Financial Officer for the accounts.

This statement shows the movement in the year on the different reserves held by the Group and the Council. Reserves are analysed into 'usable reserves' (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The surplus on the provision of services line shows the true economic cost of providing the authority's services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund balance and the Housing Revenue Account for Council Tax setting and dwelling rent setting purposes respectively. The net increase / decrease before transfers to earmarked reserves line shows the statutory General Fund and Housing Revenue Account balances before any discretionary transfers to or from earmarked reserves undertaken by the Council.

This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. The Council raises taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Group and the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Group and the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example, the capital receipts reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves are those that the Group and the Council is not able to use to provide services. This category of reserves include reserves that hold unrealised gains and losses (for example, the revaluation reserve) where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line 'adjustments between accounting basis and funding basis under regulations'.

The Audited Statement of Accounts presents the financial position and performance of the Council, together with the financial position of the wider Council Group for the year to 31 March 2012.

The Statement of Accounts has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 and the Service Reporting Code of Practice.

The Statement of Accounts comprise the following financial statements and accompanying explanatory notes:

The Council has an interest in a number of companies and joint ventures. Where material, the financial results of the Council’s subsidiaries, associates and joint ventures are consolidated into Group Accounts. The aim of these accounts is to show the full picture of the Council's sphere of control and influence over service provision, resources and exposure to risk that the Council has taken on through its involvement in various entities.

The following statements show the position for the Group and the Council separately:

3


Introduction - continued● Financial Statements and Their Purpose - continued

● Cash Flow Statement

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● Council Tax Income Account

● Non-Domestic Rate Account

● Common Good Fund

● Annual Governance Statement

● Remuneration Report

● Newly Adopted Accounting Standards

The Non-Domestic Rate Account is an agent's statement that reflects the statutory obligation for billing authorities to maintain a separate Non-Domestic Rate Account. The statement shows the gross income from the rates and deductions made under statute. The net income is paid to the Scottish Government as a contribution to the national Non-Domestic Rate pool.

Heritage assets have been recognised in the Financial Statements, for the first time, under the requirements of FRS30 Heritage Assets.

Heritage assets are those assets that are intended to be preserved in trust for future generations because of their cultural, environmental or historical associations. Examples include historical buildings and museum and gallery collections.

Recognition of heritage assets has been accounted for as a prior year adjustment. These Financial Statements therefore include a re-stated Balance Sheet as at 1 April 2010 and as at 31 March 2011. Further details on heritage assets can be seen in note 17, and the impact of the prior year adjustment on the previously published Balance Sheets in note 48.

This presents information on the remuneration of senior elected members, senior officers within the Council and the most senior employee within each of its subsidiary companies.

This explains how the Council conducts its business, both internally and in its dealings with others. The statement details the review of effectiveness of the code of governance and outlines any enhancements underway.

This presents the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement and the Balance Sheet for the Common Good Fund.

This statement shows the changes in cash and cash equivalents of the Group and the Council during the reporting period. The statement shows how the Group and the Council generate and use cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations are funded by way of taxation and grant income or from the recipients of services provided by the Group and the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Group and the Council's future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Group and the Council.

These statements present the position, as previously described, for the Housing Revenue Account.

Housing Revenue Account Movement in Reserves Statement and Comprehensive Income and Expenditure Statement

The Council Tax Income Account shows the gross income raised from Council Taxes levied and deductions made under statute. The resultant net income is transferred to the Comprehensive Income and Expenditure Statement of the Council.

4


Financial PerformanceRevenue

Budget Actual (Under) 2011/12 2011/12 Spend

£000 £000 £000 General Fund services 882,455 885,473 3,018Dividend income (net) (3,000) (3,000) 0Significant trading operations (8,046) (6,403) 1,643Loans charges / interest on revenue balances 106,193 102,774 (3,419)Contribution to earmarked balances 4,646 4,646 0Budgeted contribution to unallocated general reserve 0 0 0

Total expenditure to be funded 982,248 983,490 1,242

Council tax (226,125) (227,639) (1,514)Net cost of council tax benefit (561) (275) 286

Total - council tax income account (226,686) (227,914) (1,228)Community charge income 0 (61) (61)General revenue funding (458,120) (458,120) 0Distribution from non-domestic rate pool (297,442) (297,442) 0

Funding (982,248) (983,537) (1,289)

General Fund surplus for the year 0 (47) (47)

Net sum released from provisions (relating to previous years) 0 (5,394) (5,394)

Transfer to Council Priorities Fund 0 (5,441) (5,441)

Budget performance - General FundThe main variances in the Council's outturn position arose in the following areas:

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A sum of £11.042m was returned from the provisions previously set aside for equal pay and modernising pay. This funding was partly used to meet the costs arising from the review of bad debt and other provisions, with the residual sum of £5.441m being set aside in the Council Priorities Fund held within earmarked balances.

The in-year surplus of £0.047m was also transferred to the Council Priorities Fund.

Council tax income exceeded budget by £1.514m, as a result of reduced levels of exemptions and discounts in prior years' tax. This was partly offset by a shortfall of £0.286m in the net cost of council tax

The Council's financial performance is presented in the Comprehensive Income and Expenditure Statement, which can be seen on page 19. This statement has been prepared using International Financial Reporting Standards. To show the net position of the Council, it is necessary to adjust the Comprehensive Income and Expenditure Statement for statutory items that require to be taken into account in determining the position on the General Fund and Housing Revenue Account for the year. These are shown in the Movement in Reserves Statement (pages 15 to 17).

Fees and charges levied by the Council have been offset against the cost of providing services and are included within the actual cost of General Fund Services shown above.

The outturn position for the General Fund, excluding accounting practice adjustments, compared to budget is summarised below. Further details will be provided in the report to the Finance and Resources Committee in August 2012, which will be available on the Council's website.

A reduction of £3.419m on loan charges / interest on revenue balances, primarily resulting from effective treasury management on the investment of surplus funds and slippage in the capital programme.

An overspend on General Fund services of £3.018m, including unbudgeted expenditure relating to trams and statutory repairs, together with a reduced contribution of £1.643m from the Council's significant trading operations, partially offset by service underspends. General Fund services includes costs that are not directly chargeable to specific services, with budgets being held centrally. For the third year in succession, all services returned underspends against their approved budgets.

5


Financial Performance - continuedPrincipal Sources of FundingThe principal sources of funding used by the Council during the year were:

£000 227,975458,120297,442

983,537

Reconciliation to Amounts Reported for Resource Allocation Decisions

Net Expenditure Income Expenditure

£000 £000 £000 Children and Families 401,640 (14,875) 386,765City Development 15,121 (3,766) 11,355Corporate Governance 112,705 (43,310) 69,395Health and Social Care 244,886 (62,692) 182,194Joint Boards 70,452 (1,906) 68,546Services for Communities 387,533 (255,229) 132,304Net cost of benefits 221,912 (220,661) 1,251Other non-departmental specific income and expenditure 36,828 (9,844) 26,984

1,491,077 (612,283) 878,794

General Fund services (as shown on page 5) 885,473Significant trading operations (as shown on page 5) (6,403)Net cost of council tax benefit (as shown on page 5) (275)

878,795ReservesThe Council's General Fund comprises two elements:

● The unallocated General Fund; and

● Balances earmarked for specific purposes.

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● Balances set aside, primarily from grant income, due to timing differences between the receipt of the grant income and the planned expenditure thereof. The Council holds £38.551m of income which has been received in advance of planned expenditure.

The latest review was in February 2012, as part of the 2012-2015 budget setting process. The unallocated General Fund balance remains at £13.025m. There were no planned contributions to the unallocated General Fund for 2011/12.

Council tax / community charge income (net of cost of benefits)

Total

In addition, the Council has a further £88.413m of balances earmarked for specific purposes. These are held for a number of reasons:

Balances set aside for specific financial risks which are likely to arise in the medium term future. Examples include monies earmarked for equal pay and the insurance fund. The Council holds £43.496m against these future risks. It should be noted, however, that the approved budget for 2012/13 includes use of £5.945m of funding, primarily from these earmarked balances.

The unallocated General Fund is held against the risk of unanticipated expenditure or reduced income arising in any particular year. The level on this reserve is reviewed annually by the Council as part of the revenue budget process. This review considers the level of balances held, the financial risks which could be realised and the arrangements in place to manage these.

Note 32 to the Financial Statements shows the amounts reported for resource allocation decisions. The service income and expenditure shown in note 32 can be reconciled back to the total shown for General Fund services as follows:

General revenue fundingDistribution from non-domestic rates pool

6


Reserves - continued●

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Impact of Current Economic Climate and Financial Stability

Modernising Pay

Housing Revenue Account

Balances set aside to enable the Council to undertake investment in specific projects which will deliver savings in future years. These savings are used, initially, to reimburse the earmarked balances. The Council holds £3.447m of balances for such projects.

The Council has a statutory obligation to maintain a revenue account for its housing provision in accordance with the Housing (Scotland) Act 1987. The Housing Revenue Account records all expenditure and income relating to the Council's own housing stock. Revenue expenditure on housing management, repairs and maintenance is funded from rent paid by tenants.

The Council is also pursuing a major capital investment programme to improve its housing stock to meet the Scottish Housing Quality Standard by 2015. This programme is funded largely through prudential borrowing with the costs of borrowing met from rental income.

Balances held under the School Board Delegation Scheme (DSM), which permits balances on individual school budgets to be carried forward to the following financial year. The current balance is £2.919m.

For the third consecutive year, all service areas maintained expenditure within budgeted levels in 2011/12. In addition, the Scottish Local Government Finance Settlement for 2012/13 to 2014/15 made provision for each local authority to receive no less than 85% of the per capita average grant for Scotland as a whole, equating to additional funding for Edinburgh of around £23 million in each of the years concerned. Given these factors and having previously re-established unallocated reserves to a level consistent with the risk the Council faces, a number of non-recurring service investments were therefore able to be included in the Council’s 2012/13 Budget.

Looking forward, however, in the face both of an overall level of grant funding that is decreasing in real terms and on-going increases in demographic-related demand, further service efficiencies and a greater emphasis upon service prioritisation will be required to address a projected savings requirement of around £60 million over the period from 2013/14 to 2015/16. It is within this context that the Council’s Priority-Based Planning project is proceeding. This initiative seeks to link the Council’s spending more closely to its priority outcomes through scrutiny of individual services to assess the extent to which they contribute to key outcomes and/or could be delivered in different ways. A further focus of the project is on addressing a number of themes common to a range of Council services, including examining opportunities around investment in early intervention and prevention, community capacity-building and review of business processes. This work complements separate on-going projects to deliver savings through better procurement and making better use of the Council's property estate.

The Council implemented its modernising pay scheme on 4 October 2010. However, there remain a number of significant financial issues as a result of historical pay inequalities which have continuing implications for the Council's financial strategy.

As at 31 March 2012, £79.549m has either been paid or provided for to meet actual and potential future settlement of equal pay claims. From the date of implementation, employees whose new salaries and wages are lower than their previous earnings are contractually entitled to a three-year pay protection period. This has already resulted in additional liabilities as settlement discussions roll out to deal with eligible claims from both solicitors' clients and other unrepresented claimants. The costs associated with equal pay settlement negotiations will have implications for future years and this will be taken into account in the Council's financial strategy.

In summary, the level of reserves at 31 March 2012, together with the forward strategy, are considered appropriate in view of the financial liabilities and risks likely to face the Council in the short to medium term.

7


Housing Revenue Account - continued

Significant Trading Operations

£000 Surplus (6,403)IAS 19 Charges (1,058)Other adjustments, including non distributed costs and holiday accrual (638)

Net income included in Comprehensive Income and Expenditure Statement (8,099)

Included in individual services in Comprehensive Income and Expenditure Statement (2,598)Included in net surplus from trading accounts (see notes 12 and 33) (5,501)

Net income included in Comprehensive Income and Expenditure Statement (8,099)

Following a formal period of consultation to identify savings, BlindCraft closed on 29 July 2011. Further details can be seen in note 33 to the Financial Statements

In March 2009, the Council approved a programme to build up to 1,300 new homes for sale and rent under the 21st Century Homes programme. Construction work on the council phase in Gracemount is complete, with the first Council homes handed over in February 2012. This site will provide 215 new homes of which half will be affordable, including social rent, mid rent and low cost home ownership with the first phase of affordable housing being released in July 2012. Planning permission in principle has been granted for the site in North Sighthill, and construction of the remaining phases at Pennywell and Craigmillar is due to start in 2012/13.

The 2009/10 surpluses and deficits included in the statutory requirement to breakeven have not been re-stated to include the impact of the costs for accrued holiday leave entitlement, although the figures included in the Comprehensive Income and Expenditure Statement have been re-stated. The figures for 2010/11 and 2011/12 include these costs.

The provisions contained in the Local Government in Scotland Act 2003 require the Council to consider all services provided and determine which are Significant Trading Operations. The Act requires statutory trading accounts to be maintained for Significant Trading Operations and that they should break even over a three-year rolling period. 2011/12 is the tenth year of trading for the areas identified as Significant Trading Operations.

The Housing Revenue Account broke even at the end of the financial year, after making a contribution, via the General Fund, of £3.514m to the renewal and repairs fund. In addition, £4m of Housing Revenue Account debt was repaid during the year in accordance with the approved budget and the thirty year business plan.

Good progress was maintained towards meeting the Scottish Housing Quality Standard with 75% of dwellings compliant as at 31 March 2012, compared to 70% as at 31 March 2011.

Direct Cleaning, Edinburgh Catering Services - Other Catering and Refuse Collection (including Trade Waste) failed to achieve their statutory obligation to break even over the three-year period 2009-10 to 2011-12. Excluding costs relating to equal pay, Direct Cleaning would have met their statutory targets to break even over a three-year period. Refuse Collection did not have any equal pay costs. Further details can be seen in note 33 to the Financial Statements.

The surplus of £6.403m in the table on page 5 represents the overall outturn from all the Significant Trading Operations, excluding IAS 19 and other adjustments. In the Comprehensive Income and Expenditure Statements (pages 18 and 19), the results are included in 'Net Surplus from Trading Undertakings', Exceptional Expenditure or within the relevant service as stated in note 33 to the Financial Statements.

8


Capital ExpenditureThe outturn position for capital expenditure is summarised below:

Revised Budget Actual (Slippage) /2011/12 2011/12 Acceleration

£000 £000 £000 Capital expenditureGeneral Fund services 352,561 289,621 (62,940)Housing Revenue Account 48,250 49,303 1,053

Total capital expenditure 400,811 338,924 (61,887)

Capital receipts and other contributions - General Fund services (33,698) (22,477) 11,221 - Housing Revenue Account (4,300) (3,033) 1,267Government and other grants - General Fund services (79,044) (79,339) (295) - Housing Revenue Account (550) (3,892) (3,342)

Total capital income (117,592) (108,741) 8,851

Balance to be funded through borrowing - General Fund services 239,819 187,805 (52,014) - Housing Revenue Account 43,400 42,378 (1,022)

Total advances from loans fund 283,219 230,183 (53,036)

Expenditure on General Fund services slipped by £62.940m. Of this, £11.318m related to the tram project. Further detail on the tram project can be seen on page 10. The remainder of the slippage related to a number of projects across the programme, the most significant of which include flood prevention, asset management works, environmental projects funded through the zero waste fund, private sector housing grant, Niddrie Burn / Edinburgh Royal Infirmary link road, public realm works, grants to registered social landlords projects and the Edinburgh International Conference Centre - additional function space. Expenditure on the Housing Revenue Account was accelerated by £1.053m.

Funding of capital expenditure included £83.231m from government and other grants. The Council received £29.998m of Government grants relating to housing development funding and the trams project. A further £8.421m was generated from the sale of assets and other receipts. Additionally, £17.089m of funding was received from developers and other bodies. The remaining £230.183m was funded through borrowing.

The current economic climate continues to have a serious impact on the property market and this in turn has impacted on the Council's ability to raise income to fund capital projects through the sale of assets. The residential market has been particularly affected and this is where the Council's largest capital receipts were anticipated. As this is not expected to improve in the immediate future, the Council has had to re-align its capital programme to ensure that it remains affordable.

The Council received £48.655m of general capital grant. This includes £1.906m which was passed to Lothian and Borders Police Board. The support provided through general capital grant enables the Council to direct resources to its own priorities.

Capital expenditure for the year totalled £338.924m. Of this amount, £49.303m was spent on Council housing through the Housing Revenue Account programme with a further £29.610m on social housing through the housing development fund. £130.049m was spent on tram works, roads and other infrastructure, £21.832m on recreational venues and £29.727m on educational properties, including the purchase of land at Fountainbridge for the potential future location of Boroughmuir High School. In addition, £23.025m was spent through General Fund services on construction of additional function space and offices at Edinburgh International Conference Centre (EICC).

9


Capital Expenditure - continuedMajor capital projects undertaken during the year included:

● Continuing investment in roads and other infrastructure

● Construction and refurbishment of schools

● Continuation of the tram project

● Refurbishment of the Assembly Rooms and Royal Commonwealth Pool

● Construction of additional function space and office at the EICC

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Tram Project

As of 28 April 2012, £605m had been incurred on the project. Works undertaken include:

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● 27 tram vehicles are complete and factory tested, 12 have been delivered to the depot;

● The crossover section of track at Haymarket Yards was completed in February 2012;

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● The underpass at the A8 / Gogar roundabout was completed in April 2012.

Long-term Borrowing

The Council borrowed money throughout the year to meet anticipated capital expenditure requirements and to refinance maturing loans after allowing for debt repayments. The borrowing strategy is prepared in accordance with the Code of Practice on Treasury Management in Local Authorities. The majority of the Council's borrowing comes from the Public Works Loan Board with the remainder from the European Investment Bank and market and other loans. Further details are provided at note 31 to the Financial Statements.

The Council is required, by regulation, to have regard to the Prudential Code, which was established by CIPFA to support local authorities in taking their capital investment decisions, in undertaking its duties. The key objectives of the Prudential Code are to ensure, within a clear framework, that the capital plans of local authorities are affordable, prudent and sustainable. Revenue costs arising from long-term borrowing are provided for within the framework of the Long-Term Financial Plan.

A further key objective is to ensure that treasury management decisions are taken in accordance with professional guidance and best practice. The Prudential Code also has the objectives of being consistent with and supporting local strategic planning, local asset management planning and proper option appraisal.

Purchase of a 4.7 hectare site at Fountainbridge for the potential future location of Boroughmuir High School and other uses.

During 2011/12 revised governance and project management arrangements were put in place. The Council has taken executive control of the project and appointed Turner and Townsend to provide project management support to the Infraco contract and utility related issues. In addition, Transport Scotland has taken a more active role in the project going forward. Following mediation, a thorough review of the project governance arrangements was undertaken. As a result, tie Ltd no longer has any involvement in the tram project. Turner and Townsend were appointed to assist the Council on project management and commercial matters.

As a result of mediation, the contractor and the Council reached agreement on a settlement to build the project from the airport to St Andrew Square / York Place. The additional requirement for funding was reported to and approved by Council on 2 September 2011. The total revised project cost is now forecast at £776m with the additional £231m being funded by the Council. The project remains on the revised budget and on target for completion by summer 2014.

The first major milestone was reached with the handover of the Gogar depot in December 2011, the same month that dynamic testing began;

Remaining utility works were completed in Shandwick Place in February 2012 and in St Andrew Square in March 2012, allowing main infrastructure works to commence;

10


Investments

Public Private Partnership - Provision of School Buildings

Further details are provided at note 41 to the Financial Statements.

International Accounts Standard 19 - Employee Benefits

Net Pension LiabilityThe net pension liability, shown in note 43 to the Financial Statements, in accordance with the requirements of IAS19 Employee Benefits, amounts to £381.215m. This exceeds current General Fund reserves of £101.438m. It should be noted that this is a snapshot of the position at 31 March 2012. The actuarial valuation, which takes a longer term view, will consider the appropriate employer's contribution rates and this, together with employee contributions and revenues generated from fund investments, will be utilised to meet the fund's commitments.

The Council's approach to the investment of its surplus funds has always been to prioritise the security of its investments rather than to seek the greatest return possible on them. Throughout the 'credit crunch' the Council has continued to manage its counterparty exposure accordingly to protect its funds. More details can be found under credit risk on pages 112 and 113.

Terms and conditions for Scottish teachers have changed during 2011/12, with the introduction of school closure days. Some days within school holiday periods are now 'school closure days' and are non-accumulating absence days within the annual leave calculations.

Costs relating to teachers within the annual leave calculation have decreased from £13.151m in 2010/11 to £7.073m in 2011/12. This is mainly attributable to the introduction of 'school closure days'.

The total amount paid during the year for termination benefits can be seen in the Remuneration Report on page 145.

In April 2007, the Council entered into a second public private partnership with Axiom Education Limited for the provision of school buildings, property maintenance and other facilities. This project provides for replacement of six secondary schools and two primary schools.

The requirement to account for retirement benefits, is based on the principle that an organisation should account for retirement benefits at the point at which it commits to paying them, rather than when payment actually falls due. The net cost of services in the Comprehensive Income and Expenditure Statement therefore includes an appropriate amount for the retirement benefits the Council has committed to pay, while the effect on the amount to be met from government grant and local tax payers has been balanced through inclusion of pensions interest costs and a transfer from the pensions reserve. This is because the Council bases its budget on the agreed employer's pension contributions payable and payments to pensioners in the year rather than benefit entitlements earned by employees.

In November 2001, the Council entered into a public private partnership with Edinburgh Schools Partnership, for the provision of school buildings, property maintenance and other facility management services. This was supplemented by a further agreement in April 2004. The project provides for a total of eighteen new or refurbished schools and other facilities throughout the city.

Property used in providing services under PPP contracts is now recognised as an asset on an authority's balance sheet.

IAS 19 - Employee Benefits covers all types of employee benefits. It covers benefits payable during employment, termination benefits and post-employment benefits.

The adoption of IAS 19 requires the Council to include the cost of paid annual leave in the Financial Statements. The cost of annual leave that employees have earned the right to that remains unused as at 31 March is included in the net cost of services in the Comprehensive Income and Expenditure Statement (CIES), with a corresponding adjustment made in the Movement in Reserves Statement, thus avoiding any impact on the Council's funding position.

11


Provisions

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Financial Ratios

2011/12 2010/11 ● Reserves

● 1.33% 1.30%

● £0 £4m

0.00% 44.30%

● Council Tax● 94.60% 94.30%

● 23.20% 22.60%

● Debt and Borrowing - Prudence● £1,563.6m £1,412.1m

● £1,660.7m £1,555.5m

Unallocated General Fund balance as a percentage of annual budgeted net expenditure

The unallocated General Fund balance has remained constant at £13.025m. The increase in the ratio is due to a reduction in annual budgeted net expenditure.

Movement in the unallocated General Fund balance

As shown on page 5, there was no planned contribution to the unallocated General Fund balance in 2011/12. The contribution of £4m in 2010/11 enabled the Council to meet its medium term reserves strategy one year ahead of schedule.

The Council has made provision within its Financial Statements against both non-collection of income and obligations arising from past events.

As can be seen from note 20.4 to the Financial Statements, the Council has made provision for £240.781m against non-collection of outstanding income, mainly comprising council tax and community charge. During the year, a net additional amount of £13.679m was set aside in these provisions for impairment of debtors, including statutory repair notices.

Note 24 to the Financial Statements shows that the Council has provided for £35.409m for potential costs arising from past events, a net decrease of £92.288m from the previous year, mainly relating to settlement of costs relating to the tram project and equal pay and the reversal of provisions relating to equal pay and modernising pay. Within the total amount, £6.964m relates to the tram scheme and £23.968m for equal pay claims.

This is the first year that financial ratios have been included in the Financial Statements. Ratios have been provided across three headings - reserves, Council Tax and debt and borrowing.

In-year collection rate This shows the % of Council Tax collected during the financial year that relates to bills issued for that year. It does not include collection of funding relating to previous financial years.

Council Tax income as a percentage of overall funding

This shows the proportion of total funding that is derived from Council Tax.

External debt levels External debt levels include long-term commitments in respect of finance leases (mainly schools provided through PPP schemes).

External debt levels exceed the capital financing requirement as borrowing is based on market conditions and therefore may be undertaken in advance of need.

Capital Financing Requirement

The capital financing requirement represents the underlying need to borrow to fund expenditure on assets. Further details can be seen in note 39 to the Financial Statements

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Financial Ratios - continued2011/12 2010/11

● Debt and Borrowing - Affordability● 10.45% 9.74%

35.97% 35.85%

● 2.30% 4.05%

2.19% 2.70%

Group Accounts

Group Accounts - Prior Year AdjustmentsLothian and Borders Fire and Rescue Board●

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HUGH DUNN, CPFAActing Chief Financial Officer28 September 2012

The Financial Statements reflect a prior year adjustment relating to the treatment of IAS19 transactions. The adjustment affects both expenditure and income within the Comprehensive Income and Expenditure Statement (CIES), however, as this is shown on a net expenditure basis, there is no impact on the CIES.

The depreciation policy for vehicles has been reviewed to better reflect the use of economic value of those assets. Depending on the vehicle type, these assets are now depreciated over a period of five to fifteen years, reflecting the estimated useful life of the assets. The change has been applied retrospectively by adjusting the opening balances and comparative amounts. Details of the change can be seen in note 48 to the Financial Statements.

The Group Balance Sheet, shown on pages 20 and 21 shows net assets for 2011/12 of £842.076m. Within this total, the Group has a combined pension liability of £1,621.873m. This reflects the inclusion of pension liabilities relating to Council, police and fire officers, other employees, including subsidiary companies and the incorporation of joint boards as associates within the group. This exceeds the value of distributable reserves held by the Group. It should be noted that this is a snapshot of the position at 31 March 2012. The actuarial valuation, which takes a longer term view, will consider the appropriate employers' contribution rates and these, together with employee contributions and revenues generated from fund investments, will be utilised to meet the financing of these liabilities. It is therefore appropriate to adopt a going concern basis for the preparation of the group financial statements.

Impact of capital investment on Council Tax

These ratios show incremental impact of financing costs (the increase in financing costs from the previous financial year) as a percentage of Council Tax, in respect of costs payable through the General Fund and house rents, in respect of costs payable through the Housing Revenue Account.

Impact of capital investment on house rents

Financing costs to net revenue stream - General FundFinancing costs to net revenue stream - Housing Revenue Account

These ratios show the proportion of total revenue funding that is used to meet financing costs. The ratios exclude any voluntary repayments of debt made during the year

The Council's arms-length companies have also been affected by the economic climate. A number of the companies are involved in the property market and have seen the values of their property portfolios decrease as a direct result of the current economic conditions.

13

STATEMENT OF RESPONSIBILITIES FOR THESTATEMENT OF ACCOUNTS

The Authority's Responsibilities

The Authority is required:

●

●

The Chief Financial Officer's Responsibilities

In preparing this statement of accounts, the Chief Financial Officer 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, except where stated in the Policies and Notes to the Accounts.

The Chief Financial Officer has also:

● kept proper accounting records which were up to date;

● taken reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of Accounts


to make arrangements for the proper administration of its financial affairs, including group interests, and to secure that one of its officers has the responsibility for the administration of those affairs. In this Authority, that officer is the Chief Financial Officer.

to manage its affairs to secure economic, efficient and effective use of its resources and safeguard its assets.

The Statement of Accounts presents a true and fair view of the financial position of the Council as at 31 March 2012, and its income and expenditure for the year ended 31 March 2012.

The Chief Financial Officer is responsible for the preparation of the Authority's Statement of Accounts which, in terms of the CIPFA / LASAAC Code of Practice on Local Authority Accounting in the United Kingdom ('the Code of Practice'), is required to present a true and fair view of the financial position of the Authority at the accounting date and its income and expenditure for the year (ended 31 March 2012).

14

MOVEMENT IN RESERVES STATEMENT

Housing Renewal General Revenue and Capital

Fund Account Repairs Receipts Balance Balance Fund Reserve

2011/12 £000 £000 £000 £000 Balance at 31 March 2011 (89,634) 0 (15,404) 0

Movement in reserves during 2011/12

(Surplus) or deficit on the provision of services (18,591) 2,093 0 0

Other Comprehensive Income and Expenditure 0 0 0 (8,421)

Total Comprehensive Income and Expenditure (18,591) 2,093 0 (8,421)

Adjustments between accounting basis and 6,634 (5,607) 0 8,421funding basis under regulations (Note 9)

Net (increase) / decrease before transfers to statutory reserves (11,957) (3,514) 0 0

Transfer (to) / from other statutory reserves (Note 10.3) 153 3,514 (3,589) 0Minority interest and other consolidation adjustments 0 0 0 0

(Increase) / decrease in year (11,804) 0 (3,589) 0

Balance at 31 March 2012 (101,438) 0 (18,993) 0

Capital Council's Grants Total Group

Unapplied Capital Usable Usable Account Fund Reserves Reserves

2011/12 £000 £000 £000 £000 Balance at 31 March 2011 (1,541) (16,390) (122,969) (17,857)


(Surplus) or deficit on the provision of services 0 0 (16,498) 57,975

Other Comprehensive Income and Expenditure 0 0 (8,421) (16,362)

Total Comprehensive Income and Expenditure 0 0 (24,919) 41,613

Adjustments between accounting basis and (5,992) 99 3,555 (55,406)funding basis under regulations (Note 9)

Net (increase) / decrease before transfers to statutory reserves (5,992) 99 (21,364) (13,793)

Transfer (to) / from other statutory reserves (Note 10.3) 0 (78) 0 2,544Minority interest and other consolidation adjustments 0 0 0 0

(Increase) / decrease in year (5,992) 21 (21,364) (11,249)

Balance at 31 March 2012 (7,533) (16,369) (144,333) (29,106)

This statement shows the movement in the year on the different reserves held by the Council and its Group members. Reserves are analysed into 'usable reserves' (i.e. those that can be applied to fund expenditure or reduce local taxation), most of which is already earmarked and other, unusable reserves. The surplus or deficit on the provision of services line shows the true economic cost of providing the Group's services, more details of which are shown in the Group Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund balance and the Housing Revenue Account for Council Tax setting and dwelling rent setting purposes. The net increase / decrease before transfers to earmarked reserves line shows the statutory General Fund and Housing Revenue Account balances before any discretionary transfers to or from earmarked reserves undertaken by the Council. Group reserves are shown as either usable or unusable reserves.

15


Total Council's Group Usable Unusable Unusable Total

Reserves Reserves Reserves Reserves 2011/12 £000 £000 £000 £000

Balance at 31 March 2011 (140,826) (1,716,665) 918,730 (938,761)


(Surplus) or deficit on the provision of services 41,477 0 0 41,477

Other Comprehensive Income and Expenditure (24,783) (35,017) 121,285 61,485

Total Comprehensive Income and Expenditure 16,694 (35,017) 121,285 102,962

Adjustments between accounting basis andfunding basis under regulations (Note 9) (51,851) (3,555) 55,406 0

Net (increase) / decrease before transfers to statutory reserves (35,157) (38,572) 176,691 102,962

Transfer (to) / from other statutory reserves (Note 10.3) 2,544 0 (2,544) 0

Minority interest and other consolidation adjustments 0 0 71 71

(Increase) / decrease in year (32,613) (38,572) 174,218 103,033

Balance at 31 March 2012 (173,439) (1,755,237) 1,092,948 (835,728)

Housing Renewal General Revenue and Capital

Fund Account Repairs Receipts Balance Balance Fund Reserve

2010/11 Comparative Data £000 £000 £000 £000

Balance at 31 March 2010 (73,113) 0 (13,779) 0


(Surplus) or deficit on the provision of services (251,018) 12,832 0 0

Other Comprehensive Income and Expenditure 0 0 0 (8,435)

Total Comprehensive Income and Expenditure (251,018) 12,832 0 (8,435)

Adjustments between accounting basis andfunding basis under regulations (Note 9) 240,399 (14,446) 0 8,435

Net (increase) / decrease before transfers to statutory reserves (10,619) (1,614) 0 0

Transfer (to) / from other statutory reserves (Note 10.3) (5,902) 1,614 (1,625) 0

Minority interest and other consolidation adjustments 0 0 0 0

(Increase) / decrease in year (16,521) 0 (1,625) 0

Balance at 31 March 2011 (89,634) 0 (15,404) 0

16


Capital Council's Grants Total Group

Unapplied Capital Usable Usable Account Fund Reserves Reserves


Balance at 31 March 2010 (27,207) (22,467) (136,566) 12,942


(Surplus) or deficit on the provision of services 0 0 (238,186) (87,509)


Total Comprehensive Income and Expenditure 0 0 (246,621) (107,531)

Adjustments between accounting basis and 25,666 164 260,218 73,850funding basis under regulations (Note 9)

Net (increase) / decrease before transfers to statutory reserves 25,666 164 13,597 (33,681)

Transfer (to) / from other statutory reserves (Note 10.3) 0 5,913 0 (405)

Minority interest and other consolidation adjustments 0 0 0 3,287

(Increase) / decrease in year 25,666 6,077 13,597 (30,799)

Balance at 31 March 2011 (1,541) (16,390) (122,969) (17,857)

Total Council's Group Usable Unusable Unusable Total

Reserves Reserves Reserves Reserves 2010/11 Comparative Data £000 £000 £000 £000

Balance at 31 March 2010 (123,624) (1,254,564) 1,058,162 (320,026)


(Surplus) or deficit on the provision of services (325,695) 0 0 (325,695)

Other Comprehensive Income and Expenditure (28,457) (201,883) (57,881) (288,221)

Total Comprehensive Income and Expenditure (354,152) (201,883) (57,881) (613,916)

Adjustments between accounting basis andfunding basis under regulations (Note 9) 334,068 (260,218) (73,850) 0

Net (increase) / decrease before transfers to statutory reserves (20,084) (462,101) (131,731) (613,916)

Transfer (to) / from other statutory reserves (Note 10.3) (405) 0 405 0

Minority interest and other consolidation adjustments 3,287 0 (8,105) (4,818)

(Increase) / decrease in year (17,202) (462,101) (139,431) (618,734)

Balance at 31 March 2011 (140,826) (1,716,665) 918,731 (938,760)

17

GROUP COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT

for the year ended 31 March 2012

(Re-stated) Gross Net 2010/11 Expend. Income Expend.

£000 Notes £000 £000 £000 SERVICES

344,011 Education Services 353,280 (12,816) 340,464275,313 Social Work 347,227 (63,311) 283,916

(1,757) Housing Revenue Account 76,676 (91,476) (14,800)42,072 Other Housing Services 294,634 (263,366) 31,26847,759 Cultural and Related Services 85,572 (16,761) 68,81171,662 Environmental Services 92,371 (20,424) 71,94735,989 Roads and Transport 322,821 (271,104) 51,71733,914 Planning and Development 62,976 (21,885) 41,09146,846 Police Joint Board Requisition 45,628 (1,906) 43,72222,753 Fire Joint Board Requisition 21,051 0 21,05113,302 Corporate and Democratic Core 12,414 (1,130) 11,28420,162 Non-Distributed Costs 19,352 0 19,3525,479 Services to the Public 21,470 (15,414) 6,0568,761 Other Operating Expenditure 43,431 (37,493) 5,938

(162,301) Exceptional Items 49. (9,952) 0 (9,952)(63,990) Associates and Joint Ventures Accounted 233,169 (169,152) 64,017

for on an Equity Basis

739,975 COST OF SERVICES 2,022,120 (986,238) 1,035,882

(2,168) Other Operating Expenditure 11. (1,812)

64,147 Financing and Investment Income and Exp. 12. 56,462

(1,127,649) Taxation and Non-Specific Grant Income 13. (1,049,054)

(325,695) DEFICIT / (SURPLUS) ON PROVISION OF SERVICES 41,478

(50,023) (110,880)

(161,242) 66,159

(76,956) Other Unrealised (Gains) / Losses 106,206

(288,221) Other Comprehensive Income and Expend. 61,485

(613,916) 102,963

An analysis of minority interest shares in the Group Comprehensive Income and Expenditure Statement can be seen in note 7.1.

This statement shows the accounting cost in the year of providing services for the Group in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. The Council raises taxation to cover its expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

TOTAL COMPREHENSIVE (INCOME) AND EXPENDITURE

Surplus on Revaluation of Non-Current Assets

Actuarial (Gains) / Losses on Pension Liabilities

18

COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT


Gross Net 2010/11 Expend. Income Expend.

£000 Notes £000 £000 £000 SERVICES

344,011 Education Services 353,280 (12,816) 340,464275,313 Social Work 347,227 (63,311) 283,916

(1,757) Housing Revenue Account 76,676 (91,476) (14,800)42,072 Other Housing Services 294,634 (263,366) 31,26849,881 Cultural and Related Services 82,157 (11,064) 71,09371,662 Environmental Services 92,371 (20,424) 71,94764,588 Roads and Transport 99,612 (42,725) 56,88734,055 Planning and Development 58,591 (19,997) 38,59446,846 Police Joint Board Requisition 45,628 (1,906) 43,72222,753 Fire Joint Board Requisition 21,051 0 21,05113,302 Corporate and Democratic Core 12,414 (1,130) 11,28420,162 Non-Distributed Costs 19,352 0 19,3525,479 Services to the Public 21,470 (15,414) 6,0562,697 Other Operating Expenditure / (Income) 38,175 (31,511) 6,664

(162,301) Exceptional Items 49. (9,952) 0 (9,952)

828,763 COST OF SERVICES 1,552,686 (575,140) 977,546

(867) Other Operating Expenditure 11. (2,033)

64,447 Financing and Investment Income and Exp. 12. 56,503

(1,130,529) Taxation and Non-Specific Grant Income 13. (1,048,514)

(238,186) SURPLUS ON PROVISION OF SERVICES (16,498)

(50,023) (110,880)

(161,242) 66,159

947 Other Unrealised (Gains) / Losses 1,283

(210,318) Other Comprehensive Income and Expend. (43,438)

(448,504) (59,936)

RECONCILIATION OF THE COUNCIL'S POSITION TO THE GROUP POSITION£000 £000

(448,504) Total Comprehensive (Income) and Expenditure on the Council's (59,936) Comprehensive Income and Expenditure Statement (CIES)

(1,231) Subsidiary and associate transactions included in the Council's CIES 1,840

(Surplus) / deficit arising from other entities included in the Group Accounts(40,498) Subsidiaries (2,141)

(123,683) Associates 163,200

(613,916) Group total Comprehensive (Income) and Expenditure for the year 102,963

This statement shows the accounting cost in the year of providing Council services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. The Council raises taxation to cover its expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

Surplus on Revaluation of Non-Current Assets

Actuarial (Gains) / Losses on Pension Liabilities

TOTAL COMPREHENSIVE (INCOME) AND EXPENDITURE

19

GROUP BALANCE SHEET

(re-stated) (re-stated) 1 April 31 March

2010 2011 £000 £000 Notes £000 £000

2,320 2,476 Intangible Assets 16. 979

1,005,705 1,009,675 Council Dwellings 1,028,5991,653,166 1,635,321 Other Land and Buildings 1,708,176

111,193 99,206 Vehicles, Plant, Furniture and Equipment 101,158629,419 728,855 Infrastructure Assets 809,38912,016 12,756 Community Assets 11,61819,706 40,175 Surplus Assets 39,11540,350 62,737 Assets under Construction 100,147

3,471,555 3,588,725 Property, Plant and Equipment 14. 3,798,202

8,477 7,258 Investment Properties 15. 7,200

37,478 37,605 Heritage Assets 17. 37,232

2,812 7,975 Assets Held for Sale 22. 11,077

0 0 Available for Sale Financial Assets 643

327 307 Deferred Tax 173

0 0 Other Long-Term Assets (Pension) 7,073

6,004 7,739 Long-Term Investments 10,175

48,242 42,376 Investments in Associates and Joint Ventures 37,180

55,668 59,248 Long-Term Debtors 20. 75,186

3,632,883 3,753,709 Long-Term Assets 3,985,120

12,193 33,118 Short-Term Investments 22,304


25,081 21,954 Inventories 19. 14,788

202,005 191,704 Short-Term Debtors 20. 86,617

135,808 224,360 Cash and Cash Equivalents 21. 210,031

378,287 476,493 Current Assets 336,925

(28,029) (48,909) Short-Term Borrowing (35,610)

(253,411) (220,189) Short-Term Creditors 23. (213,618)

(52,851) (129,704) Provisions 24. (38,936)

(334,291) (398,802) Current Liabilities (288,164)

31 March 2012

The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Group. The net liability of the Group (assets less liabilities) represents the total net loss of the Group. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Group may use to provide services. The second category of reserves are those that the Group is not able to use to provide services. This category of reserves include reserves that hold unrealised gains and losses (for example, the revaluation reserve) where amounts would only become available to provide services if the assets are sold.

20

GROUP BALANCE SHEET


2010 2011

£000 £000 Notes £000 £000

(1,216,180) (1,274,809) Long-Term Borrowing (1,401,717)

(247,050) (225,494) Other Long-Term Liabilities (219,606)

(16,831) (17,570) Deferred Tax (8,643)

(1,151,901) (1,022,353) Liabilities in Associates and Joint Ventures (1,179,933)

(722,288) (346,559) Other Long-Term Liabilities (Pensions) (381,906)

(3,354,250) (2,886,785) Long-Term Liabilities (3,191,805)

322,629 944,615 Net Assets 842,076

(769,093) (808,914) Revaluation Reserve (906,510)

(1,251,384) (1,329,289) Capital Adjustment Account (1,306,950)

56,848 55,768 Financial Instruments Adjustment Account 54,276

679,608 335,902 Pensions Reserve 381,215

29,457 29,868 Employee Statutory Adjustment Account 22,732

1,058,162 918,730 Group Unusable Reserves 1,092,831

(196,402) (797,935) Unusable Reserves 26. (662,406)

(27,207) (1,541) Capital Grants Unapplied Account (7,533)

(22,467) (16,390) Capital Fund (16,369)

(13,779) (15,404) Renewal and Repairs Fund (18,993)

(73,113) (89,634) General Fund (101,438)

12,942 (17,857) Group Usable Reserves (29,106)

(123,624) (140,826) Usable Reserves 10. (173,439)

(320,026) (938,761) Total Group Reserves (835,845)

(2,603) (5,854) Minority Interest (6,231)

(322,629) (944,615) Total Reserves (842,076)


The unaudited accounts were issued on 14 June 2012 and signed by K.Kelly, former Chief Financial Officer. The audited accounts were issued on 28 September 2012.

31 March 2012

21

BALANCE SHEET


2010 2011 £000 £000 Notes £000 £000

2,320 2,476 Intangible Assets 16. 979

1,005,705 1,009,675 Council Dwellings 1,028,5991,604,706 1,588,189 Other Land and Buildings 1,685,840

39,483 31,170 Vehicles, Plant, Furniture and Equipment 25,039626,639 726,364 Infrastructure Assets 807,18612,016 12,756 Community Assets 11,61819,706 40,175 Surplus Assets 39,11539,911 61,342 Assets under Construction 100,148

3,348,166 3,469,671 Property, Plant and Equipment 14. 3,697,545

2,227 2,288 Investment Properties 15. 2,120

37,478 37,605 Heritage Assets 17. 37,232


23,335 23,335 Long-Term Investments 26,813

59,668 62,748 Long-Term Debtors 20. 78,686

3,476,006 3,606,098 Long-Term Assets 3,854,452

12,193 33,118 Short-Term Investments 22,304


1,870 2,028 Inventories 19. 2,800

158,175 168,924 Short-Term Debtors 20. 73,754

117,384 207,464 Cash and Cash Equivalents 21. 195,831

292,822 416,891 Current Assets 297,874

(28,029) (46,863) Short-Term Borrowing (33,564)

(178,102) (173,300) Short-Term Creditors 23. (183,725)

(50,668) (127,697) Provisions 24. (35,409)

(256,799) (347,860) Current Liabilities (252,698)

31 March 2012

The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example, the capital receipts reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves are those that the Council is not able to use to provide services. This category of reserves include reserves that hold unrealised gains and losses (for example, the revaluation reserve) where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line 'adjustments between accounting basis and funding basis under regulations'.

22

BALANCE SHEET


2010 2011

£000 £000 Notes £000 £000

(1,213,186) (1,281,119) Long-Term Borrowing 18. (1,408,752)

(228,105) (218,474) Other Long-Term Liabilities 18. (210,091)

(679,608) (335,902) Other Long-Term Liabilities (Pensions) 43.7 (381,215)

(2,120,899) (1,835,495) Long-Term Liabilities (2,000,058)

1,391,130 1,839,634 Net Assets 1,899,570


(1,251,384) (1,329,289) Capital Adjustment Account (1,306,950)

56,848 55,768 Financial Instruments Adjustment Account 54,276

679,608 335,902 Pensions Reserve 381,215

29,457 29,868 Employee Statutory Adjustment Account 22,732

(1,254,564) (1,716,665) Unusable Reserves 26. (1,755,237)

(27,207) (1,541) Capital Grants Unapplied Account (7,533)

(22,467) (16,390) Capital Fund (16,369)

(13,779) (15,404) Renewal and Repairs Fund (18,993)

(73,113) (89,634) General Fund (101,438)

(136,566) (122,969) Usable Reserves 10. (144,333)

(1,391,130) (1,839,634) Total Reserves (1,899,570)



31 March 2012

23

GROUP CASH FLOW STATEMENT

Year ended 31 March 2012

(Re-stated) 2010/11

£000 OPERATING ACTIVITIES Notes £000 £000 (230,245) Taxation (227,399)

(1,160,557) Grants (1,238,429)

(73,002) Housing rents (75,710)

(448,301) Sales of goods and rendering of services (524,244)

(4,528) Interest and investment income received (6,805)

(1,916,633) Cash inflows from operating activities (2,072,587)

571,762 Cash paid to and on behalf of employees 562,078

184,953 Housing benefits paid out 192,749

813,223 Cash paid to suppliers of goods and services 987,583

2,479 Taxation paid 2,175

94,854 Interest paid 100,348

1,667,271 Cash outflows from operating activities 1,844,933

(249,362) Net cash flows from operating activities 27. (227,654)

236,960 Net cash flows from investing activities 28. 338,634

(76,150) Net cash flows from financing activities 29. (96,651)

(88,552) Net decrease / (increase) in cash and cash equivalents 14,329

(135,808) Cash and cash equivalents at 1 April (224,360)

(224,360) Cash and cash equivalents at 31 March 21. (210,031)

The Cash Flow Statement shows the changes in cash and cash equivalents of the Group during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Group are funded by way of taxation and grant income or from the recipients of services provided by the Group. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Group's future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Group.

24

CASH FLOW STATEMENT

Year ended 31 March 2012

(re-stated) 2010/11

£000 OPERATING ACTIVITIES Notes £000 £000 (229,895) Taxation (226,015)

(1,160,557) Grants (1,137,607)

(73,002) Housing rents (75,710)

(305,705) Sales of goods and rendering of services (358,453)

(4,409) Interest and investment income received (6,779)

(1,773,568) Cash inflows from operating activities (1,804,564)

553,430 Cash paid to and on behalf of employees 561,126

184,953 Housing benefits paid out 192,749

702,532 Cash paid to suppliers of goods and services 734,830

93,816 Interest paid 99,585

1,534,731 Cash outflows from operating activities 1,588,290

(238,837) Net cash flows from operating activities 27. (216,274)

231,443 Net cash flows from investing activities 28. 330,045

(82,686) Net cash flows from financing activities 29. (102,138)

(90,080) Net decrease / (increase) in cash and cash equivalents 11,633

(117,384) Cash and cash equivalents at 1 April (207,464)

(207,464) Cash and cash equivalents at 31 March 21. (195,831)

The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the reporting period.

25

NOTES TO THE FINANCIAL STATEMENTS

1. Accounting Policies

1.1 Accruals of Income and Expenditure●

● Provision has been made in the relevant accounts for bad and doubtful debts.

1.2 Debt Redemption●

●

1.3 Cash and Cash EquivalentsCash and cash equivalents includes:● credit and debit funds held in banks; and

● investments maturing within three months of the Balance Sheet date.

1.4 Contingent Liabilities

1.5 Employee Benefits● Accruals of Holiday Leave

● Pensions

● Teachers

● Other EmployeesOther employees, subject to certain qualifying criteria, are eligible to join the Local Government Pension Scheme (LGPS). The LGPS is a defined benefit statutory scheme, administered in accordance with the Local Government Pension Scheme (Scotland) Regulations 1998, as amended.

Cost of services' within the Comprehensive Income and Expenditure Statement includes a charge for annual leave to which employees are entitled, but have not taken, as at the Balance Sheet date.

The Council is not required to raise Council Tax to cover the cost of accrued annual leave. These costs are a reconciling item in the Movement in Reserves Statement for the General Fund and Housing Revenue Account balances by way of an adjusting transaction with the employee statutory adjustment account.

This is an unfunded scheme administered by the Scottish Public Pensions Agency. The pension cost charged in the accounts is the contribution rate set on the basis of a notional fund.

The Council participates in two different pension schemes which meet the needs of employees in particular services. Both the schemes provide members with defined benefits related to pay and service. The schemes are as follows:

The revenue and capital accounts have been prepared on an accruals basis in accordance with the Code of Practice.

Contingent liabilities are not recognised in the accounting statements. Where there is a possible obligation that may require a payment or transfer of economic benefit, this is disclosed in the notes to the financial statements.

The Annual Accounts for the year ended 31 March 2012 have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12: A Statement of Recommended Practice, (the Code) and the Service Reporting Code of Practice. This is to ensure that the Annual Accounts 'present a true and fair view' of the financial position and transactions of the Council.

The Council operates a consolidated loans fund under the terms of the Local Government (Scotland) Act 1975. Capital payments made by services are financed from the loans fund and repaid on an annuity basis.

Gains or losses arising on the repurchase or early settlement of borrowing are recognised in the Comprehensive Income and Expenditure Statement in the period during which the repurchase or early settlement is made. Where the repurchase of borrowing is taken with a refinancing or restructuring option, gains or losses are recognised over the life of the replacement borrowing.

26


1. Accounting Policies - continued1.5 Employee Benefits - continued

● Pensions - continued● Other Employees - continued

Pension assets have been valued at bid value (purchase price), as required under IAS19.

1.6 Financial Instruments● Financial Liabilities

● Financial Assets

However, the Council has made three loans to a related party 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 at a marginally higher effective rate of interest than the rate receivable from the related party, with the difference serving to increase the amortised cost of the loan in the Balance Sheet.

Loans and receivables are initially measured at fair value and carried at their amortised cost. Annual credits to 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, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement.

The Financial Statements have been prepared including pension costs as determined under International Accounting Standard 19 - Employee Benefits (IAS19). The cost of services includes expenditure equivalent to the amount of retirement benefits the Council has committed to during the year. Pensions interest costs and the expected return on pension assets have been charged to 'financing and investment income' in the Comprehensive Income and Expenditure Statement.

The pension costs charged to the Comprehensive Income and Expenditure Statement in respect of employees are not equal to contributions paid to the funded scheme for employees. The amount by which pension costs under IAS19 are different from the contributions due under the pension scheme regulations are disclosed in the Movement in Reserves Statement for the General Fund and Housing Revenue Account.

Gains and losses on the repurchase or early settlement of borrowing are credited and debited to surplus or deficit on provision of services 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, the premium or discounts is respectively deducted from or added to the amortised cost of the new 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.

Under pension regulations, contribution rates are set to meet 100% of the overall liabilities of the Fund.

Financial liabilities are initially measured at fair value and carried at their amortised cost. Annual charges to the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. For the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year in the loan agreement.

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 / loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliationof amounts charged to the Comprehensive Income and Expenditure Statement to the net charge against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement for the General Fund Balance.

27


1. Accounting Policies - continued1.6 Financial Instruments - continued

● Financial Assets - continued

● Available-for-Sale-Financial Instruments

1.7 Government and non-Government Grants and Contributions● Revenue

● Capital

1.8 Intangible Assets● Intangible Assets

● Recognition

● MeasurementIntangible fixed assets are initially measured at cost.

Intangible fixed assets represent software licences purchased by the Council.

Expenditure on the acquisition, creation or enhancement of intangible fixed assets has been capitalised on an accruals basis.

Capital grants and contributions are recognised in the Comprehensive Income and Expenditure Statement except to the extent there are conditions attached to them that have not been met.

Where there are no conditions attached to capital grants and contributions, these funds are a reconciling item in the Movement in Reserves Statement for the General Fund and Housing Revenue Account by way of an adjusting transaction with the capital adjustment account, where expenditure has been incurred and the unapplied capital grants account where expenditure has not been incurred.

Where there are outstanding conditions attached to capital grants and contributions that have not been met at the Balance Sheet date, the grant or contribution will be recognised as part of capital grants receipts in advance. Once the condition has been met, the grant or contribution will be transferred from capital grants receipts in advance and recognised as income in the Comprehensive Income and Expenditure Statement, as above.

The Council's investments in Lothian Buses plc, CEC Holdings Limited and tie Limited have been assessed as outwith the scope of FRS26.

Unless otherwise stated, the accounts of these companies may be obtained on application to the Chief Financial Officer, Waverley Court, 4 East Market Street, Edinburgh EH8 8BG.

Where such funds remain unapplied at the Balance Sheet date, but approval has been given to carry these funds forward to the next financial year, these amounts have been set aside in the General Fund.

Revenue grants and contributions have been included in the financial statements on an accruals basis.

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 Comprehensive Income and Expenditure Statement.

Any gains and losses that arise on the de-recognition of the asset are credited / debited to the Comprehensive Income and Expenditure Statement.

Surplus funds on behalf of the Council and associated bodies and cash monies of Lothian Pension Funds are now managed by the Council under a formal management agreement in a pooled investment arrangement. While the monies continue to be shown as investments in Lothian Pension Funds' accounts, they are no longer shown as both liabilities and investments in the Council's accounts.

The Council has a significant financial interest in several companies and trusts which have been set up for specific purposes. Details of these appear in note 7 to the Financial Statements. These financial interests have been assessed under the requirements of FRS26 Financial Instruments: Measurement.

28


1. Accounting Policies - continued1.8 Intangible Assets - continued

● Depreciation

1.9 InventoriesInventories are measured at the lower of cost and net realisable value.

1.10 Investment Properties● Measurement

● RevaluationInvestment properties are revalued annually.

● DepreciationInvestment properties held at fair value are not depreciated.

● De-recognition

1.11 Leases● Operating Leases

● Leased-in Assets

● Leased-out Assets

● Finance Leases● Leased-in Assets

Rental income received under operating leases is credited to the relevant service in accordance with the terms specified in the lease agreement.

Finance leases, which have substantially transferred to the authority the benefits and risks of ownership of a non-current asset, are treated as if the asset had been purchased outright.

Assets acquired under finance leases are included in non-current assets at the lower of the fair value or the present value of the minimum lease payments. The capital element of the lease is included as obligations under finance leases / creditors.

Rental payments, net of benefits received, under operating leases are charged to the relevant service on a straight line basis over the life of the lease.

Software licences are depreciated over the period of the licence, commencing in the year after acquisition.

Investment properties are de-recognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits or service potential is expected from its disposal.

The gain or loss arising from the retirement or disposal of an investment property is recognised in the 'surplus or deficit on provision of services' within the Comprehensive Income and Expenditure Statement in the period of the retirement or disposal.

Any gains or losses arising from a change in the fair value of investment properties are recognised in the Comprehensive Income and Expenditure Statement for the period in which they arise.

Inventories acquired through a non-exchange transaction are measured at their fair value as at the date of acquisition.

Inventories held for distribution at no charge or a nominal charge are measured at the lower of cost and current replacement cost.

Investment properties are initially measured at cost. After initial recognition, investment properties are measured at fair value.

29


1. Accounting Policies - continued1.11 Leases - continued

● Finance Leases - continued● Leased-in Assets - continued

1.12 Current and Non-Current Assets Held for Sale

● Measurement

● DepreciationCurrent and non-current assets held for sale are not depreciated.

1.13 Overheads

1.14 Public Private Partnership - School Buildings, Maintenance and Other Facilities

●

●

●

●

● lifecycle replacement costs - recognised as non-current assets on the Balance Sheet.

finance cost - an interest charge of 7.35% (PPP1 scheme) and 5.004% (PPP2 scheme) on the outstanding balance sheet liability - debited to 'financing and investment income' in the Comprehensive Income and Expenditure Statement.

contingent rent - increases in the amount to be paid for the property arising during the contract - debited to 'financing and investment income' in the Comprehensive Income and Expenditure Statement.

payment towards liability - applied to write down the value of the finance lease on the Balance Sheet.

The amounts payable to the PPP operators each year are analysed into five elements:

The costs of support services are allocated to direct services. The allocations are made on a basis appropriate to the service provided, in order to match costs to service usage. Certain support service costs are recovered through direct charges during the year.

Public Private Partnership (PPP) contracts are agreements to receive services, where the responsibility for making available the non-current assets required to provide the services passes to the PPP contractor. As the Council is deemed to control the services that are provided under this scheme and as ownership of the schools and other facilities will pass to the Council at the end of the contracts for no additional charge, the Council carries the non-current assets used under the contracts on its Balance Sheet.

Non-current assets recognised on the Balance Sheet are revalued and depreciated in the same way as other assets owned by the Council.

fair value of the services received during the year - debited to education services in the Comprehensive Income and Expenditure Statement.

The lease rentals comprise capital and interest elements. The capital element is applied to reduce the outstanding obligation and the interest element is charged to revenue on a straight line basis over the terms of the lease.

Current assets held for sale are assets that the Council has identified as surplus to requirement, are being actively marketed and it is expected that the sale will be realised within twelve months of the Balance Sheet date.

Non-current assets held for sale are assets that the Council has identified as surplus to requirement, are being actively marketed, but it is not expected that the sale will be realised within twelve months of the Balance Sheet date.

Assets held for sale are measured at the lower of carrying value and fair value less costs to sell at the Balance Sheet date. Where the sale is expected to occur in more than twelve months, the cost is measured at present value.

30


1. Accounting Policies - continued1.15 Property, Plant and Equipment

● Categories of AssetsProperty, plant and equipment is categorised into the following classes:

Council dwellings Other land and buildings

Vehicles, plant, furniture and equipment Infrastructure assets, e.g. roads and footways

Community assets, e.g. parks Assets under construction

Surplus assets (assets that are surplus to requirements, but there are no clear plans to sell these at the current time.)

● Recognition

● Measurement

All other classes of property, plant and equipment are measured at fair value.

●

● Council dwellings - fair value is measured at existing use value - social housing.

●

● Depreciation

● Charges to Revenue for use of Non-Current Assets

● depreciation attributable to the assets used by the relevant service.

●

The Council is not required to raise council tax to cover depreciation or impairment losses. Depreciation and impairment losses are therefore a reconciling item in the Movement in Reserves Statement for the General Fund and Housing Revenue Account by way of an adjusting transaction with the capital adjustment account.

Depreciation is provided on all property, plant and equipment, other than community assets and assets under construction.

Component accounting is applied as part of the revaluation process. As a result, where a building asset is split down into further components for the first time in year, the depreciation charge is based on the opening book value over the opening remaining useful life of the asset rather than subsequent component values and associated lives. The difference is not considered material.

The Council does not depreciate its non-current assets in the year of acquisition. The Council operates a five-year rolling revaluation programme for assets and provides for depreciation on a straight line basis on the opening book value over the remaining useful life of the asset. Thus the charge to the Comprehensive Income and Expenditure Statement for the year is not impacted by changes in asset value during the year arising from either revaluation or enhancements.

impairment losses attributable to the clear consumption of economic benefits on property, plant and equipment used by the service and other losses where there are no accumulated gains in the Revaluation Reserve against which they can be written off.

Service revenue accounts, support services and trading accounts are debited with the following amounts to record the real cost of holding non-current assets during the year:

Expenditure on the acquisition, creation or enhancement of non-current assets has been capitalised on an accruals basis.

Infrastructure, community assets and assets under construction are measured at historical cost.

Other land and buildings - fair value is the amount that would be paid for the assets in its existing use.

Vehicles, plant, furniture and equipment - fair value is the amount equivalent to depreciated historical cost.

31


1. Accounting Policies - continued1.15 Property, Plant and Equipment - continued

● Revaluations

● De-recognition

● Components

● Structural - includes external and internal walls, traditional roofing, doors, etc.

●

● Finishes - includes doors, windows and room finishes.

●

● Fittings and furnishings - includes fittings, furnishings and sanitary appliances.

1.16 Heritage Assets● Categories of Assets

Heritage assets comprise the following:

Monuments and statues Civic regalia and artefacts

Archival collections Libraries special collections

Museum and gallery collections

Intangible heritage assets represent three private vehicle registration plates.

● Recognition

Non traditional roofing - includes flat roof, non-traditional roof coverings and industrial type roofs.

Mechanical and electrical services - includes water, heat, ventilation, electrical, lifts, fire and communications.

It has not been practical or possible to split out all heritage assets belonging to the common good fund, charities or trusts. Therefore, the Council's Balance Sheet may hold elements of heritage assets that belong to other entities.

Expenditure on the acquisition, creation or enhancement of heritage assets has been capitalised on an accruals basis.

Where assets are included in the Balance Sheet at fair value, revaluations are carried out at intervals of no more than five years. The Council operates a rolling programme for revaluations. The determination of fair value of land and buildings is undertaken by the Council's Property Manager (Property Management and Development).

Component accounting is applied to all assets that comprise land and buildings. Land and buildings are treated as separate components of an asset and accounted for separately.

The building component of an asset is separated into further components primarily to those with a carrying value of over £5 million approximately. This policy is also applied to buildings with a carrying value of less than £5 million where enhancement expenditure is considered significant in relation to the overall carrying value of the building component.

Where it is necessary to break a building down into further components, the following categories are applied:

An asset is de-recognised either on its disposal, or where no future economic benefits or service potential are expected from its use or disposal. The gain or loss arising from de-recognition of an asset is included in 'surplus or deficit on the provision of services' within the Comprehensive Income and Expenditure Statement when the asset is de-recognised.

The gain or loss on de-recognition of property, plant and equipment assets is a reconciling item in the Movement in Reserves Statement for the General Fund and Housing Revenue Account.

32


1. Accounting Policies - continued1.16 Heritage assets - continued

● Measurement

● Monuments and statues Historic value

● Civic regalia and artefacts Insurance purposes valuation

● Archival collections

● Libraries special collections Insurance purposes valuation

● Museum and gallery collections Insurance purposes valuation

● Private vehicle registration plates

● Depreciation

1.17 Provisions

1.18 ReservesReserves held on the Balance Sheet are classified as either usable or unusable reserves.

● Usable ReservesThe Council operates the following usable reserves:

●

●

●

●

●

Insurance purposes valuation, based on restoration costs only

Cost or current value information is not readily available, therefore these assets have not been recognised on the Council's Balance Sheet

Heritage assets are deemed to have indeterminate lives and a high residual value; hence it is not considered appropriate to charge depreciation.

Heritage asset valuations may be made by any method that is appropriate and relevant. Furthermore valuations need not be carried out by external valuers and there is no prescribed minimum period between valuations.

The following measurement bases have been applied to heritage assets based on the most relevant and appropriate information available. This is set in the context where it is not practicable to obtain up to date valuations for all heritage assets at a cost which is commensurate with the benefits to users of the Council's financial statements.

The value of provisions is based upon the Council's obligations arising from past events, the probability that a transfer of economic benefit will take place and a reasonable estimate of the obligation.

Capital fund - under Schedule 3 of the Local Government (Scotland) Act 1975, certain receipts derived from the sale of property may also be used to create a capital fund "to be used for defraying any expenditure of the authority to which capital is properly applicable, or in providing money for repayment of the principal of loans".

Renewal and repairs fund - holds monies set aside for the renewal and repair of Council property. This fund is operated under the terms of Schedule 3 to the Local Government (Scotland) Act 1975.

General Fund - held to mitigate financial consequences of risks and other events impacting on the Council's resources. Monies within the General Fund can be earmarked for specific purposes.

Usable reserves hold monies that can be applied to fund expenditure or reduce Council Tax. Unusable reserves cannot be applied to fund expenditure.

Capital receipts reserve - this represents capital receipts available to finance capital expenditure in future years.

Capital grants unapplied account - holds capital grants and contributions that have been received towards specific works that have yet to be completed.

33


1. Accounting Policies - continued1.18 Reserves - continued

● Unusable ReservesThe Council operates the following unusable reserves:●

●

●

●

●

1.19 Revenue Expenditure Funded from Capital Under Statute

1.20 Value Added Tax

1.21 Group Account ConsolidationGroup accounts have been prepared on the following basis:

●

●

●

●

●

● Inter-company transactions have been eliminated on consolidation.

●

●

Minority interests have been disclosed separately within the Group Balance Sheet and in Note 7.1 to the Financial Statements.

Group members' financial statements have been prepared on an accruals basis, with the exception of the International Conference Centre Income Trust and International Conference Centre Expenditure Trust, which have been prepared on a cash basis.

Lothian Buses' and CEC Holdings Limited's reporting periods are to 31 December. As this is within three months of the Council's reporting period (to 31 March), no consolidation adjustments have been made.

Accounting policies for group members have been aligned where possible.

The following methods of consolidation have been used:

Subsidiaries - line-by-line basis;

Associates - equity method.

Value added tax (VAT) is excluded from the financial statements unless it is not recoverable from HM Revenues and Customs.

Capital adjustment account - provides a mechanism between the different rates at which assets are depreciated and are financed through the capital controls system.

Revaluation reserve - holds unrealised gains arising since 1 April 2007 from holding non-current assets.

Financial instruments adjustment account - provides a mechanism between the different rates at which gains and losses (such as premiums on the early repayment of debt) are recognised under the Code and are required by statute to be met from the General Fund.

Pension reserve - represents the net monies which the Council requires to meet its pension liability, as calculated under IAS19, Employee Benefits. The Council operates a pensions reserve fund under the terms of the Local Government Pension Reserve Fund (Scotland) Regulations 2003.

Employee statutory adjustment account - represents the net monies which the Council requires to meet its short-term compensated absences for employees under IAS19.

Expenditure that may be capitalised under statutory provisions that does not result in the creation of assets for the Council has been charged to the 'net cost of services' in the Comprehensive Income and Expenditure Statement.

These costs are a reconciling item in the Movement in Reserves Statement for the General Fund by way of an adjusting transaction with the capital adjustment account.

34


2. Accounting Standards that have been Issued but not yet Adopted

3. Judgements Made in Applying Accounting Policies

3.1 Tram Project

3.2 Provision of School Buildings

3.3 Group Membership

The following companies have been assessed as subsidiaries of the Council:

Shareholding

CEC Holdings Limited 100.00%Lothian Buses plc 91.01%tie Limited 100.00%Edinburgh Convention Bureau 100.00%Edinburgh, Lothian and Scottish Borders Screen 100.00% Industries Office LimitedMarketing Edinburgh Limited 100.00%Pacific Shelf 825 Limited 100.00%

Edinburgh Leisure 33.33% Board representationFestival City Theatres Trust 36.36% Board representationInternational Conference Centre Income Trust 100.00%International Conference Centre Exp. Trust 100.00%Lothian and Borders Fire and Rescue Board 53.17% Funding percentageLothian and Borders Police Board 54.67% Funding percentageLothian Valuation Joint Board 61.22% Funding percentage

In addition 100% of the Common Good accounts have been consolidated.

Amendments have been made to IFRS7 - Financial Instruments: Disclosures (transfers of financial assets). These were issued in October 2010 and are intended to assist users of financial statements evaluate the risk exposures that relate to transfers of financial assets and the effect of those risks on the Council's financial position.

The Council is not aware of any transfers that are covered by the change to IFRS7.

The following companies, trusts and joint boards have been assessed as associates of the Council:

In applying the accounting policies set out in Note 1 to the Financial Statements, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The most significant judgements made in these Financial Statements are detailed below:

The Council is deemed to control the services provided under the Public Private Partnership agreements (PPP1 and PPP2) for the provision of school buildings, maintenance and other facilities with Edinburgh Schools Partnership (PPP1) and Axiom Education Limited (PPP2).

The accounting policies for public private partnerships have been applied to these arrangements and the schools (valued at net book value of £519.396m at 31 March 2012) are recognised as Property, Plant and Equipment on the Council's Balance Sheet.

The Council has an interest in a number of subsidiary and associate companies, joint ventures and trusts. Full details of these interests are shown in note 7 to the Financial Statements. The most significant of these companies in terms of the size of trading operations and other factors are included in the Group Accounts.

Mediation has been undertaken in relation to the Edinburgh Tram project. The Council has now signed a settlement agreement with the contractor for a reduced project scope, from the airport to St Andrew Square / York Place, with an overall budget of £776m.

35


4. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty

If the Council were to exceed its 5% de minimis level, a minimum repayment of £5.811m would be due to HM Revenues and Customs.

VAT Recovery Status

The Council's accounts are prepared on the assumption that VAT charged on its purchases is fully recoverable and that it will not become partially exempt.

If the useful life of assets is reduced, depreciation increases and the carrying value of the assets falls.

It is estimated that the annual depreciation charge would increase and the carrying value would fall by £10.307m for each year that useful lives were reduced.

Should the settlement values increase by 10% this would have the effect of adding £2.397m to the provision required.

Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets. A reduction in spending on repairs and maintenance would bring into doubt the useful lives assigned to the assets.

Property, Plant and Equipment

Provisions

The Financial Statements contain 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 following table details uncertainties on assumptions and estimates, and outlines the potential effect if actual results differ from the assumptions made.

Item UncertaintyEffect if Actual Results Differ from Assumptions

The Council has made a provision of £23.968m in respect of the remainder of anticipated equal pay settlements. This is based on the number of potential claimants and assumes similar settlement terms to that achieved previously. There is uncertainty surrounding both of these assumptions.

Arrears At 31 March, the Council had a balance of sundry debtors of £27.210m. A review of significant balances suggested that an impairment of doubtful debts of £3.763m (14%) was appropriate. In the current economic climate it is not certain that this will be sufficient.

If collection rates were to deteriorate, a doubling of the amount of the impairment of doubtful debts would require an additional £3.763m to be set aside as an allowance.

Pensions Liability

Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries is engaged to provide the Council with expert advice about the assumptions to be applied.

The effects on the net pensions liability of changes in individual assumptions can be measured.

36


4.

5. Material Items of Income and Expense

6. Events After the Balance Sheet Date●

●

The Council makes an assumption on the level of Council Tax that will be collected over a number of years. The Council currently assumes that 96.3% of Council Tax will be collected. An impairment for doubtful debts of £8.917m has been provided for. In the current economic climate it is not certain that this would be sufficient.

Council Tax Arrears If collection rates were to deteriorate, an increase of 1% in the amount to be impaired would require an additional £2.403m to be set aside as an allowance.

House Rent Arrears At 31 March, the Council had a balance of housing rent arrears of £2.091m. A review of significant balances suggested that an impairment of doubtful debts of £1.340m (64%) was appropriate. In the current economic climate it is not certain that this will be sufficient.

If collection rates were to deteriorate, an increase of 10% in the amount to be impaired would require an additional £0.209m to be set aside as an allowance.

The Council's approved budget provides for inflationary uplifts on long-term contracts.

If inflation were to increase by 1%, this would result in an additional cost of £0.62m per annum.

The Police and Fire Reform (Scotland) Act 2012 received royal assent on 7 August 2012. Responsibility for Police and Fire and Rescue Services will transfer from local government to new central government bodies on 1 April 2013. The full impact of the reform process is currently being assessed.

New Edinburgh Limited, a 50% owned subsidiary of CEC Holdings Limited, was placed into administration on 9 July 2012. There was no financial impact on the value of the Council's investment in CEC Holdings Limited.

Provisions - the Council used £12.924m of the provision previously set aside for equal pay to offset costs arising during the year. The provision set aside for equal pay was reduced by £11.042m, based on the current level of settlements. The effect of this reduction is included within exceptional items in the Comprehensive Income and Expenditure Statement.

Following mediation, the Council signed a settlement agreement with the contractor in September 2011 for a reduced project scope, with an overall budget of £776m.

The revenue impact on the Council of borrowing the additional £231m to complete the project will be £15m per annum. Each additional £10m of borrowing over and above this sum would cost the Council an additional £0.664m per annum, based on a thirty year repayment period.

This list does not include assets and liabilities that are carried at fair value based on recently observed market prices.

Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty - continued

Item UncertaintyEffect if Actual Results Differ from Assumptions

Edinburgh Trams Project

Long-Term Contracts

37


7. Subsidiaries and Associates

Subsidiaries: Associates:● CEC Holdings Limited ● Edinburgh Leisure ● Lothian Buses plc ● Festival City Theatres Trust● tie Limited ● Lothian and Borders Fire and Rescue Board

● Lothian and Borders Police Board● Lothian Valuation Joint Board● Common Good

Trusts:● International Conference Centre Income Trust● International Conference Centre Expenditure Trust

● Capital City Partnership Limited (Council became the sole member January 2012)● Common Repairs Grant Trust● Edinburgh Convention Bureau (voluntary strike-off initiated January 2012)● Edinburgh, Lothian and Scottish Borders Screen Industries Office Limited (wound up May 2012)● Pacific Shelf 825 Limited ● Marketing Edinburgh Limited (new company)

7.1

Attributable shares of income and expenditure Minority 2011/12 Authority Interests Total

£000 £000 £000 (Surplus) or Deficit on the Provision of Services 41,968 (490) 41,478

Other Comprehensive Income and Expenditure 60,758 727 61,485

102,726 237 102,963

2010/11 Comparative Data £000 £000 £000 (Surplus) or Deficit on the Provision of Services (323,357) (2,338) (325,695)

Other Comprehensive Income and Expenditure (287,308) (913) (288,221)

(610,665) (3,251) (613,916)

7.2 Subsidiary Companies● Capital City Partnership

The company is a private company limited by guarantee. It is a charitable organisation. From January 2012 the Council became the sole member of the company.

The principal activities of the company are to promote community regeneration, by bringing together key statutory, voluntary, community and private sector bodies.

Analysis of Minority Interest Shares in the Group Comprehensive Income and Expenditure Statement

The Council holds shares in various trading companies, either as a controlling or minority shareholder.

The Council is also represented on the Boards of various companies that are limited by guarantee and have no share capital. It participates in these companies by means of Board membership and the provision of funding and management support.

Unless otherwise stated, the accounts of the companies may be obtained on application to the Chief Financial Officer, Waverley Court, 4 East Market Street, Edinburgh EH8 8BG.

The following entities have a significant impact on the Council's operations and have been consolidated into the Group Accounts:

The following companies are not consolidated into the Group Accounts. An assessment has been carried out on these companies and their activities and the level of Council control. These companies are not considered to be a material part of the Group and have therefore been excluded from the Group Accounts:

38


7. Subsidiaries and Associates - continued7.2 Subsidiary Companies

● Capital City Partnership - continuedThe most recent audited results of the company are as follows: 31.03.2012 31.03.2011

£000 £000 Net assets 961 1,825

Net (loss) / profit before taxation (871) 328

Retained profit carried forward 971 1,564

● CEC Holdings Limited

The most recent audited results of the company are as follows: 31.12.2011 31.12.2010 £000 £000

Net assets 17,290 17,869

Net loss before taxation (4,487) (6,791)

Retained loss carried forward (52,903) (50,090)

● Edinburgh Convention Bureau

● Edinburgh, Lothian and Scottish Borders Screen Industries Office Limited

● Lothian Buses plc

(re-stated) The most recent audited results of the company are as follows: 31.12.2011 31.12.2010

£000 £000 69,346 51,577

(9,792) (30,283)

56,190 38,281

Dividend 3,296 2,198

● Marketing Edinburgh LimitedThe company is a private company limited by guarantee. The Council is the sole member.

The principal activities of the company are to increase economic activity within the Edinburgh areas bypromoting it as a destination to live, work, study etc.

The assets of Edinburgh Convention Bureau and Edinburgh, Lothian and Scottish Borders Screen Industries Office Limited were transferred to Capital City Partnership in 2011/12.

The company's accounts were not available at the time these Financial Statements were issued.

Net assets

Net profit before taxation

The City of Edinburgh Council is the major shareholder in Lothian Buses plc, a company incorporated to operate buses in the City of Edinburgh and its surrounding area. The Council's shareholding comprises 5,824,139 (91.01%) £1 ordinary shares (fully paid).

A copy of the latest accounts can be obtained by writing to the Finance Director, Lothian Buses plc, Annandale Street, Edinburgh, EH7 4AZ.

The Council inherited its interest in Lothian Buses plc, following the reorganisation of local government in 1996. It is considered that this was on an acquisition basis, however, as no consideration was given for these interests, there was no goodwill involved in these transactions.

Profit and loss account reserve

The company's assets have been transferred to Marketing Edinburgh Limited and the company was wound up in June 2012.

The company's assets have been transferred to Marketing Edinburgh Limited and the company was wound up in May 2012.

The Council inherited its interest in CEC Holdings Limited following the reorganisation of local government in 1996. It is considered that this was on an acquisition basis, however, as no consideration was given for these interests, there was no goodwill involved in these transactions.

The principal activities of the company are property development and the operation of an international conference centre. The company is wholly owned by the City of Edinburgh Council.

39


7. Subsidiaries and Associates - continued7.2 Subsidiary Companies - continued

● Pacific Shelf 825 LimitedThe City of Edinburgh Council wholly owns 100% of the company.

The principal activity of the company during the period was leasing land and property.

● tie Limited

The most recent unaudited results of the company are as follows: 31.03.2012 31.03.2011 £000 £000

Turnover (117,492) (63,951)

Net assets / ( liabilities) 1 (521)

Net profit before taxation (196) (951)

Retained profit / (loss) carried forward 0 (522)

7.3 Associates● Edinburgh Leisure

The principal activity of the company is the provision of recreation and leisure facilities.

The City of Edinburgh Council leases its sport and leisure centres to the company.


Net (liabilities) / assets 724 7,194

Net operating (income) (890) (5,153)

Fund balances carried forward (724) (7,194)

31.03.2012 31.03.2011 £000 £000

Incoming resources (8,918) (8,565)

Net loss / (surplus) (2,156) (1,718)

Net assets / (liabilities) 241 2,398

Total usable reserves (241) (2,398)

The principal activity of the company is to promote, support and / or effect the development, procurement and implementation of projects defined in, or referred to in the Local Transport Strategy of the City of Edinburgh Council. The Council owns 100% (1,000 shares) of the issued share capital through Transport Edinburgh Limited, a dormant company.

The company's assets have been transferred to Shawfair Land Limited, a subsidiary of CEC Holdings Limited. The company will be wound up in 2012/13

The company is in the process of being wound up, with most of the activities transferring to the Council and Lothian Buses.

The group share of the results of Edinburgh Leisure, based on 33.33% (2010/11 33.33% ) Board Representation, is as follows:

The City of Edinburgh Council is represented on the company's Board of Directors and contributes a substantial sum to the company towards the cost of operating sport and leisure facilities.

This is a non-profit-distributing company limited by guarantee and registered as a Charity. Each member has undertaken to contribute an amount not exceeding £1 towards any deficit arising in the event of the company being wound up.

Although Edinburgh Leisure is included in the Group Accounts, due to the nature of its activities being a core part of the Council's policy, the Council has no legal interest in the assets or liabilities of the company.

40


7. Subsidiaries and Associates - continued7.3 Associates - continued

● Festival City Theatres Trust This is a non-profit-distributing company limited by guarantee and registered as a Charity.


Net assets 4,576 5,054

Net outgoing resources 382 1,400

Fund balances carried forward (4,576) (5,054)

31.03.2012 31.03.2011 £000 £000

Incoming resources (2,464) (2,196)

Net outgoing resources 139 467

Net assets 1,664 1,685

Total usable reserves (1,664) (1,685)

● Lothian and Borders Fire and Rescue Board

Restated 2011/12 2010/11

£000 £000 Funding - requisitions (21,051) (22,753)Other income (7,022) (4,722)

Total income (28,073) (27,475)

Deficit / (surplus) for the year 11,913 (10,816)

Net liabilities (177,178) (158,685)

Usable reserves (1,251) (1,877)Unusable reserves 178,429 160,562

Total reserves 177,178 158,685

The City of Edinburgh Council is represented on the trust's board of directors and gives substantial financial assistance. The City of Edinburgh Council leases the King's Theatre and the Festival Theatre to the trust.

Although Festival City Theatres Trust is included in the Group Accounts, due to the nature of its activities being a core part of the Council's policy, the Council has no legal interest in the assets or liabilities of the company.

Costs are apportioned according to the estimated cost of service provision within the area of each constituent authority.

The group share of the results of the Lothian and Borders Fire and Rescue Board, based on 53.17% (2010/11 53.24%) funding percentage is as follows:

The South Eastern Combined Fire Services Area Administration Scheme 1995 requires the Joint Board to comprise 18 members appointed from the constituent authorities as follows: two members from East Lothian, Midlothian and Scottish Borders Councils; three from West Lothian Council; and nine from the City of Edinburgh Council.

The group share of the results of the Festival City Theatres Trust, based on 36.36% (2010/11 33.33%) Board representation, is as follows:

41


7. Subsidiaries and Associates - continued7.3 Associates - continued

● Lothian and Borders Police Board

Restated 2011/12 2010/11

£000 £000 Funding - requisitions (43,722) (46,846)Other income (81,804) (109,800)

Total income (125,526) (156,646)

(Surplus) / deficit for the year 44,909 (61,113)

Net liabilities (1,000,232) (860,881)

Usable reserves (4,131) (6,136)Unusable reserves 1,004,363 867,017

Total reserves 1,000,232 860,881

● Lothian Valuation Joint Board

2011/12 2010/11 £000 £000

Funding - requisitions (3,744) (3,780)Other income (199) (44)

Total income (3,943) (3,824)

Surplus for the year (140) (2,098)

Net liabilities (2,523) (2,787)

Usable reserves 0 0Unusable reserves 2,523 2,787

Total reserves 2,523 2,787

The group share of the results of the Lothian Valuation Joint Board, based on 61.22% (2010/11 61.57%) funding percentage is as follows:

The group share of the results of the Lothian and Borders Police Board, based on 54.67% (2010/11 55.80%) funding percentage is as follows:

The Lothian and Borders Combined Police Area Amalgamation Scheme 1995 requires the Joint Board to comprise 18 members appointed from the constituency authorities as follows: two members from East Lothian, Midlothian and Scottish Borders Councils; three from West Lothian Council; and nine from the City of Edinburgh Council.

The Amalgamation Scheme 1995 provides that the estimated expenditure of the Board in each financial year shall be apportioned among constituent authorities according to the cost of the provision of services by Lothian and Borders Police within the area of each constituent authority.

Costs incurred by the Lothian Valuation Joint Board are apportioned in accordance with the non-domestic rateable subjects and dwellings valued for council tax within the areas of each constituent authority.

The Lothian Valuation Joint Board provides Valuation Appeals, Lands Valuation, Electoral Registration and Council Tax Valuation Services.

The Board comprises 16 members of whom nine are elected by the City of Edinburgh, three by West Lothian and two each by East and Midlothian Councils.

42


7. Subsidiaries and Associates - continued7.4 Audit Opinions noted on the Accounts of the Companies

Unless otherwise indicated, all the companies noted have an unqualified audit opinion.

7.5 Shareholder Support to Council Companies

7.6 Financial Impact of Consolidation

8. Trusts● Common Repairs Grants Trust

The balance of unexpended funds held at 31 March 2012 was £0.536m (2011 £0.543m).

● International Conference Centre Expenditure Trust

● International Conference Centre Income Trust

9. Adjustments Between Accounting Basis and Funding Basis Under Regulations

The decrease of £5.088m in the balance from last year comprises £3.559m for payment for construction and development costs of the EICC extension and office development in Morrison Street; £1.202m transferred to the International Conference Centre Expenditure Trust; a further investment of £0.452m in EICC operations less interest received during the year of £0.125m.

This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure.

A number of companies within the group are currently dependent on the continued financial support of the Council. The companies are EICC Limited, a subsidiary of CEC Holdings Limited - the Council owns 100% of the shares in CEC Holdings Limited, Festival City Theatres Trust and Edinburgh Leisure.

The effect of inclusion of subsidiaries and associates on the Group Balance Sheet is to decrease both reserves and net assets by £1,057.494m (2010/11 £895.019m) representing the Council's share of the realisable surpluses or deficits in these companies.

As noted in the foreword to the accounts, the financial impact on consolidation of the group mainly arises from the inclusion of pension liabilities. This is a snapshot of the position at 31 March 2012. The actuarial valuation, which takes account of the longer term view, will consider the appropriate employers' contribution rates and these together with employee contributions and revenues generated from fund investments will be utilised to meet the financing of these liabilities.

This Trust was set up to hold funds received from the sale of land at the Edinburgh International Conference Centre site, pending their use for development and other costs of the centre. The balance of unexpended funds held at 31 March 2012 was £9.432m (2011 £14.520m).

This Trust was set up to hold funds provided by the City of Edinburgh Council and by private owners for the grant-aided repair of multiple-ownership housing in the city.

This Trust was set up to hold funds provided by the Council for its development of the Edinburgh International Conference Centre. The balance of unexpended funds held at 31 March 2012 was £5.252m (2011 £4.006m).

The increase in the balance of £1.246m from last year is due to an approved transfer of £1.202m from the International Conference Centre Income Trust to provide a sinking fund to meet capital expenditure on the Edinburgh International Conference Centre (EICC) and interest accrued on the fund during the year of £0.044m.

43


9. Adjustments Between Accounting Basis and Funding Basis Under Regulations - continued

Housing General Revenue Capital

Fund Account Receipts 2011/12 Balance Balance Reserve

£000 £000 £000 Adjustments primarily involving the Capital Adjustment AccountReversal of items debited or credited to the ComprehensiveIncome and Expenditure Statement (CIES)Charges for depreciation and impairment of non-current assets (146,795) (27,163) 0Movements in the market value of investment properties (168) 0 0Amortisation of intangible assets (1,621) 0 0Capital grants and contributions applied 61,084 3,893 0Revenue expenditure funded from capital under statute (33,811) 0 0Insertion of items not debited or credited to the CIESStatutory provision for the financing of capital investment 62,542 17,787 0Capital expenditure charged against General Fund and 33,811 0 0 HRA balancesAdjustments primarily involving the Capital Grant Unapplied AccountApplication of grants to capital financing transferred to the 0 0 0 Capital Adjustment AccountAdjustments primarily involving the Capital Receipts ReserveTransfer of cash sale proceeds credited as part of the gain / 2,759 (726) 0 loss on disposal of assetsUse of the Capital Receipts Reserve to finance new capital 0 0 8,421 expenditureAdjustments primarily involving the FinancialInstruments Adjustment AccountAmount by which finance costs charged are different from 1,054 399 0 finance costs chargeable in the year in accordance with statutory requirementsAdjustments primarily involving the Pensions ReserveReversal of items relating to retirement benefits debited (40,456) (318) 0 or credited to the CIESEmployer's pension contributions and direct payments to 61,055 565 0 pensioners payable in the yearAdjustments primarily involving the Employee StatutoryAdjustment AccountAmount by which officer remuneration charges to the CIES 7,180 (44) 0 are different from remuneration chargeable in the year in accordance with statutory requirements

Total Adjustments 6,634 (5,607) 8,421

Usable Reserves

44



Capital Movement Grants in

Unapplied Capital Unusable 2011/12 Account Fund Reserves

£000 £000 £000 Adjustments primarily involving the Capital Adjustment AccountReversal of items debited or credited to the ComprehensiveIncome and Expenditure Statement (CIES)Charges for depreciation and impairment of non-current assets 0 0 173,958Movements in the market value of investment properties 0 0 168Amortisation of intangible assets 0 0 1,621Capital grants and contributions applied (6,274) 0 (58,703)Revenue expenditure funded from capital under statute 0 0 33,811Insertion of items not debited or credited to the CIESStatutory provision for the financing of capital investment 0 0 (80,329)Capital expenditure charged against General Fund and 0 0 (33,811) HRA balancesAdjustments primarily involving the Capital Grant Unapplied AccountApplication of grants to capital financing transferred to the 282 99 (381) Capital Adjustment AccountAdjustments primarily involving the Capital Receipts ReserveTransfer of cash sale proceeds credited as part of the gain / 0 0 (2,033) loss on disposal of assetsUse of the Capital Receipts Reserve to finance new capital 0 0 (8,421) expenditureAdjustments primarily involving the FinancialInstruments Adjustment AccountAmount by which finance costs charged are different from 0 0 (1,453) finance costs chargeable in the year in accordance with statutory requirementsAdjustments primarily involving the Pensions ReserveReversal of items relating to retirement benefits debited 0 0 40,774 or credited to the CIESEmployer's pension contributions and direct payments to 0 0 (61,620) pensioners payable in the yearAdjustments primarily involving the Employee StatutoryAdjustment AccountAmount by which officer remuneration charges to the CIES 0 0 (7,136) are different from remuneration chargeable in the year in accordance with statutory requirements

Total Adjustments (5,992) 99 (3,555)

Usable Reserves

45


9. Adjustments Between Accounting Basis and Funding Basis Under Regulations - continued

Housing General Revenue Capital

Fund Account Receipts 2010/11 Comparative Data Balance Balance Reserve

£000 £000 £000 Adjustments primarily involving the Capital Adjustment Account

Reversal of items debited or credited to the ComprehensiveIncome and Expenditure Statement (CIES)Charges for depreciation and impairment of non-current assets (134,267) (36,147) 0

Movements in the market value of investment properties 61 0 0

Amortisation of intangible assets (262) 0 0

Capital grants and contributions applied 134,318 1,158 0

Revenue expenditure funded from capital under statute (44,820) 0 0

Movements in donated assets 171 0 0

Insertion of items not debited or credited to the CIESStatutory provision for the financing of capital investment 59,443 17,483 0

Capital expenditure charged against General Fund and 44,820 0 0 HRA balancesAdjustments primarily involving the Capital Grant Unapplied AccountApplication of grants to capital financing transferred to the 0 0 0 Capital Adjustment Account

Adjustments primarily involving the Capital Receipts ReserveTransfer of cash sale proceeds credited as part of the gain / 1,730 (863) 0 loss on disposal of assets

Use of the Capital Receipts Reserve to finance new capital 0 0 8,435 expenditure

Adjustments primarily involving the FinancialInstruments Adjustment AccountAmount by which finance costs charged are different from 785 289 0 finance costs chargeable in the year in accordance with statutory requirements

Adjustments primarily involving the Pensions ReserveReversal of items relating to retirement benefits debited 120,853 3,113 0 or credited to the CIES

Employer's pension contributions and direct payments to 58,018 480 0 pensioners payable in the year

Adjustments primarily involving the Employee StatutoryAdjustment AccountAmount by which officer remuneration charges to the CIES (451) 41 0 are different from remuneration chargeable in the year in accordance with statutory requirements

Total Adjustments 240,399 (14,446) 8,435

Usable Reserves

46



Capital Movement Grants in

Unapplied Capital Unusable 2010/11 Comparative Data Account Fund Reserves

£000 £000 £000 Adjustments primarily involving the Capital Adjustment Account

Reversal of items debited or credited to the ComprehensiveIncome and Expenditure Statement (CIES)Charges for depreciation and impairment of non-current assets 0 0 170,414

Movements in the market value of investment properties 0 0 (61)

Amortisation of intangible assets 0 0 262

Capital grants and contributions applied (478) 0 (134,998)

Revenue expenditure funded from capital under statute 0 0 44,820

Movements in donated assets 0 0 (171)

Insertion of items not debited or credited to the CIESStatutory provision for the financing of capital investment 0 0 (76,926)

Capital expenditure charged against General Fund and 0 0 (44,820) HRA balancesAdjustments primarily involving the Capital Grant Unapplied AccountApplication of grants to capital financing transferred to the 26,144 164 (26,308) Capital Adjustment Account

Adjustments primarily involving the Capital Receipts ReserveTransfer of cash sale proceeds credited as part of the gain / 0 0 (867) loss on disposal of assets

Use of the Capital Receipts Reserve to finance new capital 0 0 (8,435) expenditure

Adjustments primarily involving the FinancialInstruments Adjustment AccountAmount by which finance costs charged are different from 0 0 (1,074) finance costs chargeable in the year in accordance with statutory requirements

Adjustments primarily involving the Pensions ReserveReversal of items relating to retirement benefits debited 0 0 (123,966) or credited to the CIES

Employer's pension contributions and direct payments to 0 0 (58,498) pensioners payable in the year

Adjustments primarily involving the Employee StatutoryAdjustment AccountAmount by which officer remuneration charges to the CIES 0 0 410 are different from remuneration chargeable in the year in accordance with statutory requirements

Total Adjustments 25,666 164 (260,218)

Usable Reserves

47


10. Usable Reserves10.1 Transfers to and from Usable Reserves

Net Net Balance Transfers Transfers Balance

at Out In at 01.04.10 2010/11 2010/11 31.03.11

Group Reserves £000 £000 £000 £000 SubsidiariesCEC Holdings Limited Revenue reserves 45,340 4,750 0 50,090

Capital grants unapplied account 0 0 (7,122) (7,122)

Lothian Buses Revenue reserves 4,986 0 (33,291) (28,305)

Tie Limited Revenue reserves 2,206 0 (1,684) 522

Capital grants unapplied account (1,341) 552 0 (789)

Total Usable Reserves - Subsidiaries 51,191 5,302 (42,097) 14,396

Associates and Joint VenturesCommon Good Fund Earmarked revenue reserve (1,637) 6 0 (1,631)

Edinburgh Leisure Capital contribution (144) 144 0 0

Earmarked revenue reserve (180) 0 (189) (369)

Revenue reserves 1,037 0 (3,066) (2,029)

International Conference Centre Trusts Income Trust (26,231) 11,711 0 (14,520)

Expenditure Trust (601) 0 (3,405) (4,006)

Festival City Theatres Trust Earmarked capital reserve (2,453) 416 0 (2,037)

Revenue reserves 147 204 0 351

Lothian and Borders Fire and Rescue Board Earmarked capital reserve (44) 0 (7) (51)

Capital Grants Unapplied Account 0 0 (152) (152)

Revenue reserves (2,118) 444 0 (1,674)

Lothian and Borders Police Board Earmarked capital reserve 0 0 (120) (120)

Capital Grants Unapplied Account 0 0 (109) (109)


(38,249) 13,044 (7,048) (32,253)

12,942 18,346 (49,145) (17,857)

This note sets out the amounts set aside in the Group's and the Council's usable reserves and the amounts posted back from these reserves to meet expenditure during the year. Comparative data is included for 2010/11.

Total Usable Reserves - Subsidiaries, Associates and Joint Ventures

Total Usable Reserves - Associates and Joint Ventures

48


10. Usable Reserves - continued10.1 Transfers to and from Usable Reserves - continued

Net Net Balance Transfers Transfers Balance

at Out In at 01.04.11 2011/12 2011/12 31.03.12

£000 £000 £000 £000 Group ReservesSubsidiariesCEC Holdings Limited Revenue reserves 50,090 2,763 0 52,853

Capital grants unapplied account (7,122) 536 0 (6,586)

Lothian Buses Revenue reserves (28,305) 0 (22,836) (51,141)

Tie Limited Revenue reserves 522 0 (522) 0

Capital grants unapplied account (789) 0 152 (637)

Total Usable Reserves - Subsidiaries 14,396 3,299 (23,206) (5,511)

Associates and Joint VenturesCommon Good Fund Earmarked revenue reserve (1,631) 7 0 (1,624)

Edinburgh Leisure Capital contribution 0 0 0 0

Earmarked revenue reserve (369) 3 0 (366)

Revenue reserves (2,029) 2,153 0 124

International Conference Centre Trusts Income Trust (14,520) 5,088 0 (9,432)

Expenditure Trust (4,006) 0 (1,245) (5,251)

Festival City Theatres Trust Earmarked capital reserve (2,037) 47 0 (1,990)

Revenue reserves 351 0 (25) 326

Lothian and Borders Fire and Rescue Board Earmarked capital reserve (51) 51 0 0

Capital Grants Unapplied Account (152) 17 0 (135)

Capital Fund 0 0 (69) (69)


Lothian and Borders Police Board Earmarked capital reserve (120) 120 0 0

Capital Grants Unapplied Account (109) 3 0 (106)

Revenue reserves (5,906) 1,881 0 (4,025)

(32,253) 9,997 (1,339) (23,595)

(17,857) 13,296 (24,545) (29,106)Total Usable Reserves - Subsidiaries, Associates and Joint Ventures

Total Usable Reserves - Associates and Joint Ventures

49



Balance Transfers Transfers Balance at Out In at

01.04.10 2010/11 2010/11 31.03.11 £000 £000 £000 £000

Council's Usable ReservesGeneral FundUnallocated General Fund (9,025) 1,614 (5,614) (13,025)

Balances held by schools under Devolved School Management (DSM)

(1,000) 0 (900) (1,900)

Balances set aside under budget flexibility scheme (5,597) 3,416 (1,014) (3,195)

Contingency funding - priority outcomes 0 0 (6,643) (6,643)

Dilapidations fund (734) 47 (3,780) (4,467)

Energy efficiency fund (679) 166 (179) (692)

Funding set aside for equal pay liabilities (13,800) 5,158 (59) (8,701)

Insurance Fund (8,462) 0 (1,688) (10,150)

Licensing Income (908) 99 (177) (986)

Recycling balances (4,847) 600 (5,601) (9,848)

Revenue grants and contributions received in advance of planned expenditure

(18,380) 8,275 (8,367) (18,472)

Savings in the BT contract set aside for IT projects (1,051) 3,463 (3,717) (1,305)

Second home discounts on Council Tax set aside for payments to registered social landlords

(5,177) 0 (2,944) (8,121)

Spend to Save Fund (2,837) 1,833 (479) (1,483)

Other earmarked balances (616) 0 (30) (646)

Surplus on Housing Revenue Account transferred to Renewal and Repairs Fund

0 1,614 (1,614) 0

Total General Fund (73,113) 26,285 (42,806) (89,634)

Housing Revenue Account Balance 0 1,614 (1,614) 0

Renewal and Repairs Fund (13,779) 48 (1,673) (15,404)

Capital Fund (22,467) 6,174 (97) (16,390)

Capital Receipts Reserve 0 8,435 (8,435) 0

Capital Grants Unapplied Account (27,207) 26,144 (478) (1,541)

Total Usable Reserves - Council (136,566) 68,700 (55,103) (122,969)

Total Usable Reserves - Group (123,624) 87,046 (104,248) (140,826)

50



Balance Inter-Fund Transfers Transfers Balance at Transfer Out In at

01.04.11 01.04.11 2011/12 2011/12 31.03.12 £000 £000 £000 £000 £000

General FundUnallocated General Fund (13,025) 0 3,514 (3,514) (13,025)

Balances held by schools under DSM (1,900) 0 0 (1,019) (2,919)

Balances set aside under budget flexibility (3,195) 2,332 0 0 (863)

Contingency funding - priority outcomes (6,643) (2,332) 2,140 (9,441) (16,276)

Dilapidations fund (4,467) 0 0 (712) (5,179)

Energy efficiency fund (692) 0 27 (195) (860)

Funding set aside for equal pay liabilities (8,701) 0 0 (2,050) (10,751)

Insurance Fund (10,150) 0 800 (1,077) (10,427)

Licensing Income (986) 0 0 (404) (1,390)

Recycling balances (9,848) 0 4,700 0 (5,148)

Revenue grants and contributions received in advance of planned expend.

(18,472) 0 4,777 (6,989) (20,684)

Savings in the BT contract set aside for IT projects

(1,305) 0 3,781 (5,062) (2,586)

Second home discounts on Council Tax set aside for payments to registered social

(8,121) 0 0 (2,939) (11,060)

Spend to Save Fund (1,483) 0 1,511 (28) 0

Other earmarked balances (646) 0 409 (33) (270)

Surplus on Housing Revenue Account transferred to Renewal and Repairs Fund

0 0 3,514 (3,514) 0

Total General Fund (89,634) 0 25,173 (36,977) (101,438)

Housing Revenue Account Balance 0 0 3,514 (3,514) 0

Renewal and Repairs Fund (15,404) 0 0 (3,589) (18,993)

Capital Fund (16,390) 0 100 (79) (16,369)

Capital Receipts Reserve 0 0 8,421 (8,421) 0

Capital Grants Unapplied Account (1,541) 0 282 (6,274) (7,533)

Total Usable Reserves - Council (122,969) 0 37,490 (58,854) (144,333)

Total Usable Reserves - Group (140,826) 0 50,786 (83,399) (173,439)

10.2 Devolved School ManagementA net credit balance of £2.919m (2010/11 £1.900m) is held within the General Fund in accordance with the Devolved School Management scheme.

51


10. Usable Reserves - continued10.3

2011/12 Renewal Capital General HRA / Repairs Receipts

Fund Balance Fund Reserve £000 £000 £000 £000

Transfers out 25,173 3,514 0 8,421

Transfers in (36,977) (3,514) (3,589) (8,421)

Total movements in fund (11,804) 0 (3,589) 0

(11,957) (3,514) 0 0

Minority interest and other consol. adjusts. 0 0 0 0

Transfers to other earmarked reserves 153 3,514 (3,589) 0


Capital Group Grants Capital Usable

Unapplied Fund Reserves Total £000 £000 £000 £000

Transfers out 282 100 13,296 50,786

Transfers in (6,274) (79) (24,545) (83,399)

Total movements in fund (5,992) 21 (11,249) (32,613)

(5,992) 99 (13,793) (35,157)


Transfers to other earmarked reserves 0 (78) 2,544 2,544

Total movements in fund (5,992) 21 (11,249) (32,613)

2010/11 Comparative Data Renewal Capital General HRA / Repairs Receipts

Fund Balance Fund Reserve £000 £000 £000 £000

Transfers out 26,285 1,614 48 8,435

Transfers in (42,806) (1,614) (1,673) (8,435)


(10,619) (1,614) 0 0


Transfers to other earmarked reserves (5,902) 1,614 (1,625) 0


Reconciliation of transfers to and from earmarked reserves in Movement of Reserves Statement to Transfers to and from Usable Reserves

Recognised in Comprehensive Income and Expenditure Statement



52


10. Usable Reserves - continued10.3

2010/11 Comparative Data Capital Group Grants Capital Usable

Unapplied Fund Reserves Total £000 £000 £000 £000

Transfers out 26,144 6,174 18,346 87,046Transfers in (478) (97) (49,145) (104,248)

Total movements in fund 25,666 6,077 (30,799) (17,202)

25,666 164 (33,681) (20,084)Minority interest and other consol. adjusts. 0 0 3,287 3,287Transfers to other earmarked reserves 0 5,913 (405) (405)

Total movements in fund 25,666 6,077 (30,799) (17,202)

11. Other Operating ExpenditureGroup Council Group Council

£000 £000 £000 £000 (Gains) / losses on the disposal of (1,812) (2,033) (2,168) (867) non-current assets

(1,812) (2,033) (2,168) (867)

12. Financing and Investment Income and Expenditure

Group Council Group Council £000 £000 £000 £000

Interest payable and similar charges 72,223 71,460 68,714 67,366

Pensions interest cost and expected return (7,757) (4,623) 3,869 4,444 on pension assets

Interest receivable and similar income (4,995) (4,814) (4,185) (3,112)

Income and expenditure in relation to 1,494 (19) (257) (257) investment properties and changes in their fair value

Other investment costs 199 0 0 0

Net surplus from trading activities (4,702) (5,501) (3,994) (3,994)

56,462 56,503 64,147 64,447

13. Taxation and Non-Specific Grant IncomeGroup Council Group Council

£000 £000 £000 £000 Council Tax income (227,975) (227,975) (226,583) (226,583)

Non-domestic rates (297,442) (297,442) (188,733) (188,733)

Non-ring fenced government grants (458,120) (458,120) (579,737) (579,737)

Capital grants and contributions (64,977) (64,977) (135,476) (135,476)

Taxation expenses (540) 0 2,880 0

(1,049,054) (1,048,514) (1,127,649) (1,130,529)

2010/11


Reconciliation of transfers to and from earmarked reserves in Movement of Reserves Statement to Transfers to and from Usable Reserves - continued

2011/12 2010/11

2011/12 2010/11

2011/12

53


14. Property, Plant and Equipment14.1 Depreciation

Council dwellings 50 years

Buildings 50 years (assets not subject to component accounting)

Buildings - structural 50 years

Buildings - non-traditional roofing 35 years

Buildings - finishes 25 years

Buildings - mechanical and electrical 20 years

Buildings - fittings and furnishings 15 years

PPP Schools 40 years (PPP1 schools) and 35 years (PPP2 schools)

Infrastructure assets 20 years

Vehicles, plant, furniture and equipment 5 years to 7 years, to reflect estimated useful life3 years to 15 years, Group Companies

14.2 Capital Commitments

Expected £000 Completion Date

Tram infrastructure contracts (including project management) 145,366 2014 Edinburgh Int. Conference Centre - additional function space 32,403 2013 HRA - kitchens and bathroom programme 10,050 2013-2014 Wester Hailes healthy living centre 8,482 2013 Water of Leith flood prevention works 5,500 2012-2013 Drumbrae care home 5,365 2013 HRA - external fabric works 4,700 2013-2014 Edinburgh North neighbourhood office 4,336 2012 HRA - Greendykes / Wauchope House - over cladding / heating 3,900 2013-2014 HRA - gas heating programme 3,700 2013-2014 Assembly Rooms 3,092 2012 HRA - neighbour environmental partnerships programme 2,150 2012-2013 Niddrie Burn Restoration and ERI Link Road phase one 1,900 2012 Edinburgh Military Tattoo - new grandstands 1,435 2012 James Gillespies High School Wave 3 essential works 1,300 2013 Road construction 1,200 2012-2013 Boroughmuir High School Wave 3 essential works 1,200 2014 HRA - external door programme 1,100 2013-2014 Kings Theatre 1,040 2012-2013 Mercury abatement plant - Mortonhall Crematorium 1,015 2012 Other capital commitments 3,663 various

242,897

No depreciation is provided in the year of the asset's purchase. Assets in the course of construction are not depreciated until they are brought into use. Where depreciation is provided for, assets are depreciated using the straight line method over the following periods:

At 31 March 2012, the Council had entered into a number of contracts for the construction or enhancement of property, plant and equipment in 2011/12 and future years. These are budgeted to cost £242.897m. Similar commitments at 31 March 2011 were £205.018m.

54


14. Property, Plant and Equipment - continued14.3 Movements on Balances - Group Accounts

Movements in 2011/12Vehicles,

Plant, Other Furniture

Council Land and and Infrastructure Dwellings Buildings Equipment Assets

£000 £000 £000 £000 Cost or ValuationAt 1 April 2011 1,039,517 1,722,277 192,776 950,214

Additions 47,555 50,436 23,684 126,708

Revaluation increases / (decreases) (412) 83,071 0 0 recognised in the Revaluation Reserve

Revaluation increases / (decreases) (7,915) (65,719) 0 0 recognised in the Surplus on the Provision of Services

Derecognition - disposals (3,543) (242) (2,942) 0

Assets reclassified (to) / from (473) (1,990) 0 0 held for sale

Other movements in cost or 0 211 (4,424) 0 valuation

At 31 March 2012 1,074,729 1,788,044 209,094 1,076,922

Accumulated Depreciation and ImpairmentAt 1 April 2011 (29,842) (86,956) (93,570) (221,359)

Depreciation charge (16,595) (40,018) (20,414) (45,875)

Depreciation charge written out to 15 24,775 0 0 Revaluation Reserve

Depreciation written out to the 119 17,198 0 0 Surplus on the Provision of Services

Derecognition - disposals 149 164 2,196 0

Impairment losses recognised in 0 0 (573) (299) the Surplus on the Provision of Services

Other movements in cost or 24 4,969 4,425 0 valuation

At 31 March 2012 (46,130) (79,868) (107,936) (267,533)

Net book valueAt 31 March 2012 1,028,599 1,708,176 101,158 809,389

At 31 March 2011 1,009,675 1,635,321 99,206 728,855

55



Movements in 2011/12Total

Assets Property Community Surplus Under Plant and

Assets Assets Construction Equipment £000 £000 £000 £000

Cost or ValuationAt 1 April 2011 12,756 40,345 62,737 4,020,622

Additions 493 233 66,551 315,660

Revaluation increases / (decreases) 147 4,689 0 87,495 recognised in the Revaluation Reserve

Revaluation increases / (decreases) (1,878) (992) 0 (76,504) recognised in the Surplus on the Provision of Services

Derecognition - disposals 0 (80) 0 (6,807)

Assets reclassified (to) / from 0 (1,109) 0 (3,572) held for sale

Other movements in cost or 100 (3,607) (29,141) (36,861) valuation

At 31 March 2012 11,618 39,479 100,147 4,300,033

Accumulated Depreciation and ImpairmentAt 1 April 2011 0 (170) 0 (431,897)

Depreciation charge 0 (241) 0 (123,143)

Depreciation charge written out to 0 0 0 24,790 Revaluation Reserve

Depreciation written out to the 0 34 0 17,351 Surplus on the Provision of Services

Derecognition - disposals 0 0 0 2,509

Impairment losses recognised in 0 0 0 (872) the Surplus on the Provision of Services

Other movements in cost or 0 13 0 9,431 valuation

At 31 March 2012 0 (364) 0 (501,831)

Net book valueAt 31 March 2012 11,618 39,115 100,147 3,798,202

At 31 March 2011 12,756 40,175 62,737 3,588,725

56



2010/11 Comparative DataVehicles,




Additions 37,358 35,651 9,509 148,743

Revaluation increases / (decreases) 5,350 33,913 0 0 recognised in the Revaluation Reserve


Derecognition - disposals (4,418) (446) (13,120) 0


Other movements in cost or 0 (7,411) (2) 0 valuation

At 31 March 2011 1,039,517 1,722,277 192,776 950,214





Derecognition - disposals 127 31 13,022 0

Impairment losses recognised in 0 0 0 (8,668) the Surplus on the Provision of Services

Other movements in cost or 19 33 2 0 valuation

At 31 March 2011 (29,842) (86,956) (93,570) (221,359)


At 31 March 2010 1,005,705 1,653,166 111,193 629,419

57



2010/11 Comparative DataTotal

Assets Property Community Surplus Under Plant and

Assets Assets Construction Equipment £000 £000 £000 £000

Cost or ValuationAt 1 April 2010 14,665 19,760 40,350 3,805,378

Transfer to heritage assets (2,649) 0 0 (2,649)

Re-stated at 1 April 2010 12,016 19,760 40,350 3,802,729

Additions 986 4 30,277 262,528

Revaluation increases / (decreases) 0 7,660 0 46,923 recognised in the Revaluation Reserve

Revaluation increases / (decreases) (127) (1,917) 0 (62,731) recognised in the Surplus on the Provision of Services

Derecognition - disposals 0 0 0 (17,984)

Assets reclassified (to) / from (56) (218) 0 (10,533) held for sale

Other movements in cost or (63) 15,056 (7,890) (310) valuation

At 31 March 2011 12,756 40,345 62,737 4,020,622

Accumulated Depreciation and ImpairmentAt 1 April 2010 0 (54) 0 (331,174)

Depreciation charge 0 (206) 0 (113,507)

Depreciation charge written out to 0 0 0 3,006 Revaluation Reserve

Depreciation written out to the 0 90 0 5,212 Surplus on the Provision of Services

Derecognition - disposals 0 0 0 13,180



At 31 March 2011 0 (170) 0 (431,897)

Net book valueAt 31 March 2011 12,756 40,175 62,737 3,588,725

At 31 March 2010 12,016 19,706 40,350 3,471,555

58


14. Property, Plant and Equipment - continued14.5 Movements on Balances - City of Edinburgh Council

Movements in 2011/12Vehicles,




Additions 47,555 49,173 7,038 126,708

Revaluation increases / (decreases) (412) 83,071 0 0 recognised in the Revaluation Reserve


Derecognition - disposals (3,543) (15) (248) 0


Other movements in cost or 0 30,855 0 0 valuation

At 31 March 2012 1,074,729 1,736,511 88,440 1,070,252





Derecognition - disposals 149 0 65 0

Impairment losses recognised in the 0 0 (573) (299) Surplus on the Provision of Services


At 31 March 2012 (46,130) (50,671) (63,401) (263,066)


At 31 March 2011 1,009,675 1,588,189 31,170 726,364

59



Movements in 2011/12Total

Assets Property Community Surplus Under Plant and PPP

Assets Assets Construction Equipment Assets £000 £000 £000 £000 £000

Cost or ValuationAt 1 April 2011 12,756 40,345 61,342 3,820,290 551,571

Additions 493 233 66,154 297,354 53

Revaluation increases / 147 4,689 0 87,495 (465) (decreases) recognised in the Revaluation Reserve

Revaluation increases / (1,878) (992) 0 (76,504) 0 (decreases) recognised in the Surplus on the Provision of Services

Derecognition - disposals 0 (80) 0 (3,886) 0

Assets reclassified (to) / 0 (1,109) 0 (3,572) 0 from held for sale

Other movements in cost 100 (3,607) (27,348) 0 0 or valuation

At 31 March 2012 11,618 39,479 100,148 4,121,177 551,159

Accumulated Depreciation and ImpairmentAt 1 April 2011 0 (170) 0 (350,619) (20,973)

Depreciation charge 0 (241) 0 (114,543) (11,419)

Depreciation charge written 0 0 0 24,790 629 out to Revaluation Reserve

Depreciation written out to 0 34 0 17,351 0 the Surplus on the Provision of Services

Derecognition - disposals 0 0 0 214 0

Impairment losses 0 0 0 (872) 0 recognised in the Surplus on the Provision of Services

Other movements in cost 0 13 0 47 0 or valuation

At 31 March 2012 0 (364) 0 (423,632) (31,763)

Net book valueAt 31 March 2012 11,618 39,115 100,148 3,697,545 519,396

At 31 March 2011 12,756 40,175 61,342 3,469,671 530,598

The disclosure for PPP assets is for information only the costs and depreciation are included in 'Other Land and Buildings'.

60



2010/11 Comparative DataVehicles,




Additions 37,358 35,483 4,944 148,743

Revaluation increases / (decreases) 5,350 33,913 0 0 recognised in the Revaluation Reserve


Derecognition - disposals (4,418) (57) 0 0


Other movements in cost or 0 (7,166) 0 0 valuation

At 31 March 2011 1,039,517 1,641,136 81,650 943,544





Derecognition - disposals 127 1 0 0



At 31 March 2011 (29,842) (52,947) (50,480) (217,180)


At 31 March 2010 1,005,705 1,604,706 39,483 626,639

61



2010/11 Comparative Data Total Assets Property

Community Surplus Under Plant and PPP Assets Assets Construction Equipment Assets

£000 £000 £000 £000 £000 Cost or ValuationAt 1 April 2010 14,665 19,760 39,911 3,596,979 552,861

Transfer to heritage assets (2,649) 0 0 (2,649) 0

Re-stated at 1 April 2010 12,016 19,760 39,911 3,594,330 552,861

Additions 986 4 29,321 256,839 1,150

Revaluation increases / 0 7,660 0 46,923 2,874 (decreases) recognised in the Revaluation Reserve

Revaluation increases / (127) (1,917) 0 (62,731) (3,314) (decreases) recognised in the Surplus on the Provision of Services

Derecognition - disposals 0 0 0 (4,475) 0

Assets reclassified (to) / (56) (218) 0 (10,533) 0 from held for sale

Other movements in cost (63) 15,056 (7,890) (63) (2,000) or valuation

At 31 March 2011 12,756 40,345 61,342 3,820,290 551,571

Accumulated Depreciation and ImpairmentAt 1 April 2010 0 (54) 0 (246,164) (11,942)

Depreciation charge 0 (206) 0 (104,152) (11,291)

Depreciation charge written 0 0 0 3,006 1,592 out to Revaluation Reserve

Depreciation written out to 0 90 0 5,212 668 the Surplus on the Provision of Services

Derecognition - disposals 0 0 0 128 0

Impairment losses recognised 0 0 0 (8,668) 0 in the Surplus on the Provision of Services

Other movements in cost 0 0 0 19 0 or valuation

At 31 March 2011 0 (170) 0 (350,619) (20,973)

Net book valueAt 31 March 2011 12,756 40,175 61,342 3,469,671 530,598

At 31 March 2010 12,016 19,706 39,911 3,348,166 540,919

The disclosure for PPP assets is for information only the costs and depreciation are included in 'Other Land and Buildings'.

62


14. Property, Plant and Equipment - continued14.7 Council Dwellings, Other Land and Buildings and Investment Properties

The significant assumptions applied in estimating fair value are:

●

●

● Not all properties were inspected.

Vehicles, Plant,

Other Furniture Council Land and and Infrastructure

Council assets Dwellings Buildings Equipment Assets £000 £000 £000 £000

Carried at historical cost 94,583 13,646 88,440 1,070,252

Valued at fair value as at: 31 March 2012 79 794,362 0 0

31 March 2011 2,333 82,814 0 0

31 March 2010 1,200 404,319 0 0

31 March 2009 976,067 376,601 0 0

31 March 2008 467 64,769 0 0

Total cost or valuation 1,074,729 1,736,511 88,440 1,070,252

Assets Community Surplus Under

Council assets Assets Assets Construction Total £000 £000 £000 £000

Carried at historical cost 11,618 129 100,148 1,378,816

Valued at fair value as at: 31 March 2012 0 5,479 0 799,920

31 March 2011 0 21,035 0 106,182

31 March 2010 0 12,757 0 418,276

31 March 2009 0 0 0 1,352,668

31 March 2008 0 79 0 65,315

Total cost or valuation 11,618 39,479 100,148 4,121,177

The Council carries out a rolling programme of revaluations that ensures that all property, plant and equipment required to be measured at fair value is revalued at least every five years. All valuations were carried out internally. Valuations of land and buildings were carried out under the direction of the Council's Property Manager (Property Management and Development), W. Miller FRICS, in accordance with the Statements of Asset Valuation Practice and Guidance Notes of The Royal Institution of Chartered Surveyors. Fixtures and fittings are included in the valuation of the buildings where appropriate.

Unless otherwise stated, all properties with a greater than de minimis value were assumed to be in a reasonable state of repair and have a life expectancy of more than fifty years.

The valuations were prepared using information from the Council's internal records, together with the valuation roll produced by Lothian Valuation Joint Board.

The following statement shows the progress of the Council's five-year rolling programme for the revaluation of property, plant and equipment.

63


15. Investment Properties15.1 Income and Expenses on Investment Properties


Rental income from investment properties (187) (187) (196) (196)

0 0 0 0

(187) (187) (196) (196)

15.2 Movement in Fair ValueThe following table summarises the movement in the fair value of investment properties over the year.


Value at 1 April 7,258 2,288 8,477 2,227

Additions: - Purchases 0 0 225 0

Disposals (170) 0 (225) 0

Net (loss) / gain from fair value adjustments (1,681) (168) (1,731) 61

Transfers 0 0 0 0 - (to) / from Inventories 0 0 300 0 - (to) / from Property, Plant and Equipment 1,793 0 212 0

Value at 31 March 7,200 2,120 7,258 2,288

16. Intangible Assets

2 Years

3 Years Jadu software

5 Years

6 Years Data encryption software

The following items of income and expense have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement.

There are no restrictions on the Council's ability to realise the value inherent in its investment properties or on the Council's right to the remittance of income and the proceeds of disposal. Within the Group, £4.5m of investment properties represents the Council's share of land at Shawfair, which is held jointly with Midlothian Council. The disposal of this would therefore require the consent of Midlothian Council.

Intangible assets represent purchased software licences.

Software is given a finite useful life, as set out below, based on the period of the licence purchased.

Direct operating expenses arising from investment property

2011/12 2010/11

2011/12 2010/11

GLOW Software, Mosaic Household directory, Digilog VRA solution

Weighbridge, Arcview, Adobe Acrobat, GIS, Anite Swift, Online Ticketing software

64


16. Intangible Assets - continued

2011/12 2010/11 £000 £000

Housing Services 1,149 0Education services 421 225Cultural and related services 33 33Environmental services 1 1Allocable overheads 17 3

Value at 31 March 1,621 262

The movement on intangible asset balances during the year is as follows:


Balance at 1 AprilGross carrying amount 2,898 2,898 2,480 2,480

Less: Accumulated amortisation (422) (422) (160) (160)

Net carrying amount at 1 April 2,476 2,476 2,320 2,320

Additions during the year - Purchased intangible assets 124 124 418 418

Amortisation for the period (1,621) (1,621) (262) (262)

Net carrying amount at 31 March 979 979 2,476 2,476

Comprising:Gross carrying amounts 3,022 3,022 2,898 2,898

Accumulated amortisation (2,043) (2,043) (422) (422)

Net carrying amount at 31 March 979 979 2,476 2,476

This intangible asset has therefore been fully amortised in year (£1.149m).

The following items of capitalised software are individually material to the financial statements.

Remaining Amortisation

2011/12 2010/11 Period £000 £000 at 31.03.12

Anite Swift 311 467 2 years

Data encryption software 223 279 4 years

GLOW Software 320 391 1 year

The carrying amount of intangible assets is amortised on a straight-line basis. The amortisation of £1.621m in 2011/12 (2010/11 £0.262m) was charged to the following services.

Carrying Amount

2011/12 2010/11

In 2011/12 the Council determined it no longer holds these nomination rights due to Housing Associations agreeing to shortlist their properties under the Council's social housing allocation policy.

The Council held an intangible asset in the form of nomination rights representing support for the construction of houses for rent by Housing Associations (carrying value of £1.149m at 1st April 2011).

65


17. Heritage Assets17.1 Reconciliation of the Carrying Value of Heritage Assets

Movements in 2011/12 Civic Monuments Regalia

and and Archival Statues Artefacts Collections

Cost or Valuation £000 £000 £000 At 1 April 2011 2,790 2,047 6,797

Additions 8 0 0

Revaluation increases / (decreases) recognised in the (381) 0 0 Surplus on the Provision of Services

At 31 March 2012 2,417 2,047 6,797

Accumulated ImpairmentAt 1 April 2011 0 0 0

At 31 March 2012 0 0 0

Net book valueAt 31 March 2012 2,417 2,047 6,797

At 31 March 2011 2,790 2,047 6,797

Museum Libraries' and Total

Special Gallery Heritage Collections Collections Assets


Additions 0 0 8

Revaluation increases / (decreases) recognised in the 0 0 (381) Surplus on the Provision of Services

At 31 March 2012 1,675 24,296 37,232


At 31 March 2012 0 0 0


At 31 March 2011 1,675 24,296 37,605

66


17. Heritage Assets - continued17.1 Reconciliation of the Carrying Value of Heritage Assets - continued

Comparative Movements in 2010/11 Civic Monuments Regalia

and and Archival Statues Artefacts Collections


Additions 88 0 0

Revaluation increases / (decreases) recognised in the 55 0 0 Revaluation Reserve

Revaluation increases / (decreases) recognised in the (16) 0 0 Surplus on the Provision of Services

At 31 March 2011 2,790 2,047 6,797


At 31 March 2011 0 0 0


At 31 March 2010 2,663 2,047 6,797

Museum Libraries' and Total

Special Gallery Heritage Collections Collections Assets


Additions 0 0 88

Revaluation increases / (decreases) recognised in the 0 0 55 Revaluation Reserve

Revaluation increases / (decreases) recognised in the 0 0 (16) Surplus on the Provision of Services

At 31 March 2011 1,675 24,296 37,605


At 31 March 2011 0 0 0


At 31 March 2010 1,675 24,296 37,478

67


17. Heritage Assets - continued17.2 Details of Heritage Assets

●

●

●

●

●

●

●

●

18. Financial Instruments18.1 Categories of Financial Instruments

The following categories of financial instrument are carried on the Council's Balance Sheet

31.03.12 31.03.11 31.03.12 31.03.11 Investments £000 £000 £000 £000 Loans and receivables 3,478 0 235,262 268,628

Unquoted equity investment at cost 23,335 23,335 0 0

Total investments 26,813 23,335 235,262 268,628

DebtorsLoans and receivables 3,500 3,500 25,213 33,306

Total debtors 3,500 3,500 25,213 33,306

BorrowingsFinancial liabilities (principal amount) (1,400,073) (1,272,805) (34,912) (54,969)

Accrued interest 0 0 (18,206) (16,652)

Amortised cost (8,679) (8,314) 0 0

Total borrowings (1,408,752) (1,281,119) (53,118) (71,621)

Long-Term Current

Monuments and Statues are valued on an historic basis and valuations are carried out under the direction of the Council's Property Manager (Property Management and Development).

Civic Regalia and artefacts include items such as the Lord Provosts Badge and Chain of Office and the Roseberry Jewel. The value of these assets is based on an insurance purposes valuation carried out in 1998.

Archival collections include historical records which relate to the history of Edinburgh and its surrounding areas. The value of these assets is based on a current insurance purposes valuation based on restoration costs only. This valuation has not changed since 2008/09.

Libraries special collections include items such as rare book collections and pictures in Calotype. The value of these assets is based on an insurance purposes valuation carried out in 2007.

The valuations for heritage assets have all been carried out internally and although they are from earlier periods, they are considered the most appropriate and relevant. Carrying out valuations for the majority of collections held is very costly and time consuming so it is not practicable to obtain recent valuations at a cost which is commensurate with the benefits to users of the financial statements. The carrying amounts of these heritage assets will be reviewed with sufficient regularity in the future to ensure they are brought up to date and remain appropriate.

It has not been practical or possible to split out all heritage assets belonging to common good, charities or trusts. Therefore, the Council's balance sheet may hold this element of heritage assets that belong to other entities.

The Council has three private vehicle registration plates which meet the definition of intangible heritage assets. These have not been recognised on the balance sheet due to lack of information on cost or current value. They are limited registration numbers that rarely become available for sale and therefore no relevant or appropriate current value can be placed on these.

Museums and Gallery collections include various collections held at a number of museums across Edinburgh. They include items held within the Social History, Applied Art, Writers Museum, Lauriston Castle, Childhood, City Art Centre and Picture Loan Scheme. The value of these assets is based on insurance purposes valuations carried out in 2003 with a small minority of the assets being based on insurance purposes valuations carried out in 1996.

68


18. Financial Instruments - continued18.1 Categories of Financial Instruments - continued

31.03.12 31.03.11 £000 £000

Other Long-Term LiabilitiesPPP and finance lease liabilities (209,741) (218,124)

Deferred liability (350) (350)

Total other long-term liabilities (210,091) (218,474)

Further detail on the finance lease and PPP liabilities can be seen in notes 40 and 41.

31.03.12 31.03.11 Creditors £000 £000 Financial liabilities at amortised cost (13,741) (19,735)

PPP and finance leases due within 1 year (8,666) (9,432)

Total creditors (22,407) (29,167)

18.2 Income, Expenses, Gains and Losses Financial Financial Liabilities: Assets:

Measured at Loans Amortised and

Cost Receivables Total £000 £000 £000

Interest expense (71,021) 16 (71,005)

Impairment losses 0 (13) (13)

Total expense in Surplus on the Provision of Services (71,021) 3 (71,018)

Interest income 0 2,446 2,446

Net gain / (loss) for the year (71,021) 2,449 (68,572)

18.3 Fair Value of Assets and Liabilities

● the fair values for financial liabilities have been determined by reference to the Public Works Loans Board (PWLB) redemption rules and prevailing PWLB redemption rates as at each Balance Sheet date.

Lothian Regional Council entered into an agreement for the disposal of Norton Park Annex to the Tudor Trust. The terms of the disposal included the creation of a Title Company with share capital of 100 ordinary shares, held by the Tudor Trust, and 350,000 £1 preference shares held by City of Edinburgh Council. The preference shares carry rights that, in the event of the company being wound up or the property sold, the Council will receive the first £0.35m of the sale proceeds. This is reflected in the Balance Sheet as 'Other Long-term Liabilities' of £0.35m, as shown above and as a long-term investment.

Long-Term

Current

Financial liabilities and financial assets represented by loans and receivables are carried in the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that will take place over the remaining term of the instruments, using the following assumptions:

In addition to the above interest expense, £1.858m (2010/11 £1.858m) (of which £1.810m [2010/11 £1.804m] related to the Council) was charged to the loans pool from the financial instruments adjustment account during the year, but not reflected in the Comprehensive Income and Expenditure Statement. It also excludes £0.439m (2010/11 £0.363m) of loans fund expenses charged to the Council.

69


18. Financial Instruments - continued18.3 Fair Value of Assets and Liabilities - continued

●

● no early repayment of impairment is recognised.

●

● the fair value of trade and other receivables is taken to be the invoiced or billed amount.

The fair values are calculated as follows:Carrying Fair Carrying Fair Amount Value Amount Value

£000 £000 £000 £000 Public Works Loans Board (1,141,294) (1,485,312) (1,027,666) (1,202,579)European Investment Bank (286) (306) (457) (526)Market debt (293,111) (320,584) (292,300) (343,962)Temporary borrowing (7,625) (7,625) (7,558) (7,558)Other bodies (19,554) (19,554) (24,758) (24,758)Other long-term liabilities (350) (350) (350) (350)Trade creditors (5,076) (5,076) (10,302) (10,302)Finance Leases (218,406) (218,406) (227,556) (227,556)

Financial liabilities (1,685,702) (2,057,213) (1,590,947) (1,817,591)

Carrying Fair Carrying Fair Amount Value Amount Value

Investments £000 £000 £000 £000 Loans and receivables 238,740 238,718 268,628 268,630Unquoted equity investment at cost 23,335 23,335 23,335 23,335DebtorsLoans and receivables 3,500 3,500 3,500 3,500Other trade debtors 25,213 25,213 33,306 33,306

Total Investments 290,788 290,766 328,769 328,771

19. Inventories Items 19.1 Group - Movements in 2011/12 Provided Construction

at Nil or and Other Items Fuel Nominal Raw Held for

Stocks Charge Materials Sale £000 £000 £000 £000

Balance at 1 April 627 609 1,143 146

Purchases 26,669 1,529 16,790 212

Held by a third party 0 27 0 0

Recognised as an expense in the year (26,681) (1,331) (16,142) (300)

Stock written off 0 0 (14) 0

Balance at 31 March 615 834 1,777 58

where no instrument will mature in the next twelve months, carrying amount is assumed to approximate to fair value.

for loans and receivables, the prevailing benchmark market rates have been used to provide the fair value.

31.03.12 31.03.11

31.03.11 31.03.12

The fair value is higher than the carrying amount because the authority’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 at the Balance Sheet date. This commitment to pay interest above current market rates increases the amount that the authority would have to pay if the lender requested or agreed to early repayment of the loans.

70


19. Inventories - continued19.1 Group - Movements in 2011/12 - continued

Clothing Work in and Catering

Progress Equipment Stocks Total £000 £000 £000 £000

Balance at 1 April 19,243 76 110 21,954

Purchases 1,434 281 1,973 48,888


Recognised as an expense in the year (109) (278) (1,972) (46,813)

Stock written off (9,252) (2) 0 (9,268)

Balance at 31 March 11,316 77 111 14,788

19.2 Group - Comparative Movements in 2010/11 Items Provided Construction



Balance at 1 April 563 191 1,171 329

Purchases 23,382 1,270 24,149 811

Donations 0 170 0 0



Stock written off 0 0 (135) (23)

Balance at 31 March 627 609 1,143 146



Balance at 1 April 22,572 143 112 25,081

Purchases 602 294 1,993 52,501

Donations 0 0 0 170


Recognised as an expense in the year (3,870) (359) (1,995) (55,622)

Stock written off (61) (2) 0 (221)

Balance at 31 March 19,243 76 110 21,954

71


19. Inventories - continued19.3 Council - Movements in 2011/12 Items

Provided Construction at Nil or and Other Items

Fuel Nominal Raw Held for Stocks Charge Materials Sale

£000 £000 £000 £000 Balance at 1 April 184 609 901 146

Purchases 3,106 1,529 8,408 212



Stock written off 0 0 (14) 0

Balance at 31 March 183 834 1,536 58



Balance at 1 April 2 76 110 2,028

Purchases 108 281 1,973 15,617



Stock written off 0 (2) 0 (16)

Balance at 31 March 1 77 111 2,800

19.4 Council - Comparative Movements in 2010/11 Items Provided Construction



Balance at 1 April 150 191 909 329

Purchases 2,977 1,270 9,469 811

Donations 0 170 0 0



Stock written off 0 0 (135) (23)

Balance at 31 March 184 609 901 146

72


19. Inventories - continued19.4 Council - Comparative Movements in 2010/11 - continued



Balance at 1 April 36 143 112 1,870

Purchases 602 294 1,993 17,416

Donations 0 0 0 170

Held by Third Party 0 0 0 45


Stock written off (15) (2) 0 (175)

Balance at 31 March 2 76 110 2,028

20. Debtors20.1 Long-term Debtors


Central government bodies 7,949 7,949 4,709 4,709Other local authorities 31,745 31,745 35,201 35,201Other entities and individuals 208,848 212,348 183,091 186,591

Total long-term debtors before provision 248,542 252,042 223,001 226,501 for impairment

Less: Provision for impairment (173,356) (173,356) (163,753) (163,753)

Total net long-term debtors 75,186 78,686 59,248 62,748

20.2 Analysis of Long-term DebtorsLong-term debtors comprise the following elements:


Capital advances Lothian / Borders Police Board 24,347 24,347 26,711 26,711 Lothian / Borders Fire / Rescue Board 7,250 7,250 8,490 8,490 Further Educ. Colleges (pre 1996 debt) 148 148 165 165Council Tax 95,606 95,606 91,395 91,395Community Charge 72,516 72,516 72,571 72,571Non-Domestic Rates 1,037 1,037 5,656 5,656CEC Holdings 0 3,500 0 3,500Edinburgh Marketing loan 60 60 81 81Edinburgh Leisure loan 0 0 216 216House rents 1,882 1,882 1,794 1,794Car loan scheme 140 140 185 185Other debtors 45,556 45,556 15,737 15,737

248,542 252,042 223,001 226,501

The Edinburgh Leisure Loan is repayable in July 2012 and has been transferred to current debtors.

2011/12 2010/11

Long-term debtors include £24.347m (2010/11 £26.711m) and £7.250m (2010/11 £8.490m) for sums recoverable from Lothian and Borders Police and Fire and Rescue Boards respectively. These sums relate to monies advanced to the joint boards for capital expenditure.

2011/12 2010/11

73


20. Debtors - continued20.3 Current Debtors


Central government bodies 23,920 22,913 61,921 60,376Other local authorities 7,893 7,574 4,827 6,488NHS bodies 1,083 1,082 7,348 7,346Public corporations and trading funds 1,167 1,167 1,953 1,953Other entities and individuals 119,979 108,443 179,004 156,110

Total current debtors before provision 154,042 141,179 255,053 232,273 for impairment

Less: Provision for impairment (67,425) (67,425) (63,349) (63,349)

Total net current debtors 86,617 73,754 191,704 168,924

20.4 Provision for Impairment

Group Council Group Council Long-term provision for impairment £000 £000 £000 £000 Community charge (72,516) (72,516) (72,571) (72,571)Council tax (88,046) (88,046) (83,711) (83,711)Non-Domestic rates (737) (737) (947) (947)Sundry debtors (12,057) (12,057) (6,524) (6,524)

Total long-term provision for impairment (173,356) (173,356) (163,753) (163,753)

Current provision for impairment £000 £000 £000 £000 Community charge (50) (50) (60) (60)Council tax (59,529) (59,529) (56,951) (56,951)Non-Domestic rates (94) (94) (626) (626)Sundry debtors (7,752) (7,752) (5,712) (5,712)

Total current provision for impairment (67,425) (67,425) (63,349) (63,349)

21. Cash and Cash Equivalents


Cash held 510 486 554 528

Bank current accounts (4,436) (17,612) (13,803) (28,573)

Short-term deposits:With banks or building societies 117,574 116,574 124,314 122,214With other local authorities 38,004 38,004 94,376 94,376With money market fund 31,567 31,567 18,919 18,919With H.M. Treasury 26,812 26,812 0 0

210,031 195,831 224,360 207,464

The balance of cash and cash equivalents comprises the following elements. Investments maturing within three months of the balance sheet are deemed to be cash and cash equivalents.

2011/12 2010/11

2011/12 2010/11

2011/12 2010/11

74


22. Assets Held for Sale

Group Council Group Council 22.1 Non-Current Assets £000 £000 £000 £000

Balance at 1 April 7,975 7,975 2,812 2,812

Assets newly classified as held for sale:Property, Plant and Equipment 5,655 5,655 5,822 5,822

Additions 92 92 23 23

Revaluation gains/(losses) recognisedin the revaluation reserve (1,736) (1,736) 124 124

Revaluation gains/(losses) recognised inSurplus on the Provision of Services (21) (21) (5) (5)

Assets declassified as held for sale:Property, Plant and Equipment (254) (254) 0 0

Assets sold (134) (134) (1) (1)

Transfers from non-current to current (500) (500) (800) (800)

Balance at 31 March 11,077 11,077 7,975 7,975

Group Council Group Council 22.2 Current Assets £000 £000 £000 £000

Balance at 1 April 5,357 5,357 3,200 3,200

Assets newly classified as held for sale:Property, Plant and Equipment 449 449 4,692 4,692

Additions 229 229 21 21

Revaluation gains/(losses) recognisedin the revaluation reserve 542 542 (83) (83)

Revaluation gains/(losses) recognised inSurplus on the Provision of Services 1,014 1,014 (52) (52)

Assets declassified as held for sale:Property, Plant and Equipment (2,325) (2,325) 0 0

Assets sold (2,581) (2,581) (3,221) (3,221)

Transfers from non-current to current 500 500 800 800

Balance at 31 March 3,185 3,185 5,357 5,357

23. Creditors


Central government bodies (22,372) (19,218) (8,058) (2,144)

Other local authorities (13,921) (9,246) (10,948) (9,167)

NHS bodies (274) (267) (431) (424)

Public corporations and trading funds (625) (625) (1,543) (1,543)

Other entities and individuals (176,426) (154,369) (199,209) (160,022)

(213,618) (183,725) (220,189) (173,300)

2011/12 2010/11

2011/12 2010/11

2011/12 2010/11

75


24. Provisions

Equal Pay Council Tax Trams Claims Discounts

£000 £000 £000 Balance at 1 April 2011 (75,435) (47,934) (1,252)

Additional provisions made during the year (2,082) 0 (215)

Amounts used during the year 70,553 12,924 0

Transferred to debtor impairments 0 0 0

Unused amounts reversed during the year 0 11,042 0

Balance at 31 March 2012 (6,964) (23,968) (1,467)

Housing Benefit Insurance Other

Subsidy Claims Provisions £000 £000 £000

Balance at 1 April 2011 (642) (611) (1,823)

Additional provisions made during the year (150) (231) (2,191)

Amounts used during the year 336 516 494

Transferred to debtor impairments 0 0 0

Unused amounts reversed during the year 306 0 986

Balance at 31 March 2012 (150) (326) (2,534)

Total Council Group Total

Provisions Provisions Provisions £000 £000 £000

Balance at 1 April 2011 (127,697) (2,007) (129,704)

Additional provisions made during the year (4,869) (1,727) (6,596)

Amounts used during the year 84,823 1,732 86,555

Transferred from other long-term liabilities 0 (1,525) (1,525)

Unused amounts reversed during the year 12,334 0 12,334

Balance at 31 March 2012 (35,409) (3,527) (38,936)

Provision has been made within the Group Financial Statements for outstanding payments of £38.936m (2010/11 £129.704m).

Of this amount, £35.409m (2010/11 £127.697m) relates to the Council. These include estimates of settlements on outstanding equal pay, compensation and insurance claims, land acquisition costs and costs arising from the mediation process for the tram project and Council Tax discounts payable to Registered Social Landlords. The precise amount of these payments is unknown, however, provision has been made in the accounts, as summarised below, based on a Council assessment of the costs.

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25. Usable Reserves

26. Unusable Reserves26.1 Summary of Unusable Reserves

31 March 31 March 1 April 2012 2011 2010 £000 £000 £000

Revaluation Reserve (906,510) (808,914) (769,093)

Capital Adjustment Account (1,306,950) (1,329,289) (1,251,384)

Financial Instruments Adjustment Account 54,276 55,768 56,848

Pensions Reserve 381,215 335,902 679,608

Employee Statutory Adjustment Account 22,732 29,868 29,457

Total Council Unusable Reserves (1,755,237) (1,716,665) (1,254,564)

Subsidiaries, Associates and Joint Ventures 1,092,831 918,730 1,058,162

Total Group Unusable Reserves (662,406) (797,935) (196,402)

26.2 Revaluation Reserve

● revalued downwards or impaired and the gains are lost;

● used in the provision of services and the gains are consumed through depreciation; or

● disposed of and the gains are realised.

2011/12 2010/11 £000 £000

Balance at 1 April 2010 n/a (734,264)

Recognition of heritage assets n/a (34,829)

Re-stated at 1 April 2010 n/a (769,093)

Balance at 1 April (808,914) (769,093)

Upward revaluation of assets (150,195) (91,952)

Downward revaluation of assets and 39,315 41,929 impairment losses not charged to the Surplus on the Provision of Services

Surplus on revaluation of non-current assets (110,880) (50,023) not posted to the Surplus on the Provision of Service

Difference between fair value depreciation 11,021 8,473 and historical cost depreciation

Accumulated gains on assets sold 2,263 1,729

Amount written off to the capital adjustment 13,284 10,202 account

Balance at 31 March (906,510) (808,914)

The revaluation reserve contains the gains made by the Council arising from increases in the value of its property, plant and equipment. The balance is reduced when assets with accumulated gains are:

The reserve contains unrealised gains accumulated since 1 April 2007, the date the reserve was created. Accumulated gains arising before 1 April 2007 were consolidated into the capital adjustment account.

Balance as at:

Movements in the Group and the Council's usable reserves are detailed in the Movement in Reserves Statement (on pages 15 to 17) and Note 10.

77


26. Unusable Reserves - continued26.3 Capital Adjustment Account

2011/12 2010/11 £000 £000

Balance at 1 April (1,329,289) (1,251,384)Reversal of items relating to capital expendituredebited or credited to the CIESCharges for depreciation and impairment of 112,503 109,788 non-current assetsRevaluation losses on property, plant and 58,542 57,592 equipment, heritage assets and assets held for saleAmortisation of intangible assets 1,621 262Revenue exp. funded from capital under statute 33,811 44,820Amounts of non-current assets written off on (2,033) (867) disposal or sale as part of the gain / loss on disposal to the CIES

204,444 211,595Adjusting amounts written out of the (13,284) (10,202) revaluation reserve

Net written out amount of the costs of non- 191,160 201,393 current assets consumed in the yearCapital financing applied in the year:Use of the capital receipts reserve to finance (8,421) (8,435) new capital expenditureCapital grants and contributions credited to the (58,702) (134,998) CIES that have been applied to capital financingApplication of grants from the capital grants (380) (26,308) unapplied account / capital fund Statutory provision for the financing of capital (77,417) (73,893) investment charged against the General Fund and HRA balancesCapital expenditure charged against the General (33,811) (44,820) Fund and HRA balances

(178,731) (288,454)Movement in donated assets 0 (171)Movements in the market value of investment 168 (61) properties credited to the CIESOther unrealised losses debited to the CIES 9,742 9,388

Balance at 31 March (1,306,950) (1,329,289)

The account also holds revaluation gains accumulated on property, plant and equipment prior to 1 April 2007, the date the revaluation reserve was created to hold such gains.Note 9 provides details of the source of the transactions posted to this account, except those involving the revaluation reserve.

The capital adjustment account provides a balancing mechanism for 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 (CIES) (with reconciling postings from the revaluation reserve to convert fair value figures to a historical cost basis). The account is credited with the amounts set aside by the Council to finance the costs for acquisition, construction and enhancement of non-current assets.The account holds accumulated gains and losses on investment properties.

78


26. Unusable Reserves - continued26.4 Financial Instruments Adjustment Account

2011/12 2010/11 £000 £000

Balance at 1 April 55,768 56,848

Proportion of premiums incurred in previous (1,810) (1,804) financial years to be charged against the General Fund and HRA balances in accordance with statutory requirements

Proportion of equivalent interest rate calculation on 357 730 lender option / borrower option loans (LOBOs)

Amount by which finance costs charged to the (1,453) (1,074) Comprehensive Income and Expenditure Statement are different from finance costs chargeable in accordance with statutory requirements

Proportion of premiums incurred in previous (47) (53) financial years relating to Joint Boards

Proportion of equivalent interest rate calculation on LOBOs relating to Joint Boards 9 22

Net amount relating to Joint Boards (38) (31)

Difference between actual interest paid and interest (1) 25 rate assumed in equivalent interest rate calculation on transition

Balance at 31 March 54,276 55,768

26.5 Pensions Reserve

The debit balance on the pension reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources that the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits require to be paid.

The financial instruments adjustment account provides a balancing mechanism between the different rates at which gains and losses (such as premiums on the early repayment of debt) are recognised under the Code and are required by statute to be met from the General Fund and Housing Revenue Account. This account also holds the equivalent interest rate adjustment on lender option / borrower option loans.

The Council operates a loans pool on behalf of Lothian and Borders Fire and Rescue and Police Boards as well as the General Fund and Housing Revenue Account. A proportion of the premiums and discounts therefore relate to debt incurred by the joint boards. Although these amounts are held on the Council's Balance Sheet, the corresponding charges are not reflected in the Comprehensive Income and Expenditure Statement.

The pensions reserve provides a balancing mechanism arising from the different arrangements for accounting for post employment benefits (pension costs) and for funding pensions in accordance with statutory provisions. The Council accounts for pensions in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs.

Statutory arrangements, however, require benefits to be financed as the Council makes its contributions to Lothian Pension Fund or pays any pensions for which it is directly responsible.

79


26. Unusable Reserves - continued26.5 Pensions Reserve - continued

2011/12 2010/11 £000 £000


Actuarial gains or losses on pension assets and liabilities 66,159 (161,242)

Reversal of items relating to retirement benefits debited or credited to the 40,774 (123,966)Surplus on the Provision of Services in the Comprehensive Income andExpenditure Statement

Employer's pension contributions and direct payments to pensioners (61,620) (58,498)payable in the year


26.6 Employee Statutory Adjustment Account

2011/12 2010/11 £000 £000


Settlement or cancellation of accrual made at the (29,868) (29,457)end of the preceding year

Amount accrued at the end of the current year 22,732 29,868

Amount by which officer remuneration charged to (7,136) 411the Comprehensive Income and ExpenditureStatement on an accruals basis is different fromremuneration chargeable in the year in accordancewith statutory requirements


26.7 Unusable Reserves - Group Members31 March 31 March 1 April

2012 2011 2010 Subsidiaries £000 £000 £000 CEC Holdings Limited

Capital adjustment account (60,383) (58,456) (50,386)

Capital contribution (6,985) (6,770) (4,720)

Lothian Buses

Revaluation reserve (6,150) (28,274) (28,641)

Total Unusable Reserves - Subsidiaries (73,518) (93,500) (83,747)

The employee statutory adjustment account provides a balancing mechanism arising from the different arrangements that would otherwise impact on the General Fund and HRA balances from accruing for compensated absences earned but not taken in the year (annual leave entitlement carried forward at 31 March). Statutory arrangements require that the impact on the General Fund and HRA balances is mitigated by transfers to or from this account.

Balance as at:

Terms and conditions for Scottish teachers have changed during 2011/12, with the introduction of school closure days. Some days within school holiday periods are now 'school closure days' and are non-accumulating absence days within the annual leave calculations. Costs relating to teachers within the annual leave calculation have decreased from £13.151m in 2010/11 to £7.073m in 2011/12. This is mainly attributable to the introduction of 'school closure days'. The impact of this can be seen in the employee statutory adjustment account.

80


26. Unusable Reserves - continued26.7 Unusable Reserves - Group Members - continued

31 March 31 March 1 April 2012 2011 2010 £000 £000 £000

Associates and Joint VenturesCommon Good



Lothian and Borders Fire and Rescue Board


Employee statutory adjustment account - pensions 10,475 9,583 12,187

Employee statutory adjustment account - other 318 223 255

Financial instrument adjustment account 24 31 45

Pension reserve 189,650 172,489 212,478


Lothian and Borders Police Board


Employee statutory adjustment account - pensions 53,905 44,026 48,649

Employee statutory adjustment account - other 1,591 1,495 1,167

Financial instrument adjustment account 84 102 136

Pension reserve 990,122 861,089 942,937


Lothian Valuation Joint Board

Capital adjustment account (285) (322) (326)

Employee statutory adjustment account 50 53 46

Pension reserve 2,757 3,056 7,228

Total Unusable Reserves - Associates and Joint Ventures 1,166,349 1,012,230 1,141,909

1,092,831 918,730 1,058,162

27. Cash Flow Statement - Operating ActivitiesThe cash flows for operating activities include the following items:


Interest received (3,805) (3,779) (2,528) (2,409)

Interest paid 100,348 99,585 94,854 93,816

Dividends received (3,000) (3,000) (2,000) (2,000)

2011/12 2010/11

Total Usable Reserves - Subsidiaries, Associates and Joint Ventures

Balance as at:

81


28. Cash Flow Statement - Investing Activities


Purchase of property, plant and equipment, 315,680 308,576 189,302 183,825 investment property and intangible assets

Purchase of short- and long-term investments 25,782 25,782 33,856 33,119

Other payments for investing activities 43,694 41,217 63,724 61,118

Proceeds from the sale of property, plant and (8,424) (8,157) (10,314) (8,436) equip., inv. property and intangible assets

Proceeds from short- and long-term investments (33,289) (33,119) (12,193) (12,193)

Other receipts from investing activities (4,809) (4,254) (27,415) (25,990)

Net cash flows from investing activities 338,634 330,045 236,960 231,443

29. Cash Flow Statement - Financing Activities


Cash receipts of short- and long-term borrowing (138,852) (136,925) (90,752) (90,723)

Other receipts from financing activities (1,573) (1,573) (10,057) (10,057)

Cash payments for the reduction of the 19,361 11,946 19,226 12,660 outstanding liabilities relating to finance leases

Repayments of short- and long-term borrowing 24,413 24,414 5,433 5,434

Net cash flows from investing activities (96,651) (102,138) (76,150) (82,686)

30. Analysis of Change in Financing ActivitiesBalance Cash Non Cash Balance

01.04.2011 Trans. Trans. 31.03.2012 Group £000 £000 £000 £000 Debt due within 1 Year (48,909) 14,853 (1,554) (35,610)Debt due after 1 Year (1,274,809) (126,542) (366) (1,401,717)

Total debt due (1,323,718) (111,689) (1,920) (1,437,327)

Other liquid resources 54,056 (3,157) 1,573 52,472

Finance leases (237,847) 2,913 (2,913) (237,847)

Total (1,507,509) (111,933) (3,260) (1,622,702)

Council £000 £000 £000 £000 Debt due within 1 Year (46,863) 14,853 (1,554) (33,564)Debt due after 1 Year (1,281,119) (127,267) (366) (1,408,752)

Total debt due (1,327,982) (112,414) (1,920) (1,442,316)

Other liquid resources 54,044 (1,787) 215 52,472

Finance leases (227,556) 12,063 (2,913) (218,406)

Total (1,501,494) (102,138) (4,618) (1,608,250)

2011/12 2010/11

2011/12 2010/11

82


31.

Balance Cash Non Cash Balance 01.04.2011 Trans. Trans. 31.03.2012

Group £000 £000 £000 £000 FinancingTemporary loans (7,559) (66) 0 (7,625)PWLB (1,027,666) (112,512) (1,116) (1,141,294)Market loans (292,300) 0 (811) (293,111)European Investment Bank (457) 164 7 (286)Other Borrowing 4,264 725 0 4,989

Net financing (1,323,718) (111,689) (1,920) (1,437,327)

Council £000 £000 £000 £000 FinancingTemporary loans (7,559) (66) 0 (7,625)PWLB (1,027,666) (112,512) (1,116) (1,141,294)Market loans (292,300) 0 (811) (293,111)European Investment Bank (457) 164 7 (286)

Net financing (1,327,982) (112,414) (1,920) (1,442,316)

Accrued interest is included in the carrying value of investments and loans.

32. Amounts Reported for Resource Allocation Decisions

●

●

●

The income and expenditure for the Council's main service areas is shown separately on the following pages. Income and expenditure for the subsidiary, associate and joint venture companies is shown in total.

Reconciliation of Movements in Cash Receipts and Repayments of Short- and Long-Term Borrowing

expenditure on support services is budgeted for within the relevant departments that provide the support services and not charged directly to services receiving the support services.

The analysis of income and expenditure by service shown in the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice. However, decisions about resource allocations are taken by the Council on the basis of budget reports analysed across departments. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular:

no charges are made to departments in relation to capital expenditure, whereas depreciation, revaluation and impairment losses in excess of balances on the revaluation reserves are charged to services in the Comprehensive Income and Expenditure Statement.

the cost of retirement benefits is based on the payment of employer's contributions to Lothian Pension Fund rather than the current service cost of benefits earned during the year.

83


32. Amounts Reported for Resource Allocation Decisions - continued32.1 Departmental Income and Expenditure

Children and City Corporate

2011/12 Families Devt. Governance £000 £000 £000

Fees, charges and other service income (7,585) (992) (27,897)Government grants and other contributions (7,290) (2,774) (15,413)

Total Income (14,875) (3,766) (43,310)

Employee expenses 254,752 4,912 44,071Other service expenses 146,888 10,209 68,634

Total Expenditure 401,640 15,121 112,705

Net Expenditure / (Income) 386,765 11,355 69,395

Health Housing Services and Social Revenue Joint for

Care Account Boards Communities £000 £000 £000 £000

Fees, charges and other service income (17,273) (90,328) 0 (214,240)Government grants and other contributions (45,419) (1,612) (1,906) (40,989)

Total Income (62,692) (91,940) (1,906) (255,229)

Employee expenses 89,565 9,690 0 127,076Other service expenses 155,321 72,456 70,452 259,138Support service recharges 0 6,280 0 1,319

Total Expenditure 244,886 88,426 70,452 387,533

Net Expenditure / (Income) 182,194 (3,514) 68,546 132,304

Net Other Cost of Equal Group

Benefits Pay Members Total £000 £000 £000 £000

Fees, charges and other service income 0 0 (220,334) (578,649)Income from associates 0 0 (173,913) (173,913)Government grants and other contributions (220,661) 0 (23,652) (359,716)

Total Income (220,661) 0 (417,899) (1,112,278)

Employee expenses 0 (11,042) 80,419 599,443Other service expenses 221,912 0 147,784 1,152,794Expenditure on associates 0 0 237,932 237,932Support service recharges 0 0 0 7,599Depreciation, amortisation and impairment 0 0 10,100 10,100

Total Expenditure 221,912 (11,042) 476,235 2,007,868


84


32. Amounts Reported for Resource Allocation Decisions - continued32.1 Departmental Income and Expenditure - continued

Children and City Corporate

2010/11 Comparative Data Families Devt. Services Finance £000 £000 £000 £000

Fees, charges and other service income (6,941) (56,550) (50,371) (6,447)Government grants and other contributions (9,957) (6,674) (7,223) (6,726)

Total Income (16,898) (63,224) (57,594) (13,173)

Employee expenses 256,266 31,225 39,579 19,962Other service expenses 143,651 49,785 77,080 7,709Support service recharges 0 0 513 0


Net Expenditure / (Income) 383,019 17,786 59,578 14,498

Health Housing Services and Social Revenue Joint for

Care Account Boards Communities £000 £000 £000 £000

Fees, charges and other service income (11,071) (86,376) 0 (132,029)Government grants and other contributions (39,989) (1,282) (2,126) (51,199)

Total Income (51,060) (87,658) (2,126) (183,228)

Employee expenses 90,672 9,768 0 94,293Other service expenses 132,887 70,267 75,649 233,895Support service recharges 0 6,009 0 1,755



Net Other Cost of Equal Group

Benefits Pay Members Total £000 £000 £000 £000

Fees, charges and other service income (1) 0 (100,418) (450,204)Income from associates 0 0 (211,222) (211,222)Government grants and other contributions (214,907) 0 (86,982) (427,065)

Total Income (214,908) 0 (398,622) (1,088,491)

Employee expenses 0 18,416 71,976 632,157Other service expenses 215,198 0 79,743 1,085,864Expenditure on associates 0 0 147,231 147,231Support service recharges 0 0 0 8,277Depreciation, amortisation and impairment 0 0 10,500 10,500

Total Expenditure 215,198 18,416 309,450 1,884,029

Net Expenditure / (Income) 290 18,416 (89,172) 795,538

85


32. Amounts Reported for Resource Allocation Decisions - continued32.2


Net expenditure in departmental analysis 895,590 837,254 795,538 884,710

Net expenditure of services and support (59,121) (59,121) (409,048) (409,048) services not included in the dept. analysis

Amounts in the Comprehensive Income and 255,532 255,532 407,989 407,605 Expenditure Statement (CIES) not reported to management in departmental analysis

Amounts included in departmental analysis (61,620) (61,620) (58,498) (58,498) not included in CIES

Amounts included in the departmental 5,501 5,501 3,994 3,994 analysis included below Cost of Services in the CIES

Cost of Services in CIES 1,035,882 977,546 739,975 828,763

32.3 Reconciliation to Subjective AnalysisServices Not

Group Dept. not in Reported 2011/12 Analysis Analysis to Mgmt.

£000 £000 £000 Fees, charges and other service income (578,649) 41,842 6,801Income from associates and joint ventures (173,913) 0 0Interest and investment income 0 0 0Income from Council Tax 0 0 0Government grants and other contributions (359,716) 7,562 0

Total Income (1,112,278) 49,404 6,801

Employee expenses 599,443 (41,563) 79,953Other service expenses 1,152,794 (66,962) (6,801)Expenditure on associates and joint ventures 237,932 0 0Support service recharges 7,599 0 0Depreciation, amortisation and impairment 10,100 0 175,579

Total Expenditure 2,007,868 (108,525) 248,731

Net Expenditure / (Income) 895,590 (59,121) 255,532

Reconciliation of Departmental Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statements for the Group and the Council

2011/12 2010/11

86


32. Amounts Reported for Resource Allocation Decisions - continued32.3 Reconciliation to Subjective Analysis - continued

Reported Not Below Allocation

Group Included Cost of of 2011/12 in CIES Services Recharges

£000 £000 £000 Fees, charges and other service income 0 40,916 0Income from associates and joint ventures 0 0 0Interest and investment income 0 0 0Income from Council Tax 0 0 0Government grants and other contributions 0 28,919 0

Total Income 0 69,835 0

Employee expenses (61,620) (17,274) 3,105Other service expenses 0 (47,060) 4,494Expenditure on associates and joint ventures 0 0 0Support service recharges 0 0 (7,599)Depreciation, amortisation and impairment 0 0 0

Total Expenditure (61,620) (64,334) 0

Net Expenditure / (Income) (61,620) 5,501 0

Group Cost of Corporate 2011/12 Services Amounts Total

£000 £000 £000 Fees, charges and other service income (489,090) (39,422) (528,512)Income from associates and joint ventures (173,913) 0 (173,913)Interest and investment income 0 (4,995) (4,995)Income from Council Tax 0 (227,975) (227,975)Government grants and other contributions (323,235) (849,458) (1,172,693)

Total Income (986,238) (1,121,850) (2,108,088)

Employee expenses 562,044 17,274 579,318Other service expenses 1,036,465 47,518 1,083,983Expenditure on associates and joint ventures 237,932 0 237,932Support service recharges 0 0 0Depreciation, amortisation and impairment 185,679 0 185,679Interest payments 0 64,466 64,466Gain on disposal of assets 0 (1,812) (1,812)

Total Expenditure 2,022,120 127,446 2,149,566

Net Expenditure / (Income) 1,035,882 (994,404) 41,478

87



Services Not Council Dept. not in Reported 2011/12 Analysis Analysis to Mgmt.

£000 £000 £000 Fees, charges and other service income (358,315) 41,842 0Income from associates and joint ventures 0 0 0Interest and investment income 0 0 0Income from Council Tax 0 0 0Government grants and other contributions (336,064) 7,562 0

Total Income (694,379) 49,404 0

Employee expenses 519,024 (41,563) 79,953Other service expenses 1,005,010 (66,962) 0Support service recharges 7,599 0 0Depreciation, amortisation and impairment 0 0 175,579




Council Included Cost of of 2011/12 in CIES Services Recharges



Employee expenses (61,620) (17,274) 3,105Other service expenses 0 (47,060) 4,494Support service recharges 0 0 (7,599)Depreciation, amortisation and impairment 0 0 0



88



Council Cost of Corporate 2011/12 Services Amounts Total

£000 £000 £000 Fees, charges and other service income (275,557) (40,935) (316,492)Income from associates and joint ventures 0 0 0Interest and investment income 0 (4,814) (4,814)Income from Council Tax 0 (227,975) (227,975)Government grants and other contributions (299,583) (849,458) (1,149,041)

Total Income (575,140) (1,123,182) (1,698,322)

Employee expenses 481,625 17,274 498,899Other service expenses 895,482 47,060 942,542Support service recharges 0 0 0Depreciation, amortisation and impairment 175,579 0 175,579Interest payments 0 66,837 66,837Gain on disposal of assets 0 (2,033) (2,033)


Net Expenditure / (Income) 977,546 (994,044) (16,498)

Services Not Group Dept. not in Reported 2010/11 Comparative Data Analysis Analysis to Mgmt.

£000 £000 £000 Fees, charges and other service income (450,204) 36,982 1,590Income from associates and joint ventures (211,222) 0 11,101Interest and investment income 0 0 0Income from Council Tax 0 0 0Government grants and other contributions (427,065) 4,015 0

Total Income (1,088,491) 40,997 12,691

Employee expenses 632,157 (369,498) 236,929Other service expenses 1,085,864 (80,547) (1,589)Expenditure on associates and joint ventures 147,231 0 (11,101)Support service recharges 8,277 0 0Depreciation, amortisation and impairment 10,500 0 171,059



89




Group Included Cost of of 2010/11 Comparative Data in CIES Services Recharges



Employee expenses (58,498) (20,531) 3,382Other service expenses 0 (47,924) 4,895Expenditure on associates and joint ventures 0 0 0Support service recharges 0 0 (8,277)Depreciation, amortisation and impairment 0 (16) 0



Group Cost of Corporate 2010/11 Comparative Data Services Amounts Total

£000 £000 £000 Fees, charges and other service income (368,972) (42,917) (411,889)Income from associates and joint ventures (200,121) 0 (200,121)Interest and investment income 0 (4,185) (4,185)Income from Council Tax 0 (226,583) (226,583)Government grants and other contributions (393,245) (933,751) (1,326,996)

Total Income (962,338) (1,207,436) (2,169,774)

Employee expenses 423,941 20,531 444,472Other service expenses 960,699 50,804 1,011,503Expenditure on associates and joint ventures 136,130 0 136,130Support service recharges 0 0 0Depreciation, amortisation and impairment 181,543 16 181,559Interest payments 0 72,583 72,583Gain on disposal of assets 0 (2,168) (2,168)


Net Expenditure / (Income) 739,975 (1,065,670) (325,695)

90



Services Not Council Dept. not in Reported 2010/11 Comparative Data Analysis Analysis to Mgmt.

£000 £000 £000 Fees, charges and other service income (349,786) 36,982 0Income from associates and joint ventures 0 0 0Interest and investment income 0 0 0Income from Council Tax 0 0 0Government grants and other contributions (340,083) 4,015 0

Total Income (689,869) 40,997 0

Employee expenses 560,181 (369,498) 236,929Other service expenses 1,006,121 (80,547) 0Support service recharges 8,277 0 0Depreciation, amortisation and impairment 0 0 170,676




Council Included Cost of of 2010/11 Comparative Data in CIES Services Recharges



Employee expenses (58,498) (20,531) 3,382Other service expenses 0 (47,924) 4,895Support service recharges 0 0 (8,277)Depreciation, amortisation and impairment 0 (16) 0



91



Council Cost of Corporate 2010/11 Comparative Data Services Amounts Total

£000 £000 £000 Fees, charges and other service income (270,144) (42,917) (313,061)Income from associates and joint ventures 0 0 0Interest and investment income 0 (3,112) (3,112)Income from Council Tax 0 (226,583) (226,583)Government grants and other contributions (306,263) (933,751) (1,240,014)

Total Income (576,407) (1,206,363) (1,782,770)

Employee expenses 351,965 20,531 372,496Other service expenses 882,545 47,924 930,469Support service recharges 0 0 0Depreciation, amortisation and impairment 170,660 16 170,676Interest payments 0 71,810 71,810Gain on disposal of assets 0 (867) (867)


Net Expenditure / (Income) 828,763 (1,066,949) (238,186)

33. Trading Operations

£000 £000 £000 £000 Included in Educational Services Edinburgh Catering Services - School 194 (195) and Welfare Catering

Equal Pay included in Exceptional Expend. 0 426

Included in Roads and Transport Edinburgh Road Services 1,231 946Included in Environmental Services Open Space Maintenance 490 30 Refuse Collection (including Trade Waste) 683 (42)

Total Surplus / (Deficit) Included in Cost of 2,598 1,165 Services

Included in Financing and Investment Income BlindCraft n/a (523) City Fleet Maintenance Services 327 345 Direct Cleaning 607 (435) Edinburgh Building Services 4,553 3,945 Edin. Catering Services - Other Catering 14 (144)

Equal Pay included in Exceptional Expend. 0 806

Total Surplus Included in Financing and 5,501 3,994 Investment Income

Total Surplus on Trading Operations 8,099 5,159

The Council operates the following significant trading operations under the terms of the Local Government in Scotland Act 2003. The results are included within the Comprehensive Income and Expenditure Statement as shown below:

2011/12 2010/11

92


33. Trading Operations - continued33.1 Edinburgh Catering Services - School and Welfare Catering

2011/12 2010/11 2009/10 Cumulative £000 £000 £000 £000

Turnover 5,166 4,759 5,262

Surplus / (deficit) 194 (195) 41 40

33.2 Edinburgh Road Services

2011/12 2010/11 2009/10 Cumulative £000 £000 £000 £000

Turnover 23,307 23,177 23,813

Surplus 1,231 946 1,367 3,544

Edinburgh Road Services achieved its statutory obligation to break even over the three-year period.

33.3 Open Space Maintenance

2011/12 2010/11 2009/10 Cumulative £000 £000 £000 £000

Turnover 18,404 18,454 18,941

Surplus 490 30 185 705

Open Space Maintenance achieved its statutory obligation to break even over the three-year period.

33.4 Refuse Collection (including Trade Waste)

2011/12 2010/11 2009/10 Cumulative £000 £000 £000 £000

Turnover 15,872 16,213 14,849

Surplus / (deficit) 683 (42) (1,760) (1,119)

Refuse Collection failed to achieve its statutory obligation to break even over the three-year period.

Open Space Maintenance is responsible for keeping roads, pavements and grassed areas free from litter and dumping. The grounds maintenance section maintains most of the civic amenity green spaces, including public parks and school playing fields. It also provides forestry services for the city's tree stock.

Service improvements are being implemented which have resulted in a surplus being achieved in 2011/12. These improvements, which include new shift patterns and changes to routing are on-going and once fully implemented in 2012/13 will bring additional savings.

This STO provides a weekly refuse collection for over 227,000 households, with the majority of these properties being served by a containerised waste collection system. Trade waste provides a collection and disposal service to producers of commercial waste throughout the city. In addition the service provides uplifts of bulky household refuse.

Edinburgh Catering Services - School and Welfare Catering provides catering services to primary, secondary and special schools as well as welfare catering (lunch clubs) for Social Work.

Edinburgh Catering Services - School and Welfare Catering achieved its statutory obligation to break even over the three-year period. The cumulative surplus achieved was after meeting costs of £0.426m in 2010/11 and £0.362m in 2009/10 relating to equal pay claims.

Edinburgh Road Services provides repair and maintenance of carriageways, footways and street lighting.

The surplus of £1.367m in 2009/10 was after meeting impairment costs for its Sighthill depot of £0.247m. There were no impairment costs in 2010/11 or 2011/12.

93


33. Trading Operations - continued33.5 BlindCraft

As a result of the closure, BlindCraft has not been included within trading operations for 2011/12.

Trading results for 2010/11 and 2009/10 were as follows:2010/11 2009/10 Cumulative

£000 £000 £000 Turnover 1,199 1,522

(Deficit) / Surplus (523) 10 (513)

33.6 City Fleet Maintenance ServicesCity Fleet Maintenance Services provides a full range of vehicle and plant maintenance services.

2011/12 2010/11 2009/10 Cumulative £000 £000 £000 £000

Turnover 4,146 4,388 4,262

Surplus 327 345 420 1,092

33.7 Direct Cleaning

2011/12 2010/11 2009/10 Cumulative £000 £000 £000 £000

Turnover 6,847 6,506 6,928

Surplus / (Deficit) 607 (435) (347) (175)

Following a formal period of consultation no agreement was reached on how to reduce the funding levels. At a meeting on 10 February 2011 Council members voted to close BlindCraft. A further period of statutory consultation was undertaken to mitigate the number and effects of redundancy on the staff affected. BlindCraft closed on 29 July 2011. Redundancy costs were provided for in the 2010/11 accounts.

BlindCraft provided supported employment for blind, visually impaired and other people with disabilities, and produced a range of goods which were sold through various outlets.

In recent years, BlindCraft has made significant deficits which have been funded by the Council, although the deficit stabilised at £1m per annum, before the contribution from the Health and Social Care department, this level of funding was not sustainable.

Direct Cleaning failed to achieve its statutory obligation to break even over the three-year period. The cumulative deficit shown is after meeting costs of £0.724m in 2010/11 and £0.966m in 2009/10 relating to equal pay claims. Excluding these exceptional items, Direct Cleaning would have broken even over the three-year period.

Direct Cleaning provides a daily internal building cleaning service to all departments of the Council. It also undertakes specialist cleaning when required.

City Fleet Maintenance Services achieved its statutory obligation to break even over the three-year period.

The Council has provided on-going employment support for disabled people through the approval of a budget of £0.415m.

In the year to 31 March 2012, BlindCraft returned a surplus of £0.041m, after a subsidy of £0.415m from the Health and Social Care department. This figure is included within the Social Work heading in the Comprehensive Income and Expenditure Statement.

94


33. Trading Operations - continued33.8 Edinburgh Building Services

2011/12 2010/11 2009/10 Cumulative £000 £000 £000 £000

Turnover 28,514 27,849 27,315

Surplus 4,553 3,945 4,750 13,248

33.9 Edinburgh Catering Services - Other Catering

2011/12 2010/11 2009/10 Cumulative £000 £000 £000 £000

Turnover 1,206 1,296 1,358

(Deficit) / Surplus 14 (144) (22) (152)

34. Financial Support and Guarantees34.1 Loans and guarantees

The Council has made loans to the following organisations. 2011/12 2010/11 £000 £000

Edinburgh Leisure 230 230 Forth Sector 110 135

34.2 Shared Equity Scheme

Interest for the period up to the first five years is charged to PARC and thereafter to the purchasers.

Both of these loans have been made on an interest-free basis. Adjustments have been made under the requirements of IAS 39 as required by the Code.

In 2010/11, the Council approved a pilot scheme for a Council-backed shared equity scheme to help buyers purchase homes from PARC (a subsidiary of CEC Holdings Limited) and support the regeneration of Craigmillar. The Council provided assistance to sixteen purchasers, at a cost of £0.484m. There was no further assistance provided in 2011/12.

The monies are required to be repaid to the Council either on sale of the property or after twenty years, whichever occurs earlier.

Edinburgh Catering Services - Other Catering has produced a surplus for the first time in recent years. This improvement is due to careful cost management within the service, which now operates from a reduced cost base. It is hoped that further surpluses will be achieved in the coming years and in the process will turn the rolling three-year period into a surplus position.

The Edinburgh Leisure loan is due to be repaid in July 2012. The Forth Sector loan is being repaid over two years, with two instalments having been paid in 2011/12 and an account invoiced for a third, although this was outstanding at 31 March.

Edinburgh Building Services achieved its statutory obligation to break even over the three-year period.

Edinburgh Building Services is a multi-trade property maintenance trading operation providing a full repairs service to its clients.

Excluding costs relating to equal pay, Edinburgh Catering Services - Other Catering returned a deficit of £0.06m in 2010/11 and a surplus of £0.033m in 2009/10, with a cumulative deficit of £0.013m over the three-year period, excluding costs relating to equal pay claims.

Edinburgh Catering Services - Other Catering provides staff catering and hospitality in five Council buildings.

Edinburgh Catering Services - Other Catering failed to achieved its statutory obligation to break even over the three-year period. The cumulative deficit shown was after meeting costs of £0.084m in 2010/11 and £0.055m in 2009/10 relating to equal pay claims.

95


35. Agency Income and Expenditure

2011/12 2010/11 Expenditure £000 £000 Payments to other local authorities in respect of: Area waste project 460 417 Educational services for children 1,796 1,731 Care services for children 246 148Others Police officers 2,641 2,641 Lothian and Borders Police - cab inspection 384 407

Total Expenditure 5,527 5,344

IncomeReceipts in respect of library services: Health Boards (26) (29) Scottish Prison Service (13) (5)Receipts in respect of translation and Interpretation services: Lothian Health Board (803) (689)Receipts in respect of rates collection services:

Scottish Water (1,410) (1,343)Midlothian Council (52) (40)

Receipts from other local authorities in respect of: Child protection officer 0 (34) Criminal justice services (880) (899) Educating pupils (557) (680) Pentland Hills Regional Park management (66) (78) Care services for children (523) (374) Risk Factory (48) (53) Social work undertakings (2,739) (2,754)

Total Income (7,117) (6,978)

36. Audit Costs

37. Grant Income

£000 £000 £000 £000 Revenue FundingCredited to taxation and non-specific grant income

General revenue funding (458,120) (579,737)

Non-domestic rates (297,442) (188,733)(755,562) (768,470)

The Council has entered into agency agreements with other local public bodies to provide and receive services, the income and expenditure for which is included in the Comprehensive Income and Expenditure Statement. The main activities were:

2011/12 2010/11

The fees payable to Audit Scotland in respect of external audit services undertaken in accordance with the Code of Audit Practice are £0.711m (2010/11 £0.761m). The Council also received a rebate of £0.06m in respect of the 2010/11 audit. The Council has re-charged £0.049m of the 2011/12 audit fee to Lothian Pension Funds in respect of its audit (2010/11 £0.054m).

Grants and contributions credited to the Comprehensive Income and Expenditure Statement include the following:

In addition, the Council is responsible for paying fees to Geoghegans for the audit of tie's 2011/12 accounts. The fee payable to them is £0.023m and this is included in the Council's Comprehensive Income and Expenditure Statement.

96


37. Grant Income - continued£000 £000 £000 £000

Credited to servicesGovernment grants (21,760) (30,744)Department of Works and Pensions - Housing Benefits (191,313) (178,990)N.H.S. Lothian (23,859) (21,366)Other Local Authorities (4,568) (4,597)Capital City Partnership (25) (2,353)Edinburgh International Conference Centre (54) (128)Edinburgh Leisure (195) (95)EventScotland 0 (138)Lothian and Borders Community Justice 0 (45)Lothian and Borders Fire and Rescue Board 0 (10)Lothian and Borders Police 0 (179)Lottery funding (132) (673)Scottish Enterprise (10) (116)SportScotland (789) (829)Winter Festivals (including rental income) (945) (826)

(243,650) (241,089)Credited to Council Tax Income

Department of Works and Pensions - Council Tax Benefits (29,194) (29,473)

Total (1,028,406) (1,039,032)

Capital FundingTransport Scotland (48,071) (90,465)Less: Accrued into 2010-11 47,704 n/a Scottish Government (51,593) (31,561)International Conference Centre Income Trust 0 (6,493)Scottish Enterprise (6,624) (1,852)Scottish Sports Council (224) (1,417)

(1,397) (1,519)

Usher Hall Trust 0 (600)Stevenson College 0 (267)Lothian Health Board (680) (250)Forth Estuary Transport Authority (118) (247)Royal Institute for the Blind 0 (193)Scottish Futures Trust (1,187) (176)Edinburgh World Heritage Trust (271) (176)Lothian and Borders Safety Camera P/ship 0 (146)Edinburgh Leisure 0 (105)Scottish and Southern Energy (1,000) 0Waste Recycling Environmental Grant (183) 0Parc Craigmillar (178) 0Cruden Homes (800) (9)Lottery funding (25) 0SportScotland (330) 0

Total (64,977) (135,476)

Other grants and contributions, including contributions from developers and individuals

2011/12 2010/11

97


38. Related Parties

38.1 Subsidiaries and Other Organisations - Revenue Income and Expenditure

2011/12 2010/11 £000 £000

● Revenue ExpenditureCEC Holdings (including EDI Group, EICC,

Waterfront Edinburgh, and PARC) 482 213

Edinburgh Festival Theatres 968 1,193

Edinburgh Leisure LimitedRevenue funding 8,733 9,080Other expenditure 364 94

Edinburgh World Heritage Trust 260 300

Lothian and Borders Police BoardCapital grant 1,906 2,126

Lothian Buses LimitedSupported bus services 495 579Other expenditure 495 11

NHS Bodies 1,775 0

Other Local Authorities 1,054 0

Scottish Government 405 0

Subsidiaries / Voluntary Organisations 16,837Criminal Justice Bodies 859 0Edinburgh International Festival Society 2,389 0Festivals Edinburgh Ltd 326 0Handicab 448 0Health Projects 842 0Lifecare Edinburgh 494 0Marketing Edinburgh 885 0Royal Lyceum Theatre Co Ltd 640 0

tie Limited 2,561 0

Total Revenue Expenditure 26,381 30,433

● Revenue IncomeCEC Holdings Limited (EDI Group Limited)

Loan interest (221) (224)Rent - car parks (739) (795)

Edinburgh Festival Theatres (256) (277)

Edinburgh Leisure - prudential investment costs 0 (108)

Professional services, other grants and fundingCEC Holdings Limited (including EICC Limited) (235) (170)

Lothian and Borders Fire and Rescue Board 0 (106)

Lothian and Borders Police Board (220) (77)

Other Local Authorities (822) (891)

Scottish Government (727) (446)

tie Limited 0 (57)

During the year, the Council entered into a number of transactions with related parties. The most material of these transactions, not disclosed elsewhere, are shown below.

98


38. Related Parties - continued38.1 Subsidiaries and Other Organisations - Revenue Income and Expenditure - continued

2011/12 2010/11 £000 £000

● Revenue Income - continued Lothian Health Board

Change Fund (4,917) 0Resource transfers (20,329) (20,271)Other Grants and Fees (111) (222)

SESTRAN - various grants and fees 0 (50)

tie Limited (578) (801)

Total Revenue Income (29,155) (24,495)

● Joint Board RequisitionsLothian and Borders Fire and Rescue Board 21,051 22,753

Lothian and Borders Police Board 45,628 46,848

Lothian Valuation Joint Board 3,773 3,924

SESTRAN 71 3

Total Interest on Revenue Balances 70,523 73,528

● Central Support Income Forth Estuary Transport Authority (98) (69)

Lothian and Borders Fire and Rescue Board (302) (269)

Lothian and Borders Police Board (129) (136)

Lothian Valuation Joint Board (64) (54)

Pension Funds (594) (684)

Total Central Support Income (1,187) (1,212)

● Interest on Revenue BalancesForth Estuary Transport Authority (12) (11)

Lothian and Borders Fire and Rescue Board 10 10

Lothian and Borders Police Board (4) 32

Lothian Valuation Joint Board 3 3

Pension Funds 23 25

SESTRAN 2 3

Total Interest on Revenue Balances 22 62

● Loans Charges RecoveredFurther Education Colleges (pre 1996 expenditure) (27) (26)

Lothian and Borders Fire and Rescue Board (1,655) (1,572)

Lothian and Borders Police Board (3,465) (3,403)

Total Loans Charges (5,147) (5,001)

● Lothian Pension FundCessation payments on behalf of other organisations 4,891 0

Transfer of Contributions to Lothian Pension Fund (incl. deficit funding) 62,577 59,690

Pension Strain Costs 2,497 4,135

Total Lothian Pension Fund 69,965 63,825

99


38. Related Parties - continued38.2 Subsidiaries and Other Organisations - Capital Expenditure 2011/12 2010/11

● Capital Expenditure £000 £000 Edinburgh Leisure 165 541

Edinburgh Military Tattoo 6,170 2,645

tie Limited 42,819 79,108

Total Capital Expenditure 49,154 82,294

38.3 Related Parties - indebtedness

● CapitalCEC Holdings Limited (EDI Group Ltd) 0 3,500SUSTRANS 430 0International Conference Centre Trust 0 1,213tie Limited 0 13,607Transport Scotland 686 0NHS Lothian 355 0

1,471 18,320● Revenue

CEC Holdings Limited (including all subsidiaries) 2,781 254NHS Bodies 771 0Department for Work and Pensions (1,345) (1,371)Edinburgh Leisure Limited 213 0Edinburgh Military Tattoo 203 0Festival City Theatres Trust 0 400Forth Estuary Transport Authority 620 2,753Lothian and Borders Criminal Justice Authority (912) 0Lothian and Borders Fire Board (768) (3,172)Lothian and Borders Police Board 3,550 3,956Lothian Valuation Joint Board (750) (608)Pension Funds (12,089) (4,994)Scottish Government 975 0SESTRAN 1,643 352Transport Scotland 0 50,834

(5,108) 48,404● Other Indebtedness

HM Revenues and Customs - VAT 10,182 4,544HM Revenues and Customs - PAYE and NI (12,458) (12,128)

(2,276) (7,584)● Investments held on behalf of, and repayable to:

CEC Holdings (47) (73)Common Good (1,578) (1,566)Lothian and Borders Fire Board (3,034) (3,011)Lothian and Borders Police Board (14,895) (20,108)tie Limited 0 (25,305)

(19,554) (50,063)

The following represent material amounts due to / (by) the Council, at 31 March 2012.

100


39. Capital Expenditure and Capital Financing

£000 £000 £000 £000 Opening capital financing requirement 1,412,064 1,400,470

Capital Investment

Property, plant and equipment 297,354 256,839

Heritage Assets 8 88

Assets held for sale 321 44

Intangible assets 124 418

Revenue expenditure funded from capital 33,811 44,820 under statute

Minor adjustments to PPP schools during 215 0 the year (reflected in finance leases)

331,833 302,209Sources of Finance

Capital receipts (8,421) (8,558)

Government grants and other contributions (92,918) (206,252)

Loans fund / finance lease repayments (79,007) (75,805)

(180,346) (290,615)

Closing capital financing requirement 1,563,551 1,412,064

Explanation of movements in year

Increase in underlying need to borrow 0 21,274 (supported by government financial assistance)

(Decrease) / increase in underlying need to 155,390 (5,699) borrow (not supported by government financial assistance)

Voluntary debt repayment - HRA (4,000) (4,000)

Assets acquired under finance leases 97 19

Assets acquired under PPP contracts 0 0

Increase in capital financing requirement 151,487 11,594

The increase in the underlying need to borrow (unsupported by government financial assistance) is mainly attributable to expenditure on the tram project. This expenditure and subsequent additional borrowing is based on the revised project cost of £776m, resulting in an additional £231m being funded by the Council over the life of the project.

The total amount of capital expenditure incurred during the year is shown below (including the value of assets acquired under finance leases and PPP contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years through charges to revenue (loan charges), capital expenditure results in an increase in the capital financing requirement. This shows the amount of capital expenditure that has yet to be financed. The capital financing requirement is analysed below.

2011/12 2010/11

From 2011/12 onwards, the Scottish Government has withdrawn notional capital consent. This means that previously, where the Finance Settlement included loan charge support towards £21.274m of borrowing, from 2011/12 onwards, capital support is provided solely in the form of capital grant.

101


40. Leases40.1 Assets Leased in - Finance Leases


Value at 1 April 17,529 7,238 26,399 10,354

Additions during the year 11,299 97 19 19

Repayments during the year (10,122) (3,014) (8,889) (3,135)

Value at 31 March 18,706 4,321 17,529 7,238

Other land and buildings 508 508 610 610

Vehicles, plant, equipment and furniture 18,198 3,813 16,919 6,628

Value at 31 March 18,706 4,321 17,529 7,238


Finance lease liabilities:Current 7,435 2,206 8,168 2,995

Non-current 11,271 2,115 9,361 4,243

Finance costs payable 392 392 640 640

Minimum lease payments 19,098 4,713 18,169 7,878

The minimum lease payments will be payable over the following periods:

Minimum Finance Lease RepaymentsGroup Council Group Council

£000 £000 £000 £000 Not later than one year 7,632 2,403 8,425 3,252

Later than one year and not later than five 6,279 2,310 9,642 4,524 years

Later than five years 5,187 0 102 102

19,098 4,713 18,169 7,878

Finance Lease Liabilities £000 £000 £000 £000 Not later than one year 7,435 2,206 8,168 2,995


Later than five years 5,187 0 102 102

18,706 4,321 17,529 7,238

The Council has acquired two buildings, and its IT and copying equipment under finance leases. The assets acquired under these leases are included in property, plant and equipment in the Balance Sheet at the following net amounts:

2011/12 2010/11

The Council is committed to making minimum lease payments under these leases, comprising settlement of the long-term liability for the interest in the assets acquired and finance costs that will be payable by the Council in future years while the liability remains outstanding. The minimum lease payments are shown below:

2011/12 2010/11

at 31.03.11at 31.03.12

102


40. Leases - continued40.2 Assets Leased in - Operating Leases

Group Council Group CouncilFuture Repayment Period £000 £000 £000 £000 Not later than one year 6,310 5,975 6,351 6,066


Later than five years 6,830 6,103 7,415 7,192

25,056 23,017 27,455 26,913

Value at 31 March Other land and buildings 23,489 21,450 25,119 24,577

Vehicles, plant, equipment and furniture 1,567 1,567 2,336 2,336

25,056 23,017 27,455 26,913

6,928 6,634 6,851 6,317

40.3 Assets Leased Out by the Council - Operating Leases

●

●

The future minimum lease payments receivable under non-cancellable leases in future years are:

2011/12 2010/11 £000 £000

Not later than one year 11,567 10,812

Later than one year and not later than five years 29,376 29,496

Later than five years 149,355 150,384

190,298 190,692

Under these operating leases, the Group is committed to paying the following sums, of which £0.588m is recoverable from employees (2010/11 £0.621m):

The Council has a number of leases that are agreed for a period of over 100 years, the majority of which relate to land.

The Group leases in property and vehicles financed under the terms of operating leases. The amount charged to the Comprehensive Income and Expenditure Statement under these arrangements and the value of future payments under operating leases is shown below.

2010/11 2011/12

to arms' length companies for the provision of services such as sport and leisure and theatres.

The Council leases out property and equipment under operating leases for a number of purposes, including:

for economic development purposes, including regeneration and to provide suitable affordable accommodation for local businesses.

Recognised as an expense during the year

The amounts recognised as an expense during the year include £0.400m of contributions paid by employees towards cost of car leasing (2010/11 £0.421m).

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41. Public Private Partnerships and Similar Contracts41.1 PPP - Education Projects

Payment Reimburse.for of Capital

Services Expenditure Interest Total £000 £000 £000 £000

Payable in 2012/13 14,499 6,459 16,584 37,542

Payable within two to five years 79,758 35,485 80,617 195,860

Payable within six to ten years 98,415 37,384 74,390 210,189

Payable within eleven to fifteen years 120,488 39,009 66,113 225,610

Payable within sixteen to twenty years 135,836 50,253 56,118 242,207

Payable within twenty one to twenty five years 82,662 43,046 36,815 162,523

Payable within twenty six to thirty years 6,375 2,449 1,790 10,614

538,033 214,085 332,427 1,084,545

2011/12 2010/11 £000 £000


PPP unitary charge restatement adjustment 215 0

Repayments during the year (6,448) (6,530)


The unitary charges paid to the service providers include amounts to compensate the providers for the capital expenditure incurred and interest payable whilst the capital expenditure remains to be reimbursed. The liability outstanding to pay the service providers for capital expenditure incurred is as follows:

In 2001, the Council entered into a Public Private Partnership (PPP1) for the provision of school buildings, maintenance and other facilities with Edinburgh Schools Partnership. This agreement was supplemented by a further agreement in April 2004, which now requires Edinburgh Schools Partnership to either replace or substantially renovate ten primary, five secondary and two special schools, together with one close support unit and a community wing, and to maintain these schools to a high standard. When the agreement ends in July 2033 the schools will be handed to the Council with a guaranteed maintenance-free life of five years.

In April 2007, the Council entered into a second Public Private Partnership (PPP2) for the provision of school buildings, maintenance and other facilities with Axiom Education Limited. This required Axiom Education Limited to replace six secondary schools and two primary schools and to maintain these schools to a high standard. When the agreement ends in July 2038 the schools will be handed to the Council with a guaranteed maintenance-free life of five years.

Under the agreements the Council is committed to paying the following sums as detailed in the contractor's final bid model:

Payments due under the PPP1 scheme have been inflated by 1.11% per annum and those due under the PPP2 scheme have been inflated by 1.67% per annum, reflecting the terms of the separate contracts.

The amounts disclosed as reimbursement of capital expenditure are included in other long-term liabilities on the Balance Sheet.

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41. Public Private Partnerships and Similar Contracts - continued41.2 Provision of Information Technology services

Future Repayment Inflationary Period £000 Uplift

2012-13 26,422 3.6%2013-14 27,479 4.0%2014-15 28,276 2.9%2015-16 29,125 3.0%

111,302

The cost of information technology is included in overheads and is thus allocated to direct services.

41.3 Provision of Parking Enforcement

Future Repayment Inflationary Period £000 Uplift

2012-13 6,160 5.0%2013-14 4,310 5.0%

10,470

41.4 Waste Disposal

Future Repayment Period £000

2012 - 2013 3,1812013 - 2018 22,7692018 - 2020 6,434

32,384

41.5 Other Rolling ContractsThe Council has entered into a number of rolling contracts to provide services, which are mainly care orientated through 'Supporting People'. The annual value of these contracts is £19.761m. There are a further £34.180m per annum of rolling contracts for services provided to adults by Health and Social Care.

Under the agreement the Council is committed to paying the following sums in cash terms (assuming an increase of 5% per annum):-

In 2001 the Council entered into a ten year Public Private Partnership for the provision of information technology services. This contract has now been extended for another five years.

Under the agreement the Council is committed to paying the following sums in cash terms (assuming an inflationary uplift at the level shown):-

The equipment assessed as a finance lease within this contract is included in note 40.1. The above payments include the elements relating to the finance lease for the equipment.

The Council has entered into a five year contract with National Car Parks for the provision of parking enforcement. A two-year extension to the contract has now been granted for the period to November 2013.

Under the agreement the Council is committed to paying the following sums in cash terms (assuming an inflationary uplift at the level shown):-

The Council entered into a twenty year contract with Viridor in 2000 to supply waste to their landfill site in Dunbar. The contract requires the Council to supply an agreed tonnage to the landfill site each calendar year. Fees are subject to review twice a year, based on civil engineering indices.

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42. Pension schemes accounted for as defined contribution schemes

£000 % £000 % Amount paid to Scottish Government in respect 18,223 18,640

of teachers' pension costs

As a percentage of teachers' pensionable pay 14.90 14.90

Amount paid in respect of added years 0 0

As a percentage of teachers' pensionable pay 0.00 0.00

Capitalised value of discretionary awards entered 21,054 20,338into prior to 2011/12

43. Defined Pension Schemes43.1 Participation in Pension Scheme

43.2 Transactions Relating to Post-Employment BenefitsThe cost of pension benefits, as assessed by the Fund's Actuary and reflected within 'Cost of Services', differed from the cash payment to the Fund charged against Council Tax. The following summarises the entries reflected within the Comprehensive Income and Expenditure Statement in respect of accounting for pensions under IAS19. The amount by which pension costs calculated in accordance with IAS19 are different from the contributions due under the pension scheme regulations is included in the Movement in Reserves Statement.

2011/12 2010/11

At 31 March 2012, creditors include £2.183m (2010/11 £2.229m) in respect of teachers' superannuation.

The Scottish Teachers' Superannuation Scheme is an unfunded scheme administered by the Scottish Public Pensions Agency. The scheme is excluded from the accounting requirements of IAS 19 as it is a national scheme which does not allow for the identification of pension liabilities consistently and reliably between participating authorities. The accounts, therefore, only include the payments made by the Council to the scheme in year and do not reflect the estimated pension assets or liabilities of the scheme. The exception to this are payments in relation to unfunded pension enhancements for members of the scheme as they are administered through the Local Government Pension Scheme and are taken into consideration in accounting for pension costs under IAS 19.

The Fund's Actuary is unable to provide an analysis of IAS19 pension costs by individual service. The charge in the Comprehensive Income and Expenditure Statement applied against each service included in 'Cost of Services' reflects an apportionment of costs in line with the actual cash payments made by the Council to Lothian Pension Fund.

Employees other than teachers are eligible to join the Local Government Pension Scheme. The pension costs charged to Services in respect of these employees have been calculated under IAS 19 - Employee Benefits.

In terms of this scheme in 2011/12, the Council paid an employer's contribution of £52.052m (2010/11 £51.310m) into the Lothian Pension Fund, representing 21.3% (2010/11 20.6%) of pensionable pay. The contribution rate was determined by the Fund's Actuary based on triennial actuarial valuations as at 31 March 2008. Contributions for 2012/13 will be based on the results of the March 2011 actuarial review.

In accordance with the Code of Practice guidance on the application of IAS19, Employee Benefits, the Comprehensive Income and Expenditure Statement recognises the true economic cost of retirement benefits earned by employees in 2011/12, irrespective of when benefits are due to be paid. These costs are based upon an assessment by the Fund's Actuary of the share of fund assets and liabilities attributable to the City of Edinburgh Council at 31 March 2008.

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43. Defined Pension Schemes - continued43.2 Transactions Relating to Post-Employment Benefits - continued

% of % of Comprehensive Income and £000 £000 pay £000 £000 pay Expenditure Statement (CIES)Cost of services: Current service costs 42,786 18.0% 53,243 20.7%

Past service costs / (gains) 1,207 0.5% (182,340) (70.9%)

Settlements and curtailments 1,404 0.6% 687 0.3%

45,397 (128,410)Financing and investment income: Interest cost 101,164 42.6% 108,317 42.1%

Expected return on scheme assets (105,787) (44.5%) (103,873) (40.4%)

(4,623) 4,444

Total post employee benefit charged 40,774 (123,966) to the surplus on provision of services benefits in accordance with the Code

Other post employment benefit charged to the CIES Actuarial (losses) / gains on plan (102,303) (25,531) assets

Actuarial gains / (losses) on 36,144 186,773 obligation

Total actuarial gains and losses (66,159) 161,242 charged to the CIES

Movement in Reserves StatementReversal of net charges made to the 20,846 182,464 surplus on provision of services for post employment benefits in accordance with the Code

Actual amount charged against the General Fund Balance for pensions in the year:Employer's contributions payable to 55,193 52,430 the scheme

Contributions in respect of unfunded 6,427 6,068 costs

61,620 58,498

2010/11 2011/12

The cumulative amount of actuarial gains and losses recognised in the Comprehensive Income and Expenditure Statement to 31 March 2012 is a loss of £517.425m (2010/11 £451.266m loss).

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43. Defined Pension Schemes - continued43.2 Transactions Relating to Post-Employment Benefits - continued

43.3 Asset and Liabilities in Relation to Post Employment BenefitsReconciliation of the present value of the scheme liabilities (defined benefit obligation):

2011/12 2010/11 £000 £000

Defined benefit obligation at 1 April 1,843,330 2,096,893

Current service cost 42,786 53,243

Interest cost 101,164 108,317

Contributions by members 15,477 16,072

Actuarial (gains) / losses (36,144) (186,773)

Past service costs 1,207 (182,340)

Losses on curtailments and settlements 1,404 687

Estimated unfunded benefits paid (6,427) (6,068)

Estimated benefits paid (62,536) (56,701)

Defined benefit obligation at 31 March 1,900,261 1,843,330

Reconciliation of the fair value of the scheme assets: 2011/12 2010/11 £000 £000

Defined benefit obligation at 1 April 1,507,428 1,417,285

Expected return on assets 105,787 103,873

Contributions by members 15,477 16,072

Contributions by the Council 55,193 52,430

Contributions in respect of unfunded benefits 6,427 6,068

Actuarial losses (102,303) (25,531)

Unfunded benefits paid (6,427) (6,068)

Benefits paid (62,536) (56,701)

Defined benefit obligation at 31 March 1,519,046 1,507,428

Assets have been valued at bid value, as required under IAS19.

The actual return on scheme assets in the year was £31.969m (2010/11 £78.687m)

The expected return on assets is based on the long-term future expected investment return for each asset class as at the beginning of the period (i.e. as at 31 March 2011 for the year to 31 March 2012, or date of joining the fund if later).

The amounts charged to the Comprehensive Income and Expenditure Statement are based on employer and employee contributions up to 31 March 2012 and the number of employees, deferred pensioners and pensioners as at 31 December 2011 in order to estimate the position for the year to 31 March 2012.

From October 2006, members retiring are able to elect an additional tax-free lump sum in lieu of part of their pension ("commutation"). Allowance has been made for future retirees to elect to take 50% of the maximum additional tax-free cash up to HM Revenues and Customs limits for pre-April 2009 service and 75% of the maximum tax-free cash for post-April 2009 service.

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43. Defined Pension Schemes - continued43.4 Scheme History

2011/12 2010/11 2009/10 2008/09 2007/08 £000 £000 £000 £000 £000

Fair value of employer assets 1,519,046 1,507,428 1,417,285 1,038,933 1,296,168

Present value of defined benefit obligation (1,900,261) (1,843,330) (2,096,893) (1,315,114) (1,394,315)

Deficit (381,215) (335,902) (679,608) (276,181) (98,147)

Experience gains / (losses) on assets (102,303) (25,531) 293,067 (355,405) (135,790)

Experience gains / (losses) on liabilities 72,144 13,778 (6,282) 45,059 5,968

Actuarial gains / (losses) on (102,303) (25,531) 293,067 (355,405) (135,790) employer assets

Actuarial gains / (losses) on 36,144 186,773 (697,195) 161,963 284,268 obligation

Actuarial gains / (losses) (66,159) 161,242 (404,128) (193,442) 148,478 recognised in Movement in Reserves Statement

43.5 Basis for Estimating Assets and Liabilities

Expected return on assets As % of plan assets2011/12 2010/11 2011/12 2010/11

Equity investments 6.2% 7.5% 79% 79%

Bonds 4.0% 4.9% 8% 8%

Property 4.4% 5.5% 11% 10%

Cash 3.5% 4.6% 2% 3%

Average future life expectancies at age 65:Current pensioners male 20.4 years 20.8 years

Current pensioners female 22.8 years 24.1 years

Future pensioners male 22.6 years 22.3 years

Future pensioners female 25.4 years 25.7 years

Inflation / pension increase rate 2.5% 2.8%

Salary increase rate (see below) 4.8% 5.1%

Expected return on assets 5.8% 7.0%

Discount rate 4.8% 5.5%

The total contributions expected to be made to Lothian Pension Fund by the Council in the year to 31 March 2013 are £50.628m.

Hymans Robertson, the independent actuaries to Lothian Pension Fund, have advised that the financial assumptions used to calculate the components of the pension expense for the year ended 31 March 2012 were those from the beginning of the year (i.e. 31 March 2011) and have not been changed during the year. The main assumptions in the calculations are:

The net pension liability of £381.215m exceeds current general fund reserves of £101.438m by £279.777m. The actuarial valuation will consider the appropriate employer's rates and this, together with revenues generated from the investments, will be utilised to meet the fund's commitments.

Note: The salary increase assumption used for 2011/12 is 1.0% p.a. for the first three years, moving to 4.8% p.a. from year three. For 2010/11, it was 1% until 31 March 2013 thereafter rising to 5.1%.

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43. Defined Pension Schemes - continued43.6 History of Experience Gains and Losses

2011/12 2010/11 2009/10 2008/09 2007/08 % % % % %

Experience gains and (losses) on (6.7%) (1.7%) 20.7% (34.2%) (10.5%) assetsExperience gains and (losses) on (1.9%) (10.1%) 33.2% (12.3%) (20.4%) liabilities

43.7 Pension Reserves - Group Position

Pension Pension Pension Reserve Pension Reserve Reserve (Injuries) Reserve (Injuries)

Unusable Reserves £000 £000 £000 £000 Council 381,215 0 335,902 0Lothian and Borders Police Board 990,122 53,905 860,164 43,979Lothian and Borders Fire and Rescue Board 189,651 10,474 172,489 9,583 Lothian Valuation Joint Board 2,757 0 3,056 0

1,563,745 64,379 1,371,611 53,562

2011/12 2010/11 Usable Reserves £000 £000 CEC Holdings 691 1,136Festival City Theatres Trust 77 44Edinburgh Leisure (582) 1,429Lothian Buses (6,437) 8,190tie limited 0 522

(6,251) 11,32143.8 Strain on the Pension Fund

43.9 Cessation Value Payments

Lothian Pension Fund has the right to require the Council to make additional payments to the pension fund to reflect the extra cost to the pension fund of immediate payment of benefits to employees who retire early on efficiency, redundancy or voluntary grounds. This amounted to £2.497m, excluding accrued payments, in 2011/12 (2010/11 £4.135m). The future value of payments, based on employees who have retired on the above grounds amounts to £0.209m (2010/11 £0.764m). Payments on behalf of employees who have left the Council since 1 April 2009 require to be paid in full to Lothian Pension Fund at the time of leaving.

If an employer becomes insolvent and it, or its guarantor, is unable to meet any deficit, additional contributions will be required from each remaining employer in the Fund, in proportion to their liabilities. This means that the majority of any deficit will fall on the large employers. However, where it has been established that there is a link between the employer and the Council then the Council requires to meet the total of any deficit. During the year, the Council paid £4.891m to Lothian Pension Fund in respect of cessation values for two organisations.

The actuarial gains and losses identified as movements on the pensions reserve can be analysed into the following categories, measured as a percentage of assets or liabilities at 31 March.

The pension reserves shown in the Group Balance Sheet relate to the Council. Pension reserves for the Police, Fire and Valuation joint boards are included in unusable reserves, as these are statutory accounts under the Code. Local government legislation provides that local authorities have an obligation to meet the expenditure of the joint boards of which they are constituent members. As a consequence, the City of Edinburgh Council has obligations to meet the liabilities arising from the joint board pension deficits as they fall due. Pension reserves for other companies in the group are included in usable reserves. The value of the pension reserves is shown separately below.

2011/12 2010/11

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43. Defined Pension Schemes - continued43.10 Further Information

44. Contingent Assets and Liabilities44.1 Contingent Assets

●

44.2 Contingent Liabilities●

●

45. Nature and Extent of Risks Arising from Financial Instruments45.1 Overall Procedures for Managing Risk

● by formally adopting the requirements of the Code of Practice;

● by approving annually in advance prudential indicators for the following three years limiting:

the Council’s overall borrowing;

its maximum and minimum exposures to fixed and variable rates;

its maximum and minimum exposures in the maturity structure of its debt;

●

●

●

●

Further information on Lothian Pension Fund can be found in the Council's Pension Fund's Annual Report which is available upon application to the Investments and Pensions Service Manager, Waverley Court, 4 East Market Street, Edinburgh, EH8 8BG.

There are no contingent assets at 31 March 2012.

The authorised limit for 2012/13 has been set at £1.873bn. This is the maximum limit for external borrowings or other long term liabilities.

The operational boundary for 2012/13 has been set at £1.826bn. This is the expected level of debt and other long term liabilities during the year.

The recent Supreme Court judgement in relation to mesothelioma (asbestos) claims ruled that the insurer who was on risk at the time of an employee's exposure to asbestos was liable to pay compensation. As a result, the Council's insurers may charge an additional levy on to the Council in order to meet compensation claims. The actual cost and timing of any levy cannot be estimated with reasonable accuracy and consequently no provision has been made in the financial statements in respect of this levy.

The maximum amounts of fixed and variable interest rate exposure were set at 100% and 75% of the Council's net debt respectively.

Whilst the Council has made an impairment provision for statutory repairs debtors, there may also be further liability claims against the Council in relation to works carried out under statutory repair notices served by the Council. The actual cost of these claims cannot be estimated with reasonable accuracy. It is also not possible to estimate precisely when these claims could become due.

The prudential indicators are reported and approved as part of the Council's annual budget setting process. Actual performance is also reported annually to members of the Council.

The Council’s overall risk management procedures focus on the unpredictability of financial markets, and implementing restrictions to minimise these risks. The Council complies with the CIPFA Prudential Code and has adopted the CIPFA Treasury Management in the Public Services Code of Practice. Overall these procedures require the Council to manage risk in the following ways:

by selecting investment counterparties in compliance with the Council’s Treasury Policy Statement.

The annual treasury management strategy which incorporates the prudential indicators was approved by the Council on 15 March 2012 and is available on the Council's website. The key issues within the strategy are:

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45. Nature and Extent of Risks Arising from Financial Instruments - continued45.2 Key Risks

● Credit risk – the possibility that other parties might fail to pay amounts due to the Council;

●

●

●

45.3

Principal Carry Fair Carry Outstanding Value Value Value

31.03.12 31.03.12 31.03.12 31.03.11 Summary Rating £000 £000 £000 £000 Money Markey Funds

Deutsche Bank AG, London AAA 28,971 28,981 28,981 0Standard Life AAA 0 0 0 17,176

Bank Call AccountsBank of Scotland A 18,599 18,608 18,608 20,367Royal Bank of Scotland A 20,175 20,183 20,183 20,410Santander UK A+ 17,238 17,252 17,252 27,142Barclays Bank A+ 17,087 17,095 17,095 25,658Svenska Handelsbanken AA- 27,498 27,498 27,498 0

Bank Near-Call AccountsClydesdale Bank (15 Day Notice) BBB+ 4 4 4 17,026

Bank Certificates of DepositRabobank AA 0 0 0 347

The Council's funds are managed along with those of Lothian Pension Fund, the Forth Estuary Transport Authority and some other related organisations which are pooled for investment purposes as a treasury cash fund. Management of the cash fund is on a low risk, low return basis, with security of the investments the key consideration while at the same time seeking innovative and secure cash investment opportunities. This arrangement has allowed a better management of the Council's risk in the exceptional financial and market circumstances in recent years.

As well as lending monies to other local authorities, the Council has purchased UK Government Treasury Bills as well as Bonds and Floating Rate Notes with an explicit UK Government Guarantee. At 31 March 2012, all of the Council's short term investments were represented by loans to other local authorities. Of the net Cash and Cash Equivalents, 33% are either loans to local authorities or invested in instruments with an explicit UK Government Guarantee on the capital and interest. A further 16% was held in a AAA rated Money Market Fund. All of the monies held on deposit at 31 March 2012 were in call or near call accounts with banks, with the exception of £6.387m held in a fixed term deposit maturing 20 April 2012 with a UK building society.

The Council's cash holding under its treasury management arrangements at 31 March 2012 was £219.1 million (31 March 2011: £243.8m). This was held with the following institutions:

The Council’s activities expose it to a variety of financial risks, the key risks are:

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Council’s customers. Deposits are with banks, building societies, and other institutions in line with the Council’s prevailing counterparty limits as set out in the Council’s treasury policy statement. Investment decisions are considered daily as part of the daily cash flow management by the Council’s Treasury Team who can, and do, restrict the list further in light of market conditions.

Credit Risk

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.

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45. Nature and Extent of Risks Arising from Financial Instruments - continued45.3

Principal Carry Fair Carry Outstanding Value Value Value

31.03.12 31.03.12 31.03.12 31.03.11 Summary - continued Rating £000 £000 £000 £000 Building Society Fixed Term Deposits

Nationwide Building Society A+ 6,387 6,388 6,388 0

UK Pseudo-Sovereign Risk InstrumentsLocal Authorities (see Note 1) n/a 58,439 58,562 58,537 108,347

UK Govt Guaranteed FRNs n/a 24,525 24,616 24,621 0

UK Govt Guaranteed Bonds n/a 0 0 0 7,397

218,923 219,187 219,167 243,870Note 1

2011/12 2010/11 £000 £000

Less than two months 9,390 13,325Two to four months 2,208 6,297Four to six months 956 1,608Six months to one year 2,612 2,683More than one year 10,047 9,393

Total 25,213 33,306

Collateral – During the reporting period the Council held no collateral as security.

No breaches of the Council's counterparty criteria occurred during the reporting period and the Fund does not expect any losses from non-performance by any of its counterparties in relation to deposits. In October 2008 the Icelandic banking sector defaulted on its obligations. The Fund has never had any exposure to Icelandic banks and had no investment in the sector at that time.

The Council's maximum exposure to credit risk in relation to its direct investments in banks and building societies of £107.0m cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. Recent experience has shown that it is rare for such entities to be unable to meet their commitments. A risk of irrecoverability applies to all of the Council's deposits, but the Council takes a low risk approach to investment. Despite continuing concerns over the European Sovereign Debt crisis and the effects that this might have on the banking system, there was no evidence at 31 March 2012 that this risk was likely to crystallise.

In line with the Investment Regulations governing local authorities introduced in 2010, the Council approved an annual investment strategy and treasury policy statement for both the Council and the Cash Fund at its March 2012 meeting. The papers are available on the Council's website. A full list of the deposits outstanding at 31 March 2012 is contained in the Treasury Cash Fund Investment Report for Quarter 1 2012. This is available on request from the Council's Treasury Section - Waverley Court, 4 East Market Street, Edinburgh, EH8 8BG.

Local Authorities are generally assumed to have a pseudo-sovereign credit rating (which in the UK at 31 March 2012 would have been 'AAA') due to their tax raising powers and the perceived government support. Very few have their own credit rating, but of the £58.5m above, £21.7m is with a local authority which has a 'Aa1' credit rating from Moodys, one notch down from 'AAA'.

In addition to the deposits outstanding on 31 March 2012, the Council had also committed to placing a one year deposit, with a value of £1.277m, with another local authority with a start date in April 2012.

Credit Risk - continued

All Council invoices become due for payment on issue. Excluding pre-payments of £2.733m (2010/11 £2.585m), trade debtors past due date can be analysed by age as follows:

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45.5

2011/12 2010/11 £000 £000

Less than one year (43,577) (64,401)Between one and two years (36,301) (16,369)Between two and five years (146,140) (123,323)Between five and ten years (301,837) (286,097)More than ten years (1,125,536) (1,065,140)

Financial Liabilities (1,653,391) (1,555,330)

The maturity analysis of the principal outstanding on the Council’s financial liabilities is as follows:

All trade and other payables are due to be paid in less than one year and trade creditors of £5.076m (2010/11 £10.302m) are not shown in the table above. The above figures show the principal outstanding, therefore, neither accrued interest of £18.206m (2010/11 £16.652m) nor net equivalent interest rate (EIR) adjustments of £8.679m (2010/11 £8.314m) to the carrying amounts of market debt shown in the financial liabilities are included.

The only investment which the Council has, other than £3.5m in EDI loan stock, with a maturity greater than one year is a loan of £3.193m to Fife Council maturing in August 2013. The Council had also committed to placing a deposit of £1.277m with another local authority which had a start date of 30 April 2012 and a maturity date of 29 April 2013.

The Council's approved treasury strategy addresses the main risks and the treasury team address 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. However, with the increase in new borrowing rates announced in the Government's Comprehensive Spending Review in October 2010, it is now unlikely that there will be much scope for any substantial debt rescheduling.

Liquidity risk

Re-financing and Maturity RiskThe Council maintains significant debt and investment portfolios. The re-financing risk to the Council relates to managing the exposure to replacing financial instruments as they mature. As shown in the chart in 45.6, the majority of the Council's debt portfolio consists of fixed rate longer term loans, and as such, the Council has a relatively low re-financing risk on its liabilities. However, the Council has market debt which allows the lender the option to ask for a rate increase at set dates and at that point the Council may choose to repay the loan at no additional cost. This gives a potential re-financing risk which the Council monitors and manages.

Whilst the PWLB provides access to longer term funds, it also acts as a lender of last resort to the Council. The Council is also required by statute to provide a balanced budget, 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.

The Council carries out short and medium term cash flow management to ensure that it will have sufficient liquidity to cover all of its payment obligations. This includes monitoring the maturity profile of investments to ensure sufficient liquidity is available for the Council’s day to day cash flow needs. The Council also has ready access to borrowings from the money markets to cover any day to day cash flow needs. While this has not been needed for normal cash flow requirements, it was used for tactical temporary borrowing during 2008/09 when the Council considered that interest rates were going to fall and that medium to long-term borrowing would be disadvantageous at that time.

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 and investment strategy reports), as well as through cash flow management procedures required by the Code of Practice.

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●

● borrowings at fixed rates – the fair value of the borrowing liability will fall;

●

● investments at fixed rates – the fair value of the assets will fall.

The following chart shows the source of the Council's borrowing. Most of the Council's borrowings are from the Government by way of the Public Works Loans Board, and since we are at the bottom of the interest rate cycle, none of the PWLB borrowing was variable rate.

Market riskInterest rate riskThe 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 Comprehensive Income and Expenditure Statement will rise;

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 or Movement in Reserves Statement. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the 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 the Movement in Reserves Statement, unless the investments have been designated as fair value through the Comprehensive Income and Expenditure Statement.

The Council has a number of strategies for managing interest rate risk. The annual treasury management strategy includes a forecast for short and longer term interest rates. The treasury team continue to monitor market and forecast interest rates during the year and adjust investment policies accordingly. 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. Any such strategy is run within the short and medium term liquidity requirements of the Council.

investments at variable rates – the interest income credited to the Comprehensive Income and Expenditure Statement will rise; and

Source of Borrowing 31-Mar-12

EIB0.02% Temporary Loans

0.54%

LOBO - Inverse2.83%

LOBO17.01%

PWLB - Fixed79.60%

115



Price Risk

Foreign exchange risk

46. Business Improvement District Scheme

2011/12 2010/11 £000 £000

Monies to be recovered from ratepayers at 1 April 163 137

BID Levy Income 893 943

Less: Payments made / due to Essential Edinburgh (895) (917)

Monies still to be recovered from ratepayers at 31 March 161 163

The monies raised through the BID are used to fund activities around four key themes, including:

● area promotion - advertising, marketing and events

● clean and attractive area - cleaning teams, street décor, cleanliness surveys

● safe and secure area - CCTV, improved lighting

● accessibility - pedestrian friendly environment.

47. The City of Edinburgh Council Charitable Funds

47.1 Purpose, and financial position, of the largest of the charitable funds● Jean F. Watson Bequest (Scottish Charity Reg. No. SC018971)

The purpose of the fund is to purchase works of art by artists who have connections with the city.

The financial results of the fund are as follows: 31.03.12 31.03.11 £000 £000

Income (See Note 1, page 119) (12) (23)Expenditure 3 4 Assets 1,610 1,587 Liabilities (13) (6)

Market risk - continued

The City of Edinburgh Council administers a number of charitable funds. At the start of the year this included 51 Scottish charities registered under the Charities and Trustee Investment (Scotland) Act 2005 and 50 other charitable funds, mainly educational endowments. During the year, the Council made progress with its plan to re-organise the funds. This resulted in the transfer of 39 funds to external charities and the consolidation of 23 funds into a new charity, the Edinburgh Education Trust.

The Council acts as the Billing Authority for Edinburgh’s Central Business Improvement District (BID). The Council collects a levy from the business rate payers on behalf of the BID body, Essential Edinburgh.

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.

The Council does not generally invest in equity shares but does have shareholdings to the value of £23.335m (2010/11 £23.335m) in a number of Council owned Companies and joint ventures. 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.

116


47. The City of Edinburgh Council Charitable Funds - continued47.1 Purpose, and financial position, of the largest of the charitable funds - continued

● Surplus Fire Fund (Scottish Charity Reg. No. SC018967)

The financial results of the fund are as follows: 31.03.12 31.03.11 £000 £000

Income (See Note 1, page 119) (17) (34)Expenditure 5 35 Assets 1,142 1,118 Liabilities 0 (5)

47.2 The main funds are:Scottish Charity

Registration 31.03.12 31.03.11 Scottish Registered Charities Number £000 £000

Jean F. Watson SC018971 1,597 1,582 Surplus Fire Fund SC018967 1,142 1,113 City of Edinburgh SC025067 513 506 Nelson Halls SC018946 188 188 Edinburgh Education Trust SC042754 122 n/a Usher Hall Appeal SC030180 70 70 Trinity College Hospital (Note 1) SC018969 0 7,773 Sir James Steel (Note 1) SC025067 0 1,476 John McGibbon (Note 1) SC018977 0 1,145 Alexander Mortification (Note 1) SC018949 0 864 John Watson (Note 1) SC018972 0 488 Sir William Watson (Note 1) SC018973 0 391 George Boyd Anderson (Note 2) SC025067 0 362 Other Funds Various 196 636

Total market value 3,828 16,594

Other FundsCatherine Cowper n/a 47 45 Other Funds n/a 5 118

Total market value 52 163

Notes:1. Transferred to Elizabeth Finn Care (SC040987)

2. Decision taken to expend the capital of the trust on the purposes stated in the benefactor's will.

3. The funds do not represent assets of the Council and are not included in the Balance Sheet.

Market Value

The purposes of the fund are to offer relief to persons that have suffered as the result of a fire and to recognise meritorious service in connection with fires. In both cases the fire must have occurred in the Edinburgh area.

In March 2012 the decision was made to transfer the future administration of the fund to the Edinburgh Voluntary Organisations Trust (SC031561). An application to approve the transfer has been made to the Office of the Scottish Charity Regulator (OSCR).

117


47. The City of Edinburgh Council Charitable Funds - continued47.3 Financial Position of the Scottish Registered Charity Funds

(re-stated) 2010/11 Income and Expenditure Account 2011/12

£000 Note £000 Income

(430) Investment income 1 (84)(15) Other non-investment income (15)

(445) (99)

Expenditure1,014 Prizes, awards and other expenses 2 351

93 Administrative expenses 42

1,107 393

662 Deficit for the year 294

(re-stated) 2010/11 Balance Sheet 2011/12

£000 £000 £000 Long-Term Assets

13,449 Investments 2,128 850 Artworks - Jean Watson Trust 854 586 Heritable property 3 19

14,885 Total Long-Term Assets 3,001

Current Assets41 Sundry debtors 13

1,768 Cash and bank 1,061

1,809 1,074 Current Liabilities

(100) Creditors (247)

(100) (247)

16,594 Total Assets less Liabilities 3,828

(16,634) Capital at 1 April (16,594)662 Deficit for the year 294

(611) Unrealised gains (258)(20) Capital introduced 0 (1) Transfer from Council unregistered funds (88)10 Trusts transferred to external charities 12,784 0 Transfer of fishing rights to Lagganlia Outdoor Centre 34

(16,594) Capital at 31 March (3,828)

At the request of the Office of the Scottish Charity Regulator, a separate Trustee's Report and Accounts has been prepared which gives further information on the Scottish registered charities in the trusteeship of the Council. A copy of this document may be obtained from the Council's Investment and Pensions Division - Level 3.3, Waverley Court, 4 East Market Street, Edinburgh, EH8 8BG.

118


47. The City of Edinburgh Council Charitable Funds - continued47.4 Financial Position of Other Funds

(re-stated) 2010/11 Income and Expenditure Account 2011/12

£000 £000 Income

(4) Investment income (1)

(4) (1)Expenditure

7 Prizes, awards and other expenses 0 (1) Administrative expenses 0

6 0

2 (Surplus) / Deficit for the year (1)

(re-stated) 2010/11 Balance Sheet

£000 £000 £000 Long-Term Assets

94 Investments 0

94 Total Long-Term Assets 0

Current Assets10 Sundry debtors 1

225 Cash and bank 170

235 171 Current Liabilities

0 Creditors (1)(166) Balance with City of Edinburgh Council (118)

(166) (119)

163 Total Assets less Liabilities 52

(161) Capital at 1 April (163)2 Surplus for the year (1)

(5) Realised and unrealised gains on investments (3)1 Transfer to Council Registered Funds 88 0 Trusts transferred to external charities 25 0 Compensation fund paid 2

(163) Capital at 31 March (52)

Notes1. Income

2. Expenditure

3. Heritable Property

2011/12

Investment arrangements for the funds of the remaining Trusts have been revised. The Trusts due to be transferred in 2012/13 now have their funds held in cash, while the remaining Trusts have new investments in unit trusts. These unit trusts have different distribution dates to the previous investments and this is reflected in a lower income figure being shown in the 2011/12 accounts compared to previous years.

Expenditure has reduced due to the transfer of several large poverty Trusts, which paid out pensions, to Elizabeth Finn Care. The Usher Hall appeal made a one-off disbursement of £0.6m in 2010/11.

The reduction in heritable property relates mainly to the transfer of Trinity College Hospital to Elizabeth Finn Care (£0.532m) and fishing rights (George Boyd Anderson) to Lagganlia Outdoor Centre.

119


47. The City of Edinburgh Council Charitable Funds - continued47.5 Transferred Trusts

£000 £000 To Elizabeth Finn Care (SC040987)Scottish Registered Charity Funds Trinity College Hospital 7,941 Sir James Steel 1,499 John McGibbon 1,164 Alexander Mortification 878 John Watson 491 Sir William Watson 394 Other smaller trusts 413

12,780 Other Funds Ada Noble 8 Schools Benevolent Fund 13 Irvine Trust 4

25

Total value transferred to Elizabeth Finn Care 12,805

To Edinburgh Voluntary Organisations Trust (SC031561)Scottish Registered Charity Funds Sir William Y Darling 4

Total value of transferred trusts 12,809

48. Prior Period Adjustments48.1 Heritage Assets

2010/11 Newly 01.04.10 Opening 1 April 2010 Balance Sheet Statements Reclassified recognised Re-stated

£000 £000 £000 £000 GROUPProperty, Plant and Equipment Community Assets 14,665 (2,649) 0 12,016

Long-Term Assets Heritage Assets 0 2,649 34,829 37,478

Long-Term Liabilities Liabilities in Associates and Joint (1,153,608) 0 209 (1,153,399) Ventures

Unusable Reserves Group Unusable Reserves 1,059,868 0 (209) 1,059,659 Revaluation Reserve (734,264) 0 (34,829) (769,093)

As part of its ongoing charity re-organisation project, the Council has transferred a number of trusts to external parties during the year:

The 1 April 2010 and 31 March 2011 Balance Sheets and 2010/11 comparative figures have thus been restated in the 2011/12 statement of accounts to apply the new policy.

The following notes explain the material differences between the amounts presented in the 2010/11 financial statements and the equivalent amounts presented in the 2011/12 financial statements for the Council and show how these affect community assets, heritage assets and the revaluation reserve within the Balance Sheet.

For 2011/12 the Council has recognised heritage assets under the requirements of FRS 30. Previously, heritage assets were either recognised as community assets in the property, plant and equipment classification or were not recognised in the Balance Sheet.

Value

120


48. Prior Period Adjustments - continued 48.1 Heritage Assets - continued

2010/11 Newly 01.04.10 Opening 1 April 2010 Balance Sheet Statements Reclassified recognised Re-stated

£000 £000 £000 £000 COUNCILProperty, Plant and Equipment Community Assets 14,665 (2,649) 0 12,016


Unusable Reserves Revaluation Reserve (734,264) 0 (34,829) (769,093)

2010/11 Newly 31.03.11 31 March 2011 Balance Sheet Statements Reclassified recognised Re-stated

£000 £000 £000 £000 GROUPProperty, Plant and Equipment Community Assets 15,532 (2,776) 0 12,756


Long-Term Liabilities Liabilities in Associates and Joint (1,023,262) 0 209 (1,023,053) Ventures

Unusable Reserves Group Unusable Reserves 919,633 0 (209) 919,424 Revaluation Reserve (774,085) 0 (34,829) (808,914)

COUNCILProperty, Plant and Equipment Community Assets 15,532 (2,776) 0 12,756


Unusable Reserves Revaluation Reserve (774,085) 0 (34,829) (808,914)

48.2 Lothian and Borders Fire and Rescue Board - Property, Plant and Equipment

2010/11 31.03.11 Statements Adjustment Re-stated

£000 £000 £000 GROUP

Associates and Joint Ventures Accounted for on an (63,808) (116) (63,924) Equity Basis

Other Unrealised Gains (77,933) (56) (77,989)

The depreciation policy for vehicles has been reviewed to better reflect the use of economic value of those assets. Dependent on the vehicle type, these assets are now depreciated over a period of five to fifteen years, reflecting the estimated useful life of the assets. The change has been applied retrospectively by adjusting the opening balances and comparative amounts.

Comprehensive Income and Expenditure Statement

121


48. Prior Period Adjustments - continued 48.2 Lothian and Borders Fire and Rescue Board - Property, Plant and Equipment - continued

2010/11 01.04.10 Opening 1 April 2010 Balance Sheet Statements Adjustment Re-stated

£000 £000 £000 GROUPLong-Term Liabilities Liabilities in Associates and Joint Ventures (1,153,608) 1,453 (1,152,155)

Unusable Reserves Group Unusable Reserves 1,059,868 (1,453) 1,058,415

2010/11 31.03.11 31 March 2011 Balance Sheet Statements Adjustment Re-stated

£000 £000 £000 GROUPLong-Term Liabilities Liabilities in Associates and Joint Ventures (1,023,262) 1,625 (1,021,637)

Unusable Reserves Group Unusable Reserves 919,633 (1,625) 918,008

49. Exceptional ExpenditureExceptional expenditure comprises the following amounts:

Group Council Group Council£000 £000 £000 £000

0 0 (183,226) (183,226)

(9,952) (9,952) 20,925 20,925

(9,952) (9,952) (162,301) (162,301)IAS 19 - Retirement Benefits

Modernising PayExceptional expenditure includes payments and movements on provisions relating to equal pay settlements and costs associated with implementing single status.

Equal pay settlements and implementation of single status

2011/12 2010/11

The Chancellor of the Exchequer announced in his emergency budget on 22 June 2010 that the consumer price index rather than the retail price index would be the basis for future public sector pension increases.

The impact of this change on the past services costs shown under IAS19 was a credit of £183.226m in 2010/11, of which £3.612m related to the Housing Revenue Account. Due to the materiality of the impact of this one-off change, this has been included as 'negative expenditure' within exceptional expenditure in the Comprehensive Income and Expenditure Statement.

IAS 19 - Retirement Benefits - Past Service Costs

122

HOUSING REVENUE ACCOUNT

INCOME AND EXPENDITURE STATEMENTfor the year ended 31 March 2012

2010/11 £000 EXPENDITURE £000 £000

27,248 Repairs and maintenance 26,056

17,652 Supervision and management 19,435

36,147 Depreciation and impairment of non-current assets 27,163

4,309 Other expenditure 4,022

85,356 76,676

INCOME(71,543) Dwelling rents (76,203)

(639) Non-Dwelling rents (gross) (466)

(14,931) Other income (14,807)

(87,113) (91,476)

(3,612) Exceptional Items - Past Service Costs under IAS19 0

(5,369) Net cost of HRA Services (as included in the Council's (14,800) Comprehensive Income and Expenditure Statement)

136 HRA share of corporate and democratic core 394

235 HRA share of other amounts included in the Council's 253 Net Cost of Services but not allocated to specific services

(4,998) Net expenditure for HRA Services (14,153)

HRA share of other operating expenditure included in the Council's Comprehensive Income and Expenditure Statement

863 Loss on sale of HRA fixed assets 726

18,139 Interest payable and similar charges 19,614

(102) Interest and investment income (102)

88 Pensions interest cost and expected return on (99) pension assets

18,988 20,139

(1,158) Capital grants and contributions (3,893)

12,832 Deficit for the year on HRA services 2,093

The Housing Revenue Account (HRA) Income and Expenditure Statement shows in more detail the income and expenditure on HRA services included in the Council's Comprehensive Income and Expenditure Statement.

123


MOVEMENT ON THE HRA STATEMENT

2010/11 2011/12 £000 £000

0 Balance on the HRA at the end of the previous year 0

12,832 Deficit for the year on the HRA Income and Exp Account 2,093

(14,446) Adjustments between accounting basis and funding basis (5,607) under statute

(1,614) Net increase before transfers to reserves (3,514)

1,614 Contribution to renewal and repairs fund, via the General Fund 3,514

0 Balance on the HRA at the end of the current year 0

Adjustments Between Accounting Basis and Funding Basis Under Regulations £000 £000

Adjustments primarily involving the Capital Adjustment Account

Reversal of items debited or credited to the Income and Expenditure Statement

(36,147) Charges for depreciation and impairment of non-current assets (27,163)

1,158 Capital grants and contributions applied 3,893

Insertion of items not debited or credited to the Income and Expenditure Statement

17,483 Statutory provision for the financing of capital investment 17,787

Adjustments primarily involving the Capital Receipts Reserve

(863) Transfer of cash sale proceeds credited as part of the gain / loss on (726) disposal of assets

Adjustments primarily involving the Financial Instruments Adjustment Account

289 Amount by which finance costs charged are different from finance costs 399 chargeable in the year in accordance with statutory requirements

Adjustments primarily involving the Pensions Reserve

3,113 Reversal of items relating to retirement benefits debited or credited to (318) the Income and Expenditure Statement

480 Employer's pension contributions and direct payments to pensioners 565 payable in the year

Adjustments primarily involving the Employee Statutory Adjustment Account

41 Amount by which officer remuneration charged to the Income and (44) Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

(14,446) (5,607)

124


Notes to the Housing Revenue Account

1. The number and types of dwellings in the authority's housing stock at 31 March 2012 are as follows:

Annual Annual Average Average

Types of Houses Number Rent (£) Number Rent (£) Main provision Council dwellings1 Apartment 309 3,041.91 310 2,802.002 Apartment 5,508 3,384.53 5,698 3,146.003 Apartment 10,456 3,923.16 10,735 3,646.004 Apartment 3,550 4,516.85 3,579 4,198.005 Apartment 546 4,857.25 550 4,515.006 Apartment 10 4,893.11 10 4,548.007 Apartment 3 4,738.16 3 4,403.008 Apartment 2 4,738.16 2 4,403.00

Mid-market rent dwellings3 Apartment 12 6,614.35 12 6,115.874 Apartment 7 7,317.42 7 6,783.66

20,403 20,906

2.

3.

4.

5. The Chancellor of the Exchequer announced in his emergency budget on 22 June 2010 that the consumer price index rather than the retail price index would be the basis for future public sector pension increases.

The impact of this change on the past services costs shown under IAS19 was a credit of £3.612m in 2010/11. Due to the materiality of the impact of this one-off change, this has been included within exceptional expenditure in the Housing Revenue Account Income and Expenditure Statement.

The amount of rent arrears included as debtors in the Council's Balance Sheet was £2.091m (2010/11 £1.880m) against which a provision amounting to £1.340m (2010/11 £1.192m), has been created in respect of non collectable debts.

Significant non-residential income includes ground rent at Broomhouse Drive of £0.160m per annum.

The total value of uncollectable void rents for main provision properties was £0.362m (2010/11 £0.444m). This has been netted against rental income.

(re-stated)20112012

The stock figure represents all types of residential properties, including furnished tenancies, sheltered housing and homelessness units.

125

COUNCIL TAX INCOME ACCOUNT


2010/11 £000 £000 £000

(288,786) Gross council tax levied and contributions in lieu (290,661)

49,423 Less: - Exemptions and other discounts 49,5828,825 - Provision for bad debts 8,889(351) - Net cost of benefits (275)

3,198 - Other reductions 3,28361,095 61,479

(227,691) (229,182)

1,207 Previous years' adjustments 1,268

(226,484) Total transferred to General Fund (227,914)

Notes to the Council Tax Income AccountThe in-year collection rate for Council Tax was 94.6% (2010/11 94.3%).

Calculation of the Council Tax Base 2011/12

Number of Disabled Effective Ratio to Band D Charges Band Properties Relief Exemptions Discounts Properties Band D Equivalents per Band

A Up to £27,000 23,188 88 (2,903) (3,384) 16,989 6/9 11,326 £779.33B £27,001 - £35,000 46,540 66 (3,514) (6,923) 36,169 7/9 28,131 £909.22C £35,001 - £45,000 42,872 (31) (3,273) (5,378) 34,190 8/9 30,391 £1,039.11D £45,001 - £58,000 36,269 47 (3,078) (4,105) 29,133 9/9 29,133 £1,169.00E £58,001 - £80,000 38,566 (11) (3,503) (3,607) 31,445 11/9 38,433 £1,428.78F £80,001 - £106,000 23,289 (17) (1,194) (1,947) 20,131 13/9 29,078 £1,688.56G £106,001 - £212,000 20,032 (113) (517) (1,256) 18,146 15/9 30,243 £1,948.33H Over £212,000 3,701 (29) (135) (188) 3,349 18/9 6,698 £2,338.00

Total 203,433

Add: Contributions in Lieu 549Less: Provision for Non-Payment 7,547

Council Tax Base 196,435

Each household or occupied dwelling is allocated to a council tax band by the Assessor. The charge per council tax band is calculated as a proportion of band D - these proportions are determined by legislation.

A council tax bill is reduced by 25% where a dwelling has only one occupant or, with certain exceptions, 10% where the property is empty or a second home. For council tax purposes, students and certain other categories of people are not regarded as occupants. Reductions in council tax payable are also granted for physically disabled people.

Charges in respect of water and sewerage are the responsibility of Scottish Water. The Council collects both water and sewerage charges and makes payment to the Water Authority.

126

NON-DOMESTIC RATES INCOME ACCOUNT


2010/11 £000 £000 £000

(374,401) Gross rates levied and contributions in lieu (392,287)

75,555 Less: - Reliefs and other deductions 79,69450 - Payment of interest 3

3,509 - Uncollectable debt written off and provision for impairment 3,82579,114 83,522

(295,287) (308,765)

7,867 Previous years' adjustments 6,941

(287,420) Net Non-Domestic Rates Income (301,824)

Allocated to:(287,759) Contribution to National Non-Domestic Rates Pool (302,108)

339 284

(287,420) (301,824)

Notes to the Non-Domestic Rates Income Account Rateable Value

Rateable Values as at 1 April 2011 Number £000 Shops, offices and other commercial subjects 13,189 646,062Industrial and freight transport 2,741 78,894Telecommunications 8 15Public service subjects 342 47,360Miscellaneous 2,765 145,437

19,045 917,768

Contribution to / from National Non-Domestic Rates Pool

Poundage

100% Relief £10,00050% Relief £12,00025% Relief £18,000

Upper limit for combined rateable value £25,000

From 1 April 2008, the Scottish Government introduced the Small Business Bonus Scheme. Business properties with a rateable value of £18,000 or less may have received relief as set out below:

Properties with a rateable value greater than £35,000 (2010/11 £35,000) had their rate charges calculated using the poundage of 43.3p per £ (2010/11 41.4p per £).

Adjustments for years prior to introduction of National Non-Domestic Rates Pool

Occupiers of non-domestic property pay rates based on the valuation of the property within the valuation roll for Edinburgh. The non-domestic rate poundage is determined by the Scottish Ministers, and was 42.6p per £ in 2011/12 (2010/11 40.7p per £).

The contribution to the National Non-Domestic Rates Pool of £302.108m (2010/11 £287.759m) is the non-domestic rates contributed by the Council through the pooling arrangements for government grant purposes. The amount distributed to the Council under these pooling arrangements was £297.442m (2010/11 £188.733m).

In contrast to previous years where all non-domestic rates income raised in a council area was remitted to a national pool to be redistributed on the basis of authorities' respective populations, with effect from 2011/12, authorities retain in full the income raised locally up to the baseline level assumed in the Local Government Financial Settlement. Any variation from this assumed level is then met by means of a corresponding transfer of funds to or from the Scottish Government.

127

COMMON GOOD FUND

The market value of investments at 31 March 2012 was £1.580m (2011 £1.566m).

COMMON GOOD FUND - MOVEMENT IN RESERVES STATEMENT

Common Capital Good Adjust. Reval. Total Fund Account Reserve Reserves

2011/12 Movements £000 £000 £000 £000

Balance at 31 March 2011 (1,630) (13,850) (4,287) (19,767)


Deficit on the provision of services 1,278 0 0 1,278


Total Comprehensive Income 1,278 0 (2,104) (826) and Expenditure

Adjustments between accounting basis and funding basis under regulations:

Depreciation and impairment of non-current (1,272) 1,181 91 0 assets

Net increase / decrease before 6 1,181 (2,013) (826) transfers to earmarked reserves

Transfer to / from earmarked reserves 0 0 0 0

Increase / decrease in year 6 1,181 (2,013) (826)

Balance at 31 March 2012 (1,624) (12,669) (6,300) (20,593)

The Common Good Fund stands separate from the Council's accounts and has been described as "the ancient patrimony of the community". It was originally derived from the grants by the Sovereigns of Scotland at various times. The present fund is an amalgam of the funds of the City and Royal Burgh of Edinburgh and the Royal Burgh of South Queensferry.

A report on the (Edinburgh) Common Good prepared by the Town Clerk and City Chamberlain in 1905 set out the historical background of the fund and listed its then assets in some detail. The report also stated a "General Principle" that the Fund should be administered "for the purpose of upholding the dignity and suitable hospitality of the City; performing the duties incumbent upon a Royal Burgh ..... maintaining the municipal establishment and managing the municipal affairs; vindicating or extending the corporate rights of the community and defending its interests; acquiring additional land or property for the corporate benefit, or improving existing corporation property, and generally for any purpose which in the bona fide judgement of the Town Council is for the good of the community as a whole, or in which the inhabitants at large may share, as distinct from the separate interests or benefit of any particular individual or class, however deserving or needy. The purpose must be limited to those which concern the City and its interests".

The Local Government etc. (Scotland) Act 1994 confirms this interpretation that use of the Fund shall "… have regard to the interests of all the inhabitants" of the area.

The Fit For Future reserve represents funds set aside from certain Common Good properties to assist in the funding of the Fit For Future office accommodation project.

128

COMMON GOOD FUND - MOVEMENT IN RESERVES STATEMENT

Common Capital Good Adjust. Reval. Total Fund Account Reserve Reserves


Balance at 31 March 2010 (1,637) (14,146) (3,321) (19,104)


Deficit on the provision of services 411 0 0 411

Other Comprehensive Income and Expenditure 0 (64) (1,010) (1,074)

Total Comprehensive Income 411 (64) (1,010) (663) and Expenditure

Adjustments between accounting basis and funding basis under regulations:

Depreciation and impairment of non-current (404) 360 44 0 assets

Net increase / decrease before 7 296 (966) (663) transfers to earmarked reserves

Transfer to / from earmarked reserves 0 0 0 0

Increase / decrease in year 7 296 (966) (663)

Balance at 31 March 2011 (1,630) (13,850) (4,287) (19,767)

2010/11 £000 £000 £000

421 Common Good Fund 1,290

421 COST OF SERVICES 1,290

Financing and Investment Income(10) Interest and investment income (12)

411 DEFICIT ON PROVISION OF SERVICES 1,278

(1,010) Surplus on revaluation of non-current assets (2,104)

(64) Other unrealised gains 0

(1,074) Other Comprehensive Income and Expenditure (2,104)

(663) TOTAL COMPREHENSIVE (INCOME) AND EXPENDITURE (826)

COMMON GOOD FUND - COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT

2011/12

129

COMMON GOOD FUND - BALANCE SHEET


2010 2011 £000 £000 £000 £000

16,319 16,923 Other Land and Buildings 17,758863 926 Community Assets 926211 208 Surplus Assets 205

17,393 18,057 Property, Plant and Equipment 18,889

95 100 Heritage Assets 1001 1 Long-term Investments 2

96 101 Long-term Assets 102

407 193 Short-Term Investments 170

1,208 1,416 Cash and Cash Equivalents 1,432

1,615 1,609 Current Assets 1,602

19,104 19,767 Net Assets 20,593


(14,146) (13,850) Capital Adjustment Account (12,669)

(17,467) (18,137) Unusable Reserves (18,969)

(1,637) (1,630) Common Good Fund (1,624)

(1,637) (1,630) Usable Reserves (1,624)

(19,104) (19,767) Total Reserves (20,593)


31 March 2012


130

COMMON GOOD FUND - NOTES TO FINANCIAL STATEMENTS

1. Property, Plant and Equipment and Heritage Assets1.1 Movements on Balances

Total Other Property,

Land and Community Surplus Plant and Heritage Buildings Assets Assets Equipment Assets

£000 £000 £000 £000 £000 Cost or ValuationAt 1 April 2011 17,238 926 214 18,378 100

Revaluation increases / 2,104 0 0 2,104 0 (decreases) recognised in the Revaluation Reserve

Revaluation increases / (1,394) 0 0 (1,394) 0 (decreases) recognised in the Surplus on the Provision of Services

At 31 March 2012 17,948 926 214 19,088 100

Accumulated DepreciationAt 1 April 2011 (315) 0 (6) (321) 0

Depreciation charge (413) 0 (3) (416) 0

Depreciation written out to the 538 0 0 538 0 Surplus on the Provision of Services

At 31 March 2012 (190) 0 (9) (199) 0

Net Book ValueAt 31 March 2012 17,758 926 205 18,889 100

At 31 March 2011 16,923 926 208 18,057 100

131


1. Property, Plant and Equipment and Heritage Assets - continued1.1 Movements on Balances - continued

Total Other Property,

Land and Community Surplus Plant and Heritage Buildings Assets Assets Equipment Assets

£000 £000 £000 £000 £000 Cost or ValuationAt 1 April 2010 16,394 958 214 17,566 0

Transfer to heritage assets 0 (95) 0 (95) 95

Re-stated at 1 April 2010 16,394 863 214 17,471 95

Revaluation increases / 989 0 0 989 5 (decreases) recognised in the Revaluation Reserve

Revaluation increases / (145) 0 0 (145) 0 (decreases) recognised in the Surplus on the Provision of Services

Other movements in cost or 0 63 0 63 0 valuation

At 31 March 2011 17,238 926 214 18,378 100

Accumulated DepreciationAt 1 April 2010 (75) 0 (3) (78) 0

Depreciation charge (259) 0 (3) (262) 0

Depreciation charge written out 16 0 0 16 0 to Revaluation Reserve

Depreciation written out to the 3 0 0 3 0 Surplus on the Provision of Services

At 31 March 2011 (315) 0 (6) (321) 0

Net Book ValueAt 31 March 2011 16,923 926 208 18,057 100

At 31 March 2010 16,319 863 211 17,393 95

1.2 Information on Assets Held

Monuments and statues 20 Parks and open spaces and other properties 31 Shops, industrial units and other commercial lettings 17

Assets owned by the Common Good Fund at 31 March 2012 include:

132


2. Usable Reserves

3. Unusable Reserves3.1 Revaluation Reserve

● revalued downwards or impaired and the gains are lost;

● used in the provision of services and the gains are consumed through depreciation; or

● disposed of and the gains are realised.

£000 £000 £000 £000 Balance at 1 April (4,287) (3,321)

Upward revaluation of assets (2,869) (1,031)

Downward revaluation of assets and 765 21impairment losses not charged to the Surpluson the Provision of Services

Surplus on revaluation of non-current assets (2,104) (1,010)not posted to the Surplus on the Provision ofService

Difference between fair value depreciation 91 44and historical cost depreciation

Amount written off to the capital adjustment 91 44account

Balance at 31 March (6,300) (4,287)

Movements in the Common Good's usable reserves are detailed in the Movement in Reserves Statement (on page 128).

The revaluation reserve contains the gains made by the Common Good Fund arising from increases in the value of its property, plant and equipment. The balance is reduced when assets with accumulated gains are:

The reserve contains unrealised gains accumulated since 1 April 2007, the date the reserve was created. Accumulated gains arising before 1 April 2007 were consolidated into the capital adjustment account.

2011/12 2010/11

133


3. Unusable Reserves - continued3.2 Capital Adjustment Account

£000 £000 £000 £000 Balance at 1 April (13,850) (14,146)Reversal of items relating to capital expendituredebited or credited to the CIESCharges for depreciation of non-current assets 416 262Revaluation losses on property, plant and 856 142equipment

1,272 404Adjusting amounts written out of the (91) (44)revaluation reserve

Net written out amount of the costs of non- 1,181 360current assets consumed in the yearCapital financing applied in the year:

Movements in the market value of Long Term 0 (1)Investments debited to the CIES

Other unrealised losses debited to the CIES 0 (63)

Balance at 31 March (12,669) (13,850)

The account also holds revaluation gains accumulated on property, plant and equipment prior to 1 April 2007, the date the revaluation reserve was created to hold such gains.

The capital adjustment account provides a balancing mechanism for 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 (CIES) (with reconciling postings from the revaluation reserve to convert fair value figures to a historical cost basis).

2011/12 2010/11

134

ANNUAL GOVERNANCE STATEMENT

Scope of Responsibility

The Group's Governance Framework

The system includes:

● budgeting systems;

● reviews of financial and performance reports against forecasts;

● the preparation of regular financial reports which indicate actual expenditure against the forecasts;

● consideration of external and internal audit reports by the audit committee.

These arrangements also include:

● identifying the Council’s objectives in the Single Outcome Agreement;

● monitoring of the achievement of objectives by the Council and senior officers;

●

● reporting performance regularly to Council committees and/or boards of directors;

● describing the role of the Council and committees in Standing Orders, which also set out the decision-making powers delegated to officers;

Within the overall control arrangements the system of internal financial control is intended to ensure that assets are safeguarded, transactions are authorised and properly recorded, and material errors or irregularities are either prevented or would be detected within a timely period. The key elements of the Council's governance framework include financial regulations, financial monitoring, financial and administrative procedures (including segregation of duties, management supervision, and a system of delegation and accountability).

a systematic approach to monitoring service performance at elected member, senior officer and board and project level;

The governance framework comprises the systems, processes, cultures and values by which the Group is directed and controlled. It also describes the way it engages with, accounts to and leads the community. It enables the Group to monitor the achievement of its objectives and consider whether those objectives have led to the delivery of appropriate, cost-effective services.

The Council's Local Code of Corporate Governance is supported by evidence of compliance which is regularly reviewed and available for inspection. The rest of the Group observes the principles of the Code.

The Council has implemented arrangements for monitoring each element of the framework and providing evidence of compliance. The Chief Internal Auditor reviewed the arrangements and is satisfied that the Code continues to be adequate and effective. The framework meets the principles of effective governance.

The City of Edinburgh Council is responsible for ensuring that its business is conducted in accordance with the law and appropriate standards, and that public money is safeguarded, properly accounted for, and used economically, efficiently, effectively and ethically. The Council also has a duty to make arrangements to secure continuous improvement in the way its functions are carried out.

In discharging these responsibilities, elected members and senior officers are responsible for implementing effective arrangements for governing the Council’s affairs, and facilitating the effective exercise of its functions, including arrangements for the management of risk.

To this end, the Council has approved and adopted a Local Code of Corporate Governance that is consistent with the principles of the CIPFA / SOLACE framework Delivering Good Governance in Local Government. This statement explains how the City of Edinburgh Council delivers good governance and reviews the effectiveness of those arrangements. It also includes a statement on internal financial control.

This statement also covers the organisations included in the Council’s Group Accounts, a list of which is included at page 35 of the Accounts.

135


These arrangements also include - continued●

● the Council's Monitoring Officer who ensures compliance with laws and regulations;

● an Audit Committee whose core functions comply with CIPFA standards;

● comprehensive budget and expenditure monitoring systems;

● targets against which financial and operational performance can be assessed;

● clearly defined capital expenditure guidelines;

● formal project management disciplines;

● a Code of Guidance for the governance of Council-owned companies; and

● Codes of conduct for both elected members and officers.

It sets out the strategic priorities for 2009-12 as:

●

●

●

●

●

Changes in Governance Arrangements

●

Financial Regulations (or equivalent) that specify the controls over budgeting, income, expenditure and financial performance;

health, wellbeing and social inclusion, including care and support services, improving health, and tackling deprivation and inequality;

services for children, including supporting early years development and educational excellence, and protecting vulnerable children;

working in partnership to improve community safety and the quality of life in our communities.

Planning and building standards; transport, fleet / corporate transport unit; corporate property; cleaning and catering STOs; registration and non-legal licensing functions were realigned to Services for Communities.

In December 2011 management arrangements across the Council were reviewed to ensure that there are clear and defined linkages between service outcomes, service delivery and performance. These arrangements are outlined as follows:

environmental sustainability, including action on climate change, waste, and the city’s cleanliness;

A significant part of the governance framework is the system of internal control, which is based on an ongoing process to identify and prioritise risks to the achievement of the Group's objectives. While the system is designed to enable the Council as the lead organisation in the Group to manage risk effectively, it cannot eliminate all risk of failure to implement policies and achieve objectives. Therefore, it provides a reasonable, but not absolute, assurance of effectiveness.

Determining the Authority’s purpose, its vision for the local area and intended outcomes for the CommunityThe Edinburgh Single Outcome Agreement (SOA) 2009-12, which was submitted to the Scottish Government in May 2009, provides a statement of the context in which the Council and its partners are working.

developing the city and regional economy, including transport and housing, and mitigating the impact of the economic downturn;

Appropriate outcomes have been identified and are monitored using indicators and targets that have been developed by the Council and its partners. Regular reports are made to the Council, its partners, the public and the Scottish Government. Accountability for the outcomes has been clearly specified and the Council follows the Scottish Government’s advice on SOA governance matters.

The Council appointed a Director of Corporate Governance in September 2011. This post replaced the former posts of Director of Corporate Services and Director of Finance. Responsibilities for these two service areas were merged into Corporate Governance. In addition, the Chief Financial Officer and the Pensions and Accounting Manager were appointed as Section 95 Officers for the Council and Lothian Pension Funds respectively. These financial management arrangements conform to the governance requirements of the CIPFA statement on the Role of the Chief Financial Officer in Local Government (2010).

136


Changes in Governance Arrangements - continued●

● Health and social strategy was realigned to Health and Social Care; and

●

Review of Effectiveness

● departmental directors’ certified assurances;

● Council officers’ management activities;

● Internal Audit’s review work;

● Audit Scotland’s review work leading to its Annual Audit Report;

● risk management procedures;

● reports by external, statutory inspection agencies;

● assurances provided by the Chief Executives / Directors of Finance of group companies.

Business continuity and public safety; performance and quality; sustainability; research and information functions were realigned to Corporate Governance

Economic Development was strengthened with a renewed focus on external business support; inward investment and trade development; employability and job creation; business development; links with external economic development agencies and marketing.

Revised governance arrangements were also put in place for the tram project. The planned reduction in tie Limited staff has taken place. Council appointed Turner and Townsend as project managers, to ensure effective oversight and delivery of the project going forward.

The future provision of the statutory repairs service is being reviewed by the Council.

Each service director has reviewed the arrangements in his / her department and reported on their assessment of the effectiveness of control arrangements, together with any potential areas requiring improvement, to the Chief Executive. Where improvement actions are identified, an action plan will be developed and subject to regular monitoring. In reviewing the overall governance framework, the Council has also considered any relevant third party reviews and recommendations. Reliance has also been placed on each organisation’s most recent audited accounts together with Council officers detailed knowledge of these organisations as a consequence of their continued involvement with these companies.

In compliance with standard accounting practice, the Chief Financial Officer has provided the Chief Executive with a statement of the effectiveness of the Group’s internal financial control system for the year ended 31st March 2012. It is the Chief Financial Officer's opinion that reasonable assurance can be placed upon its effectiveness.

The Local Code of Governance details the Council’s arrangements for monitoring each element of the framework and providing evidence of compliance. The Chief Internal Auditor has reviewed the effectiveness of the Code and will report the results to the Audit Committee.

The Internal Audit Section operates in accordance with CIPFA’s Code of Practice for Internal Audit and complies with the ISO 9001/2008 quality standard. The Section undertakes an annual work programme based on an agreed audit strategy and formal assessments of risk that are reviewed regularly. During the year, the Chief Internal Auditor reported directly to the Chief Financial Officer but had free access to the Chief Executive, all directors and elected members, and reported to the Audit Committee in his own name.

The Chief Internal Auditor has provided an assurance statement on the effectiveness of the system of internal control, which was informed by:

137


● the scrutiny and governance arrangements of the Council Committees;

● the control environment covering the authorisation and approval of expenditure;

● the control framework within a customer centred statutory repairs service;

● the delegation of authority to officers below Directors;

● the processes to ensure compliance with policies and procedures;

● the mitigation of risks during a time of change of structures and service delivery;

● the procurement activities of the Council;

● the awareness and understanding of the employee code of conduct;

● the processes to ensure income is timeously received by the Council;

● the implementation of action plans agreed with external inspection agencies;

● the implementation of actions identified by service directors;

● the management of major projects through a dedicated programme office; and

● the delivery of the internal improvement plans.

● the long term financial planning and the links to outcomes;

● the mitigation of the effects of the economic downturn; and

●

Certification

SUE BRUCE ANDREW BURNS ALASTAIR MACLEANChief Executive Council Leader Director of Corporate Governance28 September 2012 28 September 2012 28 September 2012

the completion of group restructuring including governance arrangements.

It is our opinion that in light of the foregoing, reasonable assurance can be placed upon the adequacy and effectiveness of City of Edinburgh Council and its Group systems of governance. The annual review demonstrates sufficient evidence that the Code is operated effectively and the Council and its Group comply with the Local Code of Corporate Governance in all significant respects.

These reviews have identified actions that will be taken to continue improvement in the following activities:

By the Council:

By the Group:

138

REMUNERATION REPORT

Remuneration ArrangementsCouncillors

% of amount payable to

Number of Leader of Posts the Council

Depute Leader of the Council 1 75%

Depute Convener 1 50%

8 65%

Convener of Licensing Board 1 60%

Convener of Audit Committee 1 50%

6 45%

Vice-Conveners of Planning and Regulatory 2 40%

Opposition Group Leaders - Labour and Conservative 2 50%

Opposition Group Leaders - Green 1 40%

The salary that is to be paid to the Leader of the Council is set out in the Regulations. For 2011/12, the salary for the Leader of the City of Edinburgh Council was £48,704. The Regulations permit the Council to remunerate one Civic Head. The Regulations set out the maximum salary that may be paid to the Civic Head (the Lord Provost). For 2011/12 this was £36,528. The Council's policy is to pay the Lord Provost at the national maximum.

The Regulations also set out the remuneration that may be paid to senior councillors and the total number of senior councillors the Council may have (24 for the City of Edinburgh Council). The maximum yearly amount that may be paid to a senior councillor is 75% of the total yearly amount payable to the Leader of the Council. The total yearly amount payable by the Council for remuneration of all of senior councillors shall notexceed £633,144. The Council is able to exercise local flexibility in the determination of the precise number of senior councillors and their salary within these maximum limits. The Council's policy is summarised below:

Conveners of Culture and Leisure, Economic Development, Education, Children and Families, Finance and Resources, Health, Social Care and Housing, Planning, Regulatory and Transport, Infrastructure and Environment Committees

Vice-Conveners of Culture and Leisure, Economic Development, Education, Children and Families, Finance and Resources, Health, Social Care and Housing and Transport, Infrastructure and Environment Committees

The Council is required, under statute to provide information on the remuneration of each senior officer and each senior elected member, together with any other officer not otherwise included whose remuneration is over £150,000 per annum. In addition, the Council is required to provide information for the most senior employee within each of its subsidiary companies, together with all other employees whose remuneration exceeds £150,000 per annum.

All information disclosed in the tables on pages 140 to 149 in this remuneration report has been audited by Audit Scotland. The other sections of the remuneration report will be reviewed by Audit Scotland to ensure that they are consistent with the Financial Statements.

The remuneration of councillors is regulated by the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007 (SSI No. 2007/183) as amended by the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2008 (SSI 2008/415). The Regulations provide for the grading of councillors for the purposes of remuneration arrangements, as either the Leader of the Council, the Civic Head (the Lord Provost), senior councillors or councillors. The Leader of the Council and the Civic Head cannot be the same person for the purposes of payment of remuneration. A senior councillor is a councillor who holds a significant position of responsibility in the Council's political management structure.

When determining the level of remuneration for councillors, the Scottish Ministers consider the recommendations of the Scottish Local Authority Remuneration Committee (SLARC). SLARC is an advisory non-departmental public body set up in 2005 to advise Scottish Ministers on the remuneration, allowances and expenses incurred by local authority councillors.

139

REMUNERATION REPORT

Councillors - continued

Senior Employees

The Council's role in determining the remuneration policies for its companies is currently under review.

Remuneration Paid

Non-Cash Salary, Expenses Total Total

Fees and Taxable / Benefits- Remun. Remun. Allowances Expenses -in-kind 2011/12 2010/11

£ £ £ £ £

J. Dawe, Leader of the Council 48,704 35 1,407 50,146 50,271

G. Grubb, Lord Provost 36,528 0 533 37,061 37,567

S. Cardownie, Depute Leader of the Council

36,528 30 536 37,094 37,243

R. Munn, Depute Convener and Convener of Regulatory from 17.06.11

30,112 0 753 30,865 25,186

T. Buchanan, Convener Economic Development

31,658 102 2,049 33,809 33,376

D. Brock, Convener Culture and Leisure

31,658 40 958 32,656 32,563

M. MacLaren, Convener Education, Children and Families

31,658 0 787 32,445 32,108

G. Mackenzie, Convener Transport, Infrastructure and Environment

31,658 0 629 32,287 32,247

P. Edie, Convener Health, Social Care and Housing

31,658 0 205 31,863 32,529

J. Lowrie, Convener Planning 31,658 0 162 31,820 31,715

C. Keir, Convener Regulatory until 17.06.11

5,276 0 33 5,309 31,997

Council's Leader, Civic Head and Senior Councillors

The following tables provide details of the remuneration paid to the Council's Senior Councillors, Senior Employees and the remuneration paid to the Chief Executive (or the most senior manager of that body) of each of the Council's subsidiary bodies.

In addition, the Council remunerates the Conveners and Vice Conveners of the Joint Boards. The Council has an arrangement with the Joint Boards to reimburse the Council for the additional costs for councillors that arise from them being a Convener or Vice Convener of the Joint Boards.

The salary of senior employees is set by reference to national arrangements. The Scottish Joint Negotiating Committee (SJNC) for Local Authority Services sets the salaries for Chief Executives of Scottish local authorities. Circular CO/144 set the amount of salary for the Chief Executive of the City of Edinburgh Council for the period 2008 to 2011. The annual review of the national salary points is pending. It will be considered as part of a wider review of Chief Officer terms and conditions by the SJNC.

There is no formal percentage relationship for salaries between the Chief Executive and other chief officers. The national salary points to be applied to Corporate Directors and Head of Service posts are determined using the Hay job evaluation method. The decision on whether there is to be an annual pay increase applied to the national salary points, and at what level, for Chief Executive and Chief Officer posts is made by the SJNC for local authority services and thereafter applied locally by the Council.

The Director of Health and Social Care is a joint appointment and the terms and conditions, including pay for the post, are those set by NHS Lothian, who employ the post holder directly.

140

REMUNERATION REPORT

Remuneration Paid - continued Non-Cash Salary, Expenses Total Total


£ £ £ £ £

P. Wheeler, Convener Finance and Resources and Convener of FETA Board

31,658 190 1,778 33,626 32,061

A. Jackson, Convener Audit 24,352 0 0 24,352 24,352M. Thomas, Convener Licensing Board

29,222 20 378 29,620 29,927

N. Elliott-Cannon, Vice Convener Finance and Resources

21,917 0 837 22,754 22,457

T. McKay, Vice Convener Economic Development

21,917 33 1,092 23,042 22,839

D. Beckett, Vice Convener Education, Children and Families until 30.06.11

5,479 15 687 6,181 22,280

N. Work, Vice Convener Health, Social Care and Housing

21,917 33 851 22,801 23,709

R. Cairns, Vice Convener Culture and Leisure

21,917 0 100 22,017 22,172

R. Aldridge, Vice Convener Transport, Infrastructure and Environment

21,917 0 779 22,696 22,690

S. McIvor, Vice Convener Planning, Vice Convener Education, Children and Families from 13.09.11 and Convener of Lothian Valuation Joint Board until 24.8.11 (Note 3.)

21,141 174 46 21,361 20,471

L. Lang, Vice Convener Regulatory

19,482 0 0 19,482 19,718

J. Balfour, Opposition Group Leader (Conservative)

24,352 97 336 24,785 24,273

A. Burns, Opposition Group Leader (Labour)

24,352 0 0 24,352 24,352

S. Burgess, Opposition Group Leader (Green)

19,482 0 666 20,148 20,022

CouncillorsI. Whyte, Convener Lothian and Borders Police Board (Note 1.)

36,528 904 531 37,963 37,965

M Bridgman, Convener Lothian and Borders Fire and Rescue Board (Note 2.)

36,528 0 599 37,127 38,373

729,257 1,673 16,732 747,662 784,463Notes:1. The amount recharged to Lothian and Borders Police Board in 2011/12 was £16,220 (2010/11 £17,136).

2. The amount recharged to Lothian and Borders Fire and Rescue Board in 2011/12 was £27,033 (2010/11 £28,561).

3. The amount recharged to Lothian Valuation Joint Board in 2011/12 was £5,408 (2010/11 £5,714).

Council's Leader, Civic Head and Senior Councillors (cont'd)

141

REMUNERATION REPORT

Remuneration Paid - continuedRemuneration paid to Councillors - continued

Members' Salaries and Expenses

2011/12 2010/11 £ £

Salaries 1,226,356 1,263,315

Expenses

Claimed by councillors 2,773 3,787

Paid directly by the Council 28,706 29,519

Total 1,257,835 1,296,621

Remuneration paid to Senior OfficersNon-Cash

Salary, Expenses Total Total Fees and Taxable / Benefits- Remun. Remun.

Allowances Expenses -in-kind 2011/12 2010/11 £ £ £ £ £

Council's Senior Officers158,553 0 0 158,553 39,638

(from 1 January 2011)(full year equivalent) 158,553

n/a n/a n/a n/a 127,888(until 31 December 2010)

140,676 0 0 140,676 140,676

123,525 576 0 124,101 123,525

67,887 0 0 67,887 n/a

(from 26 September 2011)(full year equivalent) 132,105

17,500 0 0 17,500 123,525

(until 30 April 2011)(full year equivalent) 123,525

35,685 0 0 35,685 123,525

(full year equivalent) 123,525

61,036 0 1,308 62,344 62,278

123,525 0 0 123,525 123,525

97,782 0 0 97,782 97,133

J. Inch, Director Corporate Services

A. Maclean, Director Corporate Governance

(until 30 June 2011)

M. Turley, Director Services for Communities

M. Miller, Chief Social Work Officer

The Council paid the following amounts to members of the Council during the year (these sums include the totals shown on the previous page):

D. McGougan, Director Finance

P. Gabbitas, Director Health and Social Care

S. Bruce, Chief Executive

D. Anderson, Director City Development

T. Aitchison, Chief Executive

G. Tee, Director Children and Families

142

REMUNERATION REPORT

Remuneration Paid - continuedRemuneration paid to Senior Officers - continued

Non-Cash Salary, Expenses Total Total


£ £ £ £ £

K. Kelly, Acting Director Finance 37,172 0 0 37,172 n/a (from 1 July to 31 October 2011)(full year equivalent) 111,516

K. Kelly, Chief Financial Officer 41,461 0 0 41,461 n/a (from 1 November 2011)(full year equivalent) 99,507

Total 904,802 576 1,308 906,686 961,713

Council Subsidiary Companies

Salary, Compensation Total Total Fees and Other for Loss of Remun. Remun.

Allowances Bonus Benefits Office 2011/12 2010/11 £ £ £ £ £ £

101,577 0 1,324 0 102,901 103,260

148,234 12,910 0 0 161,144 166,058

Lothian Buses159,675 47,200 1,262 0 208,137 203,203

145,159 42,900 1,166 0 189,225 Exempt

145,043 42,900 2,431 0 190,374 Exempt

144,464 42,900 1,246 0 188,610 Exempt

n/a n/a n/a n/a n/a 233,015

(until 31 December 2010)

N. Strachan, Finance Director

Council's Subsidiary CompaniesE. Adair, Operations and Finance Director, EDI Group

I Coupar, Marketing Director,

I Craig, Managing Director

H. Rissmann, Chief Executive, EICC

W. Campbell, Operations Director

W. Devlin, Engineering Director

S. Bruce joined the Council as Chief Executive in January 2011. T. Aitchison retired from the Council in December 2010. Remuneration shown above excludes any fees payable in respect of returning officer or other election duties. S. Bruce received an additional sum of £17,288 in 2011/12 for returning officer duties - this was lower than the authorised amount of £35,288. T. Aitchison received an additional sum of £15,300 in 2010/11 for returning officer duties.

P. Gabbitas is employed by NHS Lothian and 50% of his salary costs are recharged to the Council. The above figures therefore show the Council's share.

J. Inch and D. McGougan retired from the Council in April and June 2011 respectively. A. Maclean was appointed Director of Corporate Governance in September 2011, replacing the former posts of Director of Corporate Services and Director of Finance. K. Kelly was appointed Acting Director of Finance in July 2011 and subsequently Chief Financial Officer in November 2011. Salaries shown for A. Maclean and K. Kelly relate to the responsibilities as shown.

EDI Group and EICC are subsidiary companies of CEC Holdings Limited. Figures shown for these companies and Lothian Buses are for the year ended 31 December 2011 and 2010 respectively.

143

REMUNERATION REPORT

Council Subsidiary Companies - continuedSalary, Compensation Total Total

Fees and Other for Loss of Remun. Remun. Allowances Bonus Benefits Office 2011/12 2010/11

£ £ £ £ £ £ tie Limited

180,567 15,113 1,000 87,211 283,891 158,875

105,577 0 5,000 82,825 193,402 150,000

186,706 0 0 49,130 235,836 n/a

147,320 5,124 1,000 49,857 203,301 n/a

79,638 9,182 1,000 66,864 156,684 n/a

107,625 5,600 1,000 39,893 154,118 n/a

81,846 0 1,000 30,855 113,701 n/a

Total 1,733,431 223,829 17,429 406,635 2,381,324 1,014,411

Other benefits paid mainly relate to healthcare and telephone provision.

Number of Employees by Pay Band

2011/12 2010/11 £50,000 - £54,999 185 156£55,000 - £59,999 79 105£60,000 - £64,999 37 37£65,000 - £69,999 27 35£70,000 - £74,999 27 26£75,000 - £79,999 9 13£80,000 - £84,999 2 7£85,000 - £89,999 2 3£90,000 - £94,999 7 5£95,000 - £99,999 9 15£100,000 - £104,999 1 2£105,000 - £109,999 0 1£110,000 - £114,999 0 2£115,000 - £119,999 1 0£120,000 - £124,999 2 4£125,000 - £129,999 0 1£130,000 - £134,999 0 0£135,000 - £139,999 0 1£140,000 - £144,999 1 1£145,000 - £149,999 0 0£150,000 - £154,999 0 0£155,000 - £159,999 1 0

Total Number of Employees 390 414

Council's Subsidiary Companies

The total number of Council employees receiving more than £50,000 remuneration for the year (including retirement costs) are shown below.

G Roberts, Finance Director

F McFadden, Infraco DirectorS Clark, Programme DirectorD Murray, Commercial Director

A Richards, Managing Director (ETL)

R. Jeffrey, Chief Executive

S. Bell, Tram Project Director

144

REMUNERATION REPORT

Exit Packages

2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 £000 £000

£0 - £20,000 2 9 49 77 51 86 600 894£20,001 - £40,000 4 4 82 75 86 79 2,479 2,271£40,001 - £60,000 1 6 14 32 15 38 707 1,778£60,001 - £80,000 0 0 8 13 8 13 592 918£80,001 - £100,000 1 0 6 9 7 9 611 807£100,001 - £150,000 1 1 4 3 5 4 620 469£150,001 - £200,000 0 0 2 0 2 0 328 0£200,001 - £250,000 0 0 0 1 0 1 0 234

9 20 165 210 174 230 5,937 7,371

Pension Rights

The scheme’s normal retirement age for both councillors and employees is 65.

Contribution Whole Time Pay rate On earnings up to and including £18,500 (2011 £18,000) 5.50%On earnings above £18,500 and up to £22,600 (2011 £18,000 to £22,000) 7.25%On earnings above £22,600 and up to £30,900 (2011 £22,000 to £30,000) 8.50%On earnings above £30,900 and up to £41,200 (2011 £30,000 to £40,000) 9.50%On earnings above £41,200 (2011 £40,000) 12.00%

Total Number of Exit Packages by

Cost Band

Total Cost of Exit Packages in Each

Band

Number of Other Departures

Agreed

The number of exit packages provided for by the Council during the year, together with the total cost of those packages is shown in the table below. The total cost shown includes pension strain costs and the capitalised value of compensatory added years payments.

Exit package cost band

Number of Compulsory

Redundancies

The tiers and members’ contribution rates for 2011-12 were as follows:

If a person works part-time their contribution rate is worked out on the whole-time pay rate for the job, with actual contributions paid on actual pay earned.

Pension benefits for councillors and local government employees are provided through the Local Government Pension Scheme (LGPS).

Councillors’ pension benefits are based on career average pay. The councillor’s pay for each year or part year ending 31 March (other than the pay in the final year commencing 1 April) is increased by the increase in the cost of living, as measured by the appropriate index (or indices) between the end of that year and the last day of the month in which their membership of the scheme ends. The total revalued pay is then divided by the period of membership to calculate the career average pay. This is the value used to calculate the pension benefits.

For local government employees a final salary pension scheme is operated. This means that pension benefits are based on the final year’s pay and the number of years that person has been a member of the scheme.

From 1 April 2009 a five tier contribution system was introduced with contributions from scheme members being based on how much pay falls into each tier. This is designed to give more equality between the cost and benefits of scheme membership. Prior to 2009 contributions rates were set at 6% for all non-manual employees.

145

REMUNERATION REPORT

Pension Benefits - continuedPension Rights - continued

Council's Leader, Civic Head and Senior Councillors

In-year pension contribs.Difference

For year to For year to As at from 31.03.12 31.03.11 31.03.12 31.03.11

£ £ £000 £000 J. Dawe, Leader of the Council 10,374 10,033 Pension 4 1

Lump Sum 4 0

6,414 5,016 Pension 2 1Lump Sum 2 0











There is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for lump sum up to the limit set by the Finance Act 2004. The accrual rate guarantees a pension based on 1/60th of final pensionable salary and years of pensionable service. (Prior to 2009 the accrual rate guaranteed a pension based on 1/80th and a lump sum based on 3/80th of final pensionable salary and years of pensionable service).

R. Munn, Depute Convener and Convenor of Regulatory Committee from 17.06.11

The pension entitlements of senior councillors for the year to 31 March 2012 are shown in the table below, together with the contribution made by the Council to each senior councillors' pension during the year.

The value of the accrued benefits has been calculated on the basis of the age at which the person will first become entitled to receive a pension on retirement without reduction on account of its payment at that age; without exercising any option to commute pension entitlement into a lump sum; and without any adjustment for the effects of future inflation.

The pension figures shown relate to the benefits that the person has accrued as consequence of their total local government service, and not just their current appointment.

Accrued Pension Benefits

D. Beckett, Vice Convener Education, Children and Families until 30.06.11 (withdrew from pension scheme 30 June 2011)

P. Wheeler, Convener Finance and Resources and Convener of FETA Board

T. Buchanan, Convener Economic Development

M. MacLaren, Convener Education, Children and Families

C. Keir, Convener Regulatory until 17.06.11 (withdrew from pension scheme 31 May 2011)

T. McKay, Vice Convener Economic Development

N. Elliott-Cannon, Vice Convener Finance and Resources

G. Mackenzie, Convener Transport, Infrastructure and Environment

P. Edie, Convener Health, Social Care and Housing

J. Lowrie, Convener Planning

146

REMUNERATION REPORT

Pension Benefits - continuedCouncil's Leader, Civic Head and Senior Councillors - continued



£ £ £000 £000 4,668 4,515 Pension 2 0

Lump Sum 2 0








Total 112,276 115,757

Senior Employees

In-year pension contribs.

Difference For year to For year to As at from

31.03.12 31.03.11 31.03.12 31.03.11 £ £ £000 £000

37,454 8,045 Pension 71 4Lump Sum 188 1

n/a 36,829 Pension n/a n/a Lump Sum n/a n/a

29,964 28,979 Pension 66 2Lump Sum 178 0

All senior councillors shown in the above table are members of the Local Government Pension Scheme. Not all senior councillors are members of the Local Government Pension Scheme. The pension figures shown relate to the benefits that the person has accrued as consequence of their total local government service, including any service with a Council subsidiary body, and not just their current position.

A. Burns, Opposition Group Leader (Labour)

S. McIvor, Vice Convener Planning, Vice Convenor Education, Children and Families from 13.09.11 and Convener of Lothian Valuation Joint Board until 24.8.11


L. Lang, Vice Convener Regulatory

I. Whyte, Convener Lothian and Borders Police Board

M. Bridgman, Convener Lothian and Borders Fire and Rescue Board

R. Cairns, Vice Convener Culture and Leisure

R. Aldridge, Vice Convener Transport, Infrastructure and Env.

N. Work, Vice Convener Health, Social Care and Housing


The pension entitlements of senior employees for the year to 31 March 2012 are shown in the table below, together with the contribution made by the Council to each senior employees' pension during the year.

G. Tee, Director Children and Families

T. Aitchison, Chief Executive (including returning officer role) (until 31 December 2010)

S. Bruce, Chief Executive (including returning officer role) (from 1 January 2011)

147

REMUNERATION REPORT

Pension Benefits - continuedSenior Employees - continued



£ £ £000 £000 26,311 25,446 Pension 8 2

Lump Sum 5 0

24,585 n/a Pension 4 2Lump Sum 0 0

2,193 25,446 Pension 59 0Lump Sum 164 0

6,578 25,446 Pension 63 1Lump Sum 175 0

8,240 8,240 Pension 21 1Lump Sum 63 3

26,311 25,446 Pension 49 2Lump Sum 128 0

20,814 20,009 Pension 31 2Lump Sum 79 0


Total 204,498 203,886

Council's Subsidiary Companies



£ £ £000 £000 19,558 18,903 Pension 18 2

Lump Sum 40 0

17,047 16,199 Pension n/a n/a Lump Sum n/a n/a

Lothian Buses30,817 29,634 Pension 13 3

Lump Sum 16 0

28,015 Exempt Pension 24 Exempt Lump Sum 52 Exempt

I. Craig, Managing Director

W. Campbell, Operations Director

All senior employees shown in the previous table, with the exception of P. Gabbitas are members of the Local Government Pension Scheme. P. Gabbitas is a member of the National Health Service Superannuation Scheme (Scotland). Pension figures for A. Maclean and K. Kelly are for the full year. The pension figures shown relate to the benefits that the person has accrued as consequence of their total local government / public service and not just their current appointment. Accrued pension benefits relate to the position as at 31 March 2012, or the date of leaving, if that is earlier. Employees contribute towards their pensions in accordance with the rates set out on page 145. The contribution rate for P. Gabbitas is 8.5%.

D. McGougan, Director Finance (until 30 June 2011)

P. Gabbitas, Director Health and Social Care (Council proportion)

K. Kelly, Acting Director Finance / Chief Financial Officer

The pension entitlements of senior employees within the Council's subsidiary bodies for the year to 31 March 2012 are shown below, together with the contribution made to each senior employees' pension during the year.

H. Rissmann, Chief Executive, EICC


E. Adair, Operations and Finance Director, EDI Group


M. Turley, Director Services for Communities

M. Miller, Chief Social Work Officer

D. Anderson, Director City Development

J. Inch, Director Corporate Services (until 30 April 2011)

A. Maclean, Director Corporate Governance

148

REMUNERATION REPORT

Pension Benefits - continuedCouncil's Subsidiary Companies - continued



£ £ £000 £000 Lothian Buses - continued



n/a 18,270 Pension n/a n/a Lump Sum n/a n/a

tie Limited22,869 29,869 Pension 12 2

Lump Sum 15 0

7,061 28,200 Pension 7 0Lump Sum 0 0





Total 277,567 141,075

SUE BRUCE ALASTAIR MACLEANChief Executive Director of Corporate Governance28 September 2012 28 September 2012


G Roberts, Finance Director, until September 2011

F McFadden, Infraco Director, until October 2011

S Clark, Programme Director, until October 2011

D Murray, Commercial Director, until December 2011

R. Jeffrey, Chief Executive, until June 2011

I Coupar, Marketing Director, until 31 December 2010

S. Bell, Tram Project Director, until October 2011

The individuals shown in the above table, except H. Rissmann, are members of the Local Government Pension Scheme. The pension figures shown relate to the benefits that the person has accrued as consequence of their total relevant service and not just their current appointment.

EDI Group and EICC are subsidiary companies of CEC Holdings Limited. Figures shown for these companies and Lothian Buses are for the year ended 31 December 2011 and 31 December 2010 respectively.

W. Devlin, Engineering Director

N. Strachan, Finance Director

149

Respective responsibilities of the Chief Financial Officer and auditor

Scope of the audit of the financial statements

Opinion on financial statements

In my opinion the financial statements:

●

●

●

INDEPENDENT AUDITOR'S REPORT

Independent auditor’s report to the members of City of Edinburgh Council and the Accounts Commission for Scotland

I certify that I have audited the financial statements of City of Edinburgh Council and its group for the year ended 31 March 2012 under Part VII of the Local Government (Scotland) Act 1973. The financial statements comprise the group and authority-only Movement in Reserves Statement, Comprehensive Income and Expenditure Statements, Balance Sheets, and Cash-Flow Statements, the authority-only Housing Revenue Account, Council Tax Income Account, the Non-Domestic Rates Income Account, Common Good Fund and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and as interpreted and adapted by the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (the 2011/12 Code).

This report is made solely to the parties to whom it is addressed in accordance with Part VII of the Local Government (Scotland) Act 1973 and for no other purpose. In accordance with paragraph 125 of the Code of Audit Practice approved by the Accounts Commission for Scotland, I do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties.

have been properly prepared in accordance with IFRSs as adopted by the European Union, as interpreted and adapted by the 2011/12 Code; and

have been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973 and the Local Government in Scotland Act 2003.

As explained more fully in the Statement of Responsibilities, the Chief Financial Officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. My responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) as required by the Code of Audit Practice approved by the Accounts Commission for Scotland. Those standards require me to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the body’s circumstances and have been consistently applied and adequatelydisclosed; the reasonableness of significant accounting estimates made by the Chief Financial Officer; and the overall presentation of the financial statements. In addition, I read all the financial and non-financial information in the financial statements to identify material inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies I consider the implications for my report.

give a true and fair view in accordance with applicable law and the 2011/12 Code of the state of the affairs of the group and of the body as at 31 March 2012 and of the income and expenditure of the group and the body for the year then ended;

150

Opinion on other prescribed matters

In my opinion:

●

●

Matters on which I am required to report by exception

I am required to report to you if, in my opinion:

● adequate accounting records have not been kept; or

●

● I have not received all the information and explanations I require for my audit; or

●

● there has been a failure to achieve a prescribed financial objective.

I have the following to report in respect of these matters.

Failure to achieve a prescribed financial objective

David McConnellAssistant Director of Audit Audit Scotland7th Floor, Plaza TowerEast KilbrideG74 ILW

28 September 2012

the Annual Governance Statement does not comply with Delivering Good Governance in Local Government; or

Whilst it has not been necessary to qualify my opinion in respect of the following matter I am required to report it to you.

Local authorities have a duty under section 10 of the Local Government in Scotland Act 2003 to conduct their significant trading operations so that income is not less than expenditure over each three year period. The authority failed to comply with this statutory requirement for the three year period ending 31 March 2012 in respect of their Refuse Collection (including Trade Waste), Direct Cleaning and Edinburgh Catering Services - Other Catering significant trading operations.

INDEPENDENT AUDITOR'S REPORT

the part of the Remuneration Report to be audited has been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 1985; and

the information given in the Foreword for the financial year for which the financial statements are prepared is consistent with the financial statements.

the financial statements and the part of the Remuneration Report to be audited are not in agreement with the accounting records; or

151

2011/2012 audited statement of accounts · 2016-08-17 · page explanatory foreword 3 statement of...

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