all members of the audit and corporate governance diana ... · barrister’s report . 5 . to follow...

To: All Members of the Audit and Corporate Governance

Committee Councillors: Chair: C Fitzsimmons Deputy Chair: P Bretherton W Hughes, J Joyce, S Parish, F Rashid, K Simcock, T Williams, B Axcell, I Marks and P Kennedy 20 June 2012 Audit and Corporate Governance Committee Thursday, 28 June 2012 6.00pm Informal meeting - Internal and External Auditors (Room 1) 6.30pm – Committee start time Council Chamber, Town Hall, Sankey Street, Warrington Agenda prepared by Louise Murtagh, Democratic Services Officer – Telephone: (01925) 442111, Fax: (01925) 656278, Email: [email protected] AGENDA Part 1 Items during the consideration of which the meeting is expected to be open to members of the public (including the press) subject to any statutory right of exclusion. Page Number 1. Apologies

To record any apologies received.

2.

Code of Conduct – Declaration of Interests Members are reminded of their responsibility to declare any personal interest or prejudicial interest which they have in any item of business on the agenda no later than when the item is reached.

Diana Terris Chief Executive

Town Hall

Sankey Street Warrington WA1 1UH


Town Hall



Town Hall


Page Number

3. Minutes To confirm the Minutes of the meeting of 26 April 2012 as a correct record.

1

4. Planning Investigation into the Destruction of Records Report of the Solicitor to the Council and Assistant Director Corporate Governance Barrister’s Report

5 To Follow

5. Annual Reports of the Officer Governance Group and implementation of Annual Governance Statement action plan (2010/11) items Report of the Officer Governance Group and Chief Internal Auditor

9

6. Draft Annual Governance Statement (AGS) year ended 31 March 2012 Report of the Chief Finance Officer

13

7. Annual Report of the Chief Internal Auditor on the System of Internal Control Report of the Chief Internal Auditor

45

8. Review Draft Statement of Accounts Covering report of the Chief Finance Officer Draft Statement of Accounts

69 To Follow

9. External Audit Update Verbal report of the External Auditors

10. Annual Risk Management Report 2011/2012 Report of the Assistant Chief Executive

83

11.

Anti-Fraud, Bribery and Corruption Annual Report 2011/12 Report of the Chief Internal Auditor

113

12.

Draft Work Programme 2012/2013 Report of the Audit & Corporate Governance Committee

137

Part 2 Items of a “confidential or other special nature” during which it is likely that the meeting will not be open to the public and press as there would be a disclosure of exempt information as defined in Section 100I of the Local Government Act 1972. None

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Agenda Item 3

AUDIT & CORPORATE GOVERNANCE COMMITTEE 26 APRIL 2012

Present: Councillor C Fitzsimmons (Chairman)

Councillors B Axcell, T Higgins (substitute for P Bretherton), J Joyce, F Rashid, P Kennedy, I Marks, S Parish, K Simcock and P Walker

AG71 Apologies for Absence Apologies for absence were received from Councillors P Bretherton and B Barr AG72 Code of Conduct Councillor Minute Reason Action Councillor Parish

AG 74 Cllr Parish was the Chair of Governors at a school in Warrington that had been due for Building Schools for the Future funding. This funding stream was no longer available

Councillor Parish remained in the meeting and took part in the ensuing discussions and voted thereon

AG73 Minutes Decision

That the minutes of the meeting held on 15 March 2012 be approved as a correct record and signed by the Chair.

AG74 Strategic Risk Register (Q3) September – December 2011 The Committee considered a report of the Assistant Chief Executive that provided a high level summary of the Council’s strategic risk environment as at the end of quarter 3 2011/12 (September – December 2011). It outlined activity undertaken during the period to manage strategic risks and detailed amendments to the register. The report highlighted a new entry of Risk 13 - Schools converting to Academy status, impacting the Council’s ability to plan resources and deliver statutory responsibilities to schools. The entry was an amalgamation of two risks previously listed in the register. Councillor Parish requested that in addition to the risks identified in relation to conversion of local authority schools to academies that the register also recorded the possible destabilising effect the opening of a new Free School in the borough may have.

Agenda Item 3

Attached at Appendix 1 was Q3 strategic risk register overview which provided details of all strategic risks; risk levels and direction of travel; and a commentary on recent activity.

Decision - That the Committee noted the report AG75 Treasury Management Quarterly (Q4) Report to March 2012 The Committee considered a report of the Chief Finance Officer that provided an update on 2011/12 treasury activity and performance undertaken up to 31 March 2012. The report also provided an assessment of the economic environment during the period. Details of the Council’s investments and borrowings were provided as was a table highlighting that the Council had operated within its treasury limits and Prudential Indicator Limits. Key highlights had been that Council borrowing had increase by £2m in June to fund the Local Authority Mortgage Scheme and a further £1.8m had been borrowed towards a loan to Golden Gates Housing Trust to purchase 32 new bungalows to complete the stock transfer. The Council was a member of the CIPFA Treasury Management Benchmarking Club. It was expected that the Council would continue to match or outperform above the benchmark, following the same patterns from the previous 3 quarters.

Decision - That the Committee noted the report.

AG76 Review Annual Internal Audit Plan 2012/13 The Committee considered the report of the Chief Internal Auditor which presented the final Annual (2012/13) Internal Audit Plan. The purpose of the plan was to provide a robust basis for internal audit work whilst retaining sufficient flexibility to allow the authority to react to changes in the risk environment. The 2012/13 internal audit plan was attached at Appendix A and the document provided a summary of how the Council’s internal audit resources were to be utilised during the year. The plan was centred on the Council’s refreshed strategy 2012/15 ‘Putting the People of Warrington first – enabling them to thrive in the future. The plan was based on an internal audit service which consisted of 7.1 FTE Auditors providing coverage, comprising of 1390 days. The 2012/13 plan took into account the Medium Term Financial Plan and Service Plans; the Framework of Assurance; the Strategic and Directorate Risk Registers; and reflected the outcome of: • a review of corporate assurance requirements; • a review of the outcome of previous audits and those of other assurers;

Agenda Item 3

• discussions with Directorate Management Teams and the Strategic Management Board (SMB); and

• discussions with the Chief Finance Officer

Decision - That the Committee reviewed and approved the Internal Audit Plan 2012/13.

AG65 Quarterly Internal Audit Audit Performance Report to 5 April 2012 The Committee considered the report of the Chief Internal Auditor that highlighted progress being made against Internal Audit work for the year 2011/12. The report at appendix 1 covered the period from 10 February to 5 April 2012. The audit team had issued 5 final reports since last reported to the Committee and an overview of these was provided within section 2 of this report with summaries for reports that carried limited or minimal assurance opinions included: • Additional work by Internal Audit during this period had included - • Client moneys establishment visits • Data integrity checking using interrogation software–IDEA • Investigation/review of controls re cash security arrangements at Penketh

South Primary School following theft of nursery money • Review of the NFI fraud data matching and overview of investigation of

matches • Review of the fraud bribery and corruption strategy – and production of a

schools fraud response plan A summary of progress made in implementing previous recommendations was included in Section 4, with details of outstanding Critical or High Priority recommendations included in Appendix B.

Decision - That the Committee considered and noted the report. AG77 External Audit Update The Committee considered the report of the Audit Commission that provided Members with an update on progress in delivering responsibilities as the Council’s external auditors. The report included an update on the externalisation of the Audit Practice. The progress report detailed the work conducted in areas surrounding Financial Statements and the VFM Conclusion. The Council had agreed to take part in a national study of reserves and balances. The outcome of this would be reported to the Director of Finance in the first instance and then brought to the attention of this Committee. Other matters of interest included the Government’s response to consultation on the future of local public audit and the an update on the externalisation of the Audit Practice

Agenda Item 3

Decision - That the Committee noted the update. AG78 Audit and Corporate Governance Committee Work Programme for

2011/12

The Committee was provided with a copy of the final Work Programme 2011/12 that included details of previous meetings that had occurred during the year and reports that had been considered.

The Work Programme was not a static document and had been subject to change during the year dependent upon the Committee’s requirements.

A number of the reports considered would automatically be carried forward to the Work Programme for 2012/13 as they were a requirement under the Committee’s terms of reference. There were also a number of reports listed within the programme that had not been covered during the year.

Prior to the first Committee meeting of 2012/13 officers would review the items listed but not covered this municipal year. Those that were found to be of an ad hoc nature would be removed from the programme.

Decision –That the Committee noted progress made against the Work Programme 2011/12

1

FINAL REPORT

IN THE MATTER OF: AN OMBUDSMAN’S REPORT RESPONDING TO

COMPLAINTS AND MAKING FINDINGS OF MALADMINISTRATION WITH

RESPECT TO THE PRACTICES OF WARRINGTON BOROUGH COUNCIL

AND IN THE MATTER OF DESTRUCTION OF THE COUNCIL’S RECORDS AND

NON COMPLIANCE WITH LEGISLATION REQUIRING THAT WARRINGTON

BOROUGH COUNCIL SHOULD KEEP THE PLANNING REGISTER.

_____________________

INDEPENDENT INVESTIGATION INTO THE PRACTICES OF WARRINGTON

BOROUGH COUNCIL AS HIGHLIGHTED BY THE FINDINGS OF THE

OMBUDSMAN’S REPORT WITH PARTICULAR REFERENCE TO

DESTRUCTION OF RECORDS

_____________________

ERIC OWEN

BARRISTER

KINGS CHAMBERS

MANCHESTER M2 3 FT

2

CONTENTS

I INTRODUCTION

II PRELINARY PUBLIC HEARING

III INITIAL DIRECTIONS

IV CASE SUMMARIESAND THE PROCESS FOLLOWED

V OMBUDSMAN’S REPORT

VI CASES PRESENTED

VII ADDITIONAL MATERIAL

VIII THE PLANNING EVIDENCE

IX DISCUSSION AND ANALYSIS

X CONCLUSIONS

3

I INTRODUCTION

1. 1 I have been appointed by Diana Terris , the Chief Executive of Warrington

Borough Council, to conduct an independent investigation into the practices of

Warrington Borough Council ( “ the Council”) as highlighted by findings of an

Ombudsman’s report1 with particular reference to the destruction of planning records.

2. The Chief Executive appointed me pursuant to a resolution of the Council and this

resolution sets out and defines my terms of appointment2.

3. I refer to paragraphs 1 and 2 of the resolution , which state

“1 That the Chief Executive be requested to appoint an independent

Person to conduct an in-depth investigation into the destruction of

certain planning records in 2006

2 That the terms of reference for the review are as follows-

The purpose of the review will be to:

• Examine the circumstances of the destruction of certain

planning records in 2006.

• Identify the strengths and weaknesses in the Council’s current

policies in relation to the retention of planning records.

• Identify any additional issues not identified in the report to the

Audit and Corporate Governance Committee of 29 June 2011

1 Document 25. The report is dated 14 April 2011 2 Document 36

4

• That interested parties and those with substantive relevant

information is encouraged to present evidence to the investigator

The desired outcome following the review will be-

• Assurance that the Council has fully addressed the circumstances of

the destruction of certain planning records in 2006

• Assurance that the Council’s current policies in respect of the

retention of planning documents are fit for purpose

• Restore the integrity of the Council”.

Item 3 of the resolution is a separate matter involving a Working Group.

4 At the outset it is important to set out the statutory background in relation to statutory

records which are to be kept by local planning authorities such as the Council. The

Ombudsman’s report refers to the historical statutory provision, section 14(5) of the

Town and Country Planning Act 1947, which required the maintenance of a register

of planning applications.

5 In addition, reference should be made to the General Development Procedure

Order 1995 (GDPO), which was in force in 2006, and, with effect from October 1,

2010, to The Town and Country Planning (Development Management

Procedure) (England) Order 2010, in particular regulations 36, 37 and 38.

6 The retention of planning records is vital also in terms of the Council’s functions in

relation to Local Land Charges.

7 I was supplied with the following documents at the start of the Investigation-

(i) The Ombudsman’s report dated 14 April 20113.

(ii) A report compiled by the Council’s Internal Auditor4.

3 See Document 25

5

(iii) A document dated July 2011 outlining the terms of reference of

this independent investigation.5

8 In the course of conducting my investigation I have received the documents listed in

the Index of Documents appended to this report.

9 The documents listed in that Appendix have been available for inspection at New

Town House Warrington.

10 During this investigation I have been assisted considerably by Mr John Holmes Team

Manager Legal Services with the Council. I am very grateful to him for his very

efficient and helpful assistance in relation to the administration of this investigation.

II PRELIMINARY PUBLIC HEARING

11 I held a preliminary public hearing on December 2 2011 at the Town Hall

Warrington. That meeting was advertised in the Warrington Guardian on two dates in

November 20116, and minutes of the meeting were prepared and made available for

inspection at New Town House.7

12 At the preliminary hearing I invited case summaries to be presented in writing by

December 16 2011, and I received a total of 6 case summaries by the due date – they

were from Mr Houghton 8, Mr Webb and Mr Heaton9, Mr Cooper10, Cllr Ian Marks

11 and Mr Priestner 12.

4 See Document 3 5 See Document 37 6 See Document 38 7 See Document 2 8 Document 7 9 Document 9 10 Document 4 11 Document 5 12 Document 8

6

III INITIAL DIRECTIONS

13 At the meeting on December 2nd 2011 I indicated that the Council’s Planning

Department should provide evidence to show what has been done in relation to the

recommendations of the Council’s Internal Auditor report.

14 Subsequently I sent a note to Mr John Holmes in relation to the evidence I considered

it would be appropriate to receive from officers in the Council’s Planning Department

13.

15 In a Scoping Note forwarded to the Council 14 I indicated that it would be

extremely helpful to the investigation, and, in particular, to those wishing to

participate in the investigation if this evidence could be made available before the

Christmas holiday. This was to enable those wishing to comment on this evidence to

consider it prior to presenting their own evidence.

16 I noted also that the Ombudsman’s Report paragraph 10 refers to the present Senior

Planning Officer of the Council and to the reservations he expressed to the person

responsible at the time. It seemed to me that it would be appropriate for evidence to

be presented by this officer also. In due course a statement was presented by Mr John

Groves15.

17 I considered also the position of those officers in the Planning Department who were

in post at the time of the destruction of the planning records and shortly before that. In

this respect I refer to page 4 of the Internal Audit report which refers to interviews

with officers working at the time the decision was made to destroy the records, and

also to a decision not to interview Mr Stephenson ( the then Executive Director ) and

Mr Earle ( the then Assistant Director) .

13 Document 39 14 Document 12 15 Document 21

7

18 In relation to those officers who were interviewed I asked whether there were any

records of interviews retained by the Internal Auditors. I asked to see copies of these

interviews and they have been supplied16.

19 In relation to the officers who were not interviewed, namely Mr Stephenson and Mr

Earle, it appears that they left the Council in 2007 (see page 3 of the Internal Audit

Report). In December 2011 I requested Mr Holmes to write to both of these former

officers inviting them to present evidence to my investigation. I have no statutory or

other powers to compel them to attend.

20 I pointed out, however, that they would have had contracts of employment with the

Council and, arguably, there was in those contracts an implied duty of fidelity and a

duty to disclose misdeeds and other matters which may negatively affect the Council

(see Brearley and Bloch on Employment Contracts page 29). I understand that

such a duty would only endure during the contracts and not continue after the

contracts had ended. However a severance agreement on termination of contract may

contain a warranty to assist the Council after the termination (see ibid pages 54/55).

There is case law dealing with these issues and also with the duty where it relates to

the misdeeds of colleagues (ibid 4.154).

21 Accordingly I invited the Council to consider the contracts of employment of the

former officers and any severance agreements with those officers with a view to

ascertaining the extent to which, if at all, the Council was able to secure the co-

operation of these former officers in providing evidence to assist my investigation. I

invited the Solicitor of the Council and Assistant Director Corporate Governance to

consider this request. I recognised that there may be nothing that could be done to

compel the co-operation of these former officers of the Council, but I considered

16 See document 3

8

that it was appropriate to pursue this line of enquiry having regard to the terms of the

Council resolution appointing me. In the event I was informed by an officer of the

Council, Mr Neil Worthington, who was Assistant Head of Human Resources up to

July 2010, that there was no appropriate contractual provision available to be invoked

by the Council to respond to any legacy issues relating to the periods of employment

of Mr Alan Stephenson and Mr John Earle 17.

IV CASE SUMMARIES AND THE PROCESS FOLLOWED

22 The case summaries raised issues of a procedural nature as well as substantive issues.

23 In relation to procedure, the written submission of Councillor Ian Marks, on behalf

of the Lib Dem Group of the Council, 18 argued that the investigation should be held

in public to ensure transparency and to avoid accusations or suspicions that the

Council was hiding something.

24 Upon consideration of the case summaries I decided that the hearing should be held in

public for the reasons set out in the case summary dated December 6, 2011 from

Councillor Ian Marks.

25 I was also very concerned to ensure that there was transparency and fairness to those

who had suffered as a result of the illegal destruction of planning records. I was

especially concerned to ensure that Mr Houghton had full knowledge of relevant

matters in the light of his unfortunate experience in relation to the Ombudsman’s

investigation. I understand entirely why he considers he was treated unfairly by that

investigation. However, as I explained at the formal hearing, I have no powers to

investigate the process followed by the Ombudsman in the preparation of her report.

Those concerns are not within the terms of the Council resolution appointing me and,

17 See document 19 18 See document 5

9

in fairness, Mr Houghton acknowledged this in his case summary. This investigation

cannot constitute a formal or informal judicial review of the Ombudsman’s report.

Any review would be a matter for the courts.

26 Turning to the substantive issues, I considered that the representations of Mr Cooper

fell fairly and squarely within the terms of the Council resolution,

27 In addition I considered that Mr Houghton’s concerns in relation to the destruction of

documents were manifestly within the terms of the Council resolution. However, Mr

Houghton’s concerns in relation to what others wrongly said about him are not within

the terms of the Council resolution. Nonetheless it is appropriate to record the fact

that, at the hearing, Mr Webb corrected what had been said by Mr Heaton and Mr

Webb in relation to Mr Houghton and apologised to him.

28 I considered the case summary from Mr Heaton and Mr Webb and concluded that

generally their concerns in relation to the circumstances in which planning records

came to be destroyed were also manifestly within the terms of the Council

resolution.

29 However, it is not permissible for me to expand the Council resolution to consider all

subsequent events, in particular the manner in which the LPA and others in the

Council, dealt with their concerns in relation to the events in and around Marton

Close and how planners in particular and other officers/elected members chose to deal

with the development of 22 Twiss Green Lane. The Town and Country Planning

Act 1990 as amended provides a detailed mechanism for the determination of

applications for planning permission and appeals to the Secretary of State and for

applications to be made to the courts. In appropriate cases applications may be made

10

also to the High Court for permission to apply for judicial review of decisions.

References may be made also to the Ombudsman in appropriate cases and this remedy

was utilised by Mr Webb and Mr Heaton.

30 I note that the practice of the Ombudsman is not to identify complainants. In this case,

however, the householders who made complaints to the Ombudsman, Mr Webb and

Mr Heaton, attended the public sessions of this investigation and submitted

evidence both in writing and, in the case of Mr Webb, orally , and they confirmed

that they wish to identify themselves, as indeed did Mr Houghton, who also attended

the public sessions and submitted evidence orally and in writing.

IV THE OMBUDSMANS’ REPORT

31 As explained in the report summary to the Ombudsman’s report, two householders in

a small cul de sac19 complained that the Council failed to deal properly with planning

applications and also of alleged breach of planning control by someone developing a

house on land behind their homes20. The Ombudsman discovered that a senior

planning officer who has since left the Council had arranged to destroy records

forming part of the statutory planning register and, as a result, the Council has no

record of the plans and applications approved in its area before 1996. The decision

notices themselves have been retained but without the plans and applications these do

not record what has been approved.

32 The first finding by the Ombudsman was that it was an extraordinary and inexcusable

act of maladministration by the Council to destroy records that since 1947 planning

authorities have had a statutory duty to hold and make available for public inspection. 19 Mr Heaton and Mr Webb 20 Mr Houghton

11

The Ombudsman expressed grave concern that this represented a significant and very

serious failure of corporate governance.

33 In respect of this finding the Ombudsman recommended that the Council should

apologise to the householders concerned and pay them each the sum of £5000 in

recognition of the negative impact of the development on their amenity and the time

and trouble caused to them in pursuing their complaint.

34 The Council has acted upon this finding and recommendation of the Ombudsman. A

letter of apology has been sent to the complainants and compensation has been paid to

them.

35 In addition, on receiving a draft of the Ombudsman’s report the Council agreed to

serve a Planning Contravention Notice on the developer about the access from the cul

de sac and to submit a comprehensive report to its Planning Control Committee about

enforcement. The Ombudsman recommended that the notice should be served before

the end of July 2011. That was done.

36 The Ombudsman made further findings which are set out in the report. It is my

judgement that those findings relate to the site specific complaints made by the

householders and as such those matters are not covered by the Council resolution to

establish this investigation.

37 I acknowledge that one of those findings is that the Council acted with

maladministration in that it had no records of plans approved in 1997 in relation to the

development which concerned the complainants. That is a specific instance of the

destruction of planning documents. The Council acknowledges that the destruction of

12

its records is a breach of its statutory duties and it passed the resolution establishing

this investigation because it has taken the Ombudsman’s findings extremely seriously.

38 Accordingly I have decided that I cannot consider site specific matters save as

background to the investigation into the destruction of planning records. This

investigation is confined to the terms of the Council resolution.

V THE CASES PRESENTED

39 The formal public hearings were held on three days in January 201221. During this

part of the investigation I listened to what was said by all participants and,

notwithstanding the provisional views I had expressed prior to these public hearings,

I read all the material presented to me with an open mind and reviewed the scope of

the investigation before reaching the conclusions set out in this report.

Mr DENNIS COOPER

40 Mr Dennis Cooper, who was formerly Head of Legal Services at the Council,

submitted, in his written representation22 , that-

i. The statutory planning register is an important policy and management

tool being the definitive historical planning record which is relevant to

decisions on planning applications. Destruction of the records impedes

the Council in the proper discharge of its statutory functions.

21The attendance lists are Document 20 22 Document 4

13

ii. Destruction of the register denies the opportunity to property owners to

obtain key information about their property. The action impedes

property owners in the management of their property.

iii. The Legal Department and/or the Monitoring Officer were not

involved in the decision to destroy these records. This was a failure of

corporate governance in that action with legal consequences was taken

without the benefit of legal advice.

iv. Destruction of the records impedes the Registrar of Local Land

Charges in the provision of statutorily required information. The

action impedes the Council in the proper discharge of its statutory

functions.

v. Historically, the Solicitor to the Council had advised the Planning

Department of the illegality of the destruction of the register records.

The decision maker was aware of the illegality of the proposed action.

41 Mr Cooper submitted documents which included recent email correspondence with

the Planning Department in relation to planning records23. Whilst Mr Cooper did not

attend the hearing in person it is important to record that nothing he said in his

representations was challenged by anyone who did attend the hearing or in any of the

written representations made to me or by Mr Earle or Mr Stephenson, each of whom

had had the opportunity to read the representations made because they were on

deposit.

42 I was alarmed to note, however, the almost casual and dismissive nature of some of

the responses to Mr Cooper from the Planning Department, and I shall refer to this

correspondence later in my report.

23 Document 4

14

Mr HOUGHTON

43 Mr Houghton attended the hearing to express his disappointment that the Council

Officers illegally destroyed his and other planning documents and his drawings.

Whilst all applications had been through the full planning process the loss of these

documents opened him and possibly others to vicious and hurtful accusations which

were not deserved. Therefore, on behalf of himself and his family, he had no option

but to seek clarification prior to a possible legal claim against the Council.

44 He acknowledged that this investigation is not looking into the Ombudsman’s

Report, but in the event that I should look into the Report he wished to make a

number of comments. He is annoyed that the Council officers destroyed thousands of

Planning documents and drawings, including his. He disagrees with other findings in

the Ombudsman’s Report which he described as untrue, biased, inaccurate and

possibly defamatory. He forwarded comments to the Council at the time and made

repeated requests to the Ombudsman requesting removal of the Report from the

World Wide Web. He says he was stone walled, and told that as a third party he had

no say in the matter. He was excluded from contributing to the Ombudsman’s Report,

and he did not know it existed until it was published on the World Wide Web and

then in the Press. .

45 I am grateful to Mr Houghton for his contribution to the investigation24 and for his

attendance and questions which helped me to understand the issues. Mr Houghton

24 His written statement is document 7

15

sent further documents to me after the hearing and I have read that material as

requested by him. 25

Mr HEATON and Mr WEBB

46 Mr Heaton and Mr Webb acted at all times on a joint basis in relation to this

investigation and I am grateful to them for avoiding repetition. Mr Webb attended the

hearing on each day and he also made a helpful contribution to the understanding of

the issues. Mr Heaton and Mr Webb26

a. Submitted that the seriousness and the significance of the destruction of

statutory records were concealed from them until the Ombudsman’s report and

findings compelled the Council to admit its wrongdoing in May 2011. They

said that the concealment for four years had a direct bearing on the manner in

which the LPA and others in the Council dealt with their several concerns in

relation to the events in and around Marton Close, and directly influenced how

planners and other officers/elected members had chosen to deal with the

development of 22 Twiss Green Lane.

b. Do not accept that one person alone in WBC was responsible for the

destruction of statutory records in 2006. They argue that others knew or

should have known by reason of their responsibilities or executive status that

the destruction had been or was being carried out.

c. argued that the inquiry should ascertain

i. who knew of the destruction,

ii. when they knew of it,

iii. when they recognized the seriousness of the destruction and

25 Document 32 26 Documents 9 and 18

16

iv. why they failed to disclose or express their concern or change their

behaviour following such a serious matter until the Council

unreservedly accepted the Ombudsman’s report and recommendations

v. They did not accept that the publication of the report was the first time

many in the Council, employees and elected members, first became

aware of the relevance of this situation.

47 They stated that Mr John Earle (a former Council employee) had been implicated in

the destruction. They invited me to question Mr Earle robustly on his part in relation

to this matter, the decisions he took, all the people involved and that he told or he

knew were aware that records were being destroyed. They asked why was a labour

intensive, time consuming selective rather than a speedier wholesale, destruction

decided upon. They argued that Mr Earle should be asked to identify the building, its

landlord, and the area of the building which had apparently to be speedily cleared

when the records were deliberately destroyed. Correspondence between the Council

and the landlord should be examined.

48 They pointed out that John Groves (another Council employee) had also been

mentioned. He has admitted knowing of the destruction, the significance of it and to

being uneasy about that action. Yet he decided to remain silent on the destruction

whilst dispensing planning advice and guidance to colleagues and members for four

years. They argued that the inquiry should fully investigate all aspects of Mr Groves’

involvement and seek explanations for his subsequent actions and behaviour. They

argued that Mr Groves presented a public report on the development which impacted

adversely on Marton Close. His report was flawed, inaccurate and contained untrue,

unfounded statements which maligned them. They wished this to be examined during

this investigation.

17

49 They considered it was inconceivable that discussions to terminate a lease, to release

or provide archival space, however hurriedly conducted, would not have involved a

legal input from the Borough Solicitor. The Solicitor’s duties include overseeing

corporate governance and the role of the Monitoring Officer. Both functions are or

should be related to the destruction of the records and the investigation should

examine the Solicitor’s actions, or lack thereof, in this affair.

50 Similarly, it was their case that the actions and conduct, with respect to records being

destroyed, of Mr Peter Taylor and Mr A Farrell, both line managers of Mr Groves,

should be fully investigated by the inquiry. In addition since they wrote to and

received rebuttals from the CEO they asked that the actions of the CEO in connection

with the destroyed records should also be fully examined.

51 They did not accept that only one person was solely responsible for concealing the

destruction from them, since there was a collective failure across the Council to

disclose information that they were entitled to know, when they made their inquiries

into the maladministration of a development which directly impacted on their families

and houses. They did not believe that such a serious matter as the non compliance of

statutory and council obligations went unnoticed for so long by those responsible for

such matters. In view of the timescale they considered that higher tiers of

management would have been aware of what they describe as a collective cover up on

the destruction of statutory records.

52 Several emails and letters were sent to council officers, managers and executives.

They also emailed the planners’ Executive Board Member about the absence of an

auditable trail. They considered that all the responses received were unsatisfactory

and all failed to disclose the destruction of statutory records or the significance of the

lack of those records on the matters of concern to them.

18

53 They asked me to extend the investigation to the actions of all those they

corresponded with on a development which they say blighted their lives.

54 They argued that the inquiry should examine why planning advice and guidance

continued to be sought from and given by a planning department which already had

built up a recognized controversial record over many years before 2006. They

maintained that inexplicably this state of affairs was allowed to continue through and

beyond 2006 until May 2011.

55 They referred to the Council resolution and pointed out that one of the objectives of

the inquiry is to “restore the integrity of the Council”. They argued that the integrity

of the Council was seriously being questioned before 2006 and submit that prior to

that date reports had been presented which highlighted “particular weaknesses in the

planning department’s arrangements for record taking, meetings with developers and

the need to protect officers from allegations of improper conduct”.

56 They referred also to an Ombudsman’s report issued before 2006 which contained a

statement that “the Council had a poor reputation for the maintenance of records and

in its dealings with developers.”27

57 They point out that following those adverse reports prior to the 2006 destruction of

planning documents , a senior Council officer gave a public assurance that “In terms

of establishing a formal and auditable record of how the council handles a planning

application Warrington will operate a process as clear and as transparent as any other

council”. It is a matter of record, which the Council has recognized, that the 2006

destruction of records worsened an already questionable integrity situation and further

exacerbated it by the deliberate concealment of destroyed records for another five

years.

27 Document 24

19

58 This posed the question, they said, as to whether the integrity of the Council with

such a record could be realistically restored by an inquiry with a narrow remit.

59 Therefore, they argued that the inquiry should robustly investigate why the

destruction of records was wilfully concealed from them by various means, whereas

the developer of 22 Twiss Green Lane appeared to be able to benefit from the

destruction. They accept, however, that the original way in which they had

formulated their concern in this respect was wrong and apologised to Mr Houghton.

It cannot be said that Mr Houghton benefitted from the destruction of the documents.

On the contrary, Mr Houghton, like Mr Webb and Mr Heaton, has also suffered as a

result of the destruction of documents.

60 They pointed out also that not only was the seriousness and significance of record

destruction concealed from them , but other documents after the alleged 1996 cut-off

date for destruction became corrupt and incomplete. A similar situation re-occurred

shortly after the Ombudsman started her investigation; suggesting, they said, that

some convenient house keeping was being carried out in relation to the remaining

records.

61 Some drawings were withheld from them, when they asked to examine the files, and

only “became available” after the Ombudsman’s investigation intensified. During the

hearing Mr Webb produced three drawings to support this point.28

62 Other documents which they saw during their first visit to the planning department

were missing when they returned a week later. On checking their contemporaneous

notes, they asked to look at a document again but were told “there was no such

drawing”. Planners steadfastly denied its existence until eventually it reappeared as

28 See Document 30

20

the Ombudsman’s investigation strengthened, with additional information illustrated

on it.

Mr ROBERT PRIESTNER

63 Mr Priestner’s concerns were not so much with the generality of the investigation but

rather with pertinent research by him into the planning history of land within the

administrative area of the Council. He made requests of the Planning Department for

certain records and, initially, it was thought that these records had been destroyed.

Fortunately, this has proved not to be the case. Whilst, fortunately, the records have

been discovered this episode nonetheless serves to illustrate the nature of the

problems which have been caused by the destruction of documents in Warrington.

64 Two emails were received from Mr Priestner before the opening of the formal part of

the investigation29 . An email dated 15 December 2011 outlined his concerns and is

supported by documentation .The complaint revolved around an email sent to him

from Mr Sutton of the Planning Department on the 9 November 2011 at 12.59,

which stated that the application with respect to matter number 97/37041 had been

destroyed.

65 At my request Mr Holmes made further enquiries from the Planning Department and

requested them to produce the relevant permission and the approved plan. Initially

the department was only able to produce the permission and it was unable to

produce the approved plan. Accordingly, Mr Holmes wrote to the department and

asked the department to produce the documentation by 4p.m. on the 20 December

2011.

66 On day 2 of the formal hearing Mr Priestner produced other documents, including an

email in relation to a planning application for change of use of paddock to garden &

29 See Document 8

21

installation of ground-mounted solar panels / recovery of documents with respect to

land at Rivington Cottage, Holly Hedge Lane, Walton Planning application

2011/190404730

67 Following the hearing on January 20,2011 Mr Groves wrote to Mr Priestner, and I

set out the pertinent points made in this letter because Mr Groves explains in that

letter what he told the investigation on the last day of the public session , namely that

the enquiries by Mr Priestner had been resolved, and he apologised to Mr Priestner

for the failings of the Planning Department.

68 The letter states -

b. “An ongoing relocation of the planning team from one part of New Town

House to another has made it necessary to remove and relocate documents. I

am pleased to advise that through this process the applications about which

you enquired have belatedly been located.

c. I am aware that previous response to your request to view files concluded that

the files could not be located and had most likely been destroyed. I had asked

staff to conduct further searches and indeed as part of a review of all

documentation had required staff to attend the office on a Saturday to refresh

an inventory of applications held in storage. Other staff had been asked to

review any files they had retained.

d. This resulted in my comments to the Inquiry Chair, Mr Owen about the

records I could and could not locate. To then locate the records and to report

this to Mr Owen on the last afternoon of the inquiry caused me considerable

personal embarrassment which I can assure you has been relayed to all staff. I

have stressed how an unacceptable approach to record keeping compounds a

30 see Document 16

22

view held by some that the service has systemic failings, undermining what in

other respects is considered to be an efficient and effective service. I can only

offer my apologies that this situation has arisen and for any inconvenience

which has resulted.

e. I now have the complete files for the following applications

i. 97/37041

ii. 99/39103

iii. 99/40282

iv. A00/40846 (stored electronically)

v. 2003/00479 “

Councillor Dr BRIAN AXCELL

69 Councillor Dr Axcell prepared a written statement, 31and he attended the whole

of the hearing. Councillor Axcell has represented Appleton on Warrington Borough

Council for 20 years since 1991.

70 At the Annual Council Meeting of 22nd May 2006 he was appointed Executive Board

Member for Environment Services, the Directorate with responsibility for the

planning function within the Council. He remained on the Executive Board until

2008.

71 He described meetings he had had with Senior Council Officers. Following his

appointment to the Executive Board he arranged briefing sessions with senior Council

Officers in the Environment Services Directorate.

31 See documents 6, 14 and 17 for the summary and the evidence of Cllr Dr Axcell

23

72 On 29th May 2006 he had his first meeting with the Director, Mr Alan Stephenson. At

this meeting he requested that there should be a policy of “no surprises”. Put a

different way, he wanted to know immediately of any circumstances which might

cause embarrassment to the Council. Mr Stephenson readily agreed to this request.

73 On 1st June 2006 he had his first meeting with Mr John Earle, the Council’s most

senior Planning Officer. The chief topic of the meeting was the Regional Spatial

Strategy and the Council’s response to it. His main concern at that time was the issue

of resources within the planning service, and whether the Council had sufficient staff

to be able to turn around planning applications within the required timescales. He

was assured that the Council had sufficient staff to do this.

74 His next meeting with Mr Earle was on 20th July 2006, when they discussed the

planning strategy for the town.

75 At none of the above meetings was the matter of storage space for planning records

mentioned to him nor was the destruction of planning records mentioned. He simply

did not know that planning records were being destroyed. At the time he prepared his

evidence he still did not know who proposed the action or why, or who authorised the

action, when it was done, who carried it out and who knew about it. His approval for

the action was not sought. He did not know whether approval for the action had

already been obtained from a member of the previous administration, which was in

power until 22nd May 2006.

76 He stressed that if his approval for the action had been sought, he would certainly

not have given his consent, in particular because of his own experience of the

difficulties which can arise, when records are not kept. When he moved to his

current address in 1975 he discovered that there were leaks in both surface water and

foul water drains. The house had been built in 1968, when Appleton formed part of

24

Runcorn Rural District Council. He tried to get a plan of the drain, but the former

council no longer existed after the Local Government Reorganisation in 1974. The

only way of discovering the route of the drains and finding the leaks was to dig down

and follow the pipes. He was in a state of complete ignorance of what had been

constructed.

77 Councillor Axcell asked a number of pertinent questions32, namely

a. Why was he, as Executive Board member for Environment Services, neither

consulted nor informed about the destruction of planning records?

b. Who proposed the destruction of planning records?

c. What was the motivation for the destruction?

d. Who authorised the activity?

e. Who in the Senior Management Team was informed of the proposed action,

both when it was proposed and when it was executed?

f. Which Council Officers actually destroyed the records?

g. When were the records destroyed?

h. Did any councillors know about what happened?

i. Were any councillors asked for their approval?

78 I am grateful to Cllr Axcell for his attention to detail throughout the investigation.

MR FANCE

79 Mr Fance explained that he was secretary to the Wilder spool Residents Association

for 14 years. He was interested in an agreement which, apparently, the Council had

entered into many years ago with Burse (Centre Park) which allowed residents to

view a World War II monument.

32 Unsurprisingly these questions overlap broadly with the questions posed by Mr Webb and Mr Heaton and summarised above.

25

80 This issue did not appear to relate to the subject matter of the investigation and once

this was explained to Mr Fance he acknowledged that he had nothing further to add

which was relevant to this investigation.

MISS WHITLEY

81 Miss Whitley did not attend the hearing. However, she emailed the Council and

attached a statement.33 I have read this material and note that the concern relates to

garages in Warrington. I note that this is another instance in which planning records

have been destroyed. However, it is not necessary to deal with the issues raised

because they fall outside the remit of this investigation, and I note that an appropriate

response has been sent to Miss Whitley by the Council’s Estate Department.

Mr JOHN EARLE

82 Mr Earle commenced employment with the Council in 1972 and took age retirement

in 2007. He was informed of the formal hearing and invited to attend. However, he

did not attend the hearing. He submitted an email dated 21 December 2011 34 , in

which he admitted taking the initiative to destroy the files. He said it was done with

the best of intentions saying that others would elaborate. He made reference to his”

integrity, conscientiousness and selflessness”, and he indicated that he wanted no

more contact in relation to this matter. Nonetheless, he had the opportunity to

consult the documents on deposit, a point I was anxious to ensure was the case in the

interests of fairness.

83 Having considered my preliminary view which I had expressed based on the

material before me, the Council’s solicitor sent a letter to Mr Earle setting out my

preliminary views and Mr Earle responded by letter dated May 28th 2012. He

explained that he had worked in local government for 33 years and he acknowledged

33 Document 41 34 Document 11

26

the decision to destroy the records was regrettable, but he placed the decision in

context. The decision was made at a time of budgetary restraint. The Council was

faced with a demand from the landlord for a commercial rent for storage space for

planning documents. He did what he describes as a risk assessment: - (i) he sifted the

planning documents and rooted out what he considered to be uncontroversial planning

documents, the majority of which related to house extensions, (ii) he applied his

experience to identify documents he considered to be important for the future, and

(iii) he did not destroy documents which were less than 10 years old.

M r STEPHENSON

84 Mr Alan Stephenson commenced his employment with the Council in 1989. His final

position was his appointment as Strategic Director of Environment Services in 2005.

He took age retirement in 2007. He was also invited to attend the hearing but he did

not attend either. He sent an email dated 4 January 2012 35 which simply confirmed

that he would not be attending the hearing into the destruction of planning records in

2006. Again, I make the point that he had the opportunity to consult the documents

on deposit, a point I was anxious to ensure was the case in the interests of fairness.

85 In addition the Council’s solicitor sent a letter to Mr Stephenson explaining my

preliminary views and by letter dated June 8 2012 Mr Stephenson confirmed that he

had seen the letter dated May 28 2012 from Mr Earle. He emphasises that the contents

of this letter reflect the decision- making process in relation to the destruction of

documents in this case. He points out that Mr Earle’s explanation reflects the division

of responsibility at the material time. He stresses that the management structure in

place at that time involved Strategic Directors with responsibility for leadership

35 Document 15

27

policy and strategy with Heads of Department responsible for operational decisions.

He was aware that there was an issue in relation to the need to avoid commercial

rental cost on storage space, but he does not recall any formal decision of the

management team in relation to the destruction of documents nor would he have

expected to have been informed of any such decision.

Mr RAYMOND ASHLEY

86 Following the hearing I received an email from Mr Raymond Ashley36. This was sent

to my chambers and not to Mr Holmes, as I had requested during the hearing in

December 2011. I am concerned about the generality and the relevance of this email,

and, in so far as it makes any point relevant to the investigation, in particular the

reference to the destruction of files in relation to 5 Clay Lane, I deal with this in the

discussion which follows and as part of the overall conclusions set out below. There

is no need for me to comment further on this submission.

VI ADDITIONAL MATERIAL

87 In addition to the material mentioned in the preceding paragraphs I have received the

following material-

a. Copy email from Mr Webb to Helen Jones MP dated 26 January 201237 and

letter from Helen Jones MP to the Chief Executive dated 21 February 201238.

In essence this correspondence demonstrates that Mr Webb and Mr Heaton

acknowledge that my decision to confine the investigation to matters within

the terms of the Council resolution was “understandable”, but they consider

that additional matters require investigation. In the light of my ruling in


28

relation to the remit of the investigation there is nothing further for me to add

on this point.

b. Additional material from the Planning Department. I shall deal with this in

section VII below.

VII PLANNING EVIDENCE

88 Mr Peter Taylor, Assistant Director Development and Public Protection prepared a

summary statement39. I am grateful to him for ensuring that this summary was

available for participants to consider before they prepared their submissions.

89 The Planning Department (Development Services) is one of his areas of

responsibility and the Development Services Manager reports directly to him. Since

this is crucial to the investigation I quote the summary in full. It states -

1. I have been employed by Warrington Borough Council in various roles

since March 1998. The Development Control function of Development

Services became part of my area of responsibility on an interim basis on

13 July 2007 following retirement of the previous post holder. This

position became permanent on 24 September 2007. There have been

further organisational changes since September 2007, but Development

Services has remained part of my area of responsibility. The current

Development Services Manager has also had changes in responsibility but

has had responsibility for managing the Development Control activities of

39 Document 10

29

the Council since appointment to the role of Head of Development Control

in 2001.

2. In July 2006 I held the role of Planning Policy Manager, working

alongside the Head of Development Control, reporting to the retired

former Assistant Director.

3. From my own knowledge, and from recent interviews undertaken as part

of the Internal Audit Service investigation, a decision was made in July

2006 to reduce physical paper storage costs and to transfer planning

records to electronic format. To the best of my knowledge the decision

regarding the extent of documents to be retained was made by the

Assistant Director as an operational decision to reduce storage costs. The

Internal Audit Investigation, I believe, has established as far as possible

what took place, given that decision maker(s) at the time are no longer

with the Council. Clearly the decision regarding the extent of documents

retained was contrary to statutory and Council requirements, by evidence

that necessary records prior to 1996 do not exist.

4. Planning files between 1996 and 2006 were, in the main sent for scanning

and are retained in full in electronic format. Other more significant files

were retained in hard copy and are still held in that format. The Internal

Audit Service investigation identified that there was no record of the

decision making process to determine which files should be retained. To

30

the best of my knowledge this was based on decisions of the former

Assistant Director following a brief review of available files. There is no

evidence to substantiate this.

5. Since 2006 scanning of all planning files to create a full on-line record has

been an automated element of processing every planning application. The

Internal Audit Investigation identified that there was substantial assurance

regarding the current arrangements, meaning that key controls were in

place to ensure planning records were retained in accordance with

statutory and Council requirements, but there was some inconsistency in

their application.

6. The Internal Audit Investigation report received in June 2011 made eight

recommendations for action, with agreed areas of responsibility and

deadlines for implementation. Recommendations are risk rated as critical,

high, medium or low. Of the eight recommendations in this case there

were no critical recommendations, four high, three medium and one low.

7. The quarterly progress report to Audit and Governance Committee on 15

December 2011 identified that two high and one medium recommendation

had been implemented and that two high risk recommendations had been

partly implemented and were in progress. A further review will be

undertaken in January 2012 to monitor progress and secure

implementation of all recommendations to agreed deadlines.

31

8. Based on the Internal Audit Investigation and implementation of

subsequent recommendation I am satisfied that the planning department

can demonstrate compliance with statutory and Council document

retention requirements, and improvements in process monitoring and

performance management will ensure that any potential risks in terms of

compliance are minimised.

9. The performance management process has been established in discussion

with the Executive Director Environment and Regeneration and recorded

at a meeting on 11 November 2011. This requires quarterly performance

reports on sample testing of planning records retention as recommended in

the Internal Audit report.

10. A proof of evidence will be submitted as requested by 22 December 2011

to expand and evidence, where possible, on this summary statement.”

90 Mr Taylor prepared a proof of evidence and associated Appendices which expanded on the

above summary statement. This was considered at the formal hearing and those present

had the opportunity to consider what was said and to ask pertinent questions and to make

relevant observations. In addition, both Mr Earle and Mr Stephenson had the

opportunity to consult the documents on deposit, a point I was anxious to ensure was

the case in the interests of fairness.

91 In relation to the planning Records up to 1996, Mr Taylor explained

32

a. From his own personal knowledge and recollection the decision regarding the

extent of documents dated prior to 1996 to be retained as an electronic record

was made by the Assistant Director Mr Earle in July 2006. He was confident

that the basis of the decision related to the reduction of storage space and

associated costs.

b. The Internal Audit Investigation concluded that “interviews held did not

indicate any other reasons for the decision being taken to destroy planning

records pre 1996 other than the need to act quickly to free up the basement

storage area…” The findings of the investigation are set out on Pages 2 and 3

of Mr Taylor’s Appendix 1.40 The commentary refers to two pieces of

documentary evidence. First, an email dated 4 July 2006 regarding the need to

reduce storage space to avoid additional payments to the landlord. This email

is also included in Mr Taylor’s Appendix 1.41 The second document is a

meeting note from 12 July 2006 noting progress on the destruction of planning

files.42

c. In 2006 the Council held a record of all planning applications from 1974 when

local government reorganisation took place. The current on line planning

applications database now holds what is left of those records, together with all

post 2006 planning application files and current applications received and

pending determination.

d. To demonstrate the extent of records held a random search can be undertaken

for the relevant periods for example, search for a planning record between 40See Document 13 p140 41 See Document 13 page 161 42 See Document 3 at page 62M

33

1974 and 1996, a record between 1996 and 2006, and a search post 2006. This

will evidence the extent of planning records in the planning register.

e. On the 22 December 2011 Mr Taylor undertook a random search for

applications determined between 1 April 1974 and 31 March 1975 and

recovered a list of applications, determined in that period. Selecting a random

application record from that list calls up details of the application, a link to

view plans (and documents) and “Conditions and Reasons” (the decision

notice including where appropriate reasons for refusal). His Appendix 2 was a

series of screen prints showing effectively the records for planning application

reference 74/0022. The link “view plans” identifies no documents. The link

“conditions and reasons” identifies only that the application was approved

with conditions. There is no record of the conditions. A further random

selection of application records for 75/1272 has the same result.

92 In relation to the Planning Records Post 1996 Mr Taylor explained that

a. On the 22 December 2011 he undertook a random search for applications

determined between 1 April 1996 and 31 March 1997, and recovered a list of

applications, determined during that period. Selecting a random application

from that list calls up details of that application again with links to view plans

(and documents) and “conditions and reasons”.

b. His Appendix 3 is a series of screen prints for planning application 96/35663.

The link “view plans” identifies forms, documents, plans, decision notice and

other correspondence and is clearly a full planning record. Extract of retained

34

forms, documents and plans and decision notice is included in his Appendix 3

(printed on A4 size for ease).

c. A random sample of 25 application records were checked and one record

96/34812 was found to be incomplete. Clearly this does not provide absolute

certainty of the appropriate retention of records and further checks will need to

be made.

93 In relation to Planning Records Post 2006 Mr Taylor explained

a. On 22 December 2011 a random search for applications determined between 1

April 2007 and 31 March 2008 recovered a list of applications, determined

during that period. Selecting a random application from that list calls up

details of that application again with links to view plans (and documents) and

“conditions and reasons”.

b. His Appendix 4 is a series of screen prints for planning application

2006/09449. The link “view plans” identifies forms, documents, plans,

decision notice and other correspondence and is clearly a full planning record.

Extracts of retained forms, documents and plans and decision notice is

included in his Appendix 4 (printed on A4 size for ease).

c. A sample of 25 application records identified no missing records, albeit a

relatively small sample.

94 Mr Taylor believes that these example searches of planning records identifies that

post 1996 and certainly post 2006 that the Council has retained records in accordance

with statutory requirements and document retention guidelines. The Internal Audit

Investigation concluded that there was substantial assurance over the current

arrangements to record and retains planning records.

35

95 In relation to the Audit Investigation Recommendations Mr Taylor explained that

a. The Internal Audit Investigation report attached at his Appendix 143, made

eight recommendations. These recommendations are risk rated as, critical,

high, medium or low. Of the eight recommendations in this case there were

no critical recommendations, four high, three medium and one low. The

report contains an action plan setting out responsibilities for action and

deadlines for implementation.

b. A progress meeting was held with the Executive Director, Environment and

Regeneration on 11 November, to identify progress on the recommended

actions. The record of this meeting is attached at his Appendix 544 and actions

recorded in red identify progress against each of the recommendations.

c. In addition the quarterly progress report to Audit and Governance Committee

on 15 December 2011, attached at his Appendix 645 identified that two high

and one medium recommendation had been implemented.

d. Two high risk recommendations had been partly implemented. These are

recommendations R3 and R4 relating to operating protocols and introduction

of sampling procedures, and the clarity of plan references and dates to enable

approved plans to be more easily identified within the register. The quarterly

report to Audit and Governance Committee acknowledges that appropriate

arrangements have been put in place but need to be evidenced through follow

up reviews early in 2012.

96 In conclusion Mr Taylor said that

43 See document 13 page 139 44 See document 13 page223 45 See document 13 page 235

36

a. There is no question that documents prior to 1996 have not been retained as

they should have been, but in his opinion and that of Internal Audit, the

decision was taken on a cost/efficiency basis.

b. Planning Records between 1996 and 2006 have been retained in a more

complete form which can be evidenced, but there are some files that are not

complete and the reasons behind this and potentially the extent, is uncertain

and is being clarified.

c. There is substantial assurance regarding the retention of records since 2006

and recommendations have been made to improve monitoring and

performance management to evidence the retention of records in accordance

with statutory requirements and Council retention guidelines.

97 Following the hearing I received by email46 a process /map protocol from the

Planning Department. This was requested by me during the hearing in the course of a

discussion concerning the efficacy of the monitoring process. It is a file monitoring

form and its purpose is to act as a checking mechanism on the registration and

validation of planning applications and to apply a sampling process.

98 The purpose of the sampling process is to ensure that each quarter in February, May,

August, and November; a check is made in relation to the accuracy of the Council’s

planning records. 25 random applications are selected from the list of applications

determined in the preceding three month period. A file monitoring form is to be

completed with specified items checked against a checklist- the accuracy of PS1 and

PS2 code entries, fee check, description of development, neighbour consultation,

agent/applicant details, redaction of signatures, submitted forms, and submitted and

approved plans to be stamped and held on electronic file, and the decision notice to be

46 Document 35

37

held on-line with the correct references to the application number and the dates of the

approved drawings.

99 The sampling process involves the submission of a report and monitoring forms by

the Integrated Support Team Manager to the Service Manager Development Services.

The former is required to highlight any discrepancies and to identify any corrective

actions. The Service Manager is required to review the documentation and confirm

any corrective actions and to identify any process change or actions needed to prevent

a re-occurrence. The outcomes are to be reported to the Assistant Director.

VIII DISCUSSION AND ANALYSIS

100 It is not in the least surprising that I concur with the Ombudsman’s conclusion

that the destruction of planning records was an extraordinary and inexcusable act of

maladministration by the Council.

101 Since 1947 planning authorities have had a statutory duty to hold and make

available such records for public inspection. The Ombudsman expressed grave

concern that this represented a significant and very serious failure of corporate

governance, and I agree with this finding also.

102 In these circumstances, I regret that Mr Earle and Mr Stephenson have not

participated actively in this investigation. The fact that the Council instigated this

investigation demonstrates the seriousness with which the Council views the matters

referred to in the resolution establishing this investigation and the limited

contributions by the former senior officers to this inquiry is unfortunate.

103 However, I have no power to compel their co-operation and , on the basis of

the material I have seen and on the evidence I heard during the inquiry, I can only

38

conclude that the decision of Mr Earle to destroy the planning records was a muddle

headed and misguided attempt to save the Council money. In the event, of course, the

opposite has been the case and, in addition, the corporate character of the Council

has been damaged.

104 The Council resolution requires consideration in this report of (i) the

circumstances of the destruction of the planning records, (ii) the strengths and

weaknesses of the Council’s policies, and (iii) the identification of any additional

issues.

CIRCUMSTANCES OF THE DESTRUCTION

105 The questions put by Cllr Axcell and by Mr Houghton, Mr Heaton and Mr

Webb go to the heart of the issues raised by the Council resolution authorising this

investigation, and, having expressed the above general conclusions , it is

appropriate to answer those questions specifically in the light of the material

presented to the investigation.

106 In the first place, however, I must state that I am satisfied that Cllr Dr Axcell

knew nothing at all about what happened when the records were destroyed. Even

though Cllr Axcell had a meeting on July 20, 2006 with Mr Earle when they discussed

planning strategy47, the latter did not tell the elected councillor with responsibility

for the Planning portfolio about the destruction of the planning documents which he

had authorised.

107 I am equally satisfied that the assiduity and determination of Cllr Axcell and

other elected councillors to get to the heart of what went wrong brings credit on them

as councillors. The public has been well served by its elected representatives who in

47 See paragraph 74 above

39

authorising this investigation have evinced a clear desire for transparency and

accountability.

108 Not surprisingly Cllr Axcell was anxious to know why he, as Executive Board

member for Environment Services, was neither consulted nor informed about the

destruction of planning records. It is a matter of regret that it has not been possible

to put this entirely reasonable question to former officers of the Council. Nor has it

been possible to put similarly reasonable questions from Mr Webb and Mr Heaton

and from Mr Houghton to former officers of the Council.

109 I am satisfied also that officers now serving in the Planning department

would not contemplate for one minute repeating the extraordinary and alarming

destruction of documents which the Council is obliged to retain.

110 Mr Groves, who knew about the decision, regrets that nothing was said by

him at the time to any one, and having seen and heard Mr Groves at the hearing and

considered both what he said and the manner in which he said it, I have no doubt that

with the benefit of hindsight, he would have made this information known to the

Executive Board member with responsibility for Planning. He should have done so

and I have no doubt that this omission will not be repeated.

111 In the light of the issue concerning the disclosure of wrong-doing , I asked

for information in relation to the whistle blowing policy of the Council, and a

document dated February 2000 and produced by the Council’s Human Resources,

Policy and strategy team was produced48. This document confirms that it was

prepared in the light of the Public Interest Disclosure Act 1998 , and it aims to

a. ensure the highest standards of service delivery and good governance,

48 Document 28

40

b. ensure that the Council does not overlook any problems, which it could be in

both the Council’s and the public’s interest to resolve, and

c. To ensure that concerns can be resolved internally, wherever possible,

reducing the need for issues to be raised externally.

112 This document applies to all employees, including all quasi- employees such

as trainees, casual, agency and contract workers. The whistle-blowing procedure is

separate from other procedures such as those governing individual and/or collective

grievances relating to the protection of employment.

113 It is a matter of regret that this procedure was not used by Mr Groves or

anyone else at the time of the destruction of the documents. The procedure offered the

opportunity for the issue to be raised with the Council’s Monitoring Officer, the

Solicitor to the Council. As Mr Cooper points, out a decision with legal consequences

was taken in this case without consultation with the Legal Department of the Council

and no one alerted that department to what was happening.

114 The whistle-blowing procedure allows for a variety of responses, including

reporting a matter to the police in an appropriate case. Having said that, I should make

it plain that there is no evidence whatsoever to indicate that the decision to destroy the

planning documents in this case was taken with any fraudulent or corrupt intention by

anyone. .

115 It is my view that the whistle blowing provisions of the Public Interest

Disclosure Act 1998 are very useful provisions in terms of aiming for and

securing improvements in corporate governance , and it is of the utmost importance

to ensure that all employees of the Council are fully aware of these provisions and of

this procedure. In my view it is very important to highlight this procedure to members

of staff on a regular basis starting with a report to Council. This report should note the

41

specific terms of the Act and it should emphasise the importance of the distinction

between, on the one hand, operational and management decisions with which one can

reasonably disagree (which are not within the terms of the Act) and, on the other

hand, the failure to comply with a legal obligation (which is within the terms of the

Act).

116 I have already remarked upon the assiduity of Cllr Axcell. I have no doubt

that his attention to detail has enhanced and will continue to enhance the political

oversight of the Council’s statutory functions in the future, and serve as an example

to other councillors.

117 In answer to the specific questions posed by the participants , therefore, I

am satisfied , in the first place, that the decision to destroy the records was made by

Mr Earle who admits this in his email dated 21 December 201149 and in his letter

dated May 28,2012 .

118 In terms of when the destruction occurred the evidence includes an email

dated July 6,2006 50.This was sent by Terry Redding Estates Surveyor with the

Council to Mr Earle and to Wendy Mercer ( Planning Department), Karen Spiers (

Legal Department) , Jane Andrews , Paul Cunningham , Peter Moffat ( Assistant

Director Property Estates and to Stewart Brown ( Chief Property Officer). The email

is headed NTH (New Town House) lower ground floor. It points out that the Council

had not succeeded in its attempts to negotiate terms for renting additional storage

space in the basement of New Town House, and Mr Redding had been seeking to

secure an alternative storage space. He wished to clear the space within two weeks to

minimise the landlord’s intention to charge back rent and rates. It is important to note

that in this email Mr Terry Reading did not suggest or encourage the destruction of

49 Document 11 50This is included in Document 13 at Page 161

42

the planning records. Indeed it was followed by another email which sensibly and

appropriately attached a copy of the Council’s Retention Guidelines for documents.

119 The motivation for the destruction of the documents was a muddled-headed

and misguided belief that the destruction of planning records would save the Council

money.

120 The authorisation was given by Mr Earle. There was no consultation with the

Legal Department of the Council in relation to this decision. I repeat that this is a

matter of considerable regret given the legal obligations on the Council to retain

planning records, and especially given the evidence from Mr Cooper of historical

advice that the records should be preserved51. This advice exacerbates the decision to

destroy the records.

121 In terms of who in the Senior Management Team was informed of the

proposed action, both when it was proposed and when it was executed, the notes of

the meeting of the Development Control section dated July 12 200652 record that “the

destruction of files is taking place under JSE and A S authority. Support are making

good progress.” The notes of the meeting refer to those present at the meeting as “

WM/MH/LJ/RA/MM/CH/CM/JS/EP/LMS”.

122 There is material to suggest that Mr Stephenson was aware of the decision,

namely (i) the reference by Mr Taylor to “ decision-maker(s ) are no longer with the

Council”53, (ii) the note of the Support Team meeting stating that destruction was

proceeding under “ JSE and AS authority”54, and (iii) the reference in the Internal

audit notes of a meeting in May 2011 that “ John Groves had not been in agreement

with the decision but that Alan Stephenson and John Earle had said to go ahead with

51 See Document 4 52 Document 3 Page 62 N 53 See above paragraph 91.3 54 Document 3 page 62N

43

the decision “55 .On the other hand I have to bear in mind that Mr Stephenson states

that he was not involved in the decision , and there is no record of any discussions at

the time between Mr Stephenson and others. Accordingly I cannot conclude that the

decision was made with the tacit approval of Mr Stephenson.

123 On the material I have seen and heard no councillor was asked for his or

her approval for the destruction of the planning documents .Moreover, no councillor

knew about what was happening in relation to the destruction of the documents at the

time of the destruction. Nor was any councillor informed subsequently by an officer

of the Council.

POLICIES

124 In the light of the terms of the Council resolution, which referred expressly to

the retention guidelines, I was not impressed that the initial evidence from the Council

failed to deal with these guidelines.

125 However the relevant documents were produced at my request56. They are [1]

the Retention Guidelines for Local Authorities and produced by the Local

Government Association, and [2] the Council’s Retention Protocol.

126 The former document has general application and seeks, amongst other

things, to establish best practice for preventing the premature destruction of records

that need to be retained for a specified period to satisfy legal requirements of public

administration. During the hearing reference was made especially to section 10 of this

document, which deals with planning and land use, and to section 11, which deals

with infrastructure and transport matters. The facts that section 10.6 of this document

55 Document 3 page 57 56 Documents 26 and 27

44

refers specifically to planning documents and to the planning register serves to

underline the importance of the statutory requirements for the preservation of

planning records.

127 It is clear that the Council’s Retention Protocol was updated in September

2004, which self evidently was within two years of the destruction of the planning

documents in 2006. Once more this document refers expressly to the need to prevent

the premature destruction of documents and the schedule refers to the retention of

planning documents. The document reflects the contents of the Retention Guidelines

for Local Authorities.

128 In the light of the contents of these documents, which were generally known

in the planning department, and the evidence of Mr Cooper about the importance of

retaining planning documents the destruction of the planning documents has been

properly characterised by the Ombudsman as a significant and very serious failure

of corporate governance.

129 . I was provided also with a copy of the August 2011 edition of Your Voice57

which warns council employees of the importance of retaining documents and

reminds employees that documents are to be retained for various periods of time.

This message was published as a direct response to the Council’s internal audit

investigation in this case.

130 The policies of the Council in relation to document retention seem to me to be

very clear. However, given what has happened in this case it would improve

corporate governance if these policies were re-iterated and high-lighted on a regular

basis, starting with a report to Council.

57 Document 22

45

ADDITIONAL ISSUES

131 Mr Heaton and Mr Webb referred to earlier criticisms of the Council’s

Planning Department. They produced a District Audit report in 2001 which dealt

with Probity in Planning58 , and I note that concerns were expressed then in relation to

officer meetings with developers and the need to ensure that (i) such meetings

should always involve two Council officers and (ii) that clear records should be

kept of meetings with developers.

132 They also produced a report to the Council’s Development Committee 23

January 2002, which addressed these matters, and a letter dated January 17 2002

59forwarding a copy of the report to the District Auditor. I have also seen other

documents, including a briefing note from the then Head of Internal Audit dated

10th September 2003 and addressed to Councillor John Morris which addresses

probity issues60, an email dated 15 July 2004 to Mr Groves from Audit Services

dealing with monitoring documentation in respect of section 106 applications, and a

response from Planning to the latter 61

133 A further document was produced by Mr Webb, namely an Ombudsman’s’

report dated November 3, 200362. Mr Webb made the point that this report shows that

the report dated 14 April 2011, which forms the backcloth to this investigation, is not

58 Document 23 dated 6 November 2001

59 Document 23 60 Document 23 61 Document 23 62 Document 23

46

the first time that the Planning Department has been criticised by the Ombudsman.

The evidence of Mr Webb and Mr Heaton quotes from this report 63

134 The quotation records the view of an elected and experienced councillor as

expressed to the Ombudsman.64 Self evidently, therefore, an experienced councillor

held the view in 2003 that the Council had a poor reputation for the maintenance of

planning records.

135 At the hearing Mr Groves produced a statement dated 18 January 2012,

65which deals with the matters raised in criticism of the Planning Department .Mr

Groves sought to diminish the significance of the earlier criticisms by emphasising

that the subject matter of these earlier criticisms related to section 106 agreements.

This is correct as a matter of fact. However, it remains true to say that the Planning

Department was criticised by a councillor in 2003 for its record in relation to

maintaining records, and it was the same Department that was involved in the

destruction of planning records in 2006.

136 In fairness to Mr Groves his letter to Mr Priestner made it plain that he has

stressed to members of the department that an unacceptable approach to record

keeping compounds a view held by some that the Planning service has systemic

failings, undermining what in other respects is considered to be an efficient and

effective service. In the circumstances Mr Heaton and Mr Webb did a service to the

investigation by providing the evidence of the earlier criticisms referred to above.

The point they made about the poor record of the Council has validity. Sadly the

extraordinary events in 2006 were preceded by a performance which was

understandably subject to criticism.

63 As I have noted in paragraph 56 above. 64 Document 24- see paragraph 67 of the report at page 65Document 21

47

137 I consider that it is instructive to compare the behaviour of the Planning

Department in 2006 with the behaviour of the legal department at the same time. Both

departments had been storing documents in New Town House, and it was necessary

for both departments to move documents from that location. In this respect I refer to

the statement from Janine Tudor of the Legal Department66, who deals with the

archiving of records and was dealing with this issue in 2006. She produced a list of

box numbers67 which were removed from New Town House basement on July 27,

2006, and which were sent to the Town Hall and thence to Storage Management with

all other boxes. The Legal department uses a computer system for timetable reasons

to ensure that not only does it retain documents but it does so for the appropriate

periods of time.

138 It is absolutely clear that the Legal Department acted with the utmost

propriety at all times, and, in stark contrast to the behaviour of the Planning

Department, the Legal department retained relevant documents after the documents

were removed from New Town House.

139 In these circumstances I have no doubt that the Council’s monitoring officer

would have given appropriate advice if the issue had been raised by Mr Earle and Mr

Stephenson with that officer at the time – which it was not.

140 In this respect I note what Mr Cooper has said about previous advice given to

the Planning Department by the Council’s former solicitor monitoring officer and

deputy chief to the effect that planning records should not be destroyed68. Again this

knowledge makes a bad position worse.


48

141 However in the light of the points made during the investigation it is

important to note that nothing I have seen or heard adds any credence to any

suggestion that the destruction of documents was done pursuant to any criminal

behaviour of any kind.

142 In addition there is absolutely no evidence of any determined “cover –up “as

suggested by some participants. The questions formulated by the participants and the

evidence I have seen and heard leads me to conclude that those responsible have been

identified in this report..

143 Having examined the past it is vital to look to the future and the restoration of

the integrity of the Council .In this respect the internal audit report made a number of

recommendations and Mr Taylor dealt with these issues fully in his evidence, as I

have recorded above.

144 To further test the robustness of the system now used by the Council’s

Planning Department for the preservation of records I handed to Mr Taylor and Mr

Groves a list which contained a random selection of planning application numbers or

references compiled by me.69 These covered the years from 1994 to 2011. In response

I was presented with substantial documentation70 .This comprised planning

permissions and plans and, as may be seen from the note prepared by the Planning

Department, 71 the position is that the documents were produced.

145 In order to seek further re-assurance on day 3 of the hearing in January this

year Mr Groves set up his lap top computer in a committee room and, in the presence

of Mr Webb and myself, he produced the on-line record of further randomly selected

planning records.

69 Pages 566and 567 70 Pages 567 following 71 Pages 576 and 577

49

146 In these circumstances , and, bearing in mind the process described above,

whereby a file monitoring form acts as a checking mechanism on the registration and

validation of planning applications and the policy to apply a sampling process to

ensure that each quarter in February , May , August , and November, a check is made

in relation to the accuracy of the Council’s planning records , the public and the

Council should have confidence in the integrity of the Council’s planning records for

the future.

147 I note that during the investigation there was some discussion as to whether

an application for planning permission is part of the documentation which constitutes

the planning register, and, in these circumstances, it would be helpful to annex article

36, 37 and 38 of the 2010 Order 72to the report to Council. These articles emphasise

that the application is part of the planning register.73

148 Finally, however, I was not impressed with the high handed and dismissive

way in which the Planning Department responded to the reasonable and proper

requests by Mr Cooper for information in relation to records which had been

destroyed74. To my mind this exacerbated the earlier unlawful conduct of the Council

in destroying documents and, in itself. Gives little confidence that lessons have been

learned. I consider that an apology should be extended to Mr Cooper in relation to

this matter

CONCLUSIONS

72 See paragraph 5 above 73 See e.g. articles 36(4) and 36(5), 74 See document 4 and in particular pages 72 and 79

50

149 It is unsatisfactory that this investigation has had to proceed without the

opportunity to ask questions of two former senior officers of the Council now retired.

I have explained the reasons why this was the case.

150 Given the absence of an appropriate contractual provision to require the co-

operation of former officers I recommend that the Council should , if possible75,

consider future officer contracts of employment and future severance agreements

with officers with a view to ascertaining the extent to which, if at all, the Council is

able to secure in the future the co-operation of former officers in providing evidence

to assist an investigation in relation to legacy issues where the investigation follows

the termination of employment.

151 The Council has already complied with the recommendations of the

Ombudsman in relation to the complaints by Mr Heaton and Mr Webb.

152 I explained to Mr Houghton at the hearing that I had no power to deal with

any complaint he might wish to bring against the Council or to award him

compensation.. As I have said my powers are derived only from the Council

resolution which established this investigation.

153 It is vitally important that the message about the importance of retaining

documents is repeated on a regular basis, and that all employees are fully aware of the

Council’s statutory obligations and the Council’s retention guidelines. I recommend

that a report is presented to Council and an appropriate resolution is formulated to

emphasise the importance of this issue thereby enhancing corporate governance.

154 It is of the utmost importance to ensure that all employees of the Council are

fully aware of the provisions of the Council’s whistle-blowing policy and the

procedure to be followed. Once more I recommend that a report is presented to

75 I understand that there may be wider issues in terms of national approaches to local government contracts and I recommend that this issue should be investigated.

51

Council and an appropriate resolution is formulated to emphasise the importance of

the provisions of the Public Interest Disclosure Act 1998 thereby enhancing the

effectiveness of corporate governance.

155 It is essential to maintain a checking mechanism on the registration and

validation of planning applications. In my view the Council’s intention to apply a

sampling process to ensure that each quarter in February , May , August , and

November, a check is made in relation to the accuracy of the Council’s planning

records , coupled with the continued implementation of this system, should ensure

the restoration of the integrity of the Council. I recommend that a report is presented

to Council and an appropriate resolution is formulated to emphasise the vital

importance of this issue and of its continued implementation thereby enhancing

corporate governance

156 On the basis that the above recommendations are adopted and that the

monitoring processes are fully implemented I am satisfied that the Council has fully

addressed the circumstances of the destruction of certain planning records in 2006 and

that the Council’s current policies in respect of the retention of planning documents

are fit for purpose.

157 Finally, I consider that an apology should be extended to Mr Cooper in

relation to the high handed and dismissive way in which his enquiries were dealt with.

Agenda Item 4

Page 1 of 3

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 28 JUNE 2012 Report of the: Solicitor to the Council and Head of Corporate

Governance Report Author: Timothy Date Contact Details: Email Address:

[email protected] Telephone: 01925 442150

Ward Members:

All

TITLE OF REPORT: REPORT INTO THE INQUIRY WITH RESPECT TO THE DESTRUCTION OF PLANNING RECORDS 1. PURPOSE OF THE REPORT

The purpose of the report is to update the Committee on the production of the report of Mr Owen, a barrister who has sat as an independent inspector at an inquiry between the 17th and 19 January 2012 into the destruction of certain planning records. The chronology set out in paragraph 7, below, indicates how the need for the inquiry arose starting with the report of the Local Government Ombudsman of 14th April 2012.

2. CONFIDENTIAL OR EXEMPT Not confidential. 3. FINANCIAL CONSIDERATIONS

N/A

4. RISK ASSESSMENT

As members of the Committee are aware, certain planning records held by the Council were destroyed in 2006. The records that were destroyed were those relating to the year 1996 and before. In receiving Mr Owen’s report the Committee will be considering the circumstances in which the destruction took place. As well as addressing the factual background the Committee can assess the risks that the action in question has exposed the Council to, and also assess the Council’s current system for keeping planning records and whether that system presents any risk.

5. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT

N/A

Agenda Item 4

Page 2 of 3

6. CONSULTATION The inquiry in question was widely advertised in the local press and a number of people (members of the public, elected members and council officers) attended at the inquiry and made both written and oral representations. Details of the consultation that has taken place are contained within the inspector’s report.

7. CHRONOLOGY

Date Event

14 April 2011 A report of the Local Government Ombudsman made a number of findings of maladministration against Warrington Borough Council. One of those was that Warrington Borough Council had, in 2006, made a decision to destroy planning records that related to planning decisions which had taken place in the year 1996 or before. Warrington Borough Council, like all other planning authorities, are required by law to keep a planning register; that is to say a copy of any planning permissions granted and the plans which related to those planning permissions. Although Warrington Borough Council still has copies of the planning permission documents it does not have copies of the plans which relate to those permissions since those plans (dated 1996 and before) were destroyed in 2006.

29 June 2011 A decision was made by the Audit and Corporate Governance Committee to appoint a barrister to act as an independent inspector and hold an inquiry into the destruction of those records. The reason for this was in part the finding of the Ombudsman, but also in part the results of an internal investigation, which were presented to the Committee on that date. The terms of reference of the inquiry were set out in the minutes of the Audit and Corporate Governance Committee and a copy of those minutes are attached to this report as an appendix.

18 August 2011 Counsel was instructed to conduct the inquiry.

2 December 2011 After adverts had been placed in the press encouraging anybody who was interested in making representations to the inquiry to attend at Council offices on the 2 December. A preliminary hearing was held on the 2 December at which the inspector was present and all those who wished to make representations were present. On that date the inspector made directions as to the filing of evidence for the inquiry and also made it clear what the terms of the reference of the inquiry were.

19 December 2011 A scoping document was produced by the inspector outlining the terms of reference of the inquiry and also outlining the

Agenda Item 4

Page 3 of 3

preliminary evidence that he had received.

17/19 January 2012

The inquiry into the destruction of records took place at the Town Hall, Warrington. Mr Owen, acted as inspector and a number of members of the public attended to make both oral and written representations as did officers of the Council and one elected member.

30 April 2012 A draft report was produced by the inspector and forwarded to Warrington Borough Council Legal Department.

16 May 2012 Letters were sent to two former Council officers from the Council. This was because the preliminary view of the inspector was that the two former officers were primarily responsible for the destruction of the records in question. Neither of them had attended at the hearing between the 17 and the 19 January 2012, despite being given notice of it and being asked to attend. However, given that they were now the subject of criticism in a written report, it was felt to be the right course of action to give them a final opportunity to respond to the criticism.

28 May 2012 Letter in response received from the first former officer and sent to the inquiry inspector on the 31 May 2012.

29 May 2012 Council receive a request for documents from a local solicitor instructed by the second former officer.

8 June 2012 Letter received from the solicitor, on behalf of the second former officer. That letter was forwarded to the inspector on the 8 June 2012.

8. INQUIRY REPORT

8.1 The production of a report in these circumstances is one which any inspector should handle with great care. Although the inquiry has not been judicial in the formal sense the findings of an independent person are likely to carry great weight and lead to a definitive conclusion to what has been a long standing matter. For that reason it is understandable that the Mr Owen should wish to take the greatest possible care in concluding his report. Given the receipt of final representations on 8th June 2012 Mr Owen has been unable to release his final report until he has fully addressed those representations 8.2 It is anticipated that the report will be released to the Council in week commencing 25th June 2012 at which point it will be released to members and placed.

9. RECOMMENDATIONS

That the Committee consider the report from the inquiry inspector and its recommendations.

Agenda Item 5

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 28 JUNE 2012 Report of the: Assistant Chief Executive Report Author: Kathryn Griffiths, Assistant Director Partnerships &

Performance Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANNUAL REPORT OF THE OFFICER GOVERNANCE GROUP AND IMPLEMENTATION OF ANNUAL GOVERNANCE STATEMENT ACTION PLAN (2010/11) ITEMS 1. PURPOSE OF THE REPORT 1.1 The purpose of the report is to brief the Audit and Corporate

Governance Committee on the work undertaken by the Officer Governance Group in relation to corporate governance for the year 2011/12. The report also details the progress against the actions from the 2010/11 Annual Governance Statement and Annual Governance Report.

1.2 The report provides information that will allow members:

• to receive assurance that the governance group provides adequate and effective challenge and scrutiny to the Strategic Management Board (SMB) in respect of the governance and risk management arrangements of the Council;

• to consider and approve the Council’s Annual Governance Statement with a full understanding of the risks the Council faces and what it is doing to reduce these risks; and

• to demonstrate that those charged with governance have a full understanding of management’s processes with regard to governance and risk management arrangements and internal control.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. CODE OF CORPORATE GOVERNANCE 3.1 The Audit and Corporate Governance Committee approved a revised

local Code of Corporate Governance in April 2011, that is consistent with the principles of the Chartered Institute of Public Finance and Accountancy (CIPFA) and Society of Local Authority Chief Executives (SOLACE) Framework: Delivering Good Governance in Local Government, and the governance requirements of the 2010 CIPFA statement on the: Role of the Chief Financial Officer in Local

Agenda Item 5

Government. The Officer Governance Group operates in accordance with these principles.

4. WORK UNDERTAKEN Terms or Reference/ Sub Groups 4.1 The Group met quarterly during 2011/12 in advance of Audit and

Corporate Governance Committee meetings and received updates from the corporate risk and business continuity group and other assurance providers in accordance with the framework of assurance.

Corporate Governance Improvement Planning 4.2 The Group’s improvement action plan included points raised from the

2010/11 Annual Governance Statement and Annual Governance Report. The actions noted were monitored by the Group during 2011/12. The Group reviewed improvement actions noted during the review of the Code of Corporate Governance and work will continue in 2012/13 to ensure that robust governance arrangements are ‘embedded’ into the culture of the organisation. Any further areas for improvement will also be incorporated into the Group’s improvement action plan.

Assurance Gathering 4.3 The Group mapped out the sources of assurance that they wished to

receive to ensure that the Annual Governance Statement for 2011/12 would be fully supported. Lead officers were requested to complete an assurance framework gathering template before each meeting. This provided a brief commentary and flagged emerging issues and hot topics. Any emerging issues were assessed for inclusion in the Group’s improvement action plan.

Annual Governance report 2010/11

4.4 A full action plan was developed and agreed to respond to the findings in the Audit Commission’s Annual Governance Report issued following the 2010/11 final accounts work. The action plan was agreed with SMB and was reported in full to the Audit and Corporate Governance Committee meeting in March 2012.

5 SIGNIFICANT CONTROL ISSUES AGS 2010/11

Ombudsman’s report - planning department 5.1 The Ombudsman’s report led to an Internal Audit Investigation into the

historical destruction of planning records and the arrangements for records management. The Officer Governance Group retained oversight of records management and received regular updates from a representative from the Information Governance Group. Follow up work by internal audit has been noted and any required actions as a result of the barrister’s enquiry will be overseen by the Group.

Agenda Item 5

SAP Security

5.2 The Officer Governance Group received regular updates during 2011/12 from the Chief Officer, Customer Access & Technology who provided assurance that the recommendations in the SAP security report had been addressed. The report was also subject to follow up by internal audit in March 2012. Internal audit follow up work confirmed that the recommendations in the report had been addressed. The SAP Governance Group was established and governance issues will be monitored by the Officer Governance Group in 2012/13. The Audit Commission review confirmed that significant improvements to SAP access control have been made.

6 IMPROVEMENT ACTION PLAN and FOCUS FOR 2012/13

6.1 Continuing areas for improvement include:

• Ensuring that Council policies are fit for purpose across the whole of Council - a policy resource is now available on the intranet and will continue to be developed.

• Ensuring good partnership governance is in place – the LSP Board is reviewing relationship with Health & Well Being Board and investigating future governance arrangements.

• Ensuring good neighbourhood governance is in place. • Further development of the information governance framework for

the council, supported by an implementation and improvement plan. • Programme of data quality assurance work to include joint working

by the Performance team and internal audit. • Oversight of SAP governance arrangements. • Development of integrated commissioning arrangements.

6.2 Areas of Specific focus for 2012/13:

• Ensuring that there is oversight and that the results of the barrister’s enquiry into the Planning department are acted upon and the Council takes the required action.

• Ensuring that the recommendations in the internal audit report around ICT disaster recovery and business continuity are implemented.

7. FINANCIAL CONSIDERATIONS

7.1 Effective governance and risk management procedures have a positive

impact on the Council’s financial position and facilitate sound decision making.

8. RISK ASSESSMENT 8.1 The Council must ensure that it has appropriate corporate governance

arrangements in place in order to maintain a sound system of internal control. A key requirement for the Audit and Corporate Governance Committee in order for the Committee to meet its Terms of Reference

Agenda Item 5

is to monitor and review the Council’s Corporate Governance arrangements.


9.1 The work carried out by the Group is identified through review of risks

on the strategic risk register and a regular risk assessment process. This is carried out using an established methodology that is designed to show that all potential areas are considered fairly.

10. CONSULTATION N/A 11. REASONS FOR RECOMMENDATIONS 11.1 To ensure that members have an appropriate level of assurance of

the governance work being carried out and its outcomes for the Council.

11.2 To ensure that the members of the Audit and Corporate Governance committee are able to fulfil their obligations under the CIPFA/SOLACE framework. 12. RECOMMENDATIONS 12.1 That the Audit and Corporate Governance Committee considers and

notes this report as part of its monitoring role. 13. BACKGROUND PAPERS

• CIPFA/SOLACE 2007 revised Framework: Delivering Good Governance in Local Government.

• Code of Corporate Governance • Governance Group papers and action plans.

Contacts for Background Papers: Name E-mail Telephone Kathryn Griffiths [email protected] 01925 442797 14. Clearance Details Name Consulted Date

Consulted Yes No Relevant Executive Board Member

Cllr Bowden Sent for information

19/6/12 SMB Assistant Chief Executive Katherine Fairclough 18/6/12 Chief Finance Officer Lynton Green 18/6/12 Solicitor to the Council Timothy Date 18/6/12

Agenda Item 6

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 28 JUNE 2012 Report of the: Chief Finance Officer Report Author: Jean Gleave, Chief Internal Auditor Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANNUAL GOVERNANCE STATEMENT 1. PURPOSE OF THE REPORT 1.1 The purpose of the report attached at Appendix A is to present the draft

Annual Governance Statement for 2011/2012. The Annual Governance Statement supports the Council’s Statement of Accounts and outlines how it manages its affairs to deliver high quality services and ensure that public money is spent effectively.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. BACKGROUND 3.1 The requirement to produce an Annual Governance Statement is a

statutory responsibility (Accounts and Audit Regulations 2003 and 2011).

3.2 The Council approved and adopted a revised local Code of Corporate

Governance on 20 April 2011 that is consistent with the principles of the Chartered Institute of Public Finance and Accountancy (CIPFA) and Society of Local Authority Chief Executives (SOLACE) Framework: Delivering Good Governance in Local Government, and the governance requirements of the 2010 CIPFA statement on the: Role of the Chief Financial Officer in Local Government.

3.3 Delivering Good Governance in Local Government: Framework urges local authorities to prepare a governance statement in order to report publicly on the extent to which they comply with their own code of governance on an annual basis, including how they have monitored the effectiveness of their governance arrangements in the year, and on any planned changes in the coming period. The process of preparing the governance statement should itself add value to the corporate governance and internal control framework of an organisation.

Agenda Item 6

4. APPROACH TAKEN TO PRODUCE THE 2011-12 ANNUAL

GOVERNANCE STATEMENT

4.1 The officer Governance group approved a self assessment process for review by each Directorate of their governance arrangements. Each Directorate Management Team (DMT) was asked to complete and score the assessment and return to the Chief Internal Auditor for review and collation. Self assessment documents have been returned and reminders have been issued for any further assessments that are in the process of being signed off by each executive director at the current DMT meetings. Internal Audit has assessed the returns and has also undertaken a review of governance arrangements within Directorates. In addition an assessment has been undertaken against the revised code of corporate governance and has been worked through at the Assistant Chief Executive’s DMT meetings to identify improvement actions.

4.2 During 2011/12 the officer Governance Group used the map of sources of assurance to ensure that the Annual Governance Statement is fully supported. This is shown in a diagram at appendix 1 of the statement. The group maintains a comprehensive improvement action plan that incorporates any significant control issues and other improvement actions identified.

4.4 The Strategic Management Board at their meetings on 22 May 2012

and 19 June 2012 reviewed the draft Annual Governance Statement and considered any areas that should be classified as ‘significant control issues.’ The discussions were documented as part of those meeting and the areas highlighted have been included in section 5 of the attached statement and in the action plan at appendix 2 of the statement.


5.1 There are no additional resource implications arising from this report.

6. RISK ASSESSMENT 6.1 The Annual Governance Statement provides assurance that the

Council is managing its risks effectively. 7. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT

7.1 There are no specific equalities issues in relation to the content of this

report. 8. CONSULTATION

Agenda Item 6

N/A 9. REASONS FOR RECOMMENDATIONS 9.1 To ensure that the Council maintains an effective framework of

corporate governance. 9.2 To meet the Council’s statutory obligations under the Accounts and

Audit Regulations (England) 2011. 10. RECOMMENDATION 10.1 That the Audit and Corporate Governance Committee reviews and

approves the Council’s Annual Governance Statement for 2011-12, attached at Appendix A.

11. BACKGROUND PAPERS

• Delivering Good Governance in Local Government: Framework – issued by CIPFA / SOLACE 2007

• Delivering Good Governance in Local Government: Guidance note for English Authorities – issued by CIPFA / SOLACE 2007

• The Role of the Chief Finance Officer in Local Government – CIPFA 2010

• Internal Audit working papers • Directorate governance self assessments

CONTACTS FOR BACKGROUND PAPERS:

Name E-mail Telephone Jean Gleave Chief Internal Auditor

[email protected] 01925 442354

12. Clearance Details Name Consulted Date



19/6/12

SMB 22/5/12 19/6/12

Assistant Chief Executive Katherine Fairclough

13/6/12

Chief Finance Officer Lynton Green 13/6/12 Solicitor to the Council Timothy Date 13/6/12

mailto:[email protected]

Agenda Item 6 Appendix A

+

ANNUAL GOVERNANCE STATEMENT FOR THE YEAR ENDED 31 MARCH 2012

DRAFT MAY 2012


Warrington Council is committed to the highest standards of corporate governance. Governance is about how bodies ensure that they do the right things, in the right way, for the right people in a timely, inclusive, open, honest and accountable manner. It comprises the systems and processes, and culture and values, by which bodies are directed and controlled and through which they account to, engage with and, where appropriate, lead their communities. A key aspect of governance is the requirement to put into place “effective risk management systems, including systems of internal control”. This Annual Governance Statement supports the Council’s Statement of Accounts and outlines how it manages its affairs to deliver high quality services and ensure that public money is effectively spent.


CONTENTS PAGE NO.

1. Scope of Responsibility

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2. The Purpose of the Governance Framework

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3. Governance Framework Principle 1 3.1 Strategic Planning 3.2 Financial Planning 3.3 Interests in Companies 3.4 Financial Management 3.5 Performance Management Principle 2 3.6 The Constitution 3.7 Working with Key Partners Principle 3 3.8 Governance Arrangements Principle 4 3.9 Decision Making 3.10 Risk Management 3.11 Financial Controls 3.12 Information Governance and ICT Governance 3.13 Projects and programmes Principle 5 3.14 Member Training and Development 3.15 Officer Training and Development Principle 6 3.16 Engagement Strategy 3.17 Freedom of Information 3.18 Neighbourhood Area Boards

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2 3 3 3 4

5 5

7

10 11 12 13 14

15 15

16 16 17

4. Review of Effectiveness 17 4.1 Assurance re 2010/11 significant control issues 4.2 Internal assurance and External Inspections of Governance Arrangements

18 20

Conclusion

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Appendix 1: Framework of Assurance 24 Appendix 2: Action Plan 25

Annual Governance Statement for the year ended 31 March 2012

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1. Scope of Responsibility Warrington Borough Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, that public money is safeguarded, accounted for and is used economically, efficiently and effectively. Warrington Borough Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. In discharging this overall responsibility, Warrington Borough Council is responsible for putting in place proper arrangements for the governance of its affairs and facilitating the effective exercise of its functions, which includes arrangements for the management of risk. Warrington Borough Council approved and adopted a revised local Code of Corporate Governance on 20 April 2011 that is consistent with the principles of the Chartered Institute of Public Finance and Accountancy (CIPFA) and Society of Local Authority Chief Executives (SOLACE) Framework: Delivering Good Governance in Local Government, and the governance requirements of the 2010 CIPFA statement on the: Role of the Chief Financial Officer in Local Government.

This statement explains how Warrington Borough Council has complied with the code and also meets the requirements of regulation 4 (2) of the Accounts and Audit Regulations 2003 as amended by the Accounts and Audit (Amendment)(England) Regulations 2006 in relation to the publication of a statement on internal control. A description of the key elements of the Council’s assurance and internal control environment is detailed at Appendix 1.

2. The Purpose of the Governance Framework

The governance framework comprises the systems and processes, culture and values by which the Council is directed and controlled and the activities through which it accounts to, engages with and leads the community. It enables Warrington Borough Council to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate, cost effective services. The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of Warrington Borough Council’s policies, aims and objectives; to evaluate the likelihood of those risks being realised and their impact should they be realised; and to manage them efficiently, effectively and economically.


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The annual governance statement is the means of reviewing and reporting on the Council’s overall governance arrangements. This governance statement is an open and honest self-assessment of the Council’s performance across all of its activities, with a clear statement of the actions being taken or required to address areas of concern. The governance framework has been in place at Warrington Borough Council for the year ended 31 March 2012 and up to the date of approval of the annual report and statement of accounts. 3. Governance Framework The key elements of the systems and processes that comprise Warrington Borough Council’s governance arrangements are included in the 6 principles of good governance identified in the revised CIPFA/SOLACE framework, as follows: Principle 1 - Focusing on the purpose of Warrington Borough Council and on outcomes for the community and creating and implementing a vision for the local area. 3.1 Strategic Planning A Sustainable Community Strategy was developed and published in March 2009 by the Warrington Partnership led by the Council. This is currently under review and will be replaced by a Warrington Wellbeing Strategy in July 2012. ‘One Warrington: One Future’ sets out a vision through a set of five ambitions for the Borough; this vision was developed following extensive consultation with members of the Partnership and Warrington’s residents and interest groups. In pursuing this vision, the Council and its partners have prioritised closing the gaps in the quality of life experienced by our most disadvantaged communities. The refreshed Council Strategy 2012-2015 sets out the vision and key priorities for the Council over a 3 year period. The Corporate Plan reflects the Council’s contribution to the Sustainable Community Strategy and its other (largely internally focused) improvement priorities. It is refreshed on a regular basis, and a new Corporate Plan 2012-2015 has been produced to deliver the Council Strategy. Under the constitution, the Corporate Plan is approved each year by Full Council. The Council’s strategic plans are communicated to a wide range of stakeholders through media; PR; events; and regular forms of communications such as briefings and reports. All of the Council’s major plans and strategies are published and available for download on the website/intranet.


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3.2 Financial Planning

In producing the 2012-15 Medium Term Financial Plan, residents, businesses and specific stakeholder were consulted on the proposed savings initiatives via information on the Council’s website, post cards in all public buildings and targeted meetings. Consultation responses were reported to the Overview and Scrutiny Committee in advance of the Executive Board recommendation to full Council to set the Annual Budget for 2012-13.

3.3 Interests in Companies

The Council has material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities and require it to prepare group accounts. In the Authority’s own single-entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. The Council had interests in two limited companies during the financial year:

• Warrington Borough Transport • Connexions

Warrington Borough Transport is wholly owned by Warrington Borough Council and is consolidated into the Group Accounts as a subsidiary. During 2011/12 Warrington Borough Council owned 33% of Connexions. Connexions is consolidated into the Group Accounts. The coalition Government signalled, then confirmed, intentions for significant changes to Local Authority accountabilities for Connexions related services. The new arrangements and accountabilities have seen adjustments across all Local Authorities in England, with 2011/12 a transitional year as arrangements are adjusted to meet the new requirements. Warrington Borough Council developed a comprehensive Transition Plan to manage the risks associated with the closure of Connexions. The financial risks were highlighted in a report to the Executive Board in November 2011 and these and other risks such as service maintenance, performance and reputational issues were actively managed by the formation of a co-ordinated group. The group had representation from HR, Finance, Legal, Commissioning and 14-19 and vulnerable pupil services/teams.

3.4 Financial Management The Council has a proven track record of financial management and robust monitoring arrangements in place to manage its finances in year. For 2011-12 the as part of the Service Challenge process, the Council agreed savings proposals of £22.8m to be delivered across all services. The main emphasis for the achievement of savings was via transformation and efficiency projects where possible, including re-focusing of resources to the prevention


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agenda to avoid more costly reactive solutions. Despite the extent of the savings needed, focus was maintained on protecting front line delivery as much as possible. During the 2012-13 Service Challenge process investment was identified in a number of key services as a result of statutory or regulator pressures, in spite of a further savings target of £14m required for 2012-13. Additional resources were provided for the Medium Term Financial Plan Reserve to ensure the Council can meet its financial obligations for 2012-13. This was approved to ensure that the Council will not be exposed to unexpected cuts that may have an adverse impact on the delivery of front line services. The forecast year end position for 2011-12 is a balanced budget as the annual savings target has been achieved. Whilst there was some delay in delivering some savings projects in 2011-12 the majority of savings have been achieved via the original means, however where it was evident that some of the original proposals would not be achieved in year, alternative savings were found to offset them. The authority’s financial management arrangements conform to the governance requirements of the CIPFA Statement on the Role of the Chief Financial Officer in Local Government (2010). 3.5 Performance Management Warrington’s Performance Management framework ensures that progress against key plans and strategies is monitored routinely in order that timely action can be taken to address any performance issues. A Corporate Data and Information Assurance Strategy has been produced which addresses the requirements for data quality. An internal audit review of the performance framework completed in 2011/12 provided a substantial assurance over the design of the framework. Key Performance Indicators are clearly identified for each ambition in the Corporate Plan, and are used to monitor and manage delivery. Business plans, at Directorate and Service levels, identify measures that enable achievement of corporate priorities to be assessed, taking into account financial, operational, people and customer measures. Resource and risk management are embedded within the business planning framework. Business plans are reviewed annually and approved by Executive Directors. Formal quarterly reports go to Strategic Management Board (SMB) and the Executive Board and to Overview & Scrutiny committees, who use performance data to help determine their work programme and challenge performance. The general public is able to access performance reports that are taken to the Executive Board or Partnership Board from the relevant pages on the Council/Partnership websites.


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Principle 2 - Members and Officers working together to achieve a common purpose with clearly defined functions and roles. 3.6 The Constitution

The Council’s constitution includes details of the role and responsibilities of the Executive Board; committees; the full Council; and Chief Officers and the rules under which they operate. The constitution has been subject to review during 2011/12 and the revised Constitution is to be presented to full Council in June 2012. The Council’s political structure and roles and responsibilities of Executive Members are detailed on its website. There is an annual schedule of meetings for all committees agreed at the start of each municipal year.

The constitution defines the process for making key decisions. These are recorded on a corporate pro-forma and are subject to statutory call-in procedures. The Council’s scheme of delegation is included in its constitution and the scheme of delegated decisions and financial delegation continues to be embedded across the Council. The Full Council of democratically elected members annually approves all changes to the Council’s constitution. The Council’s constitution defines how the Council operates and takes decisions regarding, for example the:

• Strategic aims and objectives of the Council • Political management organisational structure • Financial and other procedure rules • Scheme of delegation to members and senior officers The Executive Board takes executive decisions jointly. The Executive Board receives regular reports on the overall performance of the Council. Executive members hold regular meetings with their respective portfolio Executive Director in order to ensure effective liaison on key issues and major projects and programmes. For the last three years a cross party group of senior members have overseen many of the major transformational changes through the Transforming Warrington board. Following a review in February 2012, this work will be now integrated into the corporate performance framework and the board has ceased to operate. An improvement and efficiency programme is under development in order to ensure strategic oversight and to focus organisational development in this area. 3.7 Working with Key Partners

Warrington’s Health and Wellbeing board (HWB) operated in shadow form during 2011/12. The Board has overseen the production of a Joint Strategic Needs Assessment (JSNA) which is central to joint commissioning. The development of


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the JSNA was led by the Board with input from the Council, NHS Warrington, GP consortia and other partners, and there will be a new legal obligation for these agencies to have regard to the JSNA in exercising their commissioning functions. Warrington HWB will also prepare “a joint wellbeing strategy” coordinating intentions from the NHS, social care, public health, and other health determinants such as housing, education, environment and economy. An Integrated Commissioning Board was established with health partners with the purpose of overseeing the investment in integrated health and social care services. As well as improvement in local services, the Board will ensure seamless integration, improved outcomes, foster effective partnership working, and to enable barriers between health and social care to be overcome. The Board reports to the Health and Wellbeing Board and to WBC and NHS Warrington. Governance arrangements around integrated commissioning will be further strengthened in 2012/13 as public health responsibility transfers to the Council and PCT health commissioning responsibility transfers to the new Clinical Commissioning Group. A Commissioning Framework has been developed and shared with key partners. Formal planning for the transition of Public Health began in March 2011, when a Joint Local Authority and Primary Care Trust Public Health Transition Steering Group was established. This group has senior Local Authority, Public Health and Commissioning Consortium Group membership and reports to the Cheshire Wirral and Warrington (CWW) Primary Care Trust Cluster Board.

A Public Health Transition Plan, has been prepared jointly by the Executive Director of Neighbourhood and Community Services of Warrington Borough Council and the Director of Public Health. In addition there is a Milestone Delivery Plan which is reviewed monthly by the steering group.

Risks to the programme are recorded on the Public Health Transition Risk Register and reported to the CWW PCT Cluster Board and Public Health Governance Committee. An Overall risk of the programme is recorded on the Neighbourhood and Community Services Directorate’s risk register, which will feed up to the Council’s strategic risk register. Currently delivery of the Warrington Public Health Transition Plan is rated as GREEN for delivery by the Department of Health.

Warrington Partnership is the Local Strategic Partnership (LSP) for Warrington. The Partnership Agreement has been updated and approved by the Partnership Board and the improvement plan continues to be implemented. The Partnership Board is reviewing the relationship with the shadow Health & Well Being Board and investigating future governance arrangements. Warrington Safeguarding Children’s Board is a statutory Board and is responsible for co-ordinating delivery of services to children and young people in Warrington and published its annual report in September 2011.


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Warrington Children and Young People’s Partnership published a new four-year Children and Young People’s Plan in autumn 2011 following a review of the previous plan. Warrington Borough Transport (WBT) was set up in accordance with the provision of the Transport Act 1985 to take over the Council's passenger transport undertaking. The Council wholly owns WBT but is not liable for any losses; WBT is a company limited by share capital, governed by the Companies Act, and subject to different statutory rules and accounting policies than the Council.

Principle 3 - Promoting values for the Council and demonstrating the values of good governance through upholding high standards of conduct and behaviour. 3.8 Governance Arrangements

The Council maintains high standards of governance:

• The Solicitor to the Council & Assistant Director Corporate Governance is the appointed Monitoring Officer for the Council whose functions include maintenance of the constitution, supporting the Standards Committee and ensuring lawfulness of decision making. The Council’s Standards Committee seeks to promote and maintain high standards of conduct of Council’s members.

• The Council has Codes of Conduct for both members and officers together

with induction processes and a range of policies and procedures. These are supported by performance appraisal systems and a register of interests.

• The Legal Service is accredited and annually assessed against national

governance and performance criteria as part of the Law Society ‘Lexcel’ standard. The standard gives assurance upon the Service’s procedures, standards of conduct, business planning and risk management procedures. The accreditation gives assurance on the Legal Service’s ability to support the governance of the authority.

• The Chief Finance Officer is the responsible officer to the Council for the

proper management of its financial affairs in order to meet the statutory requirements of Section 151 of the Local Government Act 1972. The Chief Finance Officer is a member of the senior management board, as required by the governance requirements of the 2010 CIPFA statement on the: Role of the Chief financial Officer in Local Government, and has access to the Chief executive and to other executive directors.


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• The Audit and Corporate Governance Committee is politically balanced and does not include any Executive Board members. The Committee has a dedicated programme of training; during 2011/12 this included financial management and risk management training. A working group from the committee completed a self assessment of the committee’s effectiveness in February 2012 using the checklist from CIPFA’s ‘toolkit for local authority committees’ and the committee agreed further development areas. The committee oversees the work of the Internal and External Audit, and promotes and maintains high standards in relation to the operation of the Council’s Code of Corporate Governance, ensuring that an adequate risk management framework and associated control environment is in place and that the Council’s financial and non-financial performance is properly monitored. The Audit and Corporate Governance Committee, independent from Executive and Scrutiny functions, is required to gain and monitor the necessary assurances as to the Council’s internal control, governance, financial management and reporting framework. Support is provided through an officer governance group chaired by the Assistant Chief Executive and attended by the Chief Finance Officer and senior officers across Audit, Legal, Information Governance, Performance and other directorates as required for assurance purposes. The group maintains a clear improvement plan; this is regularly monitored and updated.

• The Council has an established joint consultation framework with its

recognised Trade Unions and this provides a sound basis for effective debate, discussion and full consultation on the introduction of new operational policies and the review and refresh of existing policies. This framework exists not only to satisfy the Council's statutory requirements under collective bargaining and consultation, but also enables the benefits of full Trade Union engagement and involvement to be realised. This best practice approach to policy review enables the appropriate consideration of external factors on operational policies and the opportunity to obtain valued feedback on proposals prior to implementation. This framework further ensures that organisational impacts of policy change are considered fully by all service areas prior to any implementation processes, and that actions identified within feedback can be progressed in a timely manner.

• The Council’s whistle-blowing policy is available to all managers and staff

via the Intranet. A revised version of the whistle-blowing policy has been produced and is currently in draft and being consulted upon through the joint consultation framework. The revised policy supports the Council in its obligations in respect of the Bribery Act 2010 which came into force on the 1st July 2011.

• The Council’s anti fraud, bribery and corruption statement and policy

incorporates the requirements of the Bribery Act. An Internal Audit review of the Council’s response to the Bribery Act 2010 was completed and a


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substantial assurance opinion was provided. Work has also continued to investigate matches that are highlighted by the National Fraud Initiative. Regular reports are provided to the Audit and Corporate Governance committee on the work undertaken in the Council to combat fraud and corruption.

• The Council’s Complaints Policy has been reviewed and is available on

the Council’s Internet site together with an overview of the complaints procedure. A leaflet has also been produced to assist the public who want to make a complaint. Revised processes have been developed which should ensure that all complaints are now managed through the Customer Relationship Management (CRM) System. This should, in turn, improve the quality of performance data and provide information which can be used consistently to inform service delivery. Internal communication, awareness raising and monitoring of the revised policies and processes is planned to continue in 2012/2013. Action agreed in the 2011/12 internal audit report on data quality with regard to complaints is being implemented.

• Equality and Diversity continues to be a key priority for the Council. We

have set out our commitment in our Equality and Diversity Policy 2012-2015. The policy will be implemented and monitored by an Equality and Diversity delivery plan.

• In accordance with the Equality Act 2010 and the General Equality Duty

we have published equality pledges which will help us to focus our attention on priority equality issues so that we can deliver improvements in policy making, service delivery and employment. The equality pledges are:

o To protect the most vulnerable o To support the local economy. o To build strong and active communities for all

• Warrington Borough Council is committed to delivering on the equality

pledges and it has a dedicated working group to ensure that this happens – the Equalities Steering Group, this is chaired by the Assistant Chief Executive.

• In accordance with the Equality Act 2010 we have also published equality monitoring information on our population, our services and who uses them, and our workforce.

• All Schools are subject to a rolling programme of audit. Internal Audit

Services report regularly to the Schools Forum and the Children and Young People’s Services Directorate on findings from schools’ audits. Internal Audit work continues to provide assurance that schools in Warrington have effective systems of financial management. Of the 13 schools audited in 2011-12 two achieved a “High” assurance rating and


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ten schools achieved a “Substantial” assurance rating. One school received a “minimal” assurance opinion and a full action plan was agreed by the school to improve the financial controls in place. An internal audit of the Pupil Referral Unit resulted in a “limited” assurance opinion. Actions were agreed with the unit that will improve the financial management arrangements. The revised self assessment process for schools ‘the Schools Financial Value Statement (SFVS)’ came into force during 2011/12.

• A mapping exercise of Council policies is almost completed which will

support the development of a corporate programme for renewal and update. A framework/guidance for the development of policy and strategy documents is also being developed which will form the basis of future policy development arrangements. Ongoing improvement and development of the Council’s ‘policy watch’ and policy resource intranet page continues.

Principle 4 - Taking informed and transparent decisions which are subject to effective scrutiny and managing risk. 3.9 Decision Making The Council’s constitution provides the framework for the decision making process; this is currently under review. Reports to the Council’s Committees require documented consideration of a range of issues in support of any recommendations made therein. These include consideration of risk, and equality and diversity issues. The Council’s constitution and decision making processes are under review currently in light of the Localism Bill.

The Overview and Scrutiny Committee function scrutinises and reviews decisions made or actions taken in connection with the discharge of any Council functions. A robust scrutiny process has been developed and the scrutiny arrangements with the following committees are currently under review:

• Neighbourhoods and Communities • Children Young People and Skills • Economy and Resources • Environment and Housing • Health and Wellbeing

Scrutiny committees work closely with the Executive Board and the Strategic Management Board and a call-in protocol is in place. Work plans for the committees are aligned closely with the sustainable community strategy and are drawn up in consultation with LSP partners. Scrutiny Officers support member development across the region by serving on the steering group for the North West Strategic Scrutiny Network.


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The Monitoring Officer and Officers from Democratic and Member Services monitor reports to members to ensure propriety of decision making and that legal advice is included where necessary and appropriate. Council lawyers are involved in policy development and scrutiny processes. There are regular meetings of officers with statutory responsibility for conduct and ethics issues. 3.10 Risk Management / Resilience and Business Continuity / Emergency

Planning Risk management arrangements are embedded in the Council and there is a risk management policy, strategy and guidance document to assist with the monitoring and reporting of risk, which will be reviewed and updated annually. This explains the methodology which provides a comprehensive framework for the management of risk throughout the Council. The revised risk management strategy, policy and guidance document has been developed during April 2012 and will be ready for circulation by the end of May 2012. Risk management training was undertaken in 2011/12 at the Welcome to Warrington and New Managers courses. Training for Audit and Corporate Governance committee members was provided in March 2012 and further training will be provided in 2012/13. The Risk Management and Business Continuity group meets on a quarterly basis and reviews both the strategic and directorate risk registers and receives updates from the Directorate leads on the risk registers and the business continuity plans. The group acts as a forum to facilitate discussion to monitor existing risks and the Council’s general risk environment, ensuring new risks are identified and considered as part of the horizon scanning process. The group also monitors incidents, and the response to incidents, to identify corporate learning and ensure business continuity and recovery plans are fit for purpose. The group provides assurance to the officer Governance group that risk management processes are embedded and risks are regularly reviewed and updated. A strategic risk register is in place and is updated regularly. The strategic risk register identifies risks to the achievement of strategic priorities as set out in the corporate plan. The strategic risk register was presented to the Strategic Management Board on a quarterly basis during 2011/2012, and was presented in September 2011 and in April 2012 to the Audit and Corporate Governance committee. Health and Safety continues to be a key focus area for the Council, there is a robust school inspection programme in place, with High Schools being inspected annually and Primary Schools inspected on a 3 year rolling programme. In addition the Council is reviewing all Health and Safety arrangements, policies and guidance notes to ensure they remain up to date and legislatively compliant. To support the policies and guidance notes Standard Operating Procedures have been introduced and will continue to be developed as a management tool to ensure key areas of risk are managed in an effective, consistent manner.


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An internal audit report during 2011/12 provided a substantial assurance opinion on the Council’s governance and risk management arrangements and provided assurance that risk management processes are embedded. Further work is planned during 2012/13 to assess business impact of key systems to inform the business continuity and recovery strategy. The Civil Contingencies Act 2004 places a duty on the Council to plan, respond and recover from emergency situations. The initial process is to assess the risks on a Local Resilience Forum (LRF) basis to determine the priorities from the multi-agency perspective to ensure the communities of Cheshire, Halton and Warrington remain safe. The Council assesses the risks to the area as part of the LRF Risk Assessment process, the risk profile and priorities each year are informed by both the national risk register and the geographic make-up of the county, in addition to responding to any specific emerging intelligence from a national perspective which would require immediate attention. The risks identified are first captured on the Community Risk Register which is reviewed annually, then assessed to determine what (if any) further mitigation works are required once the emergency response plans in place have been identified and considered. The LRF has an annual testing & training programme of emergency response plans which the Council is part of, in addition to the Council’s own internal testing and awareness raising programme. 3.11 Financial Controls

The Council’s financial controls are strong. With specific regard to the Council’s financial control arrangements these include:

• A Medium Term Financial Plan 2010-2013. • Comprehensive budgeting and budget monitoring systems. • Clearly defined capital expenditure and treasury management guidelines. • Regular reporting of the Council’s budget and performance to the Executive; Council; Economy and Resources scrutiny committee; and Audit and Corporate Governance Committee. • Formal project management disciplines. • Clear targets to measure financial and other performance. • Clearly defined arrangements for devolved financial management. • Corporate Financial and Contract Procedure Rules revised during

2011/12. • Anti Fraud Bribery and Corruption policy updated during 2011/12. • Published fraud response plan for the reporting and resolution of suspected fraudulent activities.

Internal Audit reviews of key financial systems along with detailed substantive testing to support the annual accounts 2011/12 provide assurance that controls are robust. The Corporate Procurement Strategy which was approved by the Executive Board in February 2010 is currently under review. The Strategic Procurement


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Panel has met regularly during 2011/12; the Panel ensures that procurement processes and procedures are robust, reflect the Council's core values and support the achievement of its strategic aims and objectives. The Panel oversees the governance framework for procurement to ensure that appropriate controls are in place, and decision making is at the right level, timely, and promotes a strategic approach. 3.12 Information Governance and ICT Governance The Council has stated a commitment to high standards of governance, including information governance. The officer Governance Group receives regular updates around information governance at their meetings and has reviewed the information governance action plan in place. The Executive Director Environment and Regeneration has been nominated as the Council’s Senior Information Risk Owner (SIRO). The Information Governance Group monitors the required actions to address information governance risks, and the roll out of the required training to all relevant officers. An internal audit review during 2011/12 noted that significant progress has been made in establishing an information governance framework; a great deal of work has been undertaken to establish the framework and elements such as data breach reporting, data protection, and data sharing. There is still a significant amount of work required particularly around awareness raising and a programme of training for staff. A ‘Limited’ assurance opinion was provided overall and action has been agreed and work is underway to address the issues raised in the report. The Council has established improved data sharing arrangements with its partners and an information sharing framework and protocol is in place. A partnership data sharing programme board the ‘Warrington Information Sharing Partnership’ (WISP) is in place to monitor and review all information flows between partners. ICT Governance has been a focus area for the officer Governance Group during 2011/12. Work has been developed with internal audit to map assurances for all system areas. Management of ICT risks and ICT security incidents is robust and has been highlighted as good practice, the certification of conformance to the best practice ISO27001 information security management standard has been updated by external accreditors. An internal audit review was undertaken to establish how resilient the Council would be in terms of recovery and timely return to normal service, should a major adverse incident occur affecting the main data centre. An overall ‘minimal’ assurance opinion was given. A full action plan has been agreed by management and a sub group of the Corporate Risk & Business Continuity group has been established to action the recommendations in the report. Internal Audit will continue to follow up the remaining actions.


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The Council’s key ICT system SAP underpins the Finance, Payroll, Procurement and Human Resources functions. The strategic oversight of the SAP system has been improved during 2011/12 through the introduction of a SAP Governance Group that is chaired by the Assistant Chief Executive. This group comprises of senior officers representing Finance, HR, Payroll, ICT and Audit. The group is responsible for reviewing the original implementation of SAP to assess whether it is meeting its perceived benefits, and if not to consider options to rectify this. The SAP Governance Group has met regularly since November 2011 and has overseen the production of a SAP Improvement Plan and the reorganisation of the SAP support that is delivered by Council staff. The SAP Improvement Plan covers several workstreams each of which is led by a member of the SAP Governance Group and is available for all members of staff to view on the Council's intranet. An operational SAP Working Group has also been established that represents the system users and will take forward developmental issues and training requirements. 3.13 Projects and programmes Specific governance arrangements are put in place for major programmes and projects, often based on the industry standards from the Cabinet Office Best Management Practice Suite: Managing Successful Programmes and Prince 2. Support is provided by a dedicated team within the Assistant Chief Executive’s directorate. A report was presented to SMB in February 2012 outlining a new approach to the oversight of corporate projects and programmes, and to the oversight of improvement and efficiency, building on the existing line management arrangements. Major projects during 2011/12 have included the development of the Bridge Street area which is a key component of the Warrington Regeneration Programme. This is a long term project expected to last between 10 and 15 years. An internal audit report around the project management and governance arrangements gave an overall substantial assurance opinion. Major project work was undertaken during 2011/12 to prepare for the transfer of the leisure and culture services to a new Trust from May 2012. Services from each of the Council’s Directorates provided support to the transition process. A Project Board and Project Team was created to ensure the structures, governance and finance in place for the two new organisations were established in a robust manner. Warrington is responding to Government policy concerning community asset transfer. A Community Asset Transfer Planning group was established in August 2011 to support the development of an Asset Transfer Strategy and Policy, which provides a robust framework for community groups wishing to own and manage assets. A number of asset transfers have already been undertaken, including the asset transfer of Grappenhall Library and Great Sankey Library. Warrington Borough Council’s Executive Board made the decision to make these buildings


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available for third sector organisations to manage via community asset transfer following a decision to close the libraries. Principle 5 - Developing the capacity of Members and Officers to be effective.

3.14 Member Training and Development An elected member learning and development framework is in place. This is aimed at ensuring that members are given as much support as possible to aid them when making decisions. The member’s personal development plans are undertaken by officers from within Democratic and Member Services. There are regular meetings between the Leader of the Council and the Chief Executive including the Leader undertaking personal review and development interviews with the Chief Executive. There is an induction process and training programme in place for all newly-elected members. 3.15 Officer Training and Development The officer development framework takes the form of Performance Review and Development appraisals (PR&D) which are in operation across the Council. The Council introduced a longer term leadership development programme which includes a set of competencies that are aimed at improving the leadership of the Council now and for the future. During 2011/12 training continued as part of the leadership programme and the Futures Programme for middle managers and the roll-out of 360 degree appraisal for members of the leadership group was continued. The people and workforce strategy has been revised for 2011-2014 which links directly to the corporate priorities. Delivery of the strategy is via the annual workforce plan. The Council’s organisational review identified a reduction in staffing numbers in the future. One of the main challenges for the people and workforce strategy is to develop the capacity and engagement of a reduced workforce in order to maintain service delivery. An innovative organisational change approach has been adopted where all services have been challenged to deliver improvements and efficiencies within the constraints of current finances. Through this service challenge process, a comprehensive programme of changes have been identified and are in the process of implementation, all supported by business cases and overseen by the Organisational Development Board.


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Principle 6 - Engaging with local people and other stakeholders to ensure robust public accountability.

3.16 Engagement Strategy

The Corporate Directorate Engagement Group is leading on the development and implementation of an updated Partnership Engagement and Involvement Strategy. The current Strategy defines how all the members of the Partnership ensure that local residents are encouraged and supported to have more influence and power to change and improve their lives, through consultation, engagement and involvement. The Strategy outlines approaches to engagement with communities of special interest and identity; and also the coordination of engagement across the Partnership. The updated Strategy will build on this, and various consultation and engagement methods will be recognised to ensure it also includes groups that are harder to reach. A Corporate Directorate Engagement Group was established in March 2012 to co-ordinate and advise on all consultation activity across the Council. A wide range of consultation and engagement activity was undertaken throughout 2011/12. This was collated and coordinated via the Partnership Engagement and Research Group and included:

• The Warrington Partnership Customer Insight Toolkit was published in October 2011. The purpose of the toolkit is to help public organisations in Warrington consult and involve local people in planning and delivering public services. The toolkit gives practical information to enable partners to carry out effective consultation and engagement.

• The online data observatory (DORIC), Consultation Portal was launched

within the DORIC Data Observatory (www.doriconline.org.uk) with the aim of monitoring consultation and engagement activity across the Council.

• The Warrington Wise Profiles were published in October 2011, the

information is used to build up customer knowledge and help re-design and market tailored services.

3.17 Freedom of Information

The Council has a robust process for responding to Freedom of Information requests that are received. During 2011/12 the use of the Customer Relationship Management system (CRM), for managing the FOI process, was explored. As part of the Open Data transparency agenda the Council has also published items of expenditure over £500 online.


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3.18 Neighbourhood Area Boards

Neighbourhood Area Board activity is reported monthly at the Neighbourhoods Programme Board and to the portfolio holders for Neighbourhoods and Community. Quarterly activity is also reported via the Closing the Gap Score programme in the 10% most deprived areas. 4. Review of Effectiveness The Council has responsibility for conducting, at least annually, a review of the effectiveness of its governance framework including the system of internal control. The review of effectiveness is informed by the work of the managers within the Council, the Chief Internal Auditor’s annual report, and also by comments made by the external auditors and other review agencies and inspectorates. The Council is advised on the implications of the result of the review of the effectiveness of the governance framework by the Overview and Scrutiny committee; the Audit and Corporate Governance committee; the officer Governance Group; and the Corporate Risk and Business Continuity group. The officer Governance Group maintains a comprehensive action plan to ensure continuous improvement of the governance arrangements are in place. The Audit and Corporate Governance Committee review the governance arrangements as part of their Terms of Reference and review the strategic risk register twice a year. Internal Audit Services examine the effectiveness of the Council’s internal controls. Based on evidence from planned audits and any special investigations, the Chief Internal Auditor reports to each meeting of the Audit and Corporate Governance committee on any major weaknesses that have been identified and highlights where improvements are considered necessary. Internal Audit have included reviews of fundamental financial systems during 2011/12 which was the second year of the SAP accounting system. Follow up work on the accounts receivable system provided assurance that agreed actions have been implemented, however action is still needed to improve controls in the system. Work undertaken in the Coroner’s office provided a ‘limited’ assurance opinion over the financial controls. Action was agreed with management to improve the controls in place. Based upon the work undertaken, the Chief Internal Auditor provided the Council with an overall substantial assurance opinion on the arrangements for gaining assurance through the governance framework and on the controls reviewed as part of the internal audit work. A full action plan is in place following the Audit Commission’s Annual Governance report 2010/11. This is monitored by Officer Governance group. The action plan was agreed with SMB and reported in full to the Audit and Corporate Governance Committee on 15 March 2012.


18

Key departmental officers provide formal assurance that the policies and procedures are being applied in the initiation, development and delivery of service plans, by their responses to the assurance statement questionnaires. Where gaps have been identified, action plans have been, or are in the process of being prepared. 4.1 Assurance in relation to the areas identified as significant control

issues in the 2010/11 Annual Governance Statement Recommendation Action undertaken Ensure that the results of the internal audit investigation into the Ombudsman’s report are acted upon and the Council takes the required action.

All staff were reminded of the retention guidelines in place for Council records by an article in ‘Your Voice’ and senior managers took responsibility for reviewing their directorate approach to records management following discussions at SMB and DMT meetings. The guidelines were included in the policy section on the intranet to ensure easy access. The Information Governance Group has included records management as an item on the agenda, and is in the process of a review of the retention policy. The Officer Governance Group has retained oversight of records management and receives updates from a representative from the Information Governance Group. A progress report has been requested by SMB for each directorate. A peer review of Planning was undertaken during 2011/12. The Council appointed a barrister to hold a public inquiry into the destruction of planning records and current record management procedures. The Inquiry was held in January 2012 and the barrister’s report and findings have been received recently. Follow up work by Internal Audit in March 2012 indicated that four of the recommendations from the internal audit report have been implemented fully and the remaining four recommendations have been addressed partially and are being progressed.

Ensure that the recommendations in the SAP Security report are implemented.

The recommendations in the SAP security report have been addressed by the Chief Officer, Customer Access & Technology and have been subject to follow up by Internal Audit in March


19

Recommendation Action undertaken 2012. Internal Audit follow up work confirmed that SAP high level access has been secured and external access has been closed down; access to the SAP ‘Production’ system has also been restricted. Staff with high level access, such as Domain Administrator access, have been reviewed resulting in a reduction in number from 27 to 8 staff, and further reviews have been undertaken of SAP accounts that have elevated privileges. The restriction of access will provide for a more robust control environment. SAP passwords are now aligned with Active Directory security settings, and a process for implementing complex passwords has commenced; once implemented this will provide further control, over the system. A series of communications to the business commenced during March 2012. The SAP Governance Group has identified senior officers to lead on approval and review of security changes for each SAP business area (HR & Payroll, Finance, ICT, and Procurement). This has now been completed and senior officers have ‘signed off’ the access approval. Improvements have been made to the SAP Leavers process. The SAP Security Audit has one recommendation incomplete - SAP security training for staff. This has been mitigated by the purchase of training materials in the form of security and supporting technical manuals. Formal training is being costed, reviewed and incorporated within the current round of Personal Development Reviews with implementation from April 2012 when budget will be made available. The follow up work by Internal Audit has provided evidence that controls over SAP security have been improved and that entity-level controls are now adequate.


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4.2 Internal Assurance and External Inspections of Governance Arrangements Adult Social Care Services The Local Account is a new way for councils to communicate with local people about progress made on the past year's priorities for adult social care and about the quality of its services. An important aspect is to demonstrate how citizens and consumers have influenced the development and quality of local services and, in the future, how they can develop the local account itself. Your care and support in Warrington, Local Account 2010-11 was the first such publication. The account reflected a partnership approach to developing services. It raised awareness about adult social care in general and important areas such as safeguarding, hate crime, hidden carers and self-funders. It highlights social care in the widest sense working in partnership across and beyond the council. The account includes a message and endorsement from the local Healthwatch/LINk with a request for feedback on an attached questionnaire to be returned to Healthwatch/LINk. The account is written in a publicly accessible format and is available on the council website and in hard copy to read at libraries, neighbourhood centres and Contact Warrington (the Council's contact centre). The Directorate Risk Register includes indentified risks around delivery of Residential and Nursing Care, reviewed on a quarterly basis due to the cost and volume pressures on this market and the Council's budget. Externally commissioned or internally provided Adult Social Care services are subject to a range of robust Governance measures that focus on developing partnerships, monitoring and improving and ensuring value for money. This is underpinned by a range of formal operational activities and forums including: • Formal contract monitoring and compliance across all Adult Social Care

services including scheduled, responsive and unannounced monitoring visits. • Regular Performance Monitoring reviews with provider agencies subject to

Service Level Agreements and Contracts. • Formal individual service risk assessments for services commissioned under

the Supporting People Programme • Performance reporting to the Supporting People Commissioning Body • Established multi-agency forums to monitor, report and review service

delivery. • Established Peer Reviewing Frameworks with Warrington Link/Local

Healthwatch and Warrington Speak Up group. • Key Performance indicators relating to Residential and Nursing Care and

Supported Accommodation for adults with a learning disability are incorporated in the Directorate Performance score card.

Financial governance arrangements in adult social care have been strengthened by the introduction of weekly “panels” which scrutinise all packages of care with a


21

value in excess of £400 per week with a view to ensuring prudence, consistency and innovative alternative approaches to meeting needs. An internal audit review of personalisation and the personal budgets system provided substantial assurance that key aspects of the personalisation agenda have been implemented, with procedures and controls in place giving the necessary management assurances that the objectives are being achieved. Internal Audit performed follow up work during the year on the 2010/11 internal audit report covering the finance systems and financial management arrangements in Adult Services. The review covered payments procedures and contained a ‘minimal’ assurance opinion. The follow up work and further internal audit reviews noted the action taken to implement the recommendations in the report. Further audit work was undertaken to review the plans to implement the replacement of the system which records service packages and client invoicing costs and a detailed action plan was produced to assist with the system development. An internal audit review of client finances resulted in a significant number of findings arising from the review. These were presented in detail in the action plans issued for each service, and actions were agreed that will improve the controls in place. Children and Young People’ Services The 2011 Ofsted annual assessment of children’s services judged Warrington as ‘performs well’, demonstrating significant and sustained improvement since the 2009 rating of ‘inadequate’. The majority of services in Warrington are good or outstanding. The unannounced inspection of Contact, Referral and Assessment in November 2011 found that Warrington had “taken robust action since the last unannounced inspection” and “progress has been rapid and child protection services have been strengthened”. Additionally “performance on timescales for assessments has improved significantly and is now very good when compared with similar councils”. There were no areas for priority action. The three areas for improvement, focusing on accurate recording of actions in respect of assessments and supervision of social workers, have now been addressed. Specific service or settings Ofsted inspections in 2011-12 are: • The percentage of childminders rated ‘good’ or better in Warrington has risen

from 57% in March 2011 to the current figure of 65%. Implementation of the childminders’ improvement plan will remain active during 2012-13.

• Prior to the move to the new two-bedded children’s homes, St Katherine’s Children’s Home was judged as ‘good’, up from ‘satisfactory’. Ofsted also judged Ross Close as ‘good’ in 2011.

• 34 primary and nursery schools were inspected in 2011-12 with 65% of these ‘good’ or ‘outstanding’. Of the five secondary schools inspected during 2011-12, two were rated ‘outstanding’, two ‘satisfactory’ and one ‘inadequate’. Fox


22

Wood special school was judged ‘outstanding’. Overall 87% of nursery and primary schools and 59% of secondary schools are judged as ‘good’ or ‘outstanding’.

An internal Audit report covering the support for the needs of children with disabilities reviewed the processes and controls in place across the teams within the Children & Young People’s Directorate. The review included policies and procedures in place along with financial controls and performance monitoring. The report contained a ‘limited’ assurance opinion. A full action plan was agreed by management and action has been taken to implement the recommendations in the report. Internal Audit will continue to follow up the remaining actions. External Inspection Interception of Communications Commissioner’s Office (IOCCO) The Council was subject to an inspection by the Interception of Communications Commissioner’s Office (IOCCO) in July 2011 in relation to procedures in place in the Trading Standards section of the Environment & Public Protection Service. The inspection covered the application process for information requests from telecommunications providers. Internal Audit were asked to investigate the findings from the review which had highlighted errors in the reporting process. The inspector issued a formal report to the Council in September 2011 which contained a number of recommendations to strengthen control. Management responded promptly following the inspection and a full response to the Inspector’s report has been provided; the use of the NAFN SPoC facility addressed the majority of the recommendations in the report. The recommendations contained in the internal audit report focused on further strengthening of controls within the Council and action was agreed to incorporate the recommendations into the IOCCO – RIPA action plan. The Audit & Corporate Governance Committee received a full update around the inspection and these applications will be included in future RIPA reports to the Committee. A further inspection was carried out by IOCCO in April 2012 which reported no adverse comments.


23

Conclusion The review of the Council’s governance arrangements for 2011/12 has been undertaken in order to produce this statement. The review highlighted a number of governance issues that require attention and action is being planned and/or taken as noted in the Statement. These actions have been combined with additional work being undertaken by the officer Governance Group to form a comprehensive improvement plan. No items of a significant nature affecting the Council’s governance framework have been identified, however two main areas of attention for 2012/13 will be:

• to develop the ICT disaster recovery arrangements by increasing resilience to ensure that business continuity is maintained in the event of service failure.

• to implement the recommendations from the planning enquiry

With the exception of the internal control issues that we have outlined in this statement, our review confirms that the Council has a generally sound system of internal controls that supports the achievement of its policies, aims and objectives and that those control issues have been or are being addressed. Signed: Signed: ……………………….. ………………………. Councillor Fitzsimmons Councillor O’Neill Chair of the Audit and Corporate Leader of the Council Governance Committee Date:……………… Date:………….. Signed: Signed: ……………………….. ………………………. Timothy Date Diana Terris Solicitor to the Council and Head of Chief Executive Corporate Governance Date:……………… Date:…………..

Annual Governance Statement 2011/2012 Assurance Framework Appendix 1

24

Annual Governance Statement 2011/2012 Action plan Appendix 2

25

PRIORITIES AGS Principle 4 - Taking informed and transparent decisions which are subject to effective scrutiny and managing risk.

OBJECTIVE(s):

The organisation manages its risks and maintains a sound system of internal control The organisation has structured programme governance arrangements

LEAD TASKS Links to DATE PROGRESS % comp

Executive Director Environment and Regeneration

Ensure that the results of the barrister’s investigation into the Planning department are acted upon and the Council takes the required action.

Executive Director Environment and Regeneration

Ensure that the recommendations in the Disaster Recovery report are implemented.

Agenda Item 7

Appendix A

Internal Audit Service

ANNUAL REPORT AND OPINION ON THE SYSTEM OF INTERNAL CONTROL FOR THE YEAR ENDED

31 MARCH 2012

MAY 2012

Internal Audit 4th Floor Quattro New Town House Buttermarket Street Warrington WA1 2NH http://w2kwebint/audit

Agenda Item 7

Appendix A

CONTENTS

Section Page

Management Summary 1

My Opinion 3

Audit Outcomes 2011/12 7

Appendices

1 Performance Against Plan 11

2 Assurance Opinions 15

Agenda Item 7

Appendix A

May 2012 1 HIA Opinion 2011-12

Management Summary CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006 (‘the Code’). In accordance with the CIPFA Code I am required to provide an opinion, based upon the work I have performed, on the overall adequacy and effectiveness of the organisation’s risk management, control and governance processes (i.e. the organisation’s system of internal control). The CIPFA Statement on the role of the Head of Internal Audit (HIA) in Local Government issued during 2010 noted that the Head of Internal Audit in a local authority plays a critical role in delivering the authority’s strategic objectives by:

• championing best practice in governance, objectively assessing the adequacy of governance and management of existing risks, commenting on responses to emerging risks and proposed developments; and

• giving an objective and evidence based opinion on all aspects of governance, risk

management and internal control. Head of Internal Audit Opinion My overall opinion is that: Substantial assurance can be given that there is a generally sound system of internal control, designed to meet the Council’s objectives, and that controls are generally being applied consistently. However, some weakness in the design and/or inconsistent application of controls, put the achievement of particular objectives at risk.

Basis of the Opinion My opinion has been based on:

• our assessment against the Code of Corporate Governance; • our assessment of the risk management arrangements and the framework of

assurance; and • the outcomes of our risk-based assignments.

Code of Corporate Governance A revised Code of Corporate Governance was presented to the Audit and Corporate Governance Committee in April 2011 which incorporated the governance requirements of the 2010 CIPFA statement on the: Role of the Chief Financial Officer in Local Government. A self assessment against the code has been undertaken during 2011/12 by members of the Assistant Chief Executive’s Directorate management team with input from members of the officer Governance Group, and internal audit have reviewed the assessment. Areas for

Agenda Item 7

Appendix A


development have been identified and the officer Governance Group maintain a comprehensive improvement plan to address required action. Risk Management Arrangements The review identified that for 2011/2 the Strategic Risk Register was populated with risks to the achievement of the Council’s corporate objectives. All risks are categorised and allocated to a responsible Executive Director. Risks are categorised under the following areas:

• Financial risks • Governance/organisational risks • Information Management & Technology risks • Workforce risks

The Strategic Risk Register was developed during the year to include emerging risks such as the impact of academy schools. The register is reviewed regularly by the Strategic Management Board. The Strategic Risk Register will be developed further for 2012/13 to link into the Council’s corporate objectives; to further identify key controls; and to provide key assurances for each of the risks noted. Framework of Assurance The officer Governance Group met regularly during 2011/12, using the comprehensive framework of assurance to demonstrate how assurance is provided to the Audit and Corporate Governance Committee and the Strategic Management Board. A forward workplan is in place which requires regular assurances to be provided to the Group on the risks in the Strategic Risk Register. Risk Based Assignments Arising from the agreed plan of work a total of 47 reports, action plans and memos have been issued. All of the work undertaken contributes to my overall opinion on the control environment; 27 of the reports issued contained a formal assurance opinion and have informed the opinion in this report as noted in the graph below. The graph illustrates a continued robust control environment and compared to 2010/11 fewer reports carry an overall ‘minimal’ assurance opinion.

Agenda Item 7

Appendix A


Audit Opinions for Reports Issued

9

3

18

19

2

4

3

1

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10/11

11/12

Year

Percentage of reports (number of reports included in chart)

High Substantial Limited Minimal

Agenda Item 7

Appendix A


My Opinion HEAD OF INTERNAL AUDIT OPINION ON THE EFFECTIVENESS OF THE SYSTEM OF INTERNAL CONTROL AT WARRINGTON BOROUGH COUNCIL FOR THE YEAR ENDED 31 MARCH 2012 Roles and Responsibilities The Council is collectively accountable for maintaining a sound system of internal control and is responsible for putting in place arrangements for gaining assurance about the effectiveness of that overall system. The Annual Governance Statement (AGS) is an annual statement by the Council setting out: how the responsibilities of the Council are discharged with regard to maintaining a sound

system of internal control that supports the achievement of policies, aims and objectives; the purpose of the governance arrangements as evidenced by a description of the risk

management and review processes; and the conduct and results of the review of the effectiveness of the system of internal control

including any disclosures of significant control failures together with assurances that actions are or will be taken where appropriate to address issues arising.

The Council’s Annual Governance Statement should bring together all of the evidence required to support the statement on internal control requirements. In accordance with the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006 (‘the Code’), the role of the Head of Internal Audit (HIA) is required to provide an annual opinion, based upon (and limited to) the work performed, on the overall adequacy and effectiveness of the organisation’s risk management, control and governance processes (i.e. the organisation’s system of internal control). This is achieved through a risk based plan of work, agreed with management and approved by the Audit and Corporate Governance Committee, which should provide a reasonable level of assurance, subject to the inherent limitations described below. The opinion does not imply that internal audit have reviewed all risks and assurances relating to the Council. The opinion is substantially derived from the conduct of risk based plans generated from a robust and organisation wide framework of assurance. As such, it is one component that the Council takes into account in compiling its Annual Governance Statement. This Head of Internal Audit Opinion should be taken into account by the Council when it is agreeing its Annual Governance Statement. In particular, apart from the overall opinion, where ‘Limited’ or ‘Minimal’ assurance opinions have been issued against individual audits, then the Council should assess whether or not the sources of those opinions necessitate the need for a disclosure of a significant issue. The definition of a significant issue is contained within guidance on the Annual Governance Statement. Head of Internal Audit Opinion The purpose of my annual Head of Internal Audit Opinion is to contribute to the assurances available to the Council which underpin the Council’s own assessment of the effectiveness

Agenda Item 7

Appendix A


of the organisation’s governance arrangements and system of internal control. This opinion will in turn assist the Council in the completion of its Annual Governance Statement. My opinion is set out as follows: Overall opinion; Basis for the opinion; Commentary. Overall Opinion My overall opinion is that: Substantial assurance can be given that there is a generally sound system of internal control, designed to meet the Council’s objectives, and that controls are generally being applied consistently. However, some weakness in the design and/or inconsistent application of controls, put the achievement of particular objectives at risk.

Basis of the Opinion The basis for forming my opinion is as follows: an assessment of the design and operation of the Code of Corporate Governance and

underpinning processes; an assessment of the risk management arrangements and the framework of assurance;

and an assessment of the range of individual opinions arising from risk based audit

assignments, contained within the internal audit risk based plan that have been reported throughout the year. This assessment has taken account of the relative materiality of these areas and management’s progress in respect of addressing control weaknesses.

The design and operation of the Code of Corporate Governance and associated processes An assessment against the Code of Corporate Governance was undertaken by Internal Audit. Overall design of controls was seen to be satisfactory and there is a comprehensive action plan in place, maintained by the officer Governance Group, to address required action to improve governance processes. This will be carried forward and included in the workplan for the group for 2012/13. Governance structures have been subject to review during 2011/12 and the results of the review have been presented to the Audit and Corporate Governance Committee at their meetings in December 2011 and March 2012. Forward plans for Council meetings and Committee meetings are in place, and are subject to regular review. Comprehensive minutes are in place and clear templates are used for reports to Council and Committees that demonstrate that risks and equality and diversity issues have been considered. ICT Governance Internal Audit have worked with ICT managers during 2011/12 to map assurances for all system areas. Management of ICT risks and ICT security incidents was seen to be robust, review of the ICT risk register and issues log indicated very comprehensive recording of risks with a number of risks noted, including plans for acting on the identified risks.

Agenda Item 7

Appendix A


Discussions with the Chief Officer, Customer Access & Technology and attendance at the officer Governance Group have shown that a strong focus has been continued by the Group during 2011/12 to obtain assurance around ICT, this will be carried forward into the workplan for the officer Governance Group in 2012/13. The Internal Audit report in relation to Disaster Recovery carried a minimal assurance opinion and contained a number of critical priority recommendations. The issues need to be assessed in relation to their wider impact on the Council’s critical ICT systems and this work is underway by the Council. Follow up work and a wider review of Business Continuity will be undertaken by Internal Audit during 2012/13. Information Governance Information governance has also been seen to be a continued key focus of the officer Governance Group and the Information Governance Group during 2011/12. An internal audit review during 2011/12 noted that significant progress had been made in establishing an information governance framework. A ‘Limited’ assurance opinion was provided overall which reflected the fact that although a great deal of work has been undertaken to establish the framework and elements such as data breach reporting, data protection, and data sharing, there is still a significant amount of work required to embed this approach fully. The design and operation of the Risk Management arrangements and the framework of assurance The Strategic Risk Register is intended to be a critical means by which the Council assures itself that risks to its corporate objectives are being managed. As such it is also central to the methodology by which the Council conducts its assessment of its governance arrangements and its review of the system of internal control. The Audit and Corporate Governance Committee were presented with the Strategic Risk Register in September 2011 and April 2012. The Strategic Risk Register included a summary of all risks from 2010/11 together with new risks added during 2011/12. The register showed clearly the movement of the risks, i.e. if the risk had been closed or merged with another risk. Discussion at the April meeting included a view of the risks that should be carried forward to the 2012/13 Register. The Strategic Management Board (SMB) received the Strategic Risk Register on a quarterly basis during 2011/12. It was also noted that SMB regularly discuss the key risks on the register and that they receive regular updates from the officer Governance Group, Directorate management teams and other service specific reports. Regular reports are presented including finance and activity reports and performance management reports that highlight key risks to the achievement of the Council’s corporate objectives. The Risk Management policy is currently being revised and notes that the Strategic Risk Register should be received by the Executive Board. The register was presented to the Executive Board during 2011/12, and it is intended that this will be presented to an early meeting in the 2012/13 municipal year, to enable the Executive Board to comment on the risks in the register. The Executive Board reviewed risks quarterly as part of the performance reports.

Agenda Item 7

Appendix A


The range of individual opinions arising from risk-based audit assignments contained within the internal audit plan that have been reported throughout the year. This element of the opinion is based on an assessment of the range of individual opinions arising from risk based audit assignments, contained within the internal audit plan that have been reported throughout the year. On 20th April 2011 the annual Internal Audit Plan was agreed by the Audit and Corporate Governance Committee. During the year any necessary changes to the plan were reported to, and agreed by, the Audit and Corporate Governance Committee. Arising from the agreed plan of work a total of 47 reports, action plans and memos have been issued. All of the work undertaken contributes to my overall opinion on the control environment; 27 of the reports issued contained a formal assurance opinion and have informed the opinion in this report. This assessment has taken account of the relative materiality of these areas and management’s progress in respect of addressing control weaknesses. The outcomes section of this report and Appendix 1 gives fuller details of: performance against plan; unplanned work undertaken; key points arising where our overall assurance opinion was ‘limited’ or ‘minimal’; and follow up work undertaken. Fundamental Financial Systems The Internal Audit plan included reviews of the fundamental financial systems in 2011/12. This was the 2nd year of the accounting system SAP and controls in the system continued to be assessed. During 2011/12, a significant amount of audit resource has been committed to undertake detailed testing of transactions to support the work of External Audit in providing an opinion on the financial statements. This included testing relating to both 2010/11 and 2011/12, with a key focus on Payroll transactions. The level of testing was based on the Audit Commission’s perceived level of risk within the SAP system following the reported SAP security issues in 2010/11. Whilst all audit outcomes have contributed to the overall opinion, the table shows those audits and their outcomes that I have considered particularly relevant in determining my overall opinion: Assurance Opinion

Min

imal

Lim

ited

Siub

stan

tiial

Hig

h

Audit

Disaster Recovery Information Governance Coroners Children with Disability Service Governance and Risk Management HR Processes* Recruitment and Appointments Accounts Payable Procurement and Ordering systems* Procurement / Contracts Treasury Management* * Report at draft stage

Agenda Item 7

Appendix A


Definition of opinions at Appendix 2


Audit Outcomes 2011/12 Assurances Issued During 2011/12 The schedule below notes key points arising for those reports containing ‘Limited’ or ‘Minimal’ assurance. In all cases, unless indicated otherwise, management action to address reported weaknesses was agreed. Overall Minimal Assurance Report Ref

11/12 Subject Key Actions Agreed

AW 026a Disaster Recovery • Strategy for ICT DR to be prepared and aligned with Business Continuity Plans

• Business critical ICT systems to be agreed by SMB • Decision on utilisation of the second data centre will be

made based on agreed priorities • Assessment of the flood risk to be undertaken at both data

centres

Overall Limited Assurance Report Ref

11/12 Subject Key Actions Agreed

AW026b Information Governance

• Awareness raising for staff of the relevant information governance policies

• Programme of training to be developed and rolled out • Structures in place for dealing with information

governance matters to be reviewed and SIRO review of data breach decisions

• The SMB approved data protection policy be communicated throughout the Council and available to view on both the intranet and internet

ACE201 Coroners • Reconciliations and checks on the Imprest account are undertaken

• Witness expenses paid via BACS • SAP used for ordering goods and for claiming expenses • Temporary staff now paid via the payroll system • Procurement processes reviewed

CYP103 Procedures and Financial Controls in the Children with Disability Service

• Documented procedures developed • Documentary evidence to be retained to support CareFirst

and Civica systems assessment and service recording processes

• Additional capacity to address potential staff resource issues in the Occupational Therapy service.

CYP202 Pupil Referral Unit • Development of formal framework and guidelines for administration of finances.

• Supporting documentation and appropriate checks for payments for goods and services

• Improved asset management and information security arrangements


Additional Work during 2011/12 Additional work by Internal Audit during the year has included involvement in investigation work and a separate programme of work for counter fraud, including policy development and awareness raising. Work on counter fraud has been reported separately in an annual report to the Audit and Corporate Governance Committee. Work has also included the following: Revision of Financial and Contract Regulations A review was completed of the regulations and the revised versions were approved by Full Council in March 2012. Unplanned Audits

• IOCCO Inspection • Potential data loss

Investigations were undertaken during the year in the above areas, details will be included in the separate annual report on anti fraud bribery and corruption. Schools Work A comprehensive programme of schools audits was undertaken with visits to 13 schools. which resulted in 2 high assurance opinions, 10 substantial opinions and 1 minimal assurance opinion. A separate annual report has been produced for the schools work. Other Work The internal audit team’s resources have been applied in several other respects:

• support to the Audit and Corporate Governance Committee and the officer Governance Group;

• attendance at the SAP Governance Group; • attendance at regular meetings of the Corporate Risk and Business Continuity

Group; • attendance at regular meetings with the Chief Finance Officer; • attendance at the accounts closure group meetings; • attendance at the Strategic Procurement Panel meetings; • provision of risk management training to officers and members; • maintenance of the authorised signatory list; • provision of ad-hoc advice; • annual planning and reporting; • collation of evidence and co-ordination of the preparation of the 2011/12 Annual

Governance statement; and • external work Golden Gates Housing.


Performance Indicators The table below details the key performance measures relating to Internal Audit and actual performance for 2011/12

Ref Indicator

Target

% Achievement

% FIN022 Final reports issued within 25 working

days of completion of fieldwork 95 75

FIN025 % of audit plan completed 90 77 % satisfaction with the audit service 90 96 % compliance Cipfa Code of Practice 100 98

For the final reports that were not issued within 25 days of completion of the fieldwork, the average delay was a further 25 working days, mainly attributable to delayed responses from managers to the draft reports. Completion of the audit plan for 2011/12 was impacted by the detailed testing of transactions to support the work of External Audit; time spent on investigations; and follow up of previous reports. 15% of the audit plan from 2011/12 is currently being finalised, and 5% has been carried forward into 2012/13. Summaries of the post audit feedback forms indicate an overall satisfaction rate of 96% with the audit service, with 86% of respondents noting that they were ‘very satisfied‘ with the service provided. Compliance with the CIPFA code of practice for Internal Audit in local government An assessment was undertaken by the Head of Internal Audit and reported to the Audit and Corporate Governance Committee in April 2012. The assessment indicated 98% compliance with the CIPFA code. The areas for development are in formalising protocols and working relationships with other regulatory and inspection agencies that report to the Council. A self assessment has also been undertaken against the CIPFA Statement on the role of the Head of Internal Audit (HIA) in Local Government issued during 2010. The paper was presented to the Audit and Corporate Governance Committee in February 2012 together with an assessment of compliance. Follow up Internal Audit maintained the follow up procedure whereby a summary of recommendations made for each report is provided for the Audit and Corporate Governance Committee. This includes: the number of recommendations made for each report across Critical, High, Medium and

Low categories; the number of recommendations implemented by the due date; and the number of recommendations not implemented by the due date with reasons. Where there is a failure to implement agreed recommendations by the due date without any justification for not doing so a formal process of notification to the Chief Finance Officer is made followed by referral to the Audit and Corporate Governance Committee.


Carefirst Internal Audit performed follow up work during the year on the 2010/11 internal audit report covering the finance systems and financial management arrangements in Adult Services. The initial review covered payments procedures and contained a ‘minimal’ assurance opinion. The follow up work and further internal audit reviews noted the action taken to implement the recommendations in the report. Further audit work was undertaken to review the plans to implement the replacement of the system which records service packages and client invoicing costs and a detailed action plan was produced to assist with the system development. SAP Security The recommendations in the 2010/11 SAP security report have been subject to follow up by Internal Audit in March 2012. The recommendations have been addressed by the Chief Officer, Customer Access & Technology, and internal audit follow up work confirmed that SAP high level access has been secured and external access has been closed down. Access to the SAP ‘Production’ system has been restricted and staff with high level access have been reduced. The restriction of access will provide for a more robust control environment. SAP passwords are now aligned with Active Directory security settings, and a process for implementing complex passwords has commenced; once implemented this will provide further control, over the system. Planning Follow up work by Internal Audit in March 2012 indicated that four of the recommendations from the internal audit report have been implemented fully and the remaining four recommendations have been addressed partially and are being progressed. Accounts Receivable Follow up work by Internal Audit in May 2012 indicated that recommendations have been addressed by the Revenues Manager, and the SAP system issues have been addressed by the Chief Officer, Customer Access & Technology. Eleven of the recommendations from the internal audit report have been implemented fully and the remaining three recommendations have been addressed partially and are being progressed. Data Quality Work performed as part of the Performance Framework review indicated that a well designed framework is in place. Action was agreed in the areas included in the review to further improve controls around data quality. Working with External Audit As both our plans are risk-based the need for close links with External Audit continues to be important. During the year we have liaised with External Audit to ensure that our two resources avoid unnecessary duplication. Close links with External Audit have been evidenced by: provision of our plan to them for comment; sharing of our reports and working papers; and local progress meetings on a regular basis. Working relationships Internal Audit have continued to enjoy positive working relationships with staff at all levels of the Council. This assistance is acknowledged and welcomed.

Appendix 1


PROGRESS AGAINST 2011/12 PLAN

On 20 April 2011 the Audit & Corporate Governance Committee agreed the Internal Audit plan for the year. The table below provides details of the work undertaken in accordance with the plan. The reviews highlighted in grey are those that have been used to inform the Head of Audit Opinion.

Audit Title Actual Start Date

Actual Start Date Actual Final Report Date

Assurance Opinion

Comments

ASSISTANT CHIEF EXECUTIVES Registrars Q1 June 11 9/1/12 High Final memo issued Coroners Q1 June 11 4/1/12 Limited Final Report issued Election expenses Q1 July 11 Oct 11 Substantial Final Report issued Balance sheet data transfer Q1 April 11 13/5/11 - Final report issued Procurement and Ordering systems Q2 Aug 11 Apr 12 Substantial Draft report issued Financial Performance / budgetary control Q2 Dec 11 - - Follow up work undertaken and

detailed testing to support the follow up. TOR for 12/13 review issued and agreed due to start Jun 12.

Accounts Payable Q2 Sep 11 Mar 12 Substantial Final report issued Accounts receivable substantive testing (10/11)

Q2 Sep 11 Sep 11 - Work complete and passed to Audit Commission

Accounts Receivable Q4 April 12 Jun 12 - Follow up of 10/11 review and testing undertaken.

Financial and Contract Regulations Q2 Aug 11 Mar 12 - Finalised version to full Council in March ‘12

Council tax & NDR c/f to 12/13 Treasury management Q4 April 12 Substantial Report in draft Housing and council tax benefits Q4 May 12 In progress Post Implementation Review SAP Q3 - - - Attendance at SAP governance group

and user groups Financial accounting system Q4 Mar 12 In progress. Testing limited to journal

transactions in agreement with External Audit

Fixed asset register and capital acctg Q4 - - - Planned to commence in June 2012 to support closure of accounts.

Detailed testing to support XA 11/12

Q4 Dec 11 - - In progress to support closure of accounts.

Appendix 1




Assurance Opinion

Comments

AUTHORITY WIDE Corporate Governance Q2 Sep 11 Substantial Report in draft Risk Management arrangements Q2 Sep 11 Substantial Report in draft Data Quality and Management Information Q3 Oct 11 Mar 12 Substantial Final report issued - substantial

opinion on the performance framework Information Governance Q4 Dec 11 May 12

Limited Final report issued

Fraud - NFI Q2 April 11 - - Ongoing review of 2010-11 data matches. Data uploaded for Council Tax Single Person Discount matches to Electoral Register. Matches received – and investigation undertaken.

Anti-Fraud & Corruption: Bribery and Corruption Client Finances Review

Q2 Q4

July 11 Mar 12

Jan 12 May 12

Substantial

-

Final issued Establishment action plans and summary briefing note issued

Grant Auditing: - bus service operators grant - contaminated land grant - play grant

Q2 All grants signed off Q1 Q2

June 11 Aug 11

13/6/11 22/9/11

- -

Grant claim signed off Grant claim signed off

Q2 Sep 11 Nov 11 - Grant claim signed off

Value for Money - - - - Work completed: - Accounts payable - VAT issues

CHILDREN AND YOUNG PEOPLE Children with Disability Service Q1 Jul 11 21/9/11 Limited Final report issued Out of Borough SEN (inc c/f from 10/11) Q1 Jul 11 Jan 12 Substantial Final Report issued Pupil Referral Unit (c/f from 10/11) Q2 Sep 11 Feb 12 Limited Final Report issued Carefirst Q3 Oct 11 Jan 12 Substantial Final Report issued – joint review with

Safeguarding Safeguarding & looked after children Q3 Nov 11 Jan 12 Substantial Final Report issued – joint review with

Carefirst Transition Arrangements – disabled young people

Joint review with N&C. C/f to 2012/13

Preventative and Family Support Services C/f to 12/13

Appendix 1




Assurance Opinion

Comments

ENVIRONMENT AND REGENERATION Contact Warrington Q1 June 11 Report being drafted Procurement / Contracts Q1 June 11 Substantial Draft Report issued Income Generation – fees and permits - Crematorium fees

Q2 June 11 10/10/11 Substantial Final report issued

Carbon Reduction Commitment Q2 August 11 31/8/11 - Memo issued - audit of evidence pack Transformation of Services / Realisation of cost savings

Q4 Jun 12 Project work in progress

Combined Regulatory Services Changes not going ahead Building Control Q3 May 12 In progress IM&T Disaster Recovery Q3 December 11 May 12 Minimal Final report issued Walton Hall Q4 Jun 12 In progress EDRM system System not going ahead CONTRACT Orford Park (10/11 review) 10/11 Q4 Apr 11 Jul 11 Substantial Final report issued Disabled adaptations to private housing Q3 Oct 11 3/11/11 High Final report issued Solar pV Panels Q3 Oct 11 - - Memo issued Bridge Street Development Q3 Nov 11 May 12 Substantial Final report issued EXTERNAL Burtonwood and Westbrook Parish Council Q1 June 2011 - - Sign off return to support Statement on

Internal Control NEIGHBOURHOOD AND COMMUNITY Commissioning 3rd and voluntary sector Q2 Jul 11 9/9/11 High Final report issued Neighbourhood working

Request to delay review to 12/13 and replace with review of transfer of assets to community

Community Asset Transfer Q2 Jul 11 Mar 12 - Interim report issued Carefirst Q2 July 11 Jan 12 - Final report issued Learning Disabilities and Safeguarding Q2 June 11 Dec 11 Substantial Final report issued Personalisation and personal budgets Q3 Oct 11 Substantial Draft report issued Health and Wellbeing Board Watching Brief C/F to 12/13 Commissioning Q4 - - - Workshops undertaken Contract Management Q4 Apr 12 In progress Fordton Leisure Centre Q4 May 12 In progress

Appendix 1




Assurance Opinion

Comments

Transition arrangements c/f to 2012/13

PEOPLE AND IMPROVEMENT Payroll substantive testing 2010/2011 Q2 Jun 11 - Reported findings to Audit

Commission Sep 11 Payments to Staff (schools payroll) Q4 Nov 11 In progress HR Processes Q3 Nov 11 Substantial Report in draft Recruitment and Appointments Q3 Nov 11 Substantial Draft report issued Transformation of Services Q4 Apr 12 - Due to start - Project work

Audit Title Planned Start Quarter


Assurance Opinion

Comments

Children and Young People – Schools Cardinal Newman Catholic HS Q1 June 11 20/7/11 Substantial Final Report Issued Lysander Community High School Q1 Apr 11 5/7/11 Substantial Final Report Issued

Further review planned June 2012 Stockton Heath Primary School Q2 Oct 11 Dec 11 Minimal Final issued Grappenhall Hall Special School Q2 Sep 11 Dec 11 Substantial Final issued Evelyn Street Primary School Q2 Oct 11 Dec 11 Substantial Final issued Oughtrington Primary School Q2 Sep 11 1/11/11 Substantial Final issued St Margaret’s CE Voluntary Aided Primary School

Q3 Oct 11 Dec 11 Substantial Final issued

Oakwood Avenue Primary School Q3 Oct 11 Dec 11 Substantial Final issued Cinnamon Brow CofE PS Q4 23/1/12 Mar 12 Substantial Final issued

St Augustine’s Catholic Primary School Q3 23/11/11 19/12/11 High Final Issued St Benedict’s Catholic Primary School Q3 28/11/11 5/1/12 High Final Issued St Elphin’s (Fairfield) CE Voluntary Aided Primary School

Q3 5/12/11 31/1/12 Substantial

Final Issued

St Lewis’ Catholic Primary School Q3 16/11/11 16/1/12 Substantial Final Issued


Appendix 2

Overall Audit Opinion/Recommendation Definitions

We have four categories by which we classify our overall audit opinion and our opinion of the

individual key control areas. They are defined as follows:

High Assurance All key controls are being applied consistently and effectively. This

means that all the key risks in the terms of reference are being

properly managed. No critical or high recommendations made.

Substantial Assurance Key controls exist but there is some inconsistency in their

application. This means that a few of the key risks in the terms of

reference may need attention. No critical recommendations made.

Limited Assurance Some key controls do not exist and/or are not applied consistently

or effectively. This means that a reasonable number of the key

risks in the terms of reference need attention

Minimal Assurance

A significant number of key controls do not exist and/or there are

major omissions in the application of key controls. This means that

a significant number of risks in the terms of reference are not being

properly managed.

Agenda Item 7

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 28 JUNE 2012 Report of the: Chief Internal Auditor Report Author: Jean Gleave, Chief Internal Auditor Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: INTERNAL AUDIT ANNUAL REPORT 1. PURPOSE OF THE REPORT 1.1 This report presents the annual report from the Chief Internal Auditor

for the work performed by Internal Audit during 2011/2012. In accordance with the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006, I am required to provide an opinion, based upon the work performed, on the overall adequacy and effectiveness of the organisation’s risk management, control and governance processes (i.e. the organisation’s system of internal control).

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. BACKGROUND 3.1 The internal audit plan is based on risks contained in the Strategic risk

register and the Directorate risk register. The work aims to provide assurance to the Executive Directors on systems and controls in place that assist the Directorates in meeting their objectives. The work allows the Chief Internal Auditor to form an overall opinion on the Governance and Risk Management arrangements in the Council, and the effectiveness of the Council’s internal control systems. The opinion is then used to support the Council’s Annual Governance Statement.

3.2 From the internal audit plan, reports issued during 2011/12 carry an overall assurance opinion that has formed the basis of the Head of Internal Audit Opinion at the end of the financial year. Reports carrying an overall ‘Limited’ or ‘Minimal’ assurance opinion are reported to the Audit and Corporate Governance Committee as part of the internal audit progress report along with any high priority recommendations that are outstanding.

3.3 The annual report is attached at Appendix A, and the detailed

programme of work achieved compared with the approved plan is

Agenda Item 7

detailed in Appendix 1 to the attached annual report. Definitions of assurance are noted at Appendix 2 to the attached annual report.


4.1 There are no additional resource implications arising from this report.

5. RISK ASSESSMENT 5.1 The work undertaken by Internal Audit provides assurance that the

Council has effective controls in place to manage and minimise the risks that would prevent it from achieving its objectives.


6.1 The work required to deliver the Audit Services plan is identified

through a regular risk assessment process. This is carried out using an established methodology that is designed to show that all potential audit areas are considered fairly. The Equality Impact Assessment for Audit has been reviewed and updated.

7. CONSULTATION

N/A

8. REASONS FOR RECOMMENDATIONS 8.1 To ensure that the Council maintains an effective framework of

corporate governance. 8.2 To meet the Council’s statutory obligations under the Accounts and

Audit Regulations (England) 2011. 9. RECOMMENDATION 9.1 That the Audit and Corporate Governance Committee considers and

comments upon the internal audit annual report as part of its monitoring role.

Agenda Item 7


• Internal Audit working papers


Name E-mail Telephone Jean Gleave Chief Internal Auditor





19/6/12

SMB 19/6/12 Assistant Chief Executive Katherine

Fairclough 13/6/12



2011-12 (Draft – Pre Audit – For Members)

Statement of Accounts

DRAFT

Contents (page numbers to be added to final version) Explanatory foreword Statement of responsibilities Movement in reserves statement Comprehensive income and expenditure statement Balance sheet Cash flow statement Note 1 Statement of Accounting policies Note 2 Accounting standards issued, not yet adopted Note 3 Critical judgements in applying accounting policies Note 4 Assumptions made about the future and other major sources of estimation uncertainty Note 5 Material items of income and expense Note 6 Events after the balance sheet date Note 7 Adjustments between accounting basis and funding basis under regulations Note 8 Transfers to/from earmarked reserves Note 9 Other operating expenditure Note 10 Financing and investment income and expenditure Note 11 Taxation and non-specific grant income Note 12 Property, plant and equipment Note 13 Investment properties Note 14 Intangible assets Note 15 Financial instruments Note 16 Inventories Note 17 Construction contracts Note 18 Debtors Note 19 Cash and cash equivalents Note 20 Assets held for sale Note 21 Creditors Note 22 Provisions Note 23 Usable reserves Note 24 Unusable reserves Note 25 Cash Flow Statement - Operating activities Note 26 Cash Flow Statement - Investing activities Note 27 Cash Flow Statement - Financing activities Note 28 Amounts reported for resource allocation decisions Note 29 Acquired and discontinued operations Note 30 Trading operations Note 31 Agency services Note 32 Road charging schemes Note 33 Pooled budgets Note 34 Members’ allowances Note 35 Officers’ remuneration Note 36 External audit costs Note 37 Dedicated schools grant Note 38 Grant income

Note 39 Related parties Note 40 Capital expenditure and capital financing Note 41 Leases Note 42 PFI and similar contracts Note 43 Impairment losses Note 44 Capitalisation of borrowing costs Note 45 Termination benefits Note 46 Defined contribution pension schemes Note 47 Defined benefit pension schemes Note 48 Contingent liabilities Note 49 Contingent assets Note 50 Nature and extent of risks arising from financial instruments Note 51 Landfill allowance trading scheme (LATS) Note 52 Heritage assets Note 53 Heritage assets: Five Year Summary of Transactions Note 54 Heritage assets: further information on the museum’s collections Note 55 Heritage assets: Change in accounting policy Note 56 Trust funds Note 57 Prior Period Adjustment Housing revenue account Collection fund Group accounts Glossary

Explanatory Foreword Introduction The Statement of Accounts summarises the financial performance of the Council for the year ended 31 March 2012. The foreword gives a brief summary of the Council’s overall financial results for 2011/12, the type of expenditure incurred and the funds used to pay for it. It also highlights the main influences affecting the accounts and assists in the interpretation of the main accounting statements.

Explanation of the Statements

The full statement of accounts consist of: The Statement of Responsibilities for the Statement of Accounts This identifies the officer responsible for the proper administration of the Council’s financial affairs and sets out their and the Council’s responsibilities in respect of the Statement of Accounts. Movement in Reserves Statement This shows the movement in year on the different reserves held by the Council, identified between usable reserves and unusable reserves. The statement shows that in 2011/12 usable reserves (cash backed reserves) increased by £2.904m and unusable reserves (accountancy adjustments) reduced by £18.253m. The overall movement on the Council’s 2011/12 reserves was a reduction of £15.349m. Comprehensive Income and Expenditure Statement This identifies the income and expenditure on all services the Council provides and brings together all the recognised gains and losses of the Authority during the period 1 April 2011 to 31 March 2012. The statement shows the 2011/12 cost of Council Services was £175.187m and the Council recorded a deficit on the provision of its services of £15.350m. This deficit represents the amount the Council’s net worth has fallen over the year. This is shown on the Balance Sheet as a reduction in net assets less liabilities between 31st March 2011 and 31st March 2012. In addition to the in year underspend of £0.306m the main factors which have contributed to this reduction in the net worth of the Council:

• Charging of changes to the pension deficit to the Comprehensive

Income and Expenditure Statement (CIES) • The CIES incurs a charge for the depreciation of fixed assets • The CIES also recognises the revaluation on non current assets

The Balance Sheet This statement sets out the financial position of the Council on 31 March 2012. It incorporates the funds of the Council, both Capital and Revenue. The headline figures from the Balance Sheet are:

• Long Term Assets increased by £32.272m in 2011/12 and this is mainly due to the revaluation of schools buildings in 2011/12

• The Council’s Net Pension Liability at 31 March 2012 was £127.498m, an increase of £39.421m on 2011/12. The increase in the liability was due to the actuary changing assumptions that the value of the pension fund is based on

• Usable Reserves increased by £2.904m • Provisions decreased by £0.371m • The Net Worth of the Council reduced by £15.349m in 2011/12 to

£331.020m at 31 March 2012 which was mainly due to the increase in the pension liability

Cash Flow Statement The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the reporting period. It identifies how the Council generates and uses cash and cash equivalents by classifying the cash flows as operating, investing and financing activities. Cash flows from operating activities are a key indicator of how the Council is funded by taxation and grant income, or from services provided by the Council. Investing activities identify how cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital, i.e. borrowing by the Council. The statement shows the Council recorded a cash flow net decrease of £9.684m in 2011/12. This primarily is the result of the Council following the strategy of funding its capital programme from investments instead of borrowing. The Housing Revenue Account (HRA) In November 2010 the Council transferred ownership of its Housing Stock and associated land to Golden Gates Housing Trust under a Large Scale Voluntary Transfer (LSVT). Following the transfer the Council was required to maintain a Housing Revenue Account for a minimum of 12 months afterwards to account for any residual income and expenditure that may be received or incurred. Therefore during 2011/12 the Housing Revenue Account remained operational and the statement and notes are shown in the accounts. At the 31 March 2011, 28 properties remained within the Council's ownership. These properties were transferred to the General Fund on 1 April 2011.

In June 2011 the Council applied to the Department for Communities and Local Government for permission to formally close the HRA as of 31 March 2012, and written approval was received in July 2011. The Collection Fund The Collection Fund is the account into which income due from Council Tax and Business Rates is paid. Money is paid out to Government for Businesses Rates and to the Council, Fire and Police Authorities in respect of amounts required by their budgets for the financial year. A provision is made for uncollectible Council Tax, and any surplus on the accounts is paid over to the Council and it’s preceptors in subsequent years. The Collection Fund recorded a surplus of £0.194m for the year ended 31 March 2012. The Group Accounts The Council is required to prepare Group Accounts where the Council has an interest in subsidiaries, associates and/or jointly controlled entities subject to the consideration of materiality. These statements consolidate the Council’s accounts with those of:

• Warrington Borough Transport (WBT) – In 2011/12 WBT reported a loss of £0.198m.

Segmental Reporting The Comprehensive Income and Expenditure Statement is produced under accounting standards and differs from the financial management reporting the Council uses in year (this is the same for all Councils). The Segmental reporting note (note 28) to the Accounts reconciles the Comprehensive Income and Expenditure Statement with the Council’s internal management accounts reporting format. Notes & Glossary of Terms The accounting arrangements of local government and a large organisation such as the Council are complex. To help understand the accounts the main statements are supported by explanatory notes and a glossary of terms and abbreviations used.

Main Influences on the 2011/12 Accounts The main influences on the 2011/12 have been:

• Economic Conditions • Government Cuts • Revaluation of Assets • Changes in Accounting Policy

Economic Conditions Global economic conditions have influenced the Council’s approach to its Treasury Management activities. Interest rates throughout the year were at unprecedented low levels. This meant the return earned on investments was also very low, as was the rate of interest payable on long loans. Turbulence in the world banking sector increased the risk associated with investing money. These factors contributed to the Council adopting the policy of funding capital expenditure from Council cash balances rather than undertaking new borrowing. The economy has also had a major impact on the Council’s pension liability, which increased by £39.421m in 2011/12 to £127.498m. This was fuelled by changes in actuarial assumptions used to value the pension fund, which were based on a more pessimistic economic outlook than those used in the previous year. The economy declining in 2011/12 and the impact of the Government’s austerity measures has also seen increases in the demand for some Council services. Government Cuts The Government’s Comprehensive Spending review 2010 outlined its policy to make reductions in funding of 28% to Local Government over four financial years from 2011/12 as part of its strategy to reduce the level of national debt. For Local Government these cuts were front loaded in 2011/12 and 2012/13. This resulted in the Council having its Government funding cut by £9.406m (14%) in 2011/12. Revaluation of Assets The Council revalues its property assets on a three year rolling programme. In 2011/12 all the Council Schools were revalued, together with its Private Finance Initiative (PFI) and investment assets. This resulted in the Council’s property portfolio increasing in value by £26.646m. Significant Changes in Accounting Policy The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit (England) Regulations 2011 which require the accounts to be prepared in accordance with proper accounting practices. For 2011/12 the following changes in accounting policies have been adopted:

1. Financial Reporting Standard (FRS) 30 - Heritage Assets. Heritage Assets are tangible assets with historic, artistic, scientific, technological, geographical or environmental qualities that are held and maintained principally for their contribution to knowledge and culture.

This requires that heritage assets are recorded as a separate category on the Balance Sheet for the first time and that there is a restatement of the opening balance sheet at 1 April 2010 to include such assets and to re-state the 2010/11 and 2009/10 accounts. In previous financial years, Heritage Assets were not recognised in the Balance Sheet as there was no requirement to adopt the relevant standard in prior years.

The Council has incorporated £13.260m of Heritage Assets into its Long Term Assets in the 2011/12 Balance Sheet. Detailed information on Heritage Assets is included in Notes 52 to 55 of the accounts.

2. There is a new disclosure requirement in relation to staff exit packages as the 2011/12 Code has introduced a requirement to disclose the number and cost of exit packages agreed in the financial year. The disclosure requires these to be grouped in rising bands of £20,000. Notes 35 & 45 of the accounts set out this information.

3. 2011/12 is the first year that Carbon Reduction Commitment (CRC)

emissions will give rise to a liability to purchase and surrender CRC carbon allowances. The Council has estimated a £0.258m provision for this in its 2011/12 accounts.

4. The definition of what constitutes a related party has changed in 2011/12, in relation to close family members of the person and a revision to the core definition. There is also a change in disclosure with less disclosure being required in respect of central government departments, government agencies, National Health Service bodies and other Local Authorities. These changes are incorporated into note 39 to the accounts.

5. Due to the reintroduction of a previous reporting requirement on Trust Funds the Code now requires that information is included on the nature and amount of Trust Funds and this is presented at Note 56 to the accounts.

Summary of 2011/12 Financial Year Expenditure falls into two broad areas, namely revenue spending (concerning the provision of Council services) and capital spending (the acquisition and improvement of assets).

Revenue Spending (General Fund) in 2011/12 A comparison of budget and expenditure is set out below with the actual spend as reported for each Directorate for 2011/12 as follows:

Directorate

Original Budget

£mMovement

£m

Revised Budget

£m

Actual Spend

£mVariance

£mEnvironment & Regeneration 27.755 4.565 32.320 32.310 -0.010Neighbourhood & Community 71.316 -0.415 70.901 70.855 -0.046Assistant Chief Executive 13.724 -5.030 8.694 7.823 -0.871Children & Young People 38.451 16.433 54.884 54.955 0.071Corporate Financing 3.576 -20.867 -17.291 -16.741 0.550

154.822 -5.314 149.508 149.202 -0.306

The table above shows that the Council recorded a revenue underspend position for 2011/12 of £0.306m. The Council incurred gross revenue expenditure in 2011/12 of £452.939m an analysis of which is given in the charts below:

Where the money was spent (£m)

Employees, £211.866

Supplies and Services, £106.804

Third Party Payments, £19.403

Transfer Payments, £79.053

Support Services, -£0.935

Other, £36.747

The main elements of expenditure are:

• Employees £211.866m – salary costs including teachers • Third Party Payments of £19.403m – including Concessionary Travel,

Golden Gates Housing Management Fee, learning disability expenditure • Transfer Payments of £79.053m – including Housing Benefit, Council

Tax Benefits and Rent Rebates • Supplies of £106.804m – including Social Care costs and IT and

telecoms • Other Operating costs of £35.813m – includes premises costs and

transport costs

Services on which the money was spent (£m)

Assistant Chief Executive, 88.476

Children & Young People, 216.150

Corporate Financing, -13.436

Environment & Regeneration, 62.836

Neighbourhood & Community Services,

99.707

HRA, -0.794

The chart below identifies the sources of Council funding for 2011/12:

Where the money came from (£m)

Council Tax Income, £80.080

NNDR Redistribution, £43.813

Other Non-ringfenced government grants,

£30.225

Dedicated Schools Grant, £141.926

Other Income (net of £4.6m to reserves), £157.201

The main elements of income as shown above are:

• Dedicated Schools Grant £141.926m - a grant paid by the Government that can only be used in support of the schools budget.

• Council Tax £80.080m - this is the council tax collected from local taxpayers.

• NNDR Redistribution £43.813m – the business rates redistributed from Central Government

• Other Non-ring Fenced Grants £30.225m - these are a range of grants from the Government to support general expenditure

• Other Income £157.201m – includes non-government grants, reimbursements, contributions recharges, and is net of contributions to reserves

Capital Spending in 2011/12 The Council spent £42.723m (30% under the in-year Budget Programme) on capital items in 2011/12. The Council set out its 2011/12 Capital Programme in March 2011. The capital programme is revised on a quarterly basis throughout the year to account for slippage and the addition and deletion of schemes from the programme. Based on the December 2011 revision, 70% of the 2011/12 capital budget was spent. The underspend is the result in delays in several projects in 2011/12. The majority of these delayed schemes will be rolled forward into 2012/13. The tables following show an analysis of 2011/12 capital expenditure, funding position and major scheme expenditure: 2011/12 Capital Expenditure Original Revised Actual %

MTFP (Dec) Spend Spent£m £m £m £m %

Children & Young People Directorate 12.567 9.216 8.412 91% 0.804- -9%Neighbourhood & Community Directorate 0.901 0.550 0.482 88% 0.068- -12%Corporate Finance 4.000 - - 0% - -100%People & Improvement Directorate 5.900 8.584 4.203 49% 4.381- -51%Environment & Regeneration Directorate 45.469 32.179 24.318 76% 7.861- -24%Invest to Save Programme 18.300 10.084 5.308 53% 4.776- -47%Total 87.137 60.613 42.723 70% 17.890- -30%

Variance

The Council paid for its capital expenditure from the following sources:

Capital ProgrammeActual

£mCouncil Unsupported Borrowing 15.434 Council Capital Grants and Reserves 23.153 Council Capital Receipts 4.056 Council Revenue Funding 0.080 TOTAL - Capital Funding Plans 42.723 In 2011/12 the majority of borrowing (£11.634m) has been financed from the Council’s own cash and investments rather than taking out external loans. This is in line with the Council’s Treasury Management Strategy. The most significant Capital schemes, which incurred expenditure of £0.5m or more are shown below:

2.3401.861

Local Authority Mortgage Scheme 2.0000.8970.8940.6631.1401.985

11.4701.0490.8681.8630.6130.7791.9182.498

32.840

Major Capital Schemes with Spending over £500,000 £mWorkforce RemodellingGreat Sankey High-6th Form Accommodation & Modernisation

Local Transport Plan - Structural MaintenanceOrford Park Sports VillageDisabled Adaptations to Private HousingGreat Sankey Primary Replacement

Lymm High School - RemodelCulcheth High School Local Transport Plan - BridgesAffordable Housing&Tackling Empty Homes

Solar Panels - Golden Gates Housing Properties

Capitalised Redundancy CostsRavenbank Primary SchoolSchool Capital WorksLocal Transport Plan - Long Lane Project

Capitalisation of Redundancy Costs In March 2011, the Department for Communities and Local Government (DCLG) notified Councils that there was the opportunity to submit requests for a capitalisation direction. The effect of a direction is that specified revenue expenditure is able to be treated as capital expenditure, rather than charging to revenue, it may be funded from capital sources (e.g. borrowing capital receipts, capital grants), thereby increasing a council’s financial flexibility. The Council was awarded two capitalisation directives for pension costs associated with retirements and statutory redundancy costs. In 2011/12 the Council capitalised £2.340m of redundancy costs and £1.861m of pension costs. Acquisition of assets The Council made three property acquisitions totalling £0.230m in 2011/12:

• Land at Sealand Close - £1 • 17 Farnworth Road - £0.105m • 17 Yates Close - £0.124m

Disposal of Assets The Council disposed of assets totalling £0.788m in 2011/12. The major disposals consisted of:

• The Horizon Centre, Loushers Lane - £0.305m • G Block, Culcheth High School - £0.306m • 38 Secker Avenue, Latchford - £0.076m • 54 Statham Avenue - £0.034m

• 80 Gorsey Lane - £0.067m Schools The Council’s expenditure on schools and education is predominantly funded by grant monies provided by the Government through the Dedicated Schools Grant, (DSG), (Sixth form funding derives from a separate, specific funding allocation). The DSG is ring-fenced and can only be used to cover either schools’ expenditure or specific central education services provided by the Council. The Council underspent on its DSG in 2011/12 by £0.098m, mainly as a result of reduced early retirement and long-term sickness costs, which offset increased costs in placing Warrington children in other Councils specialist educational establishments. During the year school reserves increased by £3.126m to a year end balance of £5.080m. The increase was made up of:

• Primary £1.760m • Secondary £0.969m • Special £0.397m

The increase mainly resulted from the inclusion of standards fund grant in school balances due to a change in government funding. Previously standards fund balances were reported separately. Borrowing Facilities At 31 March 2012, the Council's total external deposits with financial institutions amounted to £24.327m (£27.835m at 31 March 2011). At 31 March 2012, the Council had £114.847m of debt outstanding (£112.345m at 31 March 2011), principally used to finance the Council's capital programme. The increase in the level of debt in 2011/12 is mainly due to new loans for the Local Authority Mortgage Scheme (£2m) and for Golden Gates Housing Trust (£1.819m). There have been two loans totalling (£1.333m) which have been repaid to the PWLB during the year. The Council considers this level of borrowing to be prudent with reference to the Capital Financing Requirement (CFR) (as defined in the Prudential Framework for Capital Accounting). The CFR measures the underlying need to borrow to finance capital expenditure and as at 31 March 2012 was £119.503m (£107.280m as at 31 March 2011). Reserves The Council holds both usable (funds available for the Council to use) and unusable reserves (non cash back reserves / accountancy adjustment reserves). The usable reserve balance at 31 March 2012 was £49.335m, an increase of £2.904m over the year.

Significant Provisions Note 22 to the accounts shows that £3.176m of provisions that have been recorded in the accounts. The most significant being:

• £0.675m Redundancy

• £1.287m Insurance Fund

• £0.600m Residential Nursing Contract

Private Finance Initiative (PFI) In 2004 the Council procured and delivered 105 affordable social houses at the former Anson Close and Blenheim Close site under the Private Finance Initiative (PFI). Under the terms of the agreement, the Council is liable to pay a maximum unitary charge of £300,000 per annum (until the year 2034) towards the annual operational cost of the project. Deductions will apply in respect of non-performance by the PFI Contractor. In 2004 the Council also procured and delivered 38 affordable apartments for rent, providing supported housing at the former John Morris House site under the Private Finance Initiative. Under the terms of the agreement the Council is liable to pay a maximum unitary charge of £180,500 per annum (until the year 2038) towards the annual operational cost of the project. Events After the Balance Sheet Date On 18 May 2012 the Council set up a Community Interest Company and a Cultural Trust. Culture Warrington took over the running of Parr Hall, Pyramid and the Museum and LiveWire Warrington took over the running of the Council’s Leisure and Wellbeing Services. The Council entered into 20 property leases with these organisations as a result. This event is recorded in note 6 to the accounts but it is not formally recorded in the accounting statements. Officers’ Remuneration Note 35 to the accounts provide details of the remuneration packages paid to senior officers of the Council.

Pension Reserve The Council’s Balance Sheet includes a net pension liability of £127.498m as at 31 March 2012, an increase of £39.421m. The impact of this liability is that it reduces the net worth of the Council to £127.498m. The increase is principally due to the actuarial financial assumptions at 31 March 2012 being less favourable than they were at 31 March 2011.

The pension liability reflects the fair value of future pension liabilities that have been incurred less the assets that have already been set aside to fund them. Performance In 2011/12 across the Council there were 75 service delivery measures and at the end of the year 68% of these had been achieved or bettered. The Council also recorded a year end underspend of £0.306m. Key Performance Highlights Increasing local procurement spend within Warrington was very successful with the year end position surpassing the 40% target set for 2011/12. On average, households are diverting 44% of the total weight of the household waste they produce into their blue and green recycling, above the all England average and an improvement on the previous year. Crime rates have fallen across all categories, with significant reductions seen in serious acquisitive crime and assault with injury crime figures. The Council’s Health measures have improved on the previous year’s performance. Hospital admissions for alcohol related harm are down from 2,411 to 1,861; smoking cessation has improved from 941 to 1,100; and those participating in leisure, library, sport and physical activities increased by over 80,000. The percentage of Warrington primary schools now judged to be good or better is 73% against a national average of 69%, whilst the percentage judged outstanding is 28% against a national figure of 17%. Future Changes in Local Government Finance Local Government Resource Review In March 2011, the Government announced the Local Government Resource Review (LGRR). The Review was to “consider the way in which Local Authorities are funded, with a view to giving Local Authorities greater financial autonomy and strengthening the incentives to support growth in the private sector and regeneration of local economies’’. The major aim of the LGRR was to return business rates to Local Authority Control. The Government issued some details on the new scheme in May 2012, which incorporated allowing authorities to keep 50% of the business rates they collected with the remaining 50% being allocated via formula grant. Adequate safeguards are to be built into the new system to prevent major swings creating winners and losers. Full details of the new scheme will not be known until the Autumn 2012. Council Tax Localisation

The Government announced in Comprehensive Spending Review 2010 its intention to localise support for Council Tax from 1 April 2013. The main change for the Council is that a grant will be paid to the General Fund to replace the current Council Tax Benefit paid into the Collection Fund, which will only cover around 90% of the current benefits. Local Authorities are expected to implement a local benefits scheme to address the remaining 10%. Technical Reforms of Council Tax Councils from 1 April 2013, under the Local Government Finance Bill 2011 will have the following Council Tax discretion:

• the application of exemptions to Council Tax where, for example, improvement works make the building uninhabitable;

• to introduce an empty homes premium; and • to abolish the second homes discount.

The Council has yet to decide if it will apply local discretion but, if introduced, these measures might increase the level of Council Tax that could be raised. Localism Act The Localism Act received royal assent on 16 November 2011. It was intended to give Councils the freedom and flexibility to be creative and entrepreneurial acting directly in the interest of their communities and in their own financial interest. It included wide ranging changes aimed at empowering communities to have more control and involvement in their local areas, including enabling delivery of services at a grass roots level. The Localism Act gave Councils the following additional extra powers/responsibilities:

• If the Secretary of State considers a proposed Council Tax increase to be excessive the council will have to hold a Council Tax referendum

• General Power of competence – this is a new power that gives Councils

the same broad powers as an individual to do anything unless it is prohibited by statute

• Transfer and delegation of functions to Councils – a Local Authority will be eligible to make an application to take over other local public functions that are a high community priority

• Community right to challenge - this gives voluntary and community groups, Parish Councils and Council employees the right to express an interest in taking over the running of a Council service

• New community rights – this will require the Council to maintain an accurate Register of Assets of Community Value (both in private and

public ownership) and Communities will have the ‘Right to Bid’ to purchase assets included within the list of properties should they become vacant. It is anticipated that these provisions will come into force later in 2012.

• Neighbourhood Planning – there is a new right for local communities to shape new development by coming together to draw up a neighbourhood plan.

Changes to Schools Funding Arrangements Funding for schools and other pupil related services is provided via the Dedicated Schools Grant (DSG). The Government proposes to introduce a new DSG formula from 2013/14 which will provide funding to Councils, maintained schools and Academies, on what it considers to be a fair and transparent basis. The Government are proposing moving to a national schools formula which will have an impact on the role of the Schools Forum going forward. Any variation in DSG funding might also have an adverse impact on the over all funding position of the Council. Academies The government remains committed to the Academies agenda. Although no Warrington Schools transferred to Academy status in 2011/12 a number of High Schools are expected to transfer in 2012/13. The government is currently working on clarifying the funding arrangements of Academies but losses to local authorities are expected and this will be factored into the Council’s Medium Term Financial Plan. Public Health The Government announced in July 2010 the transfer of Public Health Funding from Primary Care Trusts to Local Authorities. This significant change in organisational responsibilities will be delivered at the same time as reductions in total NHS and Local Government funding. On 7 February 2012 the Department of Health has provided the initial baseline allocations for the Council suggesting that from 2013/14 the Council will receive funding of £8.2m to support the commissioning of public health services. Troubled Families The Council have been awarded £1.1m over the next 3 years under the Governments Troubled Families agenda. The Council will work with its partners to develop the initiative so that successful outcomes are jointly achieved. Success will be determined by:

• Getting children back to school • Reducing criminal and anti social behaviour • Getting parents on the road back to work • Reducing the costs to the taxpayer and local authorities

James Review In April 2011 the Government issued, the James Review which made recommendations for changes to Education Capital Funding. However, there has been no major announcement yet on the new way forward on Education capital funding. The Government issued interim capital grant funding for both 2011/12 and 2012/13. It is likely therefore that more substantial changes will be seen from 2013/14 onwards. Future Outlook The Council is facing a series of challenges in the future the most significant of which will undoubtedly be the cuts in grant funding announced in the 2012/2013 Settlement and implied in the Government’s 2010 Comprehensive Spending Review. The budget for 2012/2013 has been set in the context of a council tax freeze and the delivery of £14.094m of savings. In addition the Medium Term Financial Plan highlights the need to £23.114m over the subsequent four years. Work is ongoing to deliver these savings through the Medium Term Financial Planning process. There are many financial risks facing the Council and Local Government in general over the medium term, the main ones being:

• Uncertainty over future Government funding allocations; • The continued freeze in Public Sector pay leads to a risk of industrial

action; • Savings proposals may fail to deliver the required level of savings due to

increased risk of litigation; • The risk that inflation is greater than budgeted; • Interest rates, and therefore interest receipts, will be lower than forecast.

A prudent reserves strategy is vital in these times of austerity. The Chief Finance Officer gives an assurance statement to Council each year in setting the annual budget on the adequacy of the Council’s reserves. In 2011/12 the Council were able to increase their usable reserves by £2.904m and we plan to make a contribution to reserves of £1.8m in 2012/13. In addition, although capital grants have also been severely reduced the Council remains committed to continuing investment in its asset base and is proposing to spend £165.872m over the next three years on capital schemes. There will be an increased emphasis on invest to save schemes and greater joint working with private developers in the funding of the capital programme in future years.

Your Comments The Explanatory Foreword and the Accounts that follow are an important part of the Council’s arrangements for financial management and accountability. A summarised version of the Accounts, which provides a more user-friendly overview of the key figures for 2011/12, will be published in Autumn 2012 following completion of the Accounts Audit. This will be available on the Council’s website and copies will be available in public places after the conclusion of the audit. If you have any comments on any aspect of the Statement of Accounts, please contact Danny Mather, Corporate Finance Manager by e-mail at [email protected] or by phone on 01925 442344. Acknowledgements The production of the Statement of Accounts would not have been possible without the exceptionally hard work of staff across the Council. I would like to express my gratitude to all colleagues, from the finance team and other services, who have assisted in the preparation of this document. Lynton Green CPFA Chief Finance Officer Statement of Responsibilities The Council’s Responsibilities The Council is required to:

• Make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Council, that officer is the Chief Finance Officer

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

• Approve the Statement of Accounts The Chief Finance Officer’s Responsibilities The Chief Finance Officer is responsible for the preparation of the Council’s Statement of Accounts in accordance with proper practices as set out in the


CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code). In preparing this Statement of Accounts, the Chief Finance Officer has:

• Selected suitable accounting policies and then applied them consistently • Made judgements and estimates that were reasonable and prudent • Complied with the Local Authority Code

The Chief Finance 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 The Statement of Accounts gives a true and fair view of the financial position of the Council at 31 March 2012 and its income and expenditure for the year ended 31 March 2012. Signed Dated Lynton Green, Chief Finance Officer

Movement in Reserves Statement for the Year Ended 31 March 2012 This statement shows the movement in the year on the different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the Council’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. 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 dwellings rent setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the council.

General Fund

Balance £000

Earmarked General

Fund Reserves

£000

HRA Balance

£000

Earmarked HRA

Reserves £000

Capital Receipts Reserve

£000

Major Repairs Reserve

£000

Capital Grants

Unapplied £000

Total Usable

Reserves £000

Total Unusable Reserves

£000

Total Reserves

of the Authority

£000Restated Balance as at 1 April 2010 976 23,307 2,421 841 345 1,709 11,859 41,458 379,495 420,953Movement in reserves during the yearSurplus or (deficit) on provision of services 38,357 - (245,580) - - - - (207,223) - (207,223)Surplus or (deficit) on revaluation of non-current assets - - - - - - - - (2,614) (2,614)Actuarial gains or (losses) on pensions reserve - - - - - - - - 135,253 135,253Total Comprehensive Income and Expenditure 38,357 - (245,580) - - - - (207,223) 132,639 (74,584)Adjustments between accounting basis & funding basis under regulations (35,293) - 245,466 - 149 392 1,482 212,196 (212,196) -Net Increase/Decrease before Transfers to Earmarked Reserves 3,064 - (114) - 149 392 1,482 4,973 (79,557) (74,584)Transfers to or from earmarked reserves (3,064) 2,779 (1) 1 285 - - - - -Increase/Decrease in Year - 2,779 (115) 1 434 392 1,482 4,973 (79,557) (74,584)Restated Balance as at 31 March 2011 976 26,086 2,306 842 779 2,101 13,341 46,431 299,938 346,369Movement in reserves during the yearSurplus or (deficit) on provision of services (3,089) - 769 - - - - (2,320) - (2,320)Surplus or (deficit) on revaluation of non-current assets - - - - - - - - 28,986 28,986Actuarial gains or (losses) on pensions reserve - - - - - - - - (42,015) (42,015)Total Comprehensive Income and Expenditure (3,089) - 769 - - - - (2,320) (13,029) (15,349)Adjustments between accounting basis & funding basis under regulations 8,007 - 25 - (779) (80) (1,949) 5,224 (5,224) -Net Increase/Decrease before Transfers to Earmarked Reserves 4,918 - 794 - (779) (80) (1,949) 2,904 (18,253) (15,349)Transfers to or from earmarked reserves (4,612) 4,612 (794) 794 - - - - - -Increase/Decrease in Year 306 4,612 - 794 (779) (80) (1,949) 2,904 (18,253) (15,349)Balance Sheet As At 31 March 2012 1,282 30,698 2,306 1,636 - 2,021 11,392 49,335 281,685 331,020

Comprehensive Income and Expenditure Statement as at 31 March 2012 This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£000 Notes

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£00085,241 (73,882) 11,359 Central Services to the Public 78,603 (77,956) 64721,872 (7,000) 14,872 Cultural and Related Services 20,315 (7,295) 13,02019,515 (3,720) 15,795 Environment and Regulatory Services 20,446 (4,505) 15,94111,751 (7,686) 4,065 Planning Services 8,126 (3,196) 4,930

238,607 (197,210) 41,397 Childrens and Education Services 227,789 (171,853) 55,93620,668 (4,502) 16,166 Highways, Roads and Transport Services 19,351 (3,001) 16,35017,084 (21,577) (4,493) Local Authority Housing (HRA) (769) - (769)

309,590 (62,013) 247,577 Local Authority Housing (HRA) Exceptional Costs - Stock Transfer - - - 18,760 (5,682) 13,078 Other Housing Services 10,047 (1,649) 8,39883,727 (32,834) 50,893 Adult Social Care 83,218 (30,288) 52,930

6,125 (220) 5,905 Corporate and Democratic Core 5,747 (5) 5,742539 - 539 Non-Distributed Cost 2,062 - 2,062

(53,858) - (53,858) Non-Distributed Cost Exceptional Costs - Pensions Past Service Gain - - - 779,621 (416,326) 363,295 Cost of Services 474,935 (299,748) 175,187

5,795 Other Operating Expenditure Note 9 2,60617,291 Financing & Investment Income & Expenditure Note 10 851

- Surplus or Deficit on Discontinued Operations - (179,158) Taxation and Non-Specific Grant Income Note 11 (176,323)207,223 (Surplus) or Deficit on Provision of Services 2,321

2,614 Surplus or Deficit on revaluation of non-current assets Note 24 (26,646)- Investment properties not previously recognised Note 13 (2,340)- Surplus or deficit on revaluation of available for sale financial assets -

(135,253) Actuarial gains / losses on pension assets / liabilities Note 47 42,015(132,639) Other Comprehensive Income and Expenditure 13,029

74,584 Total Comprehensive Income and Expenditure 15,350

Restated 2010/11 2011/12

Balance Sheet as at 31 March 2012 The Balance Sheet shows the value of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is those that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains 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’.

Notes

Restated31 March

2010 £000

Restated 31 March

2011 £000

31 March 2012£000

Property, Plant & Equipment 12/12a 744,361 453,625 480,315Heritage Assets 52 12,338 12,867 13,260Investment Property 13 45,729 36,472 38,439Intangible Assets 14 3,560 2,881 2,181Assets Held for Sale 20 465 - - Long Term Investments 1,038 2,007 3,783Long Term Debtors 18 33,613 33,917 36,063Long Term Assets 841,104 541,769 574,041

Short Term Investments 60 5,046 7,204Inventories 16 880 925 831Short Term Debtors 18 45,416 50,014 42,952Cash and Cash Equivalents 19 22,953 31,203 22,515Assets Held for Sale 20 - - 1,909Current Assets 69,309 87,188 75,411

Cash and Cash Equivalents 19 (10,528) (8,366) (9,362)Short Term Borrowing (2,143) (3,234) (1,930)Short Term Creditors 21 (34,896) (42,944) (36,348)Provisions 22 (1,127) (2,016) (1,889)Liabilities in Disposal Groups 20 - - - Donated Assets 38 - - - Grants Receipts in Advance 38 - - - Current Liabilities (48,694) (56,560) (49,529)

Long Term Creditors 21 (5,163) (5,476) (5,316)Capital Grants Receipts in Advance 38 (15,200) (14,725) (14,449)Provisions 22 (1,105) (1,531) (1,287)Long Term Borrowing (151,881) (116,219) (120,353)Other Long Term Liabilities 47 (267,417) (88,077) (127,498)Long Term Liabilities (440,766) (226,028) (268,903)

Net Assets 420,953 346,369 331,020

Usable Reserves 23 41,458 46,431 49,335Unusable Reserves 24 379,495 299,938 281,685

Total Reserves 420,953 346,369 331,020

Cash Flow Statement as at 31 March 2012 The Cash Flow Statement shows the change in cash and cash equivalents of the Council during the reporting period. It identifies how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. Cash flows from operating activities is a key indicator of how the Council is funded by taxation and grant income or from payment for services provided by the Council. Investing activities identify how cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) by the Council.

Restated 2010/11

£000 Notes2011/12

£000207,223 Net (surplus) or deficit on the provision of services 2,320

(318,369)Adjustments to net surplus or deficit on the provision of services for non-cash movements (48,274)

48,671

Adjust for items included in the net surplus or deficit on the provision of services that are investing or financing activities 44,545

(62,475) Net cash flows from Operating Activities (1,409)16,145 Investing Activities 26 12,38335,918 Financing Activities 27 (1,290)

(10,412) Net (increase) or decrease in cash and cash equivalents 9,684

(12,425)Cash and cash equivalents at the beginning of the reporting period (22,837)

(22,837) Cash and cash equivalents at the end of the reporting period 19 (13,153)

Notes to the Financial Statements 1 Statement of Accounting Policies 1.1 General Principles The Statement of Accounts summarises the Council's transactions for the 2011/12 financial year and its position at the year-end of 31 March 2012. The Council is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2011, which require the Accounts to be prepared in accordance with proper accounting practices. These practices primarily compromise the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (the code), the 2011/12 Code update and Service Reporting Code of Practice 2011/12, supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 12 of the 2003 Local Government Finance Act. The accounting convention adopted in the Statement of Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. 1.2 Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular:

• Revenue from the sale of goods is recognised when the Council transfers the significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the Council.

• Revenue from the provision of services is recognised when the Council can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the Council.

• Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet.

• Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made.

• Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract.

• Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected.

1.3 Acquisitions and Discontinued Operations Acquired operations Acquired operations are the ones that the council has acquired during the accounting period as a result of the reorganisation of local government, or the transfer of services acquired as a consequence of legislation. The council has not acquired any operations during the current financial year. Discontinued Operations The results of discontinued operations are shown as a single amount on the face of the Comprehensive Income and Expenditure account comprising the profit or loss of discontinued operations and the gain or loss recognised either on measurement to fair value less costs to sell or on the disposal of the discontinued operation. A discontinued operation is a cash generating unit or a group of cash generating units that has been disposed of, or is classified as held for sale and represents a separate entity within our group accounts. 1.4 Cash and Cash Equivalents Cash includes all bank credit balances and overdrafts held by the Council as part of its normal cash management, including all deposit accounts accessible without notice. Cash Equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. Cash Equivalents include investments with a fixed maturity of three months or less from the date of acquisition and available for sale assets such as cash placed in money market funds. 1.5 Charges to Revenue for Non-Current Assets Services, support services and trading accounts are debited with the following amounts to record the cost of holding fixed assets during the year:

• depreciation attributable to the assets used by the relevant service • revaluation and impairment losses on assets used by the service where

there are no accumulated gains in the Revaluation Reserve against which the losses can be written off

• amortisation of intangible fixed assets attributable to the service. The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

1.6 Exceptional Items When items of income and expenditure are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance. 1.7 Employee Benefits Benefits Payable During Employment Short-term employee benefits are those due to be settled within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees and are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off in lieu) earned by employees but not taken before the year-end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs. The Council does not award long term employee benefits i.e. those which are not expected to be paid or settled within 12 months of the balance sheet date. Termination Benefits Termination benefits, whether they are a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy, are charged on an accruals basis to the relevant service line (or in discontinued operations) in the Comprehensive Income and Expenditure Statement. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the pension fund and pensioners and such amounts payable but unpaid at the year-end. Post Employment Benefits Employees of the Council are members of two separate pension schemes: The Teachers’ Pension Scheme, administered by Capita Teachers’

Pensions on behalf of the Department for Education (DfE).

The Local Government Pensions Scheme, known as the Cheshire Pension Fund and administered by Cheshire West and Chester Council.

Both schemes provided defined benefits to members (retirement lump sums and pensions), earned as employees worked for the Council. Teachers’ Pension Scheme The arrangements for the teachers’ scheme mean that liabilities for these benefits cannot ordinarily be identified specifically to the Council. The scheme is therefore accounted for as if it was a defined contribution scheme and no liability for future payments of benefits is recognised in the Balance Sheet. The Children’s and Education Services line in the Comprehensive Income and Expenditure Statement is charged with the employer’s contributions payable to the Teachers’ Pensions in the year. The Local Government Pension Scheme The Local Government Scheme is accounted for as a defined benefits scheme:

• The liabilities of the Cheshire Pension Fund scheme attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projections of projected earnings for current employees.

• Liabilities are discounted to their value at current prices, using a discount rate of 4.8% (based on the indicative rate of return on iBoxx Sterling Corporate Index, AA over 15 years).

• The assets of Cheshire Pension Fund attributable to the Council are included in the Balance Sheet at their fair value: quoted securities – current bid price unquoted securities – professional estimate unitised securities – current bid price property – market value

• The change in the net pensions liability is analysed into seven components: current service cost – the increase in liabilities as a result of years

of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked

past service cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years – debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs

interest cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid – debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

expected return on assets – the annual investment return on the fund assets attributable to the Council, based on an average of the expected long term return – credited to the Financing and Investment Income line in the Comprehensive Income and Expenditure Statement

gains or losses on settlements and curtailments – the result of actions to relieve the Council of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited or credited to the Surplus or Deficit on the Provision of Services to the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs

actuarial gains and losses – changes on the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – debited to the Pensions Reserve

contributions paid to the Cheshire Pension Fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the General Fund balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits earned by employees. Employer contribution rates are reviewed every three years. The last review took place at 31 March 2010; effective from 1 April 2010. The employer contribution rate set for the Council was 19.6 % for 2011/12 (19.1% in 2010/11). In accordance with current regulations, the actuary set the rate at a level sufficient to enable the Pension Fund to meet 100% of existing prospective liabilities, including pension increases. Discretionary Benefits The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme. The Council has in place a ground-up insurance policy which covers the majority of injury awards. Any ad-hoc injury claims not covered by the policy and for which the Council are therefore liable are recorded in the Comprehensive Income and Expenditure Account in the financial year in which they occur.

1.8 Events after the Balance Sheet date

Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Statement of Accounts is authorised for issue. Two types of events can be identified:

• those that provide evidence of conditions that existed at the end of the reporting period – the Statement of Accounts is adjusted to reflect such events

• those that are indicative of conditions that arose after the reporting period – the Statement of Accounts are not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the Statement of Accounts. 1.9 Financial Instruments Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and are carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in 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. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised. For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest); and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement. The bonds issued by the Council in previous years however are carried at a lower amortised cost than the outstanding principal, and interest is charged at a marginally higher effective rate of interest than the rate payable to bondholders as a material amount of costs incurred in its issue is being financed over the life of the stock. Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year or 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 discount is respectively deducted from or

added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. Financial Assets Financial assets are classified into two types:

• loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market

• available-for-sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments.

Loans and Receivables Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement. When soft loans are made, a loss is recorded in the Comprehensive Income and Expenditure Statement (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. Interest is credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement at a marginally higher effective rate of interest than the rate receivable from the voluntary organisations, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Statutory provisions require that the impact of soft loans on the General Fund Balance is the interest receivable for the financial year – the reconciliation of amounts debited and credited to the Comprehensive Income and Expenditure Statement to the net gain required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement.

Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Any gains and losses that arise on derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Available-for-Sale Assets Available-for-sale assets are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the Council. Assets are maintained in the Balance Sheet at fair value. Values are based on the following principles:

• instruments with quoted market prices – the market price • other instruments with fixed and determinable payments – discounted

cash flow analysis • equity shares with no quoted market prices – independent appraisal of

company valuations.

Changes in fair value are balanced by an entry in the Available-for-Sale Reserve and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available-for-Sale Financial Assets. The exception is where impairment losses have been incurred – these are debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any net gain or loss for the asset accumulated in the Available-for-Sale Reserve. Where assets are identified as impaired because of a likelihood arising from a past event the payments due under the contract will not be made (fixed or determinable payments) or fair value falls below cost, the asset is written down and a charge made to the Financing and Investment Income line in the Comprehensive Income and Expenditure Statement. If the asset has fixed or determinable payments, the impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted as the asset’s original effective interest rate. Otherwise, the

impairment loss is measured as any shortfall of fair value against the acquisition cost of the instrument (net of any principal repayment and amortisation). Any gains and losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along with any accumulated gains or losses previously recognised in the Available-for-Sale Reserve. Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses). Statutory debts such as Council Tax and Non Domestic Rates are not deemed to be financial instruments. 1.10 Grants Revenue, Revenue Expenditure Funded from Capital under Statute (REFCUS) and Capital grants with conditions attached are held as receipts in advance on the Balance Sheet until such time as the condition no longer applies, at which point the grant is recognised as income in the Comprehensive Income & Expenditure Statement. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset or service acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. Specific revenue and REFCUS grants are accrued and credited to income within service revenue accounts when the conditions regarding their use are met. Any income credited to service revenue accounts in excess of the expenditure they are intended to fund are, subject to approval, appropriated to revenue grants and contributions unapplied earmarked reserves from the General Fund Balance in the Movement in Reserves Statement until the expenditure is incurred. When the expenditure is incurred, the grant is appropriated back to the General Fund in the Movement in Reserves Statement to ensure that there is no adverse impact on the council tax position. REFCUS grants are reversed out of the General fund Balance in the Movement in Reserves Statement to either the Capital Adjustment Account if the grant has been used to finance capital expenditure in the year, or to the Capital Grants Unapplied Account Reserve until it is applied to fund capital expenditure, at which point it is transferred to the Capital Adjustment Account.

Non-specific revenue grants, including Revenue Support Grant are credited to Taxation and Non-Specific Grant Income at the foot of the Comprehensive Income and Expenditure Statement. General revenue grants are subject to the normal carry-forward processes attributable to General Fund balances.

Grants relating to the funding of non-current asset (capital) expenditure are credited to Taxation and Non-Specific Grant Income at the foot of the Comprehensive Income and Expenditure Statement when the conditions regarding their use are met. These charges are reversed out in the Movement in Reserves Statement to either the Capital Adjustment Account if the grant has been used to finance capital expenditure in the year, or to the Capital Grants Unapplied Account Reserve until it is applied to fund capital expenditure, at which point it is transferred to the Capital Adjustment Account. 1.11 Intangible Assets Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council. Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and is restricted to that incurred during the development phase (research expenditure cannot be capitalised). Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. In practice, no intangible asset held by the Council meets this criterion, and they are therefore carried at amortised cost. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.

1.12 Interest in Companies and Other Entities

The Council has material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities and require it to prepare group accounts. In the Council’s own single-entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. The Council had interests in two limited companies during the financial year:

• Warrington Borough Transport • Connexions

Warrington Borough Transport is wholly owned by Warrington Borough Council and is consolidated into the Group Accounts as a subsidiary. The Council owned 25% of Connexions, which was previously shown in the Group Accounts as a subsidiary. Connexions went into administration on 29th February 2012 and has therefore been derecognised in the Group Accounts in the current year.

Please note that Golden Gates Housing (GGH) was a wholly owned subsidiary until the 29 November 2010 and is still included in the comparative figures up to this date.

1.13 Inventories and Long Term Contracts Inventories are included in the balance sheet at the lower of cost or net realisable value. The cost of inventories is assigned using the FIFO costing formula. Long term contracts are accounted for on the basis of charging the Surplus or Deficit on the Provision of Services with the value of works and services received under the contract during the financial year. Work in progress is included in the IFRS balance sheet at cost. 1.14 Interest Receivable or Payable The effective interest rate method is used to measure the carrying value of a financial asset or liability measured at amortised cost, and to allocate associated interest income or expense to the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to equal the amount at initial recognition. The effective interest is adjusted to the actual interest payment or receipt through the Movement in Reserves Statement to ensure only actual interest is charged to Council Tax.

For financial assets and liabilities carried at cost because the effective rate of interest is the same as the carrying rate of interest, the carrying value is adjusted for accrued interest. 1.15 Internal Interest Interest earned is recorded initially in the Comprehensive Income & Expenditure Account. Subsequent allocations are made to certain other individual funds, based on individual cash flows and an average rate of interest. 1.16 Investment Property Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale. Investment properties are measured initially at cost and subsequently at fair value, based on the amount at which the asset could be exchanged between knowledgeable parties at arm’s-length. Properties are not depreciated but are revalued annually according to market conditions at the balance sheet date (year-end). Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve. 1.17 Jointly Controlled Operations and Jointly Controlled Assets Jointly controlled operations are activities undertaken by the Council in conjunction with other ventures that involve the use of the assets and resources of the venturers rather than the establishment of a separate entity. The Council recognises on its Balance Sheet the assets that it controls and the liabilities that it incurs and debits and credits the Comprehensive Income and Expenditure Statement with the expenditure it incurs and the share of income it earns from the activity of the operation. Jointly controlled assets are items of property, plant or equipment that are jointly controlled by the Council and other venturers, with the assets being used to obtain benefits for the venturers. The joint venture does not involve the establishment of a separate entity. The Council accounts for only its share of the jointly controlled assets, the liabilities and expenses that it incurs on its own

behalf or jointly with others in respect of its interest in the joint venture and income that it earns from the venture. 1.18 Leases Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lesser to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets. The Council as Lessee Finance Leases Property, Plant and Equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents are charged as expenses in the periods in which they are incurred. Lease payments are apportioned between:

• a charge for the acquisition of the interest in the property, plant and equipment – applied to write down the lease liability, and

• a finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement)

Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the Council at the end of the lease period.) The Council is not required to raise council tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, by way on an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

Operating Leases Rentals paid under operating leases are charged in the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from the use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease). The Council as Lessor Finance Leases Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets held-for-sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, is credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal), matched by a lease (long-term debtor) asset in the Balance Sheet. Lease rentals receivable are apportioned between:

• a charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received), and

• finance income (credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement)

The gain credited to the Comprehensive Income and Expenditure Statement on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund Balance to the Capital Receipts Reserve in the Movement in Reserves Statement. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. When the future rentals are received, the element for the capital receipt for the disposal of the asset is used to write down the lease debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts Reserve. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.

Operating Leases Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. 1.19 Minimum Revenue Provision (MRP) The Council is required to make an annual provision from revenue to contribute towards the repayment of borrowing. This requirement arises under the Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2008, which simplifies earlier MRP requirements by placing a duty on the Council to determine each year an amount of minimum revenue provision, which it considers to be prudent. In order to assist the Council with this determination, Guidance for assessing what would represent a prudent provision has been issued under S.21(1A) of the Local Government Act 2003(The Guidance). The Council is required to have regard to the Guidance when considering the amount of their annual “prudent” MRP. The Council has resolved to have regard to the Guidance when determining the amount of its annual MRP. The major proportion of MRP for 2009/10 related to the more historic debt liability that was outstanding at the time the Guidance was adopted. This will continue to be charged at the rate of 4 %, in accordance with option 1 of the Guidance. New capital expenditure for each subsequent year will in general be charged in accordance with Option 3 of the Guidance, which recommends that the annual charge should broadly equate to the anticipated life, or period of benefit, which is reflective of the nature of the expenditure. The annual charge will represent an equal annual instalment relative to the assessed life period. The determination of which expenditures should be charged under Option 3, and the life periods considered to be applicable to these, will be carried out under delegated powers.

The major proportion of the MRP for 2011/12 will relate to the more historic debt liability, and will continue to be charged at the rate of 4%, in accordance with option 1 of the Guidance. Certain expenditures reflected within the debt liability at 31 March 2010 will under delegated powers be subject to MRP under Option 3 of the Guidance, and will be charged over a period which is reasonably commensurate with the estimated useful life applicable to the nature of expenditure, using the equal

annual instalment method. For example, capital expenditure on a new building, or on the refurbishment or enhancement of a building, will be related to the estimated life of that building. The use of this option for certain schemes/expenditures will also result in there being no MRP charge until the year after that in which all expenditures on a scheme, project or other item of capital expenditure have been fully accrued under proper practices, regardless of the extent of such expenditure that has not been accrued at the end of the previous financial year. Items of capital expenditure will only be considered to represent separate amounts in cases where two or more major components have substantially different useful economic lives. Assets will not be transferred into the asset register and fixed assets account until complete, in accordance with Accounting Code principles. To the extent that expenditure does not create an asset, and is of a type that is subject to estimated life periods that are referred to in the Guidance, these recommended periods will generally be adopted by the Council. However, in the case of long term debtors arising from loans or other types of capital expenditure made by the Council which will be repaid under separate arrangements, there will be no minimum revenue provision made. The Council are satisfied that a prudent provision will be achieved after exclusion of these capital expenditures. A similar type of policy will apply in the case of the Golden Square Shopping Centre, except that instead of relying solely upon principal element of repayments to satisfy the MRP liability, the annual MRP charge that will in effect be made will equate to the principal amount that has been assessed by the Council’s advisers, Price Waterhouse Coopers, to be included each year within the repayments received by the Council under the lease. Rather than resulting in a fixed annual MRP charge over the period of the lease, the nominal amount of MRP charge each year will be regarded as met by the element of the lease rental which serves to write down the outstanding long term debtor created as a consequence of the lease having been granted. This approach mirrors that which is recommended within paragraph 20 of the MRP Guidance with regard to leases where the council is a lessee. Other finance leases and PFI assets will have their MRP liability determined according to the life of the financial instrument, which will act as a proxy for asset life. MRP on these instruments will be accounted for with reference to IFRS accounting principles. For those types of capital expenditure incurred by the Council which are not capable of being related to an individual asset (e.g. capitalising revenue items), asset lives will be assessed on a basis which most reasonably reflects the anticipated period of benefit that arises from the expenditure. Also, whatever type of expenditure is involved, it will be grouped together in a manner which reflects the nature of the main component of expenditure, and will only be

divided up in cases where there are two or more major components with substantially different useful economic lives. MRP will not be charged on the Local Authority Mortgage Scheme. This is because any deposit in the scheme is expected to be repaid after a five year period. The capital receipt of which will be used to reduce the CFR by the original deposit amount. The policy will be reviewed on an annual basis. If it is ever proposed to vary the terms of the original Policy Statement during any year, a revised statement should be put to members at that time. 1.20 Overheads and Support Services The cost of Overheads and Support Services are charged to those that benefit from the supply of services based on use and in accordance with Chartered Institute of Public Finance and Accountancy (CIPFA) Service Reporting Accounting Code of Practice 2011-12 (SeRCOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:

• Corporate and Democratic Core – costs relating to the Council’s status as a multifunctional, democratic organisation

• Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early and any depreciation and impairment losses chargeable on non-operational properties.

These two categories are defined in SeRCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement, as part of Net Expenditure on Continuing Services. 1.21 Prior Period Adjustments, Changes in Accounting Policies and

Estimates and Errors Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. Changes in accounting polices are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of the transactions, other events and the conditions on the Council’s financial position and financial performance. Where a change is made, it is applied retrospectively (unless otherwise stated) by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. A change in accounting policy generally requires the disclosure of three Balance Sheets to reflect the impact on the current period, the end of the

preceding period and the impact on the opening Balance Sheet of the previous period. This is the methodology adopted for the 2011/12 change to the policy for accounting for Heritage Assets. Changes in accounting estimates are accounted for prospectively i.e. in the current and future years affected by the change, there is no prior period adjustment. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. 1.22 Property, Plant and Equipment Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. Recognition Assets are capitalised in accordance with the Council’s capitalisation and componentisation policies. Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred. Measurement Assets are initially measured at cost, comprising:

• the purchase price • any costs attributable to bringing the asset to the location and condition

necessary for it to be capable of operating in the manner intended by management

• the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The Council does not capitalise borrowing costs incurred whilst assets are under construction. The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition does not have commercial substance (i.e. it will not lead to a variation in the cash flows of the Council). In the latter case, where an asset is acquired via an exchange, the cost of the acquisition is the carrying amount of the asset given up by the Council.

Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-Specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement. Assets are then carried in the Balance Sheet using the following measurement bases:

• infrastructure, community assets and assets under construction – depreciated historical cost

• dwellings – fair value, determined using the basis of existing use value for social housing (EUV-SH)

• all other assets – fair value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV).

Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value. Where non-property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value. Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year-end, although the guidance in the Code suggest that this a minimum of every 5 years, the Council are implementing a three year rolling programme of revaluations. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Comprehensive Income and Expenditure Statement where they arise from the reversal of a loss previously charged to a service. Where decreases in value are identified, they are accounted for by:

• where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)

• where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

The Revaluation Reserve only contains revaluation gains recognised since 1 April 2007, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account.

Impairment Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Examples of events and changes in circumstances that indicate impairment may have incurred include:

• significant decline (i.e. more than expected as a result of the passage of time or normal use) in an asset’s carrying amount during the period, that is specific to the asset;

• evidence of obsolescence or physical damage of an asset; • a commitment by the Council to undertake a significant reorganisation,

and • a significant adverse change in the statutory or other regulatory

environment in which the Council operates. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for as follows:

• where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)

• where there is no balance in the Revaluation Reserve or an insufficient

balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement.

Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. Depreciation Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land and certain Community Assets) and assets that are not yet available for use (i.e. assets under construction). Depreciation is calculated on the following basis:

• dwellings and other buildings – straight line allocation over the useful life of the property as estimated by the valuer

• vehicles, plant, furniture and equipment – straight line allocation over 3 to 10 years, dependant on the initial value of the asset

• infrastructure – straight line allocation over 40 years.

Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account. Componentisation Policy Component accounting is also a new concept and involves the splitting of assets into significant component parts. The main purpose of component accounting is to produce accurate primary statements with the cost of the use of an asset correctly reflected in the CIES by carrying the correct depreciation associated with fixed assets and also with the correct values of fixed assets presented in the Balance Sheet. Components have also been depreciated over different lives than the host (main) asset and recognised where they have a significant value when compared to the value of the host assets. The Council has adopted a policy that recognises that material assets when revalued i.e. assets that have a building value of over £500,000 to be recognised separately. The component has to have a value of at least 20% of the building value and a useful life which is at least 20% lower than the asset as a whole. . In future years the additional information about assets that will be available should enable the Council to gain a better understanding of the asset lives and the useful lives of the component parts. This should enhance the management of the Councils assets and also allow more clarity in the planning of revenue and capital expenditure. Disposals and Non-current Assets Held for Sale When it becomes probable that the carrying amount of an asset (or disposal group) will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset (or disposal group) is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previously losses recognised in the Surplus or Deficit on Provision of Services. Depreciation is not charged on Assets Held for Sale. If assets (or disposal group) no longer meet the criteria to be classified as Assets Held for Sale, they are reclassified back to non-current assets and valued at the lower of their carrying amount before they were classified as held for sale; adjusted for depreciation, amortisation or revaluations that would have

been recognised had they not been classified as Held for Sale, and their recoverable amount at the date of the decision not to sell. A ‘disposal group’ is a group of assets, possibly with some associated liabilities, which the Council intends to dispose of in a single transaction. The measurement basis required for non-current assets classified as held for sale is applied to the group as a whole, and any resulting loss reduces the carrying amount of the non-current assets in the disposal group in the order of allocation required by IAS 36. Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale. When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account. Amounts received for a disposal in excess of £10,000 are categorised as capital receipts. A proportion of receipts relating to housing disposals (75% for dwellings, 50% for land and other assets, (net of statutory deductions and allowances) is payable to the Government . The balance of receipts is required to be credited to the Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. Heritage Assets Heritage Assets are tangible assets with historic, artistic, scientific, technological, geographical or environmental qualities that are held and maintained principally for their contribution to knowledge and culture. Heritage Assets have been recognised as a separate category of assets for the first time in the 2011/12 financial statements and retrospectively disclosed for 2010/11 and 2009/10. Such assets have not previously been required to be recognised on the Council’s balance sheet.

Due to the cost of obtaining valuations for Heritage Assets outweighing the accounting benefit, especially in the current climate of local government funding cuts, the policy adopted is to carry these assets at their insured value. A de minimis level of £10,000 has been established for inclusion of Heritage Assets on the asset register. Any assets with a value of less than the de-minimis are not significant, e.g. fossils, minor water-colour paintings etc. The Council does not hold any Heritage Assets which have a value in excess of the de minimis which are not disclosed on the Balance Sheet. Any new Heritage Assets will be recognised and subsequently measured at valuation or cost. For significant Heritage Assets donated to the Council a valuation will be obtained where possible, at which value the asset shall be recognised. If a valuation cannot be obtained, the asset will not be recognised on the Balance Sheet but will be disclosed in the notes to the core financial statements, along with the reason why a valuation cannot be given. The carrying amounts of heritage assets are reviewed where there is evidence of impairment, e.g. where an item has suffered physical deterioration or breakage or where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the Council’s general policies on impairment. No depreciation is charged on these assets as they are deemed to have indeterminable lives. Any disposals will follow the Council’s derecognition of Non Current Asset Policy, including the legislative arrangements to ensure no impact on the General Fund for gains and losses on disposal. Further details on heritage assets can be found in notes 52 to 54 to the accounts. 1.23 Private Finance Initiative (PFI) PFI and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under the PFI schemes, and as ownership of the property, plant and equipment may pass to the Council at the end of the contracts for no additional charge, the Council carries the assets used under the contracts on its Balance Sheet as part of Property, Plant and Equipment. The Council has two housing PFI schemes. Anson and Blenheim Close where the operator was responsible for constructing 105 new dwellings for social housing, the maintenance of the properties and tenancy management services, John Morris House is the second scheme where the operator was responsible for constructing 38 new self contained flats for social housing and the maintenance of the properties together with a tenancy management service. These two PFI schemes have been accounted for as in the paragraph above.

The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. For John Morris House the liability was written down by an initial capital contribution of £395k. No applicable contribution was recorded for Anson and Blenheim Close. Non current assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Council. The amounts payable to the PFI operators each year are analysed into five elements:

• fair value of the services received during the year – debited to the

relevant service in the Comprehensive Income and Expenditure Statement

• finance cost – an interest charge of 5.718% for John Morris House and 9.040% for Anson and Blenheim Close on the outstanding Balance Sheet liability, debited to the Financing and Investment Income and Expenditure line 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 the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement

• payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease)

• lifecycle replacement costs – proportion of the amounts payable is posted to the Balance Sheet as a prepayment and is recognised as additions to Property, Plant and Equipment when the relevant works are eventually carried out.

With both the Council’s PFI schemes the operator is allowed to retain third party income (the operator keeps all the rental income from the dwellings). This is accounted for by the credit side of the PFI scheme being pro-rated between a finance lease creditor and a deferred income balance. Essentially, the deferred income balance represents the benefits that the Council is to receive over the life of the contract. This balance is then released to the Comprehensive Income and Expenditure Account over the life of the contract

The MRP charged on the Council’s two PFI schemes will be reversed out of the accounts via the Capital Adjustment Account. 1.24 Provisions Provisions are required for any liabilities of uncertain timing or amount that have been incurred. In accordance with the Code, provisions are made when the Council has a present obligation (either legal or constructive) as a result of a

past event; it is probable that a transfer of economic benefit will be required to settle it; and a reliable estimate can be made of the financial obligation. If it becomes probable that a transfer of economic benefit is no longer required to settle the obligation, the provision is reversed. Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the Council settles the obligation Landfill Allowance Trading Scheme (LATS) The Landfill Allowance Trading Scheme (LATS) was introduced in April 2005 and provides the legal framework for the duty placed on local authorities to reduce the amount of biodegradable municipal waste (BMW) disposed to landfill. The scheme was originally to run for 15 years but will now end on 31 March 2013. The scheme is a ‘cap and trade scheme’, which allocates tradable landfill allowances to each Waste Disposal Authority (WDA) up to the amount of the WDA’s ‘cap’ that has been set to ensure that England meets its targets under the EU Landfill Directive. The LATS scheme gives rise to an asset for allowances held, LATS grant income and a liability for actual BMW usage. The liability is discharged through a combination of allowances allocated either from DEFRA in the form of a grant or purchased from other authorities, or a penalty payable to DEFRA for the amount of landfill for which allowances are not held. Allowances are measured initially at their fair value and thereafter at the lower of cost and net realisable value. There will be no lending or borrowing in the final year (2012/13) as this is a target year. Contingent Liabilities A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow

of resources will be required or the amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts. Contingent Assets A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential. 1.25 Reserves The Council sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the Surplus of Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement on the Reserve Statement so that there is no net charge against council tax for the expenditure. Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments, and retirement and employee benefits and do not represent usable resources for the Council – these reserves are explained in the relevant policies. 1.26 Self Insurance The Council maintains an Insurance Fund to meet the excess amount of any insurance claims not covered by its external insurers and to self insure for a number of risks. The Fund consists of an Insurance Provision to cover known actual claims made and an Insurance Reserve which provides an additional contingency to meet further claims. 1.27 Revenue Expenditure Funded from Capital Under Statute (REFCUS) Expenditure incurred during the year that may be capitalised under statutory provisions but that does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the

General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax. 1.28 Revenue Recognition The revenue recognition policy covers the sale of goods (produced by the Council for the purpose of sale or purchased for resale), the rendering of services (excluding services directly related to construction contracts,), interest, royalties and dividends, non-exchange transactions (i.e. council tax) and where previously a liability had been recognised (i.e. creditor) on satisfying the revenue recognition criteria. Revenue is recognised and measured at the fair value of the consideration receivable. However, if payment is on deferred terms, the consideration receivable is recognised initially at the cash price equivalent. The difference between this amount and the total payments received is recognised as interest revenue in the Surplus or Deficit on provision of services. Short duration receivables with no stated interest rate are measured at original invoice amount where the effect of discounting is immaterial. There is no difference between the delivery and payment dates for non-contractual, non-exchange transactions i.e. revenue relating to council tax and general rates, and therefore these transactions are measured at their full amount receivable. 1.29 Trade and Other Creditors Trade and other creditors are not recognised when the Council becomes committed to purchase the goods or services have been delivered or rendered. With the exception of financial instruments, creditor are recognised and measured in accordance with the revenue recognition policy. 1.30 Trade and Other Debtors Trade and other debtors are not recognised when the Council becomes committed to supply the goods or services but when the ordered goods or services have been delivered or rendered. With the exception of financial instruments, debtors are recognised and measured in accordance with the revenue recognition policy. 1.31 Value Added Tax (VAT) VAT Payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income. Foreign Currency Translation Where the Council has entered into a transaction denominated in a foreign currency, the transaction is converted into sterling at the exchange rate applicable on the date the transaction was effected. Where amounts in foreign currency are outstanding at the year end, they are reconverted at the spot

exchange rate at 31 March. Resulting gains and losses are recognised in the Financing and Investment and Expenditure line in the Comprehensive Income and Expenditure Statement. 1.32 Accounting for the costs of the carbon reduction commitment

scheme The Council is required to participate in the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. This scheme is currently in its introductory phase which will last until 31 March 2014. The Council is required to purchase and surrender allowances, currently retrospectively, on the basis of emissions i.e. carbon dioxide produced as energy is used. As carbon dioxide is emitted (i.e. as energy is used), a liability and an expense are recognised. The liability will be discharged by surrendering allowances. The liability is measured at the best estimate of the expenditure required to meet the obligation, the price of the allowances being set by DECC, currently at £12 per tonne CO2 emitted of the number of allowances required to meet the liability at the reporting date. The cost to the Council is recognised and reported in the costs of the Council’s services and is apportioned to services on the basis of energy consumption. 1.33 Accounting Standards that have been issued but have not yet been

adopted Accounting standards that have been issued before 1 January 2012 but have not yet been adopted by the code include IFRS 7 – Financial Instrument Disclosures (Transfer of Assets). The 2012/13 Code includes the amendments to IFRS 7 Financial Instrument Disclosures (Transfers of Financial Assets). It replaces the previous requirements with detailed disclosures that are designed to assist users of the financial statements to evaluate the risk of exposures relating to transfers of financial assets. The transfer of such assets is known as securitisation and involves, for example, the transfer of an income stream to another organisation in return for a lump sum up front, similar to the pledging of collateral. This is not expected to be a common transaction for local authorities. The adoption of IFRS 7 amendments will not have a material impact on the accounts and will not require the publication of a third Balance Sheet at the beginning of the earliest comparative period. 2 Accounting Standards That Have Been Issued But Have Not Yet

Been Adopted The Council has adopted the amendments to IFRS 7 Financial Instruments: Disclosures Transfers of Financial Assets however there is no impact on the financial statements as the Council has not made any transfers of financial assets.

3 Critical Judgements in Applying Accounting Policies In applying the accounting policies set out in Note 1, the Council has made certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Statement of Accounts are:

• Based on IAS17 Leases and IFRIC 4 the Council has determined the treatment of its leases into operating and finance leases. These judgements have been decided on the professional opinion of the Council’s Valuers. The relevant accounting policy is applied based on the outcome of the assessment. Details of judgement applied to leases can be found in note 41 to the accounts.

• The Council is deemed to control the services provided under the Private

Finance Initiative (PFI) agreement for 105 social houses in Anson & Blenheim Close and 38 self contained flats at John Morris House. The accounting policies for PFI schemes and similar contracts have been applied to the arrangement and are recognised as Property, Plant and Equipment on the Council’s Balance Sheet. This judgement was made by Finance staff and Valuers and independently assured by Price Waterhouse Coopers. PFI assets at valued at £5.066m and are recognised as Property, Plant and Equipment on the Council’s Balance Sheet. Further details of how this judgement has been applied can be found in note 42 to the accounts.

• In accordance with IAS 40, the Council has determined that it holds

assets with a value of £38.439m that it judges are held for capital appreciation and/or for the generation of investment income, or both that it classes as investment properties. This judgement has been determined by Finance staff and the Council’s Valuers

• The Council has determined that a group relationship exists with

Warrington Borough Transport based on CIPFA group accounting guidance.

• In deciding whether the Council’s exposure to possible losses is to be

accounted for as a provision or a contingent liability, a contingent liability decision tree has been used by the Council’s professional Finance and Legal staff

• The Council has an investment of 22,222 shares valued at £150,000

representing a 15.7% shareholding in Warrington Sports Holding Ltd. It has been determined that the Council does not have control of the company and it is not a subsidiary of the Council. As the fair value of the shares cannot be easily determined due the shares having no quoted market price in an active market The cost that would be incurred in independently valuing them would be disproportionate. The investment is carried at cost as a proxy for fair value.

• The Council exercises judgement to determine whether the conditions of grant and contribution monies received have been met before recognising them as income in the Comprehensive Income and Expenditure Statement. Where conditions require specified expenditure to have taken place, the grant monies will not be recognised until this happens. Equally, where conditions specify that a grant or contribution must be repaid in the event of non-expenditure, the income is not recognised until the expenditure is incurred.

• The Council has determined that there has been no material changes in

the value of the Council’s property assets from the current carrying values on the Balance Sheet at 31 March 2011 other than those identified in the revaluations that have taken place during the year based on professional research and publication of index of yields. When such a review for impairment is conducted, the recoverable amount is determined based on value in use calculations prepared on the basis of the valuers’ assumptions and estimates in accordance wit the RICS standards “The Red Book”

• In determining the significant components of property, plant and

equipment assets and their related useful lives for depreciation purposes the Componentisation Policy contained with the accounting policies section of the accounts has been used.

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

Local Government. However, the Council has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision

• The Council carries all High Schools as Property, Plant and Equipment

on its Balance Sheet at 31 March 2012. Although a number of High Schools are expected to convert to academy status in 2012/13. At 31 March 2012 no formal transfers had been agreed and as such the Council have not impaired any High Schools down to zero in the 2011/12 accounts.

Heritage Assets have been recognised as a separate category of assets for the first time in the 2011/12 financial statements and retrospectively disclosed for 2010/11 and 2009/10. Such assets have not previously been recognised on the Council’s balance sheet. A de minimis level of £10,000 has been established for inclusion of heritage assets on the asset register and these assets are carried at their Insurance value. Any item valued below the de minimis limit, e.g. fossils, minor water colours paintings etc, are not significant. The Council does not hold and Heritage Assets which have a value in excess of the de-minimus which are not disclosed on the Balance Sheet.

Any new Heritage Assets will be recognised and subsequently measured at valuation or cost. For significant Heritage Assets donated to the

Council a valuation will be obtained where possible, at which value the asset shall be recognised. If a valuation cannot be obtained, the asset will not be recognised on the Balance Sheet but will be disclosed in the notes to the core financial statements, along with the reason why a valuation cannot be given.

The carrying amounts of heritage assets are reviewed where there is evidence of impairment, e.g. where an item has suffered physical deterioration or breakage or where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the Council’s general policies on impairment.

No depreciation is charged on these assets as they are deemed to have indeterminable lives.

Any disposals will follow the Council’s derecognition of Non Current Asset Policy, including the legislative arrangements to ensure no impact on the General Fund for gains and losses on disposal.

Further details on heritage assets can be found in notes 52 to 54 to the accounts.

• Minimum Revenue Provision (MRP) is not charged against the Golden Square lease. A long term debtor has been created with repayments charged against the debtor. The repayments are charged over the 200 year period of the lease, with the largest repayments occurring in the latter years. MRP is also not charged against the Local Authority Mortgage Scheme cash backed deposit. The future debt liability will be met from the capital receipt which will be released after a 5 year period when the deposit matures. Any repossession losses against the scheme will be charged to the LAMs reserve.

• The accounting treatment for schools non-current assets is currently

open to interpretation. CIPFA/LASAAC consulted on a proposed accounting treatment, however found the results to be inconclusive and the current guidance is to refer back to LAAP 88. LAAP 88 refers to the Code's definition of an asset and this is where the treatment becomes open to interpretation.

The Council has 34 Voluntary Aided (VA) schools. In accordance with the 2012/13 Code's definition of an asset (para 2.1.2.23) the Council has determined that it would not receive future economic benefits from these assets and therefore these assets are not included in the Council's Balance Sheet.

The Council also has 1 Voluntary Controlled (VC) school. The Council has determined that it would receive future economic benefit from this asset and therefore it has been included in the Council's Balance Sheet as part of Plant, Property and Equipment.

• Provisions on termination benefits are consistent with current communicated plans. A £2.296m termination benefits provision is recorded in the 2011/12 account

• The Council has recorded Local Authority Mortgage Scheme expenditure

as capital expenditure in the accounts. This is in accordance with regulation 25 of the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003. Section (1) (c) of the regulation defines that ‘’the giving of a loan, grant or other financial assistance to any person, whether for use by that person or by a third party, towards expenditure which would, if incurred by the Council, be capital expenditure’’ shall be treated as being capital expenditure.

4 Assumptions Made About the Future and Other Major Sources of

Estimation Uncertainty Assumptions made about the future and other major sources of estimation uncertainty The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the Council’s Balance Sheet at 31 March 2012 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows: 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. Hymans Robertson as actuaries are contracted to provide the Council with the estimate of the net liability. During 2011/12 the Council’s actuaries advised that the net pension liability had increased by £39.421m as a result of updating of the assumptions. The pension liability and reserve will vary should any of the assumptions prove inaccurate. The table below gives examples of the impact on the Council from changing assumptions.

Change in assumptions at year ended 31 March 2012:

Approximate % increase to Employer Liability

Approximate monetary amount (£000)

0.5% decrease in Real Discount Rate 10% 54,6211 year increase in member life expectancy 3% 16,1840.5% increase in the Salary Increase Rate 3% 17,6580.5% increase in the Pension Increase Rate 7% 36,378 Accruals and provisions The accounts of the Council are prepared on an accruals basis meaning that the sums due to or from the Council during the year are included in the accounts, whether or not the cash has actually been received or paid in the year in question. Accruals may be made on exact amounts where invoices, although not received in time to be processed in the correct year, are received in time to inform the amount provided for. Where it is known that amounts are due to or from the Council relating to the current year, but no exact information is available to inform this, an estimate of the amounts has to be made. If the amount estimated is different to the eventual invoice amount, the value of debtor and creditor balances included in the Balance Sheet will not have been correct and there will be a knock on effect of under or over provision in the following years’ Comprehensive Income and Expenditure Statement as the balances are written out. Many of the Council’s accruals are based on invoiced amounts, but some are based on estimated data. A liability that becomes apparent in the financial year as a result of a past event and it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation, results in a provision being made rather than an accrual. Provisions are different to accruals in that they are of uncertain timing or amount as to when they will be discharged, but a charge is still made to the Comprehensive Income and Expenditure Statement in the year. Depending on the certainty of the amount provided for, there is a risk that it may be insufficient and further amounts may need to be charged when the actual payment is made. Conversely, if the actual payment is less, the over provided amount is credited back to the Comprehensive Income and Expenditure Statement in the year the liability is discharged. Details of the provisions, totalling £2.3m at 31 March 2012 are given in Note 22. The best estimate amounts provided for are based on the professional opinion of the officer best placed to make it. If the outflow of resources is only possible rather than probable, then no estimated charge is made to the accounts until the circumstances change, only narrative disclosure is made in the Contingent Liabilities note.

Valuations and depreciation charges Professional opinions of the values of land and buildings are made by the Estates Team and estimates of the useful lives of property, plant and equipment are made by the relevant officers who have knowledge of such issues based on their professional judgement e.g. useful lives of properties are provided by in-house RICS qualified valuers. The present pressure on public sector expenditure could potentially have implications for the useful economic lives of the Council's property due to reduced spending on repairs leading to a decline in the condition of its buildings. There is no evidence that the estimated economic lives are being materially affected at this time, but this issue will be monitored. The Council revalues its assets on a three year rolling cycle. It is possible that property values could fluctuate considerably within this three year timeframe. A 1% fluctuation in property values would amount to £5.2 million being adjusted to the Non Current Assets held on the Balance Sheet. Impairment Allowance At the 31 March the Council provides for impairment of trade receivables (debtors) based on average actual collection rates. For other debts such as Council Tax, Non Domestic Rates, Housing Rents and Housing Benefit Overpayments, an estimate of the amount of debt likely to be uncollectible is based on an average estimate of previous years’ write offs. The current economic climate will have a major impact on the level of this charge. If collection rates were to deteriorate this would require an estimated additional provision. At 31 March 2012 the Council had a debtors balance of £79.015m and a debt impairment figure of £6.762m has been set aside in the accounts. Should an additional 5% of debtors prove to be uncollectable there would be an additional cost of £3.950m to the Council. Insurance Reserve The insurance reserve holds funding set aside to meet the cost of future potential insurance claims. The amount set aside is based on an annual independent review. However, an increase in the anticipated level of insurance claims could result in insufficient funds being set aside to meet the cost of claims. If the level of increased claims require a 10% increase in the insurance reserve this would amount to an extra £0.320 being needed.

5 Material Items of Income and Expense The Council considers material items to be those greater than £5m. There are no material items of income and expenditure other than those which have been disclosed on the face of the Comprehensive Income and Expenditure Statement or notes to the accounts. 6 Events After the Balance Sheet Date

The Statement of Accounts was authorised for issue by the Chief Finance Officer on 29 June 2012. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2012, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information. Where an event occurs after the balance sheet date, favourable or unfavourable, which provides evidence of conditions that existed at the balance sheet date, the amounts recognised in the Statement of Accounts are adjusted to reflect this. Where an event occurs after the balance sheet date that is indicative of conditions that arose after the balance sheet date, the amounts recognised in the Statement of Accounts are not adjusted but are disclosed as a separate note to the accounts. Events after the balance sheet date are reflected up to the date when the Statement of Accounts are authorised for issue, which is the date they are authenticated by the Chief Finance Officer by signing and dating them before publishing. On 18 May 2012 the Council transferred it Leisure, Libraries and Wellbeing Services into a Community Interest Company ‘Livewire Warrington’. On the same date the Council’s Pyramid Theatre, Parr Hall and Museum were transferred to a Charitable Trust ‘Culture Warrington. The Council has entered into 20 property leases with these two companies. 7 Adjustments Between Accounting Basis and Funding Basis Under

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

2011/12

General Fund

Balance £000

Housing Revenue Account

£000


£000


£000

Capital Grants

Unapplied £000

Movement in Unusable Reserves

£000Adjustments involving the Capital Adjustment Account:Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation and impairment of non current assets (25,696) - - - - 25,696

Amortisation of intangible assets (722) - - - - 722Movements in the market value of investment properties (287) - - - - 287Revenue expenditure funded from capital under statute (8,521) - - - - 8,521Capital grants and contributions applied 5,940 - - - - (5,940)Carrying amount of non current assets sold (4,223) - - - - 4,223Transfer to Capital Adjustment Accounts - Large Scale Voluntary Transfer - - - - - -

Housing Revenue Account Transfers - - - - - -Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:Statutory provision for the financing of capital investment 4,042 - - - - (4,042)

Adjustments primarily involving the Capital Grants Unapplied Account:Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Account 15,261 - - - (15,261) -

Application of grants to capital financing transferred to the Capital Adjustment Account - - - - 17,210 (17,210)

Adjustments involving the Capital Receipts Reserve:Use of the Capital Receipts Reserve to finance new capital expenditure - - 4,057 - - (4,057)

Proceeds From Sale of Non Current Assets 3,261 - (3,261) - - -Contribution from the Capital Receipts Reserve to finance the payments to the Government capital receipts pool. (10) - 10 - - -

Transfer from Deferred Capital Receipts Reserve upon receipt of cash - - (27) - - 27

Adjustment involving the Major Repairs ReserveReversal of Major Repairs Allowance credited to the HRA - - - - - -Use of the Major Repairs Reserve to finance new capital expenditure - - - 80 - (80)

Adjustments involving the Financial Instruments Adjustment Account:Amounts by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements.

(25) (25) - - - 50

Adjustments involving the Pensions Reserve:Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement (see Note 47)

(16,169) - - - - 16,169

Employer’s pensions contributions and direct payments to pensioners payable in the year 18,763 - - - - (18,763)

Adjustments involving the Collection Fund Adjustment Account:Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

(137) - - - - 137

Adjustment involving the Unequal Pay Back Pay Adjustment Account:Amount by which amounts charged for Equal Pay claims to the Comprehensive Income and Expenditure Statement are different from the cost of settlements chargeable in the year in accordance with statutory requirements

- - - - - -

Adjustment involving the Accumulating Compensated Absences Adjustment Account:

Adjustments in relation to Short-term compensated absences 516 - - - - (516)

Total Adjustments (8,007) (25) 779 80 1,949 5,224

Usable Reserves

Restated 2010/11

General Fund

Balance £000


£000


£000


£000

Capital Grants

Unapplied £000

Movement in

Unusable Reserves

£000Adjustments involving the Capital Adjustment Account:Reversal of items debited or credited to the Comprehensive Income and Expenditure Statement:

Charges for depreciation and impairment of non current assets (20,611) (309,595) - - - 330,206

Amortisation of intangible assets (715) - - - - 715Movements in the market value of investment properties (8,566) - - - - 8,566Revenue expenditure funded from capital under statute (9,593) - - - - 9,593Capital grants and contributions applied 34,000 - - - - (34,000)Carrying amount of non current assets sold (6,881) - - - - 6,881Transfer to Capital Adjustment Accounts - Large Scale Voluntary Transfer - 60,512 - - - (60,512)

Housing Revenue Account Transfers (242) 242 - - - -Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:Statutory provision for the financing of capital investment 336 - - - - (336)

Adjustments primarily involving the Capital Grants Unapplied Account:Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Account 1,482 (1,482) -

Application of grants to capital financing transferred to the Capital Adjustment Account -

Adjustments involving the Capital Receipts Reserve:Use of the Capital Receipts Reserve to finance new capital expenditure - - 2,473 - - (2,473)

Proceeds From Sale of Non Current Assets 3,128 - (3,128) - - -Contribution from the Capital Receipts Reserve to finance the payments to the Government capital receipts pool. (532) - 532 - - -

Transfer from Deferred Capital Receipts Reserve upon receipt of cash - - (26) - - 26

Adjustment involving the Major Repairs ReserveReversal of Major Repairs Allowance credited to the HRA - 3,375 - (3,375) - -Use of the Major Repairs Reserve to finance new capital expenditure - - - 2,983 - (2,983)

Adjustments involving the Financial Instruments Adjustment Account:Amounts by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements.

777 - - - - (777)

Adjustments involving the Pensions Reserve:Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement (see Note 47)

44,087 - - - - (44,087)

Employer’s pensions contributions and direct payments to pensioners payable in the year - - - - - -

Adjustments involving the Collection Fund Adjustment Account:Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

300 - - - - (300)

Adjustment involving the Unequal Pay Back Pay Adjustment Account:Amount by which amounts charged for Equal Pay claims to the Comprehensive Income and Expenditure Statement are different from the cost of settlements chargeable in the year in accordance with statutory requirements

(197) - - - - 197

Adjustment involving the Accumulating Compensated Absences Adjustment Account:

Adjustments in relation to Short-term compensated absences (1,480) - - - - 1,480

Total Adjustments 35,293 (245,466) (149) (392) (1,482) 212,196

Usable Reserves

8 Transfers To/From Earmarked Reserves This note sets out the amounts set aside from the General Fund and HRA balances in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund and HRA expenditure in 2011/12.

Balance at31 March

2010£'000

Transfersout 2010/11

£'000

Transfersin 2010/11

£'000

RestatedBalance at31 March

2011£'000


£'000

Transfersin 2011/12

£'000

Balance at31 March

2012£'000 Purpose of Reserve

General Fund:SchoolsBalances held by schools under a scheme of delegation 1,157 (1,157) 1,954 1,954 (1,954) 5,080 5,080

Local Management of Schools Reserve - School Loans Scheme (152) 40 (112) (42) 45 (109)

Teachers Pension Reserve (121) (121) 121 -Council

Assistant Chief Executives - - 188 188 To fund future expenditure in Assistant Chief Excuitves

Alexandra Park Trust 1 1 (1) -Anderman Bennet Trust 20 20 (20) -

Arpley Street 40 1 41 41 Ring fenced for use by the Cultural Non Profit Distributing Organisation

Anson & Blenheim PFI Reserve 172 (63) 109 (108) 1 Ring fence of PFI credits to mitigate any future liabilities

Callands & Hood Manor - 28 28 (28) -To cover the refurbishment of Hood Manor and Callands Shopping Centres

Capital Reserve 1,173 (285) 888 (888) - To fund future capital programme

Cemeteries & Crematorium Reserve 71 71 (71) - To fund improvements relating to the

crematorium and revised European Union emissions standards

Children's Services - - 991 991 To fund future expenditure in Children's Services

Children's Comfort Funds Reserve 7 7 7This reserve is for monies held on behalf of children in care and not available to the Council

Colonel Edleston 51 51 10 61 Ring fenced for use by the Cultural Non Profit Distributing Organisation

Coroners Judicial Review 10 10 10 To fund any one off costs of future judicial reviews

Criminal Injuries Compensation Reserve 12 12 12 To provide for any criminal injury

claims from children in care

DEFRA Waste Grant Reserve 347 347 (347) - To fund the purchase of refuse vehicles

Early Years - - 254 254 To fund early years provision

Environment Services - - 315 315 To fund future expenditure in Environment Services

Financial Division Restructure Reserve 100 (100) - -

To provide temporary cover in relation to financial services restructure

Grants Account 71 71 (71) -

To fund Neighbourhood & Community Services expenditure including services relating to Motor Neurone Disease (MND) services

Homelessness Reserve 53 54 107 (60) 47 To fund proposals 'to close the gap' on homelessness

Industrial Estates & Other Commercial Properties Reserve 33 (33) - -

To fund maintenance and capital works on Council's industrial units and commercial properties

Insurance Fund Reserve 2,178 21 2,199 1,021 3,220

To meet the excess on any insurance claims taken out with third party organisations and self insure certain areas of risk

Lease Termination Reserve - Dilapidation 532 (286) 246 (246) - To fund future termination of lease

agreements

Local Land Charges Reserve 15 65 80 (23) 57

Statutory account to ring fence surpluses/ deficits produced over three year cycle for fee setting purposes

Look of the Borough Reserve 35 47 82 (82) - To fund 'Look of the Borough' initiative

Mayor's Charity 11 (8) 3 3Money's collected by the Mayor on behalf of the mayoral supported charities

Members Voluntary Initiative 8 8 8 To fund 'International Partnerships' initiative

MTFP Reserve 5,974 (4,655) 2,679 3,998 1,907 5,905 To fund future reductions in government grant levels and mitigate impact to service provision

Reserves held by Schools

Balance at31 March

2010£'000


£'000

Transfersin 2010/11

£'000

RestatedBalance at31 March

2011£'000


£'000

Transfersin 2011/12

£'000

Balance at31 March

2012£'000 Purpose of Reserve

Museum Arts 105 105 (12) 93 To fund future museum exhibitions or art acquisitions

Neighbourhood & Community Services - - 10 10

To fund future expenditure in Neighbourhood & Community Services

Paddington Meadows 32 16 48 (30) 18 To fund future environmental improvement works

Rape Crisis Centre - 28 28 (28) - To aid rape crisis centre.

Revenue Grants Unapplied 3,249 (3,249) 8,593 8,593 (8,593) 4,121 4,121 Revenue Grants carried forward for earmarked schemes

SALIX Revolving Fund - - 33 33 To fund energy efficiency schemesSecond Home Discount Funding Police Community Support Officer's Reserve

35 (15) 20 (20) -To fund extra Police Community Support Officer's as part of Community Safety priorities

Section 74 Fees (Bus Station) 50 50 (50) - Ring fence of Section 74 fees for use on transportation

Serious Case Review Reserve 19 19 (19) -To fund serious case reviews conducted by the Local Safeguarding Board

Stronger Together Grant Reserve 47 (47) - - To fund 'Safer Neighbourhoods' imitative

Strategic Reserve 4,760 4,760 4,760To cover emergency events such as unforeseen financial liabilities or natural disasters

Supporting People 2,044 (1,361) 683 905 1,588 To fund future grant reductions on welfare services

Taxi Surplus - 20 20 24 44

The taxi account is a ringfenced account with any surpluses or losses being earmarked for use in respect of this service

Time Square Reserve 488 238 726 (97) 629

To fund the regeneration of area surrounding Time Square in accordance with the 'Bridge Street Quarter' master plan

Town Centre Security 2 2 (2) - To fund town centre security initiatives

Town Centre Sinking Fund 390 390 390 To offset any future overspending relating to the town centre

Union Learner Reps - 20 20 20Monies set aside to increase participation in union training services

Under Age Alcohol Reserve 39 39 (39) - To fund 'Under Age Alcohol' initiative

Unitary Development Reserve 15 15 15To part fund costs borne by the creation of the new Unitary Development Plan

Walton Hall Reserve 50 50 50 To fund the refurbishment of Walton Hall

Winwick Road - 30 30 30To contribute towards the costs of demolition of 30 and 36/8 Winwick Street

Woolston High School - - 2,350 2,350 To contribute to the school deficit upon closure

Youth Offending Team Reserve 184 204 388 (193) 261 456 A joint fund between Warrington and Halton Council's for the provision of Youth Offending services

TOTAL 23,307 (11,259) 14,038 26,086 (13,024) 17,636 30,698

HRA:Strategic Reserve 750 750 750Deferred Capital Receipts - Mortgages - - (39) 39 -

Earmarked Reserve 91 1 92 794 886TOTAL 841 - 1 842 (39) 833 1,636

TOTAL EARMARKED RESERVES 24,148 (11,259) 14,039 26,928 (13,063) 18,469 32,334 9 Other Operating Expenditure

2010/11 £000

2011/12 £000

1,510 Parish council precepts 1,521

532Payments to the Government Housing Capital Receipts Pool 10

3,753 Gains/losses on the disposal of non current assets 964 - Levies 111 - Other -

5,795 2,606

10 Financing and Investment Income and Expenditure

Restated 2010/11

£0002011/12

£00010,577 Interest payable and similar charges 5,462

6,793Pensions interest cost and expected return on pensions assets (363)

(2,893) Interest receivable and similar income (2,408)

6,207Income and expenditure in relation to investment properties and changes in their fair value (1,840)

(3,393) GF Proportion of Stock Transfer OHD Calculation - Other investment income -

17,291 Total 851 11 Taxation and Non Specific Grant Incomes

2010/11 £000

2011/12 £000

(80,981) Council Tax Income (81,464)(47,188) NNDR Redistribution (43,813)(21,032) Non-ringfenced government grants (30,225)(29,957) Capital Grants (20,821)

(179,158) Total Taxation and Non-Specific Grant Income (176,323)

12 Property, Plant and Equipment (PP&E)

Movements on Balances Movements in 2011/12:

Council Dwellings

£000

Land & Buildings

£000

Infrastructure Assets £000

Vehicles, Plant &

Equipment £000

Community Assets £000

PP&E Under Construction

£000

Surplus Assets £000

Total PP&E £000

PFI Assets Included in

PP&E£000

Cost or ValuationBalance as at 1 April 2011 323,495 314,355 114,621 21,499 10,135 18,619 - 802,724 11,062Adjustments between cost/value & depreciation/impairment - 1,059 - - - - - 1,059 -Adjusted opening balance 323,495 315,414 114,621 21,499 10,135 18,619 - 803,783 11,062Additions (Note 40) - 6,623 7,235 3,872 299 14,150 - 32,179 -Donations - - - - - - - - -Revaluation increases/decreases to Revaluation Reserve (145) 16,154 - - - - - 16,009 (158)

Revaluation increases/decreases to Surplus or Deficit on the Provision of Services

- - - - - - - - -

Derecognition - Disposals - (978) - - - - (978) -Derecognition - Other - - - - - - - - -Reclassifications & Transfers - (12,474) 734 18,563 (6,823) - -Reclassified to Held for Sale - (5,398) - - - - - (5,398) -Reclassified from Held for Sale - - - - - - - - -Balance as at 31 March 2012 323,350 319,341 122,590 43,934 10,434 25,946 - 845,595 10,904Depreciation and ImpairmentBalance as at 1 April 2011 318,063 23,682 5,181 2,174 - - - 349,100 5,637Adjustments between cost/value & depreciation/impairment - - - - - - - - -Adjusted opening balance 318,063 23,682 5,181 2,174 - - - 349,100 5,637Depreciation Charge 64 7,304 2,876 3,526 - - - 13,770 55Depreciation written out on Revaluation Reserve (29) (8,708) - - - - - (8,737) (32)

Depreciation written out on Revaluation taken to Surplus or Deficit on the Provision of Services

- - - - - - - - -

Impairment losses/reversals to Revaluation Reserve - - - - - - - - -Impairment losses/reversals to Surplus or Deficit on the Provision of Services

186 11,739 - - - - -11,925

201

Derecognition - Disposals - (777) - - - - - (777) -Derecognition - Other - - - - - - - - -Reclassifications & Transfers - - - - - - - - -Eliminated on reclassification to Held for Sale - - - - - - - - -Balance as at 31 March 2012 318,284 33,240 8,057 5,700 - - - 365,281 5,861Net Book ValueBalance as at 31 March 2012 5,066 286,101 114,533 38,234 10,434 25,946 - 480,314 5,043Balance as at 31 March 2011 5,432 290,673 109,440 19,325 10,135 18,619 - 453,624 5,425 PFI Assets are those relating to Private Finance Initiatives

Comparative Movements in 2010/11:

Council Dwellings

£000

Land & Buildings

£000

Infrastructure Assets

£000

Vehicles, Plant &

Equipment £000

Community Assets

£000


£000

Surplus Assets

£000Total PP&E

£000


PP&E£000

Cost or ValuationBalance as at 1 April 2010 323,377 287,824 106,836 7,501 8,009 26,860 - 760,407 9,688Adjustments between cost/value & depreciation/impairment - - - - - - - - -Adjusted opening balance 323,377 287,824 106,836 7,501 8,009 26,860 - 760,407 9,688Additions (Note 40) 2,512 16,582 7,785 4,813 2,126 14,353 48,171 -Donations - -Revaluation increases/decreases to Revaluation Reserve 1,513 3,214 4,727 1,374


(231)(231)

-

Derecognition - Disposals (6,639) (24) (6,663) -Derecognition - Other - -Reclassifications & Transfers 13,385 9,209 (22,594) - - -Reclassified to Held for Sale (3,907) 220 (3,687) -Reclassified from Held for Sale - -Balance as at 31 March 2011 323,495 314,355 114,621 21,499 10,135 18,619 - 802,724 11,062Depreciation and Impairment -Balance as at 1 April 2010 5,107 7,480 2,505 954 - - - 16,046 266Adjustments between cost/value & depreciation/impairment - -Adjusted opening balance 5,107 7,480 2,505 954 - - - 16,046 266Depreciation Charge 1,203 4,687 2,676 920 - - 5 9,491 259Depreciation written out on Revaluation Reserve (5,236) (1,464) - - - - - (6,700) (525)


- - - - - - - - -

Impairment losses/reversals to Revaluation Reserve 11,435 1,748 - - - - - 13,183 -Impairment losses/reversals to Surplus or Deficit on the Provision of Services

305,554 12,604 - - - - -318,158

5,637

Derecognition - Disposals - (1,064) - (9) - - - (1,073) -Derecognition - Other - - - -Reclassifications & Transfers - (309) - 309 - - (5) (5) -Eliminated on reclassification to Held for Sale - - - - - - - - -Balance as at 31 March 2011 318,063 23,682 5,181 2,174 - - - 349,100 5,637Net Book ValueBalance as at 31 March 2011 5,432 290,673 109,440 19,325 10,135 18,619 - 453,624 5,425Balance as at 31 March 2010 318,270 280,344 104,331 6,547 8,009 26,860 - 744,361 9,422

Depreciation The following useful lives and depreciation rates have been used in the calculation of depreciation:

• Other Buildings: depreciated using the straight line allocation over the life of the property as estimated by the valuer

• Freehold Land: not depreciated • Vehicles, Plant, Furniture & Equipment: depreciated over a period

between 3 and 10 years straight line • Infrastructure: depreciated straight line over the life of the asset

Capital Commitments The total capital commitments as at 31 March 2012 were £10,007k . This includes the following major projects:

• Orford Sports Village £1,004k • New Primary School at Chapelford £3,065k • Great Sankey Primary Replacement £2,739k • Solar Panels for Golden Gates Housing Trust Properties £1,467k

Effects of Changes in Estimates In 2011/12, the Council did not make any material changes to its accounting estimates for Property, Plant and Equipment. Revaluations The Council carries out a rolling programme that ensures all Property, Plant and Equipment required to be measured at fair value is revalued at least every five years. Valuations were carried out internally as at 1 April 2011. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. Valuations of vehicles, plant, furniture and equipment are based on current prices where there is an active second–hand market or latest list prices adjusted for the condition of the asset. The significant assumptions applied in estimating the fair values of the PPE property assets were for those assets valued on the Depreciated Replacement Cost method whereby they were valued by adopting the "instant build" approach as set in the Government Financial Reporting Manual. The Council carries out a revaluation of property assets classed as investment assets every year. The Council carries out a rolling programme that ensures that property assets classified as Property, Plant and Equipment requiring to be measured at fair value is valued at least every 3 years. All valuations are carried out internally. The valuations are carried out in accordance with the methodologies and bases set out in the Valuation Standards of the Royal Institution of Chartered Surveyors.

13 Investment Properties

The following items of income and expense have been accounted for in the Financing and Investment Income line in the Comprehensive Income and Expenditure Statement:

2010/11£000

2011/12£000

Rental income from investment property (3,013) (2,904)Direct operating expenses arising from investment property 654 653Net (gain)/loss (2,359) (2,251) There are no restrictions on the Council’s ability to realise the value inherent in its investment property or the Council’s right to the remittance of income and the proceeds of disposal. The Council has no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancement of these assets. The following table summarises the movement in the fair value of investment properties over the year:

31/03/2011 £000

31/03/2012 £000

Restated Balance at start of the year 45,729 36,473Additions:

- Purchases - - - Assets Not Previously Recognised 2,340- Construction - - - Subsequent expenditure - -

Disposals (690) (87)Net gains/(losses) from fair value adjustments (8,566) (287)Transfers:

- (to)/from Inventories - - - (to)/from Property, Plant and Equipment - -

Other Changes - - Balance at end of the year 36,473 38,439 14 Intangible Assets The Council accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets include both purchased licences and internally generated software. All software is given a finite useful life, based on assessments of the period that the software is expected to be of use to the Council. The useful lives assigned to the major software suites used by the Council are 5 years straight line. The carrying amount of intangible assets is amortised on a straight line basis. The amortisation of £722k charged to revenue in 2011/12 was charged to the

IT Administration cost centre and then absorbed as overhead across all the service headings in the Net Expenditure of Services. The movement on Intangible Asset balances during the year is as follows:

Internally Generated

Assets £000

Other Assets £000

Total £000


Assets £000

Other Assets £000

Total £000

Balance at start of year:· Gross carrying amounts - 3,575 3,575 3,610 3,610· Accumulated amortisation - (15) (15) (729) (729)Net carrying amount at start of year - 3,560 3,560 - 2,881 2,881Additions:· Internal development - - - - · Purchases - 36 36 22 22· Acquired through business combinations - - - -

- 3,596 3,596 - 2,903 2,903Assets reclassified as held for sale - - - - Other disposals - - - - Revaluation increases/decreases to Revaluation Reserve - - - -

Revaluation increases/decreases to Surplus or Deficit on the Provision of Services - - - -

Impairment losses recognised or reversed directly in the Revaluation Reserve - - - -

Impairment losses recognised in the Surplus/Deficit on the Provision of Services - - - -

Reversals of past impairment losses written back to the Surplus/Deficit on the Provision of Services - - - - Amortisation for the period - (715) (715) (722) (722)Other changes - - - - Net carrying amount at end of year - 2,881 2,881 - 2,181 2,181

Comprising:· Gross carrying amounts - 3,611 3,611 3,632 3,632· Accumulated amortisation - (730) (730) (1,451) (1,451)

- 2,881 2,881 - 2,181 2,181

2011/122010/11

There is one item of capitalised software that is individually material to the financial statements:

31/03/2011 £000

31/03/2012£000

Remaining Amortisation

PeriodFinancial Information Management System 2,840 2,130 2 Years

Carrying Amount

The Council purchased IT software licences totalling £22k during the year. The Council does not revalue its software assets due to the short lifespan of these assets.

15 Financial Instruments Categories of Financial Instruments The Council’s financial instruments include financial assets (cash and cash equivalents and loans and receivables) and financial liabilities (trade payables arising from day-to-day operations and borrowings). The main purposes of the Council’s financial instruments are to raise finance to support the Council’s day-to-day operations (by investing surplus cash balances where appropriate) and finance investment undertaken through the capital programme. The following categories of financial instrument are carried in the Balance Sheet:

Restated 31/03/2010

£000

Restated 31/03/2011

£00031/03/2012

£00031/03/2010

£00031/03/2011

£00031/03/2012

£000InvestmentsLoans and receivables - 969 2,745 12,425 27,883 20,357Available-for-sale financial assets - - - - - - Unquoted equity investment at cost 150 150 150 - - - Financial assets at fair value through profit and loss - - - - - - Total investments 150 1,119 2,895 12,425 27,883 20,357DebtorsLoans and receivables 33,456 33,917 34,093 - - - Financial assets carried at contract amounts - - - 15,589 15,672 15,372Total debtors 33,456 33,917 34,093 15,589 15,672 15,372BorrowingsFinancial liabilities at amortised cost 148,507 112,636 115,765 1,000 1,980 1,863Financial liabilities at fair value through profit and loss - - - - - - Total borrowings 148,507 112,636 115,765 1,000 1,980 1,863Other Long Term LiabilitiesPFI and finance lease liabilities 5,062 5,620 5,622 145 272 192Total other long term liabilities 153,569 118,256 121,388 1,145 2,252 2,055CreditorsFinancial liabilities at amortised cost - - - - - - Financial liabilities carried at contract amount - 179 - 18,720 18,085 23,127Total creditors - 179 - 18,720 18,085 23,127

Long-term Short-term

Long Term Equity Investments The Council has an investment of 22,222 shares valued at £150,000 representing a 15.7% shareholding in Warrington Sports Holding Ltd. It has been determined that the Council does not have control of the company and it is not a subsidiary of the Council. As the fair value of the shares cannot be easily determined due the shares having no quoted market price in an active market The cost that would be incurred in independently valuing them would be disproportionate. The investment is carried at cost as a proxy for fair value.

Reclassifications In 2011/12 the Council has not made any reclassifications. Income, Expense, Gains and Losses The gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to financial instruments are made up as follows:

Liabilities measured at

amortised cost £000

Loans and receivables

£000

Available-for-sale assets

£000

Assets and Liabilities at Fair Value through

Profit and Loss £000

2010/11 Total £000

Liabilities measured at

amortised cost £000

Loans and receivables

£000

Available-for-sale assets £000

Assets and Liabilities at Fair Value through

Profit and Loss £000

2011/12 Total £000

Interest expense (7,184) - - - (7,184) (5,462) - - - (5,462)Losses on derecognition - - - - - - - - - - Reductions in fair value - - - - - - - - - - Impairment losses - (463) - - (463) - (547) - - (547)Fee expense (13) - - - (13) - - - - Total expense in Surplus or Deficit on the Provision of Services (7,197) (463) - - (7,660) (5,462) (547) - - (6,009)Interest income - 2,893 - - 2,893 - 2,408 - - 2,408Interest income accrued on impaired financial assets - - - - - - - - - - Increases in fair value - - - - - - - - - - Gains on derecognition - - - - - - - - - - Fee income - - - - - - - - - - Total income in Surplus or Deficit on the Provision of Services - 2,893 - - 2,893 - 2,408 - - 2,408Gains on revaluation - - - - - - - - - - Losses on revaluation - - - - - - - - - - Amounts recycled to the Surplus or Deficit on the Provision of Services after impairment - - - - - - - - - - Surplus/deficit arising on revaluation of financial assets in Other Comprehensive Income and Expenditure - - - - - - - - - - Net gain/(loss) for the year: Income & Expenditure Account (7,197) 2,430 - - (4,767) (5,462) 1,861 - - (3,601)Below the line adjustments of write off of premiums and discounts in 2010/11 810 - - - 810 - - - - - Net gain/(loss) for the year: General Fund (6,387) 2,430 - - (3,957) (5,462) 1,861 - - (3,601) Fair Values of Assets and Liabilities Financial liabilities, financial assets represented by loans and receivables and long-term debtors and creditors are carried in the Balance Sheet at 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:

• estimated ranges of rates at 31 March 2012 of 1.34% to 4.39% for loans from the PWLB and 4.29% and 4.50% for other loans receivable and payable, based on new lending rates for equivalent loans at that date

• no early repayment or impairment is recognised • where an instrument will mature in the next 12 months, carrying

amount is assumed to approximate to fair value • the fair value of trade and other receivables is taken to be the invoiced

or billed amount.

The fair values calculated are as follows:

31/03/2010Carrying amount

£000Fair value

£000

Carrying amount

£000Fair value

£000

Carrying amount

£000Fair value

£000Financial liabilities 149,507 160,304 114,616 121,791 117,628 122,461Long-term creditors - - 179 179 - -

31/03/201231/03/2011

The fair value of the liabilities is higher than the carrying amount because the Council’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the prevailing rates at the Balance Sheet date. This shows a notional future gain (based on economic conditions at 31 March 2012).

31/03/2010

Carrying amount £000

Fair value £000

Carrying amount

£000Fair value

£000

Carrying amount

£000Fair value

£000Loans and receivables 12,575 12,575 28,852 27,831 23,102 23,215Long-term debtors 33,456 33,456 33,917 33,917 34,093 34,093

31/03/201231/03/2011

The fair value of the assets is higher than the carrying amount because the Counicl's portfolio of investments includes a number of fixed rate loans where the interest rate receivable is higher than the rates available for similar loans at the Balance Sheet date. This shows a notional future gain (based on economic conditions at 31 March 2012) attributable to the commitment to receive interest below current market rates. Short term debtors and creditors are carried at cost as this is a fair approximation of their value. 16 Inventories

2010/11 £000

2011/12 £000

2010/11 £000

2011/12 £000

2010/11 £000

2011/12 £000

Balance Outstanding at Start of Year 872 925 8 - 880 925Other Movement in Year 58 (5) - - 58 (5)Purchases 115 3 - - 115 3Recognised as an Expense in Year (25) (93) (8) - (33) (93)Written Off Balances (95) - - - (95) 0Reversals of Write Offs in Previous Years - - - - - 0Balance Outstanding at Year End 925 830 - - 925 830

Consumable StoresClient Services in Work

in Progress Totals

17 Construction Contracts The Council did not carry out any construction contracts for customers during the financial year.

18 Debtors The Councils debtors are as follows:

31/03/10£000

31/03/11£000

31/03/12£000

31/03/10£000

31/03/11£000

31/03/12£000

Central government bodies - - - 29,555 24,862 12,933Other local authorities - - - 1,426 1,826 859NHS bodies - - - - 304 2,307Public corporations and trading funds - - - 1,085 - - Other entities and individuals 33,613 33,917 36,063 13,349 23,023 26,853Total 33,613 33,917 36,063 45,415 50,015 42,952

Long Term Debtors Short Term Debtors

19 Cash and Cash Equivalents

The balance of Cash and Cash Equivalents is made up of the following elements:

31/03/10 £000

31/03/11 £000

31/03/12£000

Cash Held by the Authority 4,250 105 98Bank Current Accounts - 9,254 7,879Short Term Deposits 18,703 21,845 14,538Total 22,953 31,204 22,515

31/03/10£000

31/03/11£000

31/03/12£000

Bank Current Accounts (10,528) (8,366) (9,362) Net Position 12,425 22,838 13,153 20 Assets Held for Sale Where the Council expects to sell assets within twelve months of the balance sheet date and is actively marketing their sale they are shown under Assets Held for Sale which is classified as a current asset. As the true value of these assets to the Council will now be their disposal value they are held at Market Value less any costs of disposal rather than a value based on their continuing use by the Council.

2010/11 £000

2011/12£000

2010/11£000

2011/12£000

Balance Outstanding at Start of Year - - 465 - Assets Newly Classified as Held for Sale:- Property, Plant and Equipment - 5,398 3,682 - - Assets Not Previously Recognised 446 - Intangible Assets - - - - - Other Assets/Liabilities in Disposal Groups - - - - Revaluation losses - - - - Revaluation gains - - - - Impairment losses - - (3,545) - Assets Declassified as Held for Sale:- Property, Plant and Equipment - - - - - Intangible Assets - - - - - Other Assets/Liabilities in Disposal Groups - - - - Assets Sold - (3,935) (602) - Transfers from Non Current to Current - - - - Other Movements - - - Balance Outstanding at Year End - 1,909 - -

Current Non Current

21 Creditors The Council’s creditors are as follows:

31/03/10£000

31/03/11£000

31/03/12£000

Restated 31/03/10

£000

Resated 31/03/11

£00031/03/12

£000Central Government Bodies - - - 4,567 2,842 2,248Other Local Authorities - - - 708 514 444NHS Bodies - - - - 20 169Public Corporations and Trading Funds - - - 2,184 120 44Other Entities and Individuals 5,162 5,476 5,316 27,437 39,447 33,443Total 5,162 5,476 5,316 34,896 42,943 36,348

Long Term Creditors Short Term Creditors

22 Provisions

Outstanding Legal Cases

£000

Injury and Damage

Compensation Claims £000

Other Provisions

£000Total £000

Balance at 1 April 2011 - 1,531 2,016 3,547Additional Provisions Made in 2011/12 - 777 858 1,635Amounts Used in 2011/12 - - (864) (864)Unused Amounts Reversed in 2011/12 - (1,021) (121) (1,142)Unwinding of Discounts in 2011/12 - - - - Balance at 31 March 2012 - 1,287 1,889 3,176

• Injury and Damage Compensation Claims relate to the insurance fund

which is set up to meet the unmet excess amount on any insurance claims taken out with third party organisations and to self insure certain areas of risk. In addition the estimated cost of external insurance premiums is credited to the Insurance Fund prior to payment to external insurers. The fund is reviewed on an annual basis, taking into account the level of both known claims and also the IBNR (incurred but not reported) accrual figure, which is the estimated cost of claims that have been incurred but not yet reported to the Council. Both these

figures are obtained from third party consultants on an annual basis. The Insurance Fund transactions result in both a provision (to meet known claims) and a useable revenue reserve (additional contingency to meet further claims) on the Balance Sheet as well as a Comprehensive Income and Expenditure Statement impact.

The Other Provisions relate to:

• Staff provisions for potential future payments for redundancy and job evaluation claims.

• Property provisions for future compulsory purchase order on a property • The Carbon Reduction Commitment (CRC) Provision for future

obligation to purchase and surrender CRC Allowances in relation to carbon dioxide emissions. The provision arises at the point at which the energy is consumed and carbon dioxide is emitted.

23 Usable Reserves

Movements in the Council’s usable reserves are detailed in the Movement in Reserves Statement and Notes 23 and 24.

Restated 31/03/11

£00031/03/12

£000Held for Revenue PurposesGeneral Fund (see MiRS) 976 1,282HRA (see MiRS) 2,306 2,306Earmarked Reserves (see Note 8)- GF 26,086 30,698- HRA 842 1,636

30,210 35,922Held for Capital PurposesCapital Receipts Reserve 779 0Major Repairs Reserve 2,101 2,021Capital Grants Unapplied 13,341 11,392

16,221 13,413

Total Usable Reserves 46,431 49,335 Capital Receipts Reserve There are cash receipts from the sale of Council assets, which have not yet been used to finance capital expenditure.

31/03/11 £000

31/03/12 £000

Balance 1 April 345 779Transferred from Deferred Capital receipts 26 27Capital Receipts in year 3,413 3,261

3,784 4,067Less:Capital Receipts Pooled (532) (10)Capital Receipts used for financing (2,473) (4,057)Balance 31 March 779 - Major Repairs Reserve The Major Repairs Reserve details the Major Repairs Allowance (MRA) received by the Council. The MRA is based on national average unit costs for each of the property types and represents the estimated long-term average amount of capital spending required to maintain a Council’s stock in its current condition. The MRA received in the year totalled £3,375k all of which was used to finance capital spend in the Housing Investment Programme in 2010/11.

31/03/11 £000

31/03/12 £000

Balance on 1 April 1,709 2,101Amount transferred from the HRA - Depreciation:Dwellings 3,375Other Assets -

3,375 0 HRA Capital Expenditure - Appropriations to HRA (2,983) (80)

(2,983) (80)Balance on 31 March 2,101 2,021 Capital Grants Unapplied

Restated 31/03/11

£00031/03/12

£000Balance on 1 April 11,859 13,341Unapplied Capital Grants received in year 8,339 15,261Unapplied Capital Grants transferred to CAA in year (6,857) (17,210)Balance on 31 March 13,341 11,392

24 Unusable Reserves

Restated 31/03/2011

£00031/03/2012

£000Capital Adjustment Account 279,821 278,281Financial Instruments Adjustment Account (28) (78)Revaluation Reserve 81,543 103,949Available for Sale Financial Instruments Reserve - - Pensions Reserve (88,077) (127,498)Deferred Capital Receipts Reserve (England and Wales) 32,117 32,090 Collection Fund Adjustment Account 301 164Unequal Pay Back Pay Account (197) (197)Accumulating Compensated Absences Adjustment Account (5,542) (5,026)Total Unusable Reserves 299,938 281,685 Revaluation Reserve 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:

• revalued downwards or impaired and the gains are lost • used in the provision of services and the gains are consumed through

depreciation, or • disposed of and the gains are realised.

The reserve contains only revaluation gains accumulated since 1 April 2007, the date that the reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

Restated31/03/2011

£00031/03/2012

£000Balance at 1 April 83,340 81,543Upward revaluation of assets - 26,646Downward revaluation of assets and impairment losses not charged to the Surplus on the Provision of Services (2,614) - Surplus or deficit on revaluation of non-current assets not posted to the Surplus on the Provision of Services (2,614) 26,646Disposal of assets - (447)Difference between fair value depreciation and historical cost depreciation 817 (1,819)Balance at 31 March 81,543 105,923 Available for Sale Financial Instruments Reserve The Available for Sale Financial Instruments Reserve contains the gains made by the Council arising from increases in the value of its investments that have quoted market prices or otherwise do not have fixed or determinable payments. The balance is reduced when investment with accumulated gains are:

• revalued downwards or impaired and the gains are lost

• disposed of and the gains are realised. The Council did not have an Available for Sale Financial Instruments Reserve as at 31 March 2012. Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis.) The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement. The Account also contains accumulates gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Council.

Balance at 1 April 536,295 279,821Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement:Charges for depreciation and impairment of non current assets (330,206) (25,696)Amortisation of intangible assets (715) (722)Revaluation losses on Property, Plant and Equipment - - Revenue expenditure funded from capital under statute (9,593) (8,521)Amounts of non current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement (6,881) (3,776)

(347,395) (38,715)Adjusting amounts written out of the Revaluation Reserve (817) 1,819 Net written out amount of the cost of non current assets consumed in the year (348,212) (36,896)Capital financing applied in the year:Use of the Capital Receipts Reserve to finance new capital expenditure 2,473 4,057Use of the Major Repairs Reserve to finance new capital expenditure 2,983 80 Loans Lease principal repayments 60,512 - Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing 27,143 5,940Application of grants to capital financing from the Capital Grants Unapplied Account 6,857 17,210Statutory provision for the financing of capital investment charged against the General Fund and HRA balances 336 3,211 Write off of Warrington Borough Transport Limited Realisation Reserve 831 Capital expenditure charged against the General Fund and HRA balances - -

100,304 31,329Movements in the market value of Investment Properties debited or credited to the Comprehensive Income and Expenditure Statement (8,566) (287)Investment Properties Not Previously Recognised 2,340 Movement in the Donated Assets Account credited to the Comprehensive Income and Expenditure Statement - - Balance at 31 March 279,821 276,307

Restated31/03/2011

£00031/03/2012

£000

The Accounts also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 7 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve. Financial Instruments Adjustment Account The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefitting from gains per statutory provisions. Warrington Borough Council use the Account to manage amounts that are charged to the Comprehensive Income and Expenditure Account, but reversed out of the General Fund Balance to the Account in the Movement in reserves Statement. Over time the income or expense is posted back to the General Fund Balance in

accordance with statutory arrangements. This account includes amounts relating to a discount on the early redemption of loans and interest adjustments relating to two step loans, and one soft loan.

31/03/2011£000

31/03/2012 £000

Balance at 1 April (805) (28)Premiums incurred in the year and charged to the Comprehensive Income and Expenditure Statement 752 Proportion of premiums incurred in previous financial years to be charged against the General Fund Balance in accordance with statutory requirements - - Amount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements 25 (50)Balance at 31 March (28) (78) Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

31/03/2011£000

31/03/2012 £000

Balance at 1 April (267,417) (88,077)

Actuarial gains or losses on pensions assets and liabilities 135,253 (42,015)Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement 44,087 2,594Balance at 31 March (88,077) (127,498) Deferred Capital Receipts Reserve The Deferred Capital Receipts Reserve holds the gains recognised on the disposal of non-current assets but for which cash settlement has yet to take place. Under statutory arrangements, the Council does not treat these gains as usable for financing new capital expenditure until they are backed by cash

receipts. When the deferred cash settlement eventually takes place, amounts are transferred to the Capital Receipts Reserve.

31/03/2011£000

31/03/2012 £000

Balance at 1 April 32,143 32,117Transfer to Capital Receipts Reserve (26) (27)Balance at 31 March 32,117 32,090 Collection Fund Adjustment Account The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amount to the General Fund from the Collection Fund.

31/03/2011£000

31/03/2012 £000

Balance at 1 April 1 301Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements 300 (137)Balance at 31 March 301 164 Unequal Pay Back Account The Unequal Pay Back Account compensates for the differences between the rate at which the Council provides for the potential costs of back pay settlements in relation to Equal Pay cases and the ability to understand statutory provisions to defer the impact on the General Fund Balance until such time as cash might be paid out to claimants.

31/03/2011£000

31/03/2012 £000

Balance at 1 April - (197)Increase in provision for back pay in relation to Equal Pay cases (197) -Cash settlements paid in the year - -

Amount by which amounts charged for Equal Pay claims to the Comprehensive Income and Expenditure Statement are different from the cost of settlements chargeable in the year in accordance with statutory requirements - -Balance at 31 March (197) (197) Accumulated Absences Account The Accumulates Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact

on the General Fund Balance is neutralised by transfers to or from the Account.

31/03/2011£000

31/03/2012 £000

Balance at 1 April (4,062) (5,542)Settlement or cancellation of accrual made at the end of the preceding year 4,062 5,542Amounts accrued at the end of the current year (5,542) (5,026)

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements - - Balance at 31 March (5,542) (5,026) 25 Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items: 2010/11

£0002011/12

£000(6,289) Interest received (2,254)10,715 Interest paid 5,422

- Dividends received - 4,426 3,168

26 Cash Flow Statement – Investing Activities

2010/11£000

2011/12£000

44,406Purchase of property, plant and equipment, investment property and intangible assets 36,666

16,033Purchase of short-term and long-term investments 23,863

- Other payments for investing activities -

(3,128)

Proceeds from the sale of property, plant and equipment, investment property and intangible assets (3,261)

(10,060)Proceeds from short-term and long-term investments (20,083)

(31,106) Other receipts from investing activities (24,802)16,145 Net Cash Flows from Investing Activities 12,383

27 Cash Flow Statement – Financing Activities

2010/11£000

2011/12£000

(36,217)Cash receipts of short-term and long-term borrowing (5,898)

- Other receipts from financing activities -

166

Cash payments for the reduction of the outstanding liabilities relating to finance leases and on-balance sheet PFI contracts (15)

71,969Repayments of short-term and long-term borrowing 4,623

- Other payments for financing activities - 35,918 Net Cash Flows from Financing Activities (1,290)

28 Amounts Reported for Resource Allocation Decisions The analysis of income and expenditure by service in the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice. However, decisions about resource allocation are taken by the Council’s Executive Board on the basis of budget reports analysed across directorates. These reports are prepared on a different basis from the accounting policies used in the financial statements. Including:

• the cost of retirement benefits is based on cash flows (payment of employer’s pensions contributions) rather than current service cost of benefits accrued in the year

• no Income or Expenditure relating to Revenue Expenditure Funded From Capital Under Statute (REFCUS) is included, however this is included on the Comprehensive Income and Expenditure Statement

• no charges relating to the IFRS Employee Accrual have been included in the budget reports, however these do appear on the Comprehensive Income and Expenditure Statement

The income and expenditure of the Council’s directorates recorded in the budget reports for the year was as follows:

2011/12Assistant

Chief ExecsChildren &

Young PeopleEnvironment & Regeneration

Neighbourhood & Community

Corporate Financing HRA

Net Expenditure

IncomeFees, charges & Other Service Income (71,906) (17,515) (16,162) (35,908) (4,084) 794 (144,781)Government Grants (2,849) (153,798) (1,254) (463) - - (158,364)Interest and investment income - - - - (590) - (590)Internal Recharges (15,502) (136,834) (32,407) (2,793) (1) - (187,537)

(90,257) (308,147) (49,823) (39,164) (4,675) 794 (491,272)ExpenditureEmployee expenses 16,890 139,031 25,070 30,514 360 - 211,865Other Service Expenditure 71,570 58,153 32,090 67,483 7,555 (794) 236,057Depreciation, amortisation and impairment 16 18,966 5,676 1,710 (26,368) - - Interest Payable - - - - 5,016 - 5,016Internal Recharges 9,605 146,951 19,297 10,313 1,371 - 187,537

98,081 363,101 82,133 110,020 (12,066) (794) 640,475Net 7,824 54,954 32,310 70,856 (16,741) - 149,203

Resated 2010/11

Assistant Chief Execs

Children & Young People

Environment & Regeneration

Neighbourhood & Community

People & Improvement

Corporate Financing HRA

Net Expenditure

IncomeFees, charges & Other Service Income (2,981) (179,983) (18,942) (42,579) (2,433) (1,021) (16,772) (264,711)Government Grants (66,614) (12,393) - - (263) - - (79,270)Interest and investment income - - - - - (1,048) - (1,048)Internal Recharges (9,247) (139,022) (31,231) (3,370) (6,924) (1,334) (167) (191,295)

(78,842) (331,398) (50,173) (45,949) (9,620) (3,403) (16,939) (536,324)ExpenditureEmployee expenses 11,364 145,594 28,166 31,963 6,732 4,526 - 228,345Other Service Expenditure 67,488 65,669 30,197 70,599 2,897 3,899 14,435 255,184Depreciation, amortisation and impairment 3 11,177 6,735 2,893 756 (21,571) 2 (5)Interest Payable - - 0 - - 5,247 - 5,247Internal Recharges 8,138 147,423 20,345 11,087 1,494 307 2,501 191,295

86,993 369,863 85,443 116,542 11,879 (7,592) 16,938 680,066Net 8,151 38,465 35,270 70,593 2,259 (10,995) (1) 143,742 Reconciliation of Directorate Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement The reconciliation shows how the figures in the analysis of directorate income and expenditure (which are produced for management information purposes) relate to the amounts included in the Comprehensive Income and Expenditure Statement.

Restated 2010/11

£0002011/12

£000Net expenditure in the Directorate Analysis 143,742 149,203Net expenditure of servies and support services not included in the Analysis 221,393 6,669Amounts included in Directorate Analysis but not in Cost of Services (1,840) 19,315Cost of services in CI&E 363,295 175,187 Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis of directorate income and expenditure (which are produced for management information purposes) relate to the subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

2011/12Directorate

Analysis

Amounts not reported to

management for decision

making

Amounts reported but not included

in Cost of Services

Allocation of Recharges

Cost of Services

Corporate Amounts Total

IncomeFees, charges & Other Service Income (144,781) 1,287 (794) (144,288) (144,288)Government Grants (158,364) (158,364) (94,859) (253,223)Interest and investment income (590) 585 (5) (2,408) (2,413)Internal Recharges (187,537) 187,537 - - Income in relation to Investment Properties 2,909 2,909 (2,756) 153Income from Council Tax - (81,464) (81,464)

(491,272) 1,287 2,700 187,537 (299,748) (181,487) (481,235)ExpenditureEmployee expenses 211,865 (2,749) 209,116 209,116Other Service Expenditure 236,057 8,131 (4,020) 240,168 240,168Depreciation, amortisation and impairment - 26,417 26,417 26,417Interest Payable 5,016 (5,016) - 5,463 5,463Internal Recharges 187,537 (187,537) - - Parish Precepts - 1,521 1,521Precepts & Levies (111) (111) 111 - Payments to Housing Capital Receipts Pool - 10 10Gain / Loss on disposal of Non-Current Assets Assets - 964 964Pension Interest Cost and return on assets - (363) (363)Expenditure in relation to Investment Properites (655) (655) 915 260

640,475 5,382 16,615 (187,537) 474,935 8,621 483,556Net 149,203 6,669 19,315 - 175,187 (172,866) 2,321

2010/11Directorate

Analysis



making


in Cost of Services


Cost of Services


IncomeFees, Charges & Other Service Income (264,711) - - - (264,711) - (264,711)Interest & Investment Income (1,048) - 1,048 - - (2,893) (2,893)Government Grants (79,270) (4,772) - - (84,042) (98,177) (182,219)Internal Recharges (191,295) - - 189,871 (1,424) - (1,424)Income & Expenditure in Relation to Invesment Properties - (3,825) 3,013 - (812) 812 - Income from Council Tax - - - - - (80,981) (80,981)Transfer to Capital Adjustment Account - Large Scale Voluntary Transfer - (65,337) - - (65,337) - (65,337)

(536,324) (73,934) 4,061 189,871 (416,326) (181,239) (597,565)ExpenditureEmployee Expenses 228,345 (49,394) - - 178,951 - 178,951Other Service Expenditure 255,184 7,574 - - 262,758 - 262,758Depreciation, Amortisation and Impairment (5) 341,034 - - 341,029 - 341,029Interest Payable 5,247 . (5,247) - - 7,184 7,184Internal Recharges 191,295 - - (189,871) 1,424 - 1,424Parish Precepts - - - - - 1,510 1,510Housing Capital Receipts Pool - - - - - 532 532Gain / Loss on disposal of Fixed Assets - - - - - 4,112 4,112Pension Interest Cost and Return on Assets - - - - - 6,793 6,793Income and Expenditure in Relation to Investment Properties - (7,211) (654) - (7,865) 5,036 (2,829)Transfer to Capital Adjustment Account - Large Scale Voluntary Transfer - 3,324 - - 3,324 - 3,324

680,066 295,327 (5,901) (189,871) 779,621 25,167 804,788Net 143,742 221,393 (1,840) - 363,295 (156,072) 207,223 29 Acquired and Discontinued Operations

During 2011/12 the Council did not acquire or discontinue any operations. 30 Trading Operations Trading operations are incorporated into the Comprehensive Income and Expenditure Statement. Some are an integral part of one of the Council’s services to the public (e.g. refuse collection), whilst other are support services to the Council’s services to the public (e.g. schools catering). The income and expenditure relating to the trading accounts are included in the Net Cost of Services, with the exception of Commercial Properties and Industrial Estates which are shown in Financing and Investment Income and Expenditure (see Investment Properties in note 10).

Turnover (3,013) Turnover (2,904)Expenditure 654 Expenditure 653(Surplus) / Deficit (2,359) (Surplus) / Deficit (2,251)

Turnover (1,324) Turnover (1,285)Expenditure 1,300 Expenditure 1,201(Surplus) / Deficit (24) (Surplus) / Deficit (84)

Turnover (815) Turnover (833)Expenditure 1,050 Expenditure 982(Surplus) / Deficit 235 (Surplus) / Deficit 149

Turnover (3,108) Turnover (2,566)Expenditure 5,563 Expenditure 5,801(Surplus) / Deficit 2,454 (Surplus) / Deficit 3,235

Turnover (604) Turnover (655)Expenditure 1,401 Expenditure 1,520(Surplus) / Deficit 797 (Surplus) / Deficit 865

Turnover (3,392) Turnover (3,745)Expenditure 3,979 Expenditure 3,597(Surplus) / Deficit 588 (Surplus) / Deficit (148)

- Impairment Adjustment & Exceptional Costs -

Total Turnover (12,255) Total Turnover (11,988)Total Expenditure 13,946 Total Expenditure 13,754(Surplus)/Deficit 1,691 (Surplus)/Deficit 1,766

2010/11 £000

2011/12 £000

Commercial Properties and Industrial EstatesThe Council manages the land and buildings owned for the purposes of a property investment portfolio. The tenants are predominantly local business. All work is undertaken by the Council to ensure professional guidelines are met. The majority of lettings are at Market Value, with a limited number granting concessions to Charitable or Community Groups.

Retail MarketThe Council owns and operates Warrington Market. This includes the management, letting, cleaning, maintenance, security of over 200 market stalls and additional store rooms. We provide enterprise opportunities to the Market Traders and support to enable them to run their businesses.Car ParksThis is the day to day management of the Warrington Borough Council parking contract which includes the operational activity of the council owned 'off street' car parks and the issuance of penalty charge notices both on and off street. The activity is not carried out on a commercial basis as under the Traffic Management Act the service is expected to be cost neutral.Leisure & WellbeingThe purpose of the Leisure & Wellbeing service is to provide our communities with opportunities to develop healthier and more active lifestyles. They operate 7 facilities across the town including 4 partnership facilities. The service has a balanced approach, dealing with commercial activity at peak times and health inequalities across our communities at off peak times.Arts Centre & PyramidPyramid and Parr Hall are the town's key cultural and performance venues, offering varied programme of arts and cultural performances and also opportunities for local people to engage in activities and classes. The activities of Pyramid and Parr Hall are based on an agreed business plan which requires the delivery of a balanced budget which does not exceed the subsidy provided by the local authority and the venues operate commercially in order to make the most effective use of resources.

School MealsThe service provides school meals to school children at 70 primary, 2 special and 2 high schools and aims to deliver a quality value for money service which meets legislative standards. There is a commercially driven approach to the service and any deficit would need to be recharged to the Dedicated Schools Grant.

(Surplus) / Deficit on Trading AccountsAll the above Trading Accounts have been removed from Cost of Services and moved to Financing & Investment Income and Expenditure as detailed in Note 10.

31 Agency Services The Council is the lead authority for the Cheshire Coroner’s service and recharges these services to Cheshire East, Cheshire West and Chester and Halton Borough Council.

2010/11 £000

2011/12 £000

Recharge to Cheshire West & Chester 444 430 Recharge to Cheshire East 488 473 Recharge to Halton 161 158

Cost of Service to Warrington Borough Council 294 276

Total Cost of Coroner's Service 1,387 1,337 32 Road Charging Scheme Under The Transport Act 2000 The Council does not operate any road charging schemes under The Transport Act 2000. 33 Pooled Budgets The Council’s pooled budget arrangement with NHS Warrington ceased on 31 March 2011. There are no other pooled budget arrangements in place. 34 Members’ Allowances During the year Members allowances, including Employer's costs totalled £800k (2010/11 £805k) and are as follows:

2010/11 £000

2011/12£000

Allowances 676 677Expenses 129 123Total 805 800

35 Officers’ Remuneration

The remuneration paid to the Council’s senior employees is as follows.

Salary, Fees and

Allowances £

Bonuses £

Expenses Allowances

£

Taxable Benefits

£

Other Non-Cash Benefits

£

Compensation for Loss of

Office £

Pension Contribution

£Total

£2011/12 154,248 - 2,754 - - 30,208 187,210 2010/11 164,474 - 2,631 - - 31,414 198,519 2011/12 70,009 - 334 1,152 - 155,164 82,791 309,450

2010/11 103,632 - 351 291 - - 19,794 124,068 2011/12 118,100 - 2,754 - 23,123 143,977

2010/11 120,453 - 2,631 - - 23,007 146,091 2011/12 117,575 - 656 1,727 - - 23,133 143,091

2010/11 113,026 - 1,987 874 - - 21,588 137,475 2011/12 117,150 - 2,754 - - 22,643 142,547

2010/11 120,634 - 351 - - 23,041 144,026 2011/12 113,085 - 411 1,562 - - 22,153 137,211 2010/11 110,378 - 351 1,882 - - 21,082 133,693 2011/12 87,338 - 1,239 - - 17,118 105,695 2010/11 85,087 - 1,239 - - 16,252 102,578 2011/12 84,255 - 1,239 2,615 - 17,053 105,162 2010/11 83,426 - 1,270 2,746 - 16,884 104,326

2011/12 93,971 - 1,239 - - 18,090 113,300

2010/11 56,098 - 753 - - 10,715 67,566 2011/12 88,379 - 1,239 - - 17,118 106,736 2010/11 84,769 - 1,239 - - 16,191 102,199

2011/12 84,424 - - 1,727 2,916 - 17,088 106,155

2010/11 84,628 - - 1,748 2,916 - 16,721 106,013

2011/12 87,338 - - 1,574 - - 17,118 106,030

2010/11 86,512 - - 1,594 - - 16,524 104,630 2011/12 86,717 - - 1,575 600 - 17,114 106,006

2010/11 41,701 - 10 798 - - 7,965 50,474 2011/12 87,437 - 1,239 - - 17,118 105,794

2010/11 89,083 - 266 - - 17,015 106,364 2011/12 87,410 1,239 - 17,118 105,767 2010/11 89,036 - 1,239 - - 16,990 107,265 2011/12 72,236 - 1,239 2,916 - 14,601 90,992 2010/11 75,227 - 1,005 2,851 - 14,645 93,728

2011/12 74,183 - 1,239 - - 14,540 89,962

2010/11 21,717 - 468 - - 5,190 27,375 2011/12 86,395 - - 1,727 - - - 88,122

2010/11 54,359 - 246 874 - - - 55,479 2011/12 68,019 - 17 1,555 2,301 - 13,943 85,835

2010/11 46,086 - 823 - 1,701 - 9,121 57,731 2011/12 62,267 - 1,239 - - 12,204 75,710 2010/11 62,266 - 1,239 - - 11,893 75,398 2011/12 5,719 - - - 59,114 1,121 65,954

2010/11 64,058 - - - - 12,182 76,240 2011/12 34,277 - 566 - - 6,718 41,561

2010/11 - - - - - - -

Executive Director of Children and Young People's Services

Diana Terris Chief Executive Note 1

Executive Director Neighbourhoods & Community Services

Assistant Chief Executive

Rachel Robins Director Of People & Improvement (leaving date 11/12/2011)

Executive Director Environment & Regeneration

Assistant Director Universal Services

Assistant Director Business Planning & Resources

Assistant Director Transportation, Engineering and Operations

Assistant Director Regeneration Development & Housing

Assistant Director Targeted Services (start date 23/08/2010)

Chief Finance Officer

Assistant Director Adult and Social Care (start date 03/08/2010)

Solicitor to the Council

Assistant Director Neighbourhood & Cultural Services

Assistant Director Older People & People with a Physical Disability (leaving date 11/05/2011)

Assistant Director HR Advisory Service (start date 02/08/2010)Head of Strategic Communications

Assistant Director Integrated Adult Health & SCC (start date 04/10/2010) Note 2

Assistant Director Partnerships & Performance (start date 15/11/2010)

Assistant Director Organisational Change

Chief Customer Access & Technology Officer (start date 17/10/2011)

• Note 1: The table above excludes the sum of £19k paid to the Chief Executive for Returning Officer duties

• Note 2: The remuneration for the Assistant Director Integrated Adult Health & SCC is 50% funded by Warrington PCT

The number of Council employees including teachers receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) was as follows:

2010/11 No. Of

Employees

2010/11 No. Of Agency

Staff Bandings

2011/12 No. Of

Employees2011/12

No. Of Agency Staff70 8 £50,000 to £54,999 67 262 8 £55,000 to £59,999 45 243 1 £60,000 to £64,999 21 316 1 £65,000 to £69,999 8 0

8 1 £70,000 to £74,999 6 17 2 £75,000 to £79,999 3 05 0 £80,000 to £84,999 3 07 1 £85,001 to £89,999 8 05 1 £90,000 to £94,999 2 0

1 1 £95,000 to £99,999 2 04 4 £100,000 to £104,999 1 00 0 £105,000 to £109,999 1 03 2 £110,000 to £114,999 1 02 0 £115,000 to £119,999 2 02 0 £120,000 to £124,999 1 10 0 £125,000 to £129,999 0 00 0 £130,000 to £134,999 0 00 1 £135,000 to £139,999 0 00 0 £140,000 to £144,999 0 00 0 £145,000 to £149,999 0 00 0 £150,000 to £154,999 0 00 0 £155,000 to £169,999 1 00 0 £159,999 to £164,999 0 02 0 £165,000 to £169,999 0 00 0 £170,000 to £174,999 0 00 0 £175,000 to £179,999 0 00 0 £180,000 to £184,999 0 00 0 £185,000 to £189,999 0 00 0 £190,000 to £194,999 0 00 0 £195,000 to £199,999 0 00 0 £200,000 to £204,999 0 00 0 £205,000 to £209,999 0 00 0 £210,000 to £214,999 0 00 0 £215,000 to £219,999 0 00 0 £220,000 to £224,999 0 00 0 £225,000 to £229,999 1 0

237 31 173 9 The numbers of exit packages with total cost per band and total cost of the compulsory and other redundancies are set out in the following table.

Package

Cost Band (including

special 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12

£0 - £20,000 27 56 57 94 84 150 581,100 1,124,143 £20,000 - £40,000 17 10 40 40 57 50 1,677,256 1,374,706 £40,001 - £60,000 5 1 18 9 23 10 1,174,869 493,185 £60,001 - £80,000 1 - 1 3 2 3 148,558 187,450 £80,001 - £100,000 - - 1 - 1 - 99,125 - £100,001 - £150,000 - - 1 - 1 - 106,529 - £150,001 - £200,000 - - - 1 - 1 - 155,164 Total 50 67 118 147 168 214 3,787,437 3,334,648

Number of Other Departures Agreed

Total Number of Exit Packages by Cost

BandTotal Cost of Exit

Packages in Each BandNumber of Compulsory Redundancies

36 External Audit Costs The Council incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by the Council’s external auditors:

2010/11 £000

2011/12 £000

308 312

- -

71 79

- -

Total 379 391

Fees payable to external auditors with regard to external audit services carried out by the appointed auditor for the year

Fees payable to external auditors for the certification of grant claims and returns for the year

Fees payable in respect of others services provided by external auditors during the year

Fees payable to external auditors in respect of statutory inspections

37 Dedicated Schools Grant (DSG)

Central Expenditure

£000

Individual Schools Budget

£000Total £000

Final Dedicated Schools Grant for 2011/12 12,481 129,445 141,926Brought forward from 2010/11 228 228Carry forward to 2012/13 (agreed in advance) (985) (985)Sub Total 141,168Agreed budgeted distribution in 2011/12 12,331 129,445 141,776In-year adjustments (608) (608)Final budget distribution for 2011/12 141,168Actual central expenditure 11,722 11,722Actual Individual Schools Budget deployed to schools 129,445 129,445Local Authority contribution for 2011/12 - Carry forward to 2012/13 (agreed in advance) 1

38 Grant Income

The Council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement in 2011/12:

Credited to Taxation and Non Specific Grant Income2010/11

£0002011/12

£000Council Tax Income 80,981 81,464National Non Domestic Rates Redistribution 47,188 43,813Revenue Support Grant 6,852 13,543Local Services Support Grant - 610Early Intervention Grant - 8,392New Homes Bonus - 808Council Tax Freeze Grant - 1,994Preventing Homelessness Fund - 96Learning Disability and Health Reform - 4,784Area Based Grant 14,180 - Capital Grants 29,957 20,821Total 179,158 176,325 The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver. The balances at the year-end are as follows:

Credited to Services

2010/11 £000

(Restated)2011/12

£000GrantsDedicated Schools Grant 124,671 141,926 Rent Allowance Subsidy 35,163 51,645 Council Tax Benefit 13,435 13,462 Schools Sixth Form 6,300 6,781 Pupil Premium - 1,720 Admin Subsidy 1,361 1,371 Devolved Standards Fund 30 1,184 Youth Justice Grant - 638 10-11 Pothole grant - 555 Special Educational Need Post-16 - 482 Private Funding Initiative Premium - Anson & Blenheim - 333 National Non Domestic Rates Admin Subsidy 312 305 Future Jobs Fund - 285 Federation of Music Services - 254 Teachers Pay Grant - 245 11/12 Family Learning - 224 Child Welfare Development Centre - Social Work Improvement Fund - 195 10/11 Family Learning - 190 Altervate Vote Referendum Election Grant - 176 Private Finance Initiative - Government Support - Anson & Blenheim 155 155 Physical Education Teacher Release - 122 Housing Revenue Account Rent Rebate Subsidy 13,296 58 Assistant Director Targeted Services 127 Birchwood High School Build 1,930 Department of Transport 265 Department for Education and Schools 167 Drug Intervention Programme 145 Diplomas 121 Family Pathfinder 315 Housing & Planning Development 661 Landfill Allowance Training Scheme 489 Learning Skills Council 7,605 Public Service Agreement Reward Grant 310 School grant income 2,347 SureStart Childcare 137 SureStart Holding Account 6,962 Targeted Mental Health Services 223 Transforming Adult Social Care 816 Teacher Development Agency - Child Workforce in Schools 157 Think Family Reforms 176 Volunteer V Project 176 War Pension 100 Waste Recycling and Environmental 235 Xtra Options & Diploma's 498 Youth Opportunity Fund 107 Young Person's Learning Agency - Work-related learning 161 Concessionary Travel 1,195 Parliamentary Funding 188 Other Grants (under £100k each) 653 1,225 Grants receipts in advance prior period adjusment 6,316 ContributionsHigh Costs Care Packages Contributions - 1,157 Warrington PrimaryCare Trust - Joint Funding - 865 Contribution from NHS Warrington - Running costs for Lifestyles team - 695 Staff contributions - Childcare Vouchers - 651 Programme Office contributions - 535 NHS - Support People through Interventions - 520 Transforming Adult Social Care - Brought Forward - 493 Contribution to Coroners Service - Cheshire East - 473 Contribution to Coroners Service - Cheshire West - 430 Extended Services - 390 5 Borough Partnership NHS Trust - 176 Contribution to Coroners Service - Halton Borough Council - 158 Funding from Primary Care Trust for Wellbeing Services - 128 WBC Contribution to Alcohol Strategy & Rehabilitation - 110 Other Contibutions 794 2,871 Total 228,098 233,183

Grants Receipts in Advance (Capital Grants)

Restated 2010/11

£0002011/12

£000Capital Grants and Contributions 7,529 14,449Prior Period Adjustment 7,196 - Total 14,725 14,449

Grants Receipts in Advance (Revenue Grants)2010/11

£0002011/12

£000Devolved Standards Funds 1184Pot Holes Funding 11-12 555 - Transforming Adult Social Care Funding 493 - Dedicated Schools Grant 227 - Big Lottery Grant - 267Skills Funding Agency 102 - Other Revenue Grant Reciepts in Advance 338 148Total 2,899 415 The grants and contributions recording and identification process has been improved in the current year via the implementation of a full grant register and reconciliation process – no adjustments have been made to the 2010/11 figures in respect of this, except for the material prior period adjustments in relation to receipts in advance. 39 Related Parties The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the council or to be controlled or influenced by the council. Disclosure of these transactions allows readers to assess the extent to which the council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. In this context, related parties include:

• Central Government • Members • Officers • Other Public Bodies • Entities controlled or significantly influenced by the Council

Central Government Central government has significant influence over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the subjective analysis in Note 28 on reporting for resources allocation decisions. Grant receipts outstanding at 31 March 2012 are shown in Note 38.

Members Members of the council have direct control over the council’s financial and operating policies. The total of Members’ allowances paid in 2011/12 is shown in Note 34. Members are required to complete a declaration of interests, disclosing any party where they, or their close family, have control or influence. Members also have to declare interests in any matter on Committee/Executive Board agendas, and if the interest is prejudicial, to remove themselves from the meeting. Business Activities In 2011-12 Members held the material interests in the following organisations with whom the Council carried out business.

Payments to Organisations where Members or their close relatives hold a personal interest

Expenditure 2011-12 £

Keate House Residential Home 745,992Forshaws Davies Ridgeway Solicitors 13,545Warrington Housing Association 831,534 In each of these cases, Members are not involved in the commissioning of services from these organisations, and the level of activity with each party is not unusual. Grants Made The following grants were made to local voluntary groups where Members have a level of influence; however, grants were awarded by the Community Development team not Members directly. Grants to Organisations where Members or their close relatives hold a personal interest


Latchford Baptist Church 1,000Friends of Oakwood Park 4,000Lumb Brook Millennium Green 400Westy Credit Union 500Latchford East Community Ward Forum 6,000 Officers All senior officers of the Council, plus Assistant Directors were required to complete a declaration of interests. Individual Departmental Management Teams also had discretion to cascade the forms down to lower levels of budget holder if deemed appropriate.

Most declarations were immaterial, or where no direct influence could be shown. There were two material declarations, but neither were pecuniary interests. Payments to Organisations where Officers or their close relatives hold a personal interest


Warrington Wolves Foundation 69,594Marketing Cheshire 201,635 The Chief Executive is a Director of the Warrington Wolves Rugby League Club and the associated charitable Foundation, but plays no part in the commissioning of services or awarding of grants. An officer of the Council is also a Director of Marketing Cheshire – the Cheshire and Warrington Tourist Board. Other Public Bodies [subject to common control by central government] The Council had Pooled Budget Arrangements with NHS Warrington in relation to health and social care needs of the learning disability client group – these ceased during 2011/12. Transactions are detailed in Note 33. Entities Controlled or Significantly Influenced by the Council The Council has material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities and require it to prepare group accounts. In the Council’s own single-entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. The Council had interests in two limited company during the financial year:

• Warrington Borough Transport • Connexions;

Warrington Borough Transport is wholly owned by Warrington Borough Council and is consolidated into the Group Accounts as a subsidiary. Warrington Borough Council owned 33% of Connexions, but the entity ceased to exist during the year. The decision to wind up the entity was discussed in Council meetings and there was one Member with influence over Connexions who withdrew from the discussion. Pension fund WBC is a member of the Cheshire Pensions Fund but is not an administering council. 40 Capital Expenditure and Capital Financing

The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and Public Finance Initiative (PFI) contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed in the second part of this note.

Capital Expenditure and Capital Financing

Restated2009/10

£0002010/11

£0002011/12

£000Opening Capital Financing Requirement 133,871 149,785 107,280Capital investmentProperty, Plant and Equipment 45,803 48,170 32,179Investment Properties 417 - - Intangible Assets 3,551 36 22Long Term Debtor - Loal Authority Mortgage Scheme (LAMS) 2,000Revenue Expenditure Funded from Capital under Statute 7,934 9,593 8,522

57,705 57,799 42,723Sources of financeCapital receipts (1,039) (2,473) (4,056)Government grants and other contributions (33,967) (32,620) (22,950)Other Contributions - (60,512)Major Repairs Allowance (5,846) (2,983) (80)Sums set aside from revenue:Direct revenue contributions:General - - Housing Revenue Account (HRA) - - Developers Contributions S106 (939) (1,380) (203)Minimum Revenue Provision (MRP) - (336) (3,211)

(41,791) (100,304) (30,500)Closing Capital Finance Requirement 149,785 107,280 119,503Explanation of movements in yearIncrease in underlying need to borrowing (supported by government financial assistance) 7,377 6,412 - Increase in underlying need to borrowing (unsupported by government financial assistance) 8,537 10,958 12,223Repayment of Public Works Loan Broad (PWLB) relating to Large Scale Voluntary Transfer (LSVT) - (60,512) - Assets acquired under finance leases - 637 - Assets acquired under Private Finance Initiative (PFI) - - - Increase/(decrease) in Capital Financing Requirement 15,914 (42,505) 12,223 41 Leases Council as Lessee Finance Leases The Council has acquired various land and buildings under finance leases. The assets acquired under these leases are carried as Property, Plant and Equipment in the Balance Sheet at the following net amounts:

Assets Acquired Under Finance Leases2010/11

£0002011/12

£000Other Land and Buildings - - Vehicles, Plant, Furniture and Equipment 637 - Net book value of assets acquired under finance leases 637 - The Council is committed to making minimum payments under these leases comprising settlement of the long-term liability for the interest in the property acquired by the Council and the finance costs that will be payable by the Council in future years while the liability remains outstanding. The minimum lease payments are made up of the following amounts:

Minimum Lease Payments2010/11

£0002011/12

£000Finance lease liabilities (net present value of minimum lease payments):Current 127 125 Non-current 1,158 1,027 Finance costs payable in future years 8,126 8,030 Minimum lease payments 9,411 9,182 The minimum lease payments will be payable over the following periods:

2010/11£000

2011/12£000

2010/11£000

2011/12£000

Not later than one year 224 222 127 125 Later than one year and not later than five years

853 722 468 337

Later than five years 8,334 8,238 690 690 9,411 9,182 1,285 1,152

Minimum Lease Payments

Finance Lease Liabilities

The minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2011/12 £83,975 contingent rents were payable by the Council (2010/11 £83,975). The Council has sub-let some of the retail accommodation held under these finance leases. The above disclosure shows the net result of the lessee and lessor finance leases in relation to this accommodation. The Council currently incurs a rental charge of £109k and receives rental income of £14k in relation to these properties. The council also sub-let other property resulting in total sub-lease rental income of £231k (2010/11 £174k).

Operating Leases The Council has acquired numerous vehicles, plant and equipment and land and buildings by entering into operating leases, with a range of typical lives. The future minimum lease payments due under non-cancellable leases in future years are:

2010/11£000

2011/12£000

Leases rolling over regularly 704 300 Not later than one year 210 560 Later than one year and not later than five years

1,586 838

Later than five years 1,047 1,773 3,547 3,471

The expenditure charged to each directorate line in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:

Environment & Regeneration2010/11

£0002011/12

£000Minimum lease payments 2,013 2,601Contingent rents - Sublease payments receivable (229) (198)

1,784 2,403

Children & Young People2010/11

£0002011/12

£000Minimum lease payments 1,035 827 Contingent rents - - Sublease payments receivable - -

1,035 827

Neighbourhood & Community2010/11

£0002011/12

£000Minimum lease payments 443 41Contingent rents - - Sublease payments receivable - -

443 41

Assistant Chief Executuve2010/11

£0002011/12

£000Minimum lease payments 55 3Contingent rents - - Sublease payments receivable - -

55 3

Council as Lessor Finance Leases The Council has leased out land and buildings at various locations on finance leases with remaining terms of 7 to 193 years. Included within these leases is a material lease relating to Golden Square Shopping Centre Development. As at 31 March 2012, the total outstanding receivable amount remaining on this lease was £30.615m, repayable over a 193 year period. The Council has a gross investment in the lease, made up of the minimum lease payments expected to be received over the remaining term, and the residual value anticipated for the property when the lease comes to an end. The minimum lease payments comprise settlement of the long-term debtor for the interest in the property acquired by the lessee and finance income that will be earned by the Council in future years whilst the debtor remains outstanding. The gross investment is made up of the following amounts:

Gross Investment 2010/11

£0002011/12

£000Finance lease debtors (net present value of minimum lease payments):Current 29 32 Non-current 32,089 32,057 Unearned finance income 304,353 302,531 Unguaranteed residual value of property - - Gross investment in the lease 336,471 334,620 The unearned finance income relates to future income due from tenants over the term of the leases. The longest of these leases will be running for the next 193 years. Due to the length of the leases the unguaranteed residual value of the land and buildings are assumed to be insignificant. The gross investment in the lease and minimum lease payments will be received over the following periods:

2010/11£000

2011/12£000

2010/11£000

2011/12£000

Not later than one year 29 32 1,851 1,851 Later than one year and not later than five years

149 164 7,403 7,403

Later than five years 31,940 31,893 327,217 325,366 32,118 32,089 336,471 334,620

Gross Investment in the Lease

Minimum Lease Payments

As there is a possibility that worsening financial circumstances might result in lease payments not being made, the Council has set aside an allowance for

uncollectable amounts as part of its sundry debtor impairment which includes rental income debtors raised by the Estates Department. The level of debtor impairment required is reviewed on an annual basis and is based on average actual collection rates. The minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2011/12 £502,425 contingent rents were receivable by the Council (2010/11 £502,425). Operating Leases The Council leases out land and buildings under operating leases. The future minimum lease payments receivable under non-cancellable leases in future years are:

2010/11£000

2011/12£000

Vacant 43 20 Holding Over 917 888 Not later than one year 245 348 Later than one year and not later than five years

902 721

Later than five years 1,703 1,870 3,810 3,847

The minimum lease payments receivable include rents that were contingent on events taking place after the lease was entered into up until 31 March 2012, such as adjustments following rent reviews. The minimum lease payments do not include future contingent rents such as adjustments following rent reviews from 1 April 2012 onwards. 42 Private Finance Initiatives and Similar Contracts Anson Close and Blenheim Close PFI Scheme 2011/12 was the 5th year of a 30 year PFI contract for the construction, maintenance and tenancy management of 105 social houses. The Council has nomination rights over all of the social dwellings. At the end of the Term, the Council has the following options:

• Purchase the dwellings at their open market value at existing use for social housing purposes (an option that the Operator will not be able to turn down should the Council choose to exercise it);

• Retender the provision of the services; or • Do neither of the above and walk away.

In return for this combined construction and operations contract, the Council will make quarterly unitary charge payments to the Operator. The payments may vary according to the quality/performance of the service and availability of dwellings, but in substance, it is not expected there would be any significant unavailability of the dwellings. This means that the Council is in substance committed to a fixed payment stream independent of the demand for the assets. The payments are not subject to any indexation. The Operator is also able to charge rents to the tenants. These are set in accordance with the Warrington Area Target Registered Social Landlord (RSL) rent. Property, Plant and Equipment The assets used to provide services at Anson Close & Blenheim Close are recognised on the Council’s Balance Sheet. Movements in their value over the year are detailed in the analysis of the movement on the Property, Plant and Equipment balance in Note 12. Payments The Council makes an agreed annual payment which is increased each year by inflation and can be reduced if the contractor fails to meet availability and performance standards in any year but which is otherwise fixed. Payments remaining to be made under the PFI contract at 31 March 2011 (excluding any estimation of inflation and availability/performance deductions) are as follows:

Total at01/04/2010

£000

Total at31/03/2011

£000

Payment for Services

£000

Reimbursement of Capital

Expenditure £000

Interest £000

Total at 31/03/2012

£000305 305 Payable within 1 year 35 39 231 305

1,218 1,218 Payable within two to five years 171 157 890 1,218

1,523 1,523 Payable within six to ten years 311 202 1,010 1,523

1,523 1,523 Payable within eleven to fifteen years 471 208 843 1,522

1,523 1,523 Payable within sixteen to twenty years 716 216 590 1,522

1,523 1,523 Payable within twenty one to twenty five years 916 172 206 1,294

609 305 Payable within twenty five to thirty years - - -

8,224 7,920 Total 2,620 994 3,770 7,384 The payments made to the operator have been calculated to compensate the operator for the fair value of the services they provide, the capital expenditure incurred and interest payable whilst the capital expenditure remains to be reimbursed. The liability outstanding to pay to the operator for capital expenditure incurred is as follows:

2010/11£000

2011/12£000

Balance outstanding at start of year (2,683) (2,652)Payments during the year 31 32Capital expenditure incurred in the year - - Other movementsBalance outstanding at year end (2,652) (2,620)

John Morris House 2011/12 was the 5th year of a 30 year PFI contract for the construction, maintenance and tenancy management of 38 self contained flats for social housing. The scheme is focused on providing supported housing for 16 to 25 year olds with short to medium term housing needs. The Council has nomination rights over all of the social dwellings. At the end of the 30 year contract, the Council has the option to purchase the dwellings at its open market value at existing use for social housing purposes. If the Council does not exercise this option, the dwellings shall remain with the operator. In return for this combined construction and operations contract, the Council will make quarterly unitary charge payments to the Operator. The payments may vary according to the quality/performance of the service and availability of dwellings, but in substance, it is not expected there would be any significant unavailability of the dwellings. This means that the Council is in substance committed to a fixed payment stream independent of the demand for the assets. The payments are not subject to any indexation. The Operator is also able to charge rents to the tenants. These are set in accordance with the Warrington Area Target Registered Social Landlord (RSL) rent. Property, Plant and Equipment The assets used to provide services at John Morris House are recognised on the Council’s Balance Sheet. Movements in their value over the year are detailed in the analysis of the movement on the Property, Plant and Equipment balance in Note 12. Payments The Council makes an agreed payment each year which is increased each year by inflation and can be reduced if the operator fails to meet availability and performance standards in any year but which is otherwise fixed. Payments remaining to be made under the PFI contract at 31 March 2011 (excluding any estimation of inflation and availability/performance deductions) are as follows:

Total at 01/04/2010 £000

Total at 31/03/2011 £000

Payment for Services

£000

Reimbursement of Capital

Expenditure £000

Interest £000

Total at 31/03/2012

£000181 187 Payable within 1 year 39 34 114 187

750 750 Payable within two to five years 178 138 433 749

937 937 Payable within six to ten years 282 177 478 937

937 937 Payable within eleven to fifteen years 366 182 389 937

937 937 Payable within sixteen to twenty years 477 188 272 937

937 937 Payable within twenty one to twenty five years 622 195 121 938

562 375 Payable within twenty five to thirty years 70 60 2 132

5,241 5,060 Total 2,034 974 1,809 4,817 The payments made to the operator have been calculated to compensate the operator for the fair value of the services they provide, the capital expenditure incurred and interest payable whilst the capital expenditure remains to be reimbursed. The liability outstanding to pay the operator for capital expenditure incurred is as follows:

2010/11£000

2011/12£000

Balance outstanding at start of year (2,099) (2,070)Payments during the year 29 36Capital expenditure incurred in the year - - Other movementsBalance outstanding at year end (2,070) (2,034) 43 Impairment Losses

CouncilDwellings

£000Land£000

Buildings£000

Total£000

Impairment losses and impairments reversals chargedto the Surplus or Deficit on the Provision of Servicesand to Other Comprehensive Income and Expenditure

186 6,721 5,018 11,925

The changes in value in properties reflect the current economic slump that would directly affect building costs. 44 Capitalisation of Borrowing Costs The Council has not capitalised any of its borrowing costs during the year. 45 Termination Benefits The Council terminated the contracts of 214 employees in 2011/12, incurring redundancy liabilities of £3,334,648 (2010/11 £3,787,437 ) and pension fund liabilities of £ 2,339,588 (2010/11 £1,311,573) as part of the Council’s budget savings. In addition to these costs the Council has created a provision of £675,318 and a contingent liability of £2,296,081 (see note 22) for potential future payments for redundancy and pension costs.

The total redundancy liability shown may also include costs relating to early retirement that would ordinarily be excluded and shown as part of the post employee benefits note to the accounts (note 47). 46 Defined Contribution Pension Schemes Teachers Pensions Schemes Accounted for as Defined Contribution Schemes Teachers employed by the Council are members of the Teachers’ Pension Scheme administered by the Department for Education. The Scheme provides teachers with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the scheme is unfunded and the Department for Education uses a notional fund as the basis for calculating the employers’ contribution rate paid by Local Authorities. The Council is not able to identify its share of the underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of this Statement of Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. In 2011/12, the Council paid £8,962,258 to Teachers’ Pensions in respect of teachers’ retirement benefits, representing 14.1% of pensionable pay. The figures for 2010/11 were £9,151,619 and 14.1%. There were no contributions remaining payable at the year end. The Council is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teacher’s scheme. These costs are accounted for on a defined benefit basis and detailed in Note 47. NHS Pensions Schemes Accounted for as Defined Contribution Schemes In March 2011, the 27 lifestyle professionals transferred to the Council from the NHS, as part of the transfer of responsibility for Public Health. In November 2011, the Council formally took over the responsibility for contributing to the NHS Pension Scheme for these staff. Lifestyle professionals employed by the Council are members of the NHS Pension Scheme administered by the Department of Health. The Scheme provides lifestyle professionals with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the scheme is unfunded and the Department of Health uses a notional fund as the basis for calculating the employers’ contribution rate paid by Local Authorities. The Council is not able to identify its share of the underlying financial position and

performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of this Statement of Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. In 2011/12, the Council paid £25,585 to NHS Pensions in respect of lifestyle professionals retirement benefits, representing 14% of pensionable pay. There were no contributions remaining payable at the year end. 47 Defined Benefit Pension Schemes

Participation in Pension Schemes As part of the terms and conditions of employment of its officers, the Council makes contributions towards the cost of post employment benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that needs to be disclosed at the time that employees earn their future entitlement. The Council participates in two post employment schemes:

• The Local Government Pension Scheme, administered locally by Cheshire Pension Fund by Cheshire West and Chester Council. This is a funded defined benefit final salary scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pensions liabilities with investment assets.

• Arrangements for the award of discretionary post retirement benefits upon early retirement – this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet these pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due.

Transactions Relating to Post-employment Benefits The cost of retirement benefits is recognised in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge required to be made against council tax is based on the cash payable in the year, so the real cost of post employment/retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year.

Restated2010/11

£0002011/12

£000Comprehensive Income and Expenditure StatementCost of Services:

19,043 14,470(53,858) 56

539 2,006

32,285 26,564(25,492) (26,927)

(27,483) 16,169

(135,253) 42,015

(162,736) 58,184

44,087 2,594

(16,604) (18,763)

Current service costPast service costs/(gain)(Gains) and losses on settlements and curtailmentsFinancing and Investment Income and ExpenditureInterest costExpected return on scheme assetsTotal Post-employment Benefit Charged to the Surplus or Deficit on the Provision of Services

Reversal of net charges made to the Surplus or Deficit for the Provision of Servic es for post-employment benefits in accordance with the CodeActual amount charged against the general fund balance for pensions in the year:Employers' contributions payable to scheme

Other Post-employment Benefit Charged to the Comprehensive Income and Expenditure StatementActuarial gains and lossesTotal Post-employment Benefit Charged to the Comprehensive Income and Expenditure Movement in Reserves Statement

The cumulative amount of actuarial gains and losses recognised in the Comprehensive Income and Expenditure Statement to the 31 March 2012 is a loss of £111,168k (£69,153k 2010/11). Assets and Liabilities in Relation to Post-Employment Benefits Reconciliation of present value of the scheme liabilities (defined benefit obligation):

2010/11 £000

2011/12 £000

623,688 481,823Current service cost 17,214 14,470Interest cost 32,285 26,564

Contributions by scheme participants 5,358 5,154Actuarial gains and losses (130,285) 28,743Benefits paid (17,259) (19,353)Past service costs (53,858) 56

Entity combinations 4,141 - Curtailments 539 2,006Settlements - - Balance as at 31 March 481,823 539,463

Balance as at 1 April

Reconciliation of fair value of the scheme (plan) assets:

2010/11 £000

2011/12 £000

Balance as at 1 April 356,271 393,746Expected rate of return 25,492 26,927Actuarial gains and losses 4,968 (13,272)Employer contributions 16,604 18,763Contributions by scheme participants 5,358 5,154Benefits paid (17,259) (19,353)Entity combinations 2,312 - Settlements - - Balance as at 31 March 393,746 411,965 The expected return in scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets. The actual return on scheme assets in the year was £13,654k (2010/11 £30,561k). Scheme History

2007/08£000

2008/09£000

2009/10£000

2010/11£000

2011/12£000

Fair Value of Assets in pension scheme 318,058 254,613 356,271 393,746 411,965Present Value of Defined Benefit Obligation (376,583) (372,371) (623,688) (481,823) (539,463)Surplus/(deficit) in the Scheme (58,525) (117,758) (267,417) (88,077) (127,498) The liabilities show the underlying commitments that the Council has in the long run to pay post employment (retirement) benefits. The total liability of £127,498k has a substantial impact on the net worth of the Council as recorded in the Balance Sheet. However, statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy:

• the deficit on the Local Government scheme will be made good by increased contributions over the remaining working life of employees (i.e. before payments fall due), as assessed by the scheme actuary

• finance is only required to be raised to cover discretionary benefits when the pensions are actually paid

The total contributions expected to be made to the Local Government Pension Scheme in the year to 31 March 2013 is £15,398k. Expected contributions for the Discretionary Benefits scheme in the year to 31 March 2013 is £9,400k. Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels etc. Both the Local Government Pension Scheme and Discretionary Benefits liabilities have been assessed by Hymans Robertson LLP an independent firm of actuaries, estimates for the Council Fund being based on the latest full valuation of the scheme as a 31 March 2010. The principal assumptions used by the actuary have been:

2010/11 2011/12Long-term expected rate of return on assets in the scheme:Equity investments 7.5% 6.2%Bonds 4.9% 3.3%Property 5.5% 4.4%Cash 4.6% 3.5%Mortality assumptions:Longevity at 65 current pensioners:Men 22.9 years 22.9 yearsWomen 25.7 years 25.7 years

Longevity at 65 for future pensioners:Men 24.9 years 24.9 yearsWomen 27.7 years 27.7 years

Inflation/Pension Increase Rate 2.8% 2.5%Salary Increase Rate 5.1% 4.8%Rate of increase in pensions 6.8% 5.5%Rate for discounting scheme liabilities 5.5% 4.8%Take-up of option to convert annual pension into retirement lump sum:

Service to April 2008 50.0% 50.0%Service post April 2008 75.0% 75.0% The Discretionary Benefit arrangements have no assets to cover its liabilities. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:

31/03/2011 £000

31/03/2012£000

Equity investments 72% 72%Bonds 15% 14%Property 6% 7%Cash 7% 7%

100% 100% History of Experience Gains and Losses The actuarial gains identified as movements on the Pensions Reserves in 2011/12 can be analysed into the following categories, measured as a percentage of assets or liabilities as at 31 March 2012:

31/03/2008%

31/03/2009%

31/03/2010%

31/03/2011%

31/03/2012%

-11.8% -36.2% 21.7% 1.3% -4.9%

3.5% 0.0% 0.0% -15.2% 1.0%

Experience gains and (losses) on Assets

Experience gains and (losses) on liabilities

48 Contingent Liabilities A Contingent Liability is a potential liability which depends on the occurrence or non-occurrence of one or more uncertain future events. The Council has identified the following contingent liabilities as at 31 March 2012. a. A Contingent Liability of £2.296m has been recognised in relation to

future termination costs, reflecting service redesign options that are contained within the 2012/13 – 2015/16 Medium Term Financial Plan.

b. A Contingent Liability of £1.708m has also been created to reflect a

guarantee issued by the Council to Warrington Borough Transport (WBT), to underwrite WBT’s pension fund deficit for a period of 15 years.

c. Land Charges legislation changed in 2010 and the fee paid to Councils

was revoked. Clients are able to apply for a refund for personal searches of the local land charges register they had paid for going back to January 2005. Refund requests totalling £0.02m have been received by the Council to date and further requests are expected.

d. A number of agreements in accordance with Section 106 of the Town

and Country Planning Act 1990 exist between the Council and developers associated with the planning conditions attached to new developments. In respect of contributions received to date, should the conditions in the agreement not be met by the Council then amounts would become repayable to developers. Should developments proceed then the estimated value of contributions the Council will receive is £9.7m.

e. In January 1994 the Council’s former insurer, Municipal Mutual

Insurance (MMI), made a scheme of agreement with its creditors. Under this scheme, claims are initially paid out in full, but if the eventual winding up of the company results in insufficient assets to meet all liabilities a claw back clause will be triggered which could affect claims already paid. As at 31 March 2012 £0.557m of claims had already been paid with outstanding claims estimated at £0.03m.

The current estimated potential liability is £0.507m.

MMI have indicated that they are likely to start claw back sometime in 2012/13, due to a recent judgement on asbestos claims making it unlikely that they will achieve a solvent run-off. It is not known what percentage they will require paying back initially. Any liability will be met from the insurance reserve.

49 Contingent Assets A contingent asset is an asset that may be received but only if a certain future event occurs. The Council has identified the following contingent assets as at 31 March 2012. a. Following the transfer of its Housing Stock to GOLDEN GATES

HOUSING TRUST the Council entered into an agreement to reclaim the VAT on Improvement Works to dwellings. The estimated value of these works is £276m over the next 25 years and so it is expected that £55m of VAT would be recoverable. The agreement put in place means that WBC would expect to receive up to £28m.

b. As with other agreed stock transfers, the Council has entered into an

agreement with GOLDEN GATES HOUSING TRUST relating to the future sales under the Prescribed Right to Buy (PRTB) regulations. This relates to any future sales of the transferred stock to existing tenants until November 2040.

The Council will receive capital receipts at the end of each financial year for any dwellings sold within the year. The only exclusion to this agreement are former Commission for New Town dwellings where the sale proceeds must be passed onto the Homes and Community Agency. The Council will receive 100% of the receipt generated net of administrative costs and net income foregone that is detailed in Schedule 13 of the Transfer Agreement.

The Council received £623,403.99 of right to buy receipts in 2011/12.

c. The Council has contingent assets in relation to Section 106

Agreements (note 48 d). d. The Council has made claims where either policy of Her Majesty’s

Revenue and Customs (HRMC) has changed or where legal judgements have changed the Value Added Tax (VAT) treatment of the service.

At 31 March 2012 the Council had contingent assets relating to the following VAT claims:

Trade Waste £0.280m

Cultural Exemption £0.258m

Disable Facility Grant £0.329m

Car Parking £2.0m

The claims are subject to litigation and therefore the timing and amounts that may be paid to the Council are uncertain.

50 Nature and Extent of Risks Arising from Financial Instruments The Council’s activities expose it to a variety of financial risks:

• credit risk – the possibility that other parties might fail to pay amounts due to the Council

• liquidity risk – the possibility that the Council might not have funds available to meet its commitments to make payments

• market risk – the possibility that financial loss might arise for the Council as a result of changes in measures such as interest rates and stock market movements.

Overall procedures for managing risk The Council has adopted the CIPFA Code of Practice for Treasury Management in Public Services. It maintains and operates a Treasury Management Policy comprising an overview of the principles and practices to which the activity will comply. Alongside this Policy, the Department for Communities and Local Government has issued guidance under section 15(1) (a) of the Local Government Act 2003, to which local authorities must have regard. Annually the Council approves a Treasury Management Strategy for the forthcoming year. A yearly outturn report is also reported to Full Council. The Council’s Audit and Corporate Governance Committee is also charged with the Governance of treasury management and receive quarterly update reports on its activities. The Council also employ Treasury Management Advisors (Sector), who advise on risk mitigation strategies and keep the Council daily up to date on treasury market developments. Credit Risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the Council’s customers. The risk is minimised through the Annual Investment Strategy, which requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria, as laid down by Fitch, Moody’s and Standard and Poors Rating Services. The Annual Investment Strategy also imposes a maximum sum to be invested with a financial institution located within each category. Customers for goods and services are assessed, taking into account their financial position, past experience and other factors, with individual credit limits being set in accordance with internal rating in accordance with parameters set by the Council. The Council uses the creditworthiness service provided by our Treasury Management Consultants (Sector). This service uses a sophisticated modelling approach with credit ratings from all three rating agencies - Fitch, Moodys and Standard and Poors, forming the core element. However, it does

not rely solely on the current credit ratings of counterparties but also uses the following as overlays:

• credit watches and credit outlooks from credit rating agencies; • Credit Default Swap (CDS) spreads to give early warning of likely

changes in credit ratings; and • sovereign ratings to select counterparties from only the most

creditworthy countries

Institutions are split into colour bandings. The Council is able to deposit the following:

• purple: highest rated - Money Market Funds, Nationalised Banks and Government support – Investment of up to £18m for up to 2 years;

• blue: nationalised or semi nationalised UK banks – Initially investment of up to £10m for up to 1 year, but then increased to £15m for up to 1 year;

• orange and Coop Bank £10m for up to 1 year; _ red £10m for up to 6 months;

• green £5m for up to 3 months; and • no colour - not to be used.

The Council had a total of £23.102m deposited with a number of banks and financial institutions at 31 March 2012, the full amount is potentially exposed to credit risk, there is a specific risk attached to amounts deposited with the individual institutions based on their ability to make interest payments and repay the principal outstanding, it is however more difficult to asses the risk in general terms. 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 there was no evidence at the 31 March 2012 that this was likely to crystalise. The following analysis summarises the Council’s potential maximum exposure to credit risk on other financial assets, based on experience of default and uncollectability over the last three financial years.

Counterparties Sector Credit Rating

Amount at 31

March 2012 £000

Historical experience of Default

£000

Adjustment for Market Conditions at 31 March

2012 %

Estimated Maximum

Exposure to Default at 31 March 2012

£000

Estimated Maximum

Exposure to Default at 31 March 2011

£000Deposits with banks and financial instituitions: Prime Rate Money Market Fund Yellow - up to 5 years 4,597 0.00% 0.00% - - Legal & General Money Market Fund Yellow - up to 5 years 5,443 0.00% 0.00% - - Handelsbanken Green - up to 3 months 1 0.00% 0.00% - - Bank of Scotland Blue - up to 12 months 907 0.00% 0.00% - - National Westminster Blue - up to 12 months 3,591 0.00% 0.00% - - Bank of Scotland Blue - up to 12 months 4,000 0.00% 0.00% - - Lloyds Blue - up to 12 months 3,000 0.00% 0.00% - - Other Investments: Warrington Housing Assocociation Yellow - up to 5 years 969 0.00% 0.00% - - Golden Gates Housing Trust Yellow - up to 5 years 1,819 0.00% 0.00% - - Trade Debtors 10,422 1.05% 1.05% 109 336 Other Debtors 37,043 1.05% 1.05% 389 1,760 Mortgage Scheme Debtors 2,000 0.00% 0.003% - 6Total 73,792 498 2102

No credit limits were exceeded during the reporting period and the Council does not expect any losses or non-performance by any of its counterparties in relation to deposits and bonds. The Council does not generally allow any credit for customers, such that whole of the £11,429k trade debtor balance (before impairments) is past its due date for payment. The past due but not impaired amount can be analysed by age as follows:

31/03/2011 £000

31/03/2012 £000

5,765 6,0901,274 421(569) 1,6824,171 3,2362,730 -

13,371 11,429Non-system generated trade debtors

Less than three monthsThree to six monthsSix months to one yearMore than one year

Liquidity Risk The Council has a comprehensive cash flow management system that seeks to ensure that cash is available as needed. If unexpected movements happen, the Council has ready access to borrowings from the money markets and the Public Works Loans Board. There is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Instead, the risk is that the Council will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates. To this extent rates will be monitored to ensure that limits are adhered to regarding the maturity structure of Fixed Rate Debt to negate against a significant proportion of the debt portfolio being repayable at any one time. The maturity analysis of financial liabilities is as follows:

31/03/2011 £000

31/03/2012 £000

1,603 - - 473

684 2,721110,049 111,867112,336 115,061

Between one and two yearsBetween two and five yearsMore Than 5 Years

Less than one year

All trade and other payables are due to be paid in less than one year. Market Risk The Council is exposed to market risk in terms of the value that an instrument will fluctuate due to changes in:

Interest Rate Risk The Council is exposed to risk in terms of its exposure to interest rate movements in its borrowings and investments. Movements in interest rates have a complex impact on the Council. For instance, a rise in interest rates would have the following effects:

• borrowings at variable rates – the interest expense charged to the Surplus or Deficit on the Provision of Services will rise

• borrowings at fixed rates – the fair value of the liabilities borrowings will fall

• investments at variable rates – the interest income credited to the Surplus or Deficit on the Provision of Services will rise

• investments at fixed rates – the fair value of the assets will fall. Borrowings are not carried at fair value, so nominal gains and losses on fixed rate borrowings would not impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Surplus of Deficit on the Provision of Services and affect the General Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure. The Council has a number of strategies for managing interest rate risk. Policy is to aim to keep a maximum of 40% of its borrowings in variable rate loans. During periods of falling interest rates, and where economic circumstances make it favourable, fixed rates loans will be repaid early to limit exposure to losses. The risk of loss is ameliorated by the fact that a proportion of Government grant payable on financing costs will normally move with prevailing interest rates or the Council’s cost of borrowing and provide compensation for a proportion of any higher costs. The treasury management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget and which is used to update the budget quarterly during the year. This allows any adverse changes to be accommodated. The analysis will also advise whether new borrowing taken out is fixed or variable. According to the assessment strategy, at 31 March 2012, if interest rates had been 1% higher with all other variables held constant, the financial effect would be:

31/03/2011 £000

31/03/2012 £000

700 700

-

-

700 700

-

-

-

(20,495) (20,495)

Increase in interest payable on variable rate borrowingsIncrease in interest receivable on variable rate investmentsIncrease in government grant receivable for financing costsImpact on Surplus or Deficit on the Provision of Services

Share of overall impact debited to the HRA

Decrease in fair value of fixed rate investment assetsImpact on Other Comprehensive Income and ExpenditureDecrease in fair value of fixed rate borrowings liabilities (no impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure) The impact of a 1% fall in interest rates would be as above but with the movements being reversed. Price Risk The Council does not generally invest in equity shareholding but does have a £150k investment in Warrington Sports Holdings Limited, an unquoted long term investment which is not considered to be high risk. Consequently the Council is not currently exposed to price risk arising from movements in the price of shares. Nor does the Council have financial assets or liabilities denominated in foreign currencies, and thus has no exposure to loss arising from movements in exchange rates. Foreign Exchange Risk The Council has no financial assets or liabilities denominated in foreign currencies and thus has no exposure to loss arising from movements in exchange rates. 51 Landfill Allowance Trading Scheme (LATS) The Council has received allowances for 2011/12 for 34,215 tonnes. The estimated Bio Municipal Waste (BMW) landfill usage is 49,570 tonnes. It did not buy or sell any allowance in the year or during the reconciliation period. On 23 April, DEFRA announced that after the 2012/13 scheme year, the Landfill Allowance Trading Scheme would end. This coupled with the fact that the 2012/13 is a target year and no allowances can be carried forward, the

Council has taken the view that the value of the assets should be written down to zero value. 52 Heritage Assets Reconciliation of the Carrying Value of Heritage Assets Held by the Council

Museum Exhibits & Artworks

£000Civic Regalia

£000

Ornamental Gates£000

Statues & Town Centre

Artwork£000

Total Assets £000

Cost or Valuation 1 April 2010 7,447 236 2,105 2,550 12,338 Additions - Disposals - Revaluations 339 11 52 126 528 Impairment Losses/(reversals) recognised in the Revaluation Reserve - Impairment Losses/(reversals) recognised in Surplus or Deficit on the Provision of Services - Depreciation - 31 March 2011 7,786 247 2,157 2,676 12,866

Cost or Valuation 1 April 2011 7,786 247 2,157 2,676 12,866 Additions - Disposals - Revaluations 266 8 54 66 394 Impairment Losses/(reversals) recognised in the Revaluation Reserve - Impairment Losses/(reversals) recognised in Surplus or Deficit on the Provision of Services - Depreciation - 31 March 2012 8,052 255 2,211 2,742 13,260

Museum Exhibits and Artworks The Council’s collection of artworks and museum exhibits is reported in the Balance Sheet at insurance valuation which is based on market value. These insurance values are updated annually. Warrington Museum and Art Gallery does not consider that reliable cost or valuation information can be obtained for the vast majority of items held in the museum collection. This is because of the diverse nature of the assets held, the number of assets held and the lack of comparable market values. The Museum does not, therefore, recognise these heritage assets on a balance sheet other than as a total insurance value for the museum collection which is subject to an annual 5% increase to reflect new acquisitions, inflation, reappraisal, effects of conservation etc. Only in exceptional circumstances would this be adjusted to reflect individual acquisitions. At present the Museum’s collections consist of over 170,000 objects covering natural sciences, antiquities, social and industrial history, numismatics, ethnology, fine and decorative arts and an extensive local photographic archive. Some of the items are undoubtedly of national significance, but the majority relate to Warrington and the surrounding area. Civic Regalia

The Council’s civic regalia collection is reported in the Balance Sheet at insurance valuation which is based on market value. These insurance valuations are updated annually. Ornamental Gates The Council’s ornamental gates are reported in the Balance Sheet at insurance valuation which is based on market value. These insurance values are updated annually. Statues and Town Centre Artwork The Council’s collection of statues and town centre artwork is reported in the Balance Sheet at insurance value which is based on market value. These insurance values are updated annually. Any heritage assets not included in the above insurance categories have not been individually valued/insured or are below the de-minimis level of £10,000, for example: Organ The organ was built in 1870 and has been owned by the Council since 1926 – it has both historical and artistic qualities and is the only one which still exists in this country. The organ is housed at Parr Hall theatre. Transporter Bridge The transporter bridge is grade 2 listed and is leased to the Council on a 40 year peppercorn lease. Archival Material The Council has a collection of historical documents in its archives. Additions/Disposals of Heritage Assets Additions comprise: There were no additions of heritage assets during 2011/12 or 2010/11. 53 Heritage Assets: Five Year Summary of Transactions All heritage assets reported have been owned by the Council in excess of 5 years with none being acquired or donated during the period below. No disposals were made during the 5 year period below.

2007/08£000

2008/09£000

2009/10 £000

2010/11 £000

2011/12 £000

Cost of Acquisition of Heritage Assets Cost of Acquisition 0 0 0 0 0Total Cost of Purchases 0 0 0 0 0Value of Heritage Assets Acquired by DonationValue of Donations 0 0 0 0 0Total Donations 0 0 0 0 0Disposals of Heritage AssetsCarrying Value 0 0 0 0 0Proceeds 0 0 0 0 0 54 Heritage Assets: Further Information on the Museum’s Collections The Museum's heritage assets are the museum’s collection which are held in support of the Museum's objective to inspire, challenge and stimulate its visitors. The collections are accounted for as follows: Collections At present the Museum’s collections consist of over 170,000 objects covering natural sciences, antiquities, social and industrial history, numismatics, ethnology, fine and decorative arts and an extensive local photographic archive. Some of the items are undoubtedly of national significance, but the majority relate to Warrington and the surrounding area. Archaeology/Antiquities The archaeology collection consists of circa 23,800 objects including circa 490 Egyptology items. Most objects are prehistoric to medieval in date, with particular focus on the following:

• Stone Age and Bronze Age objects from Lancashire and Cheshire • Roman objects from Wilderspool, Warrington and elsewhere • Medieval objects, largely from Warrington friary

The museum makes archaeological objects available to other accredited museums and also accepts archaeological objects on loan. At any given time approximately 10 percent of the archaeology collections are on display. The remaining objects are held in storage but public access is encouraged. Natural History The Natural History collection consists of the following

• Circa 9,250 Botany specimens, including gifts or bequests from William Wilson, notably his herbarium of British plants and mosses.

• Circa 2,300 Geology specimens including T.G. Ryland’s worldwide mineral collection.

• Circa 6,700 Palaeontology specimens including G.A. Dunlop’s collection of fossils and fossil footprints on local Triassic slabs.

• Circa 55,300 Invertebrate specimens including Linnaeus Greening’s collection of British and foreign spiders and Colonel J A Edelsten’s collection of British and foreign molluscs.

• Circa 4,300 vertebrate specimens including Linnaeus Greening’s worldwide collection of reptiles, amphibians and snakes.

The museum makes Natural History objects available to loan to other accredited museums and also accepts objects on loan. At any time approximately 50 percent of the Natural History collections are on display. The remaining objects are held in storage but public access is encouraged. Decorative Art The decorative art collection includes the following:

• Circa 1,720 ceramic pieces including the Edelsten Bequest of British 19th century pottery, British 19th century porcelain, British 18th century wares, European 19th century porcelain and Satsuma Ware.

• Circa 880 pieces of costume, mainly early 19th century to 20th century middle class (female) dress, baby clothes, hats, shoes and accessories as well as ceremonial outfits and uniforms.

• Circa 110 pieces of furniture including the L.J. Gibson gift and 17th or 19th century provincial chairs and long case clocks.

• Circa 1,720 items of glassware including mainly 19th century or 20th century ordinary table ware by local manufacturers.

• Circa 1,080 miscellaneous decorative arts items including metalwork (local interest and electroplate replicas of items in National museums) and 19th century samplers.

The museum makes decorative art objects available to loan to other accredited museums and also accepts objects on loan. At any time approximately 20 percent of the Decorative Art collections are on display. The remaining objects are held in storage but public access is encouraged. The amount of decorative art on display in the gallery has increased significantly as a result of the 2010/2011 redisplay. Ethnology The ethnology collection includes circa 2,800 objects from Africa, North and South America, Asia and Oceania. Of particular note is the Smithies collection of ancient Peruvian artefacts which include some rare examples of Peruvian pottery. The museum makes ethnographic objects available on loan to other accredited museums and also accepts objects on loan. At any time approximately 60 percent of the Ethnology collections are on display. The remaining objects are held in storage but public access is encouraged.

Fine Art The fine art collection features circa 400 oil paintings, circa 570 watercolours, circa 500 prints and circa 330 drawings. The collection focuses largely on 19th century paintings and includes works by Luke Fildes RA, Henry Woods RA, James Charles, Hamlet Winstanley, Oswald Garside, George Sheffield, James Fitton, Evelyn Buckton, Jan Van Os, Frank Brangwyn. The sculpture collection includes some 60 pieces, mainly marble statuary by John “Warrington” Wood. There is a current emphasis on collecting modern works in order to expand the museum’s collection of contemporary art. The museum makes Fine Art objects available on loan to other accredited museums and also accepts objects on loan. At any time approximately 25 percent of the Fine art collections are on display. The remaining objects are held in storage but are rotated regularly and public access is encouraged. Social History The social history collection includes circa 6,600 items with an emphasis on domestic, community, work and leisure history including circa 100 items of ephemera such as public notices and greetings cards; circa 500 items of industrial history with an emphasis on local industries; circa 130 objects of transport history; circa 20 objects of maritime history and circa 100 objects of Scientific history. The museum has a small collection of firearms and military items although most of these have been on loan to the Queen’s Lancashire Regiment Museum since the 1930s. The museum makes social history objects available to loan to other accredited museums and also accepts objects on loan. At any time approximately 45 percent of the social history collections are on display. The remaining objects are held in storage but public access is encouraged. Numismatics The numismatic collection feature circa 6,390 numismatic items including coins (Roman, British and foreign), tokens (British trade tokens and 17th century Lancashire trade tokens) and medals (including military medals). The museum makes numismatic objects available on loan to other accredited museums and also accepts objects on loan. At any time approximately 1 percent of the numismatic collections are on display. The remaining objects are held in storage but public access is encouraged.

Photography The photograph collection consists of circa 46,500 photographs. Of these around 6500 are original glass negatives, ambrotypes, lantern slides, daguerreotypes, tintypes, sheet film negatives, roll film negatives, transparencies, cine film, calotypes, postcards, monochrome prints or colour prints. The remainder are photographic copies of social history interest. Featured photographers include Thomas Davies, John Longshaw, Samuel Mather, Webster, William Fell, Thomas Birtles, Walter, Crompton, James Parkinson, J.E. Birtles and Oswald Garside. The museum makes photographic objects from the collection available to loan to other accredited museums and also accepts objects on loan. At any given time approximately 1 percent of the photograph collections are on display but a great deal more are available through the website or can be requested and provided in the form of digital or printed versions. The remaining objects are held in storage but public access is encouraged. Heritage assets of particular importance Although the museum carries out valuations for their own internal management processes, such as insurance and acquisition, the museum aims to encourage public appreciation of the cultural and historical value, rather than financial value, of items. Preservation and management Since 2004 the Museum has a rolling conservation programme developed from an ongoing review of the condition of the collections for documentation purposes. The review was commissioned by the Collections Access Officer after establishing that existing documentation of the collection was very poor. The collection is managed by a Collections Access Officer who reports to the Principal Museum Manager. The Collections Access Team (comprising the Collections Access Officer, Assistant Collections Access Officer and Documentation Access Officer) manage the collections in accordance with policies that are approved by the Council. Further information is provided in the Museum’s Collections Management Plan which is currently under revision. Assets in the collection are only disposed of where, in the opinion of the Collections Access Officer, an item does not contribute to the interest and diversity of the Museum’s collection, or is damaged beyond use, or is dangerous, or is being returned to its place of origin or rightful owner. There is a strong presumption in favour of the retention of items within the public domain and so the museum gives priority to transferring objects, preferably by gift, to registered or accredited museums and other public institutions. The Museum maintains a register and catalogue for its collections of heritage assets which records the nature, provenance and current location of each

asset. Due to the large volume of items received annually, the register is not currently complete. It is expected that it will be fully comprehensive by the end of December 2015. Expenditure which, in the Collection Access Officer’s view, is required to preserve or clearly prevent further deterioration of individual collection items is recognised in the Income and Expenditure account when it is incurred. The museum also has a conservation budget, the costs of which are charged to the Income and Expenditure Account. 55 Heritage Assets: Change in Accounting Policy The Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 introduced a change to the treatment in accounting for heritage assets held by the Council. As set out in the summary of significant accounting policies, the Council now requires heritage assets to be carried in the balance sheet at valuation. Heritage Assets For 2011/12 the Council is required to change its accounting policy for heritage assets and recognise them at valuation. Previously, heritage assets were either recognised as community assets (at cost) in the property, plant and equipment classification in the Balance Sheet or were not recognised in the Balance Sheet as it was not possible to obtain cost information on the assets. Community assets (that are now to be classified as heritage assets) that were donated to the Council were held at valuation as a proxy for historical cost. The Council’s accounting policies for recognition and measurement of heritage assets are set out in the Council’s summary of significant accounting policies (see note 1). In applying the new accounting policy, the Council has identified that the assets previously held as community assets within property, plant and equipment should now be recognised as heritage assets. The Council will show an additional £12.3 million for the recognition of heritage assets that were not previously included in the Balance Sheet. This increase is also recognised in the Revaluation Reserve. 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 effects of restatement are as follows: At 1 April 2010 the carrying amount of the Heritage Assets is presented

at its valuation at £12.3 million. The revaluation reserve has increased by £12.3 million.

A fully restated 1 April 2010 Balance Sheet is provided. The adjustments that have been made to the balance sheet over the version published in the 2010/11 Statement of Accounts are as follows:

Effect on Opening Balance Sheet as at April 2010

Opening Balances as at 1 April 2010

£000Restatement

£000

Restatement Required to

Opening Balances as

at 1 April 2010 £000

Property, Plant and Equipment 744,361 744,361 - Heritage Assets - 12,338 12,338

Long Term Assets 828,766 841,104 12,338

Total Net Assets 408,615 420,953 12,338

Unusable Reserves 367,157 379,495 12,338

Net Worth/Total Reserves 408,615 420,953 12,338 Comprehensive Income and Expenditure Statement There were no impairments during the period. Movement in Reserves Statement – Unusable Reserves 2010/11 The restatement of the relevant lines of the Movement in Reserves Statement, as of 31 March 2011, as a result of the application of this new accounting policy is presented in the table below.

As Previously Stated 31 March 2011

£000

As Restated 31 March

2011 £000

Restatement 2011 £000

Balance as at the end of the previous reporting period - 31 March 2010

408,615 420,953 12,338

Surplus or Deficit on the Provision of Services (212,352) (212,352) - Other Comprehensive Income and Expenditure 130,726 130,726 -

Adjustments between the accounting basis and the funding basis under regulations - 528 528Increase/(Decrease) in the Year (81,626) (81,098) 528Balance at the End of the Current Reporting Period 31 March 2011 326,989 339,855 12,866

The resulting restated Balance Sheet for 31 March 2011 is provided. The adjustments that have been made to the Balance Sheet over the version published in the 2010/11 Statement of Accounts are as follows: Effect on Balance Sheet 31 March 2011

As Previously Stated 31 March 2011

£000

As Restated 31 March

2011 £000

Restatement 2011 £000

Property, Plant and Equipment 453,428 453,428 - Heritage Assets - 12,866 12,866

Long Term Assets 528,705 541,571 12,866

Total Net Assets 326,989 339,855 12,866

Unusable Reserves 286,874 299,740 12,866

Net Worth 326,989 339,855 12,866 The effect of the change in accounting policy in 2010/11 has been that heritage assets are at recognised at £12.9 million on the Balance Sheet resulting in an increase to the Revaluation Reserve of £12.9 million. 56 Trust funds The Council acts a sole trustee for one trust fund (The Colonel Edelston Bequest), and as one of several trustees for a further one trust fund (The Alderman Bennett Trust). Funds for which Council acts as a trustee:

2011/12Income

£000Expenditure

£000Assets£000

Liabilities£000

The Alderman Bennett Trust 0 0 20 0Purpose: To conserve, preserve, protect improve and enhance the amenities of the town of Warrington.The Colonel Edelston Bequest 10 0 61 0Purpose: To purchase works of artTotal 10 0 81 0

2010/11Income

£000Expenditure

£000Assets£000

Liabilities£000

The Alderman Bennett Trust 0 0 20 0Purpose: To conserve, preserve, protect improve and enhance the amenities of the town of Warrington.The Colonel Edelston Bequest 0 0 51 0Purpose: To purchase works of artTotal 0 0 71 0

Other funds The Council does not act as trustee for any other funds.

57 Prior Period Adjustments In preparing the 2011/12 Statement of Accounts, the Council has had to make a number of prior period adjustments (PPA). Two of which were statutory; the 2011/12 Accounting Code of Practice (The Code) adopted FRS 30 Heritage Assets for the first time and CIPFA introduced changes to the Service Reporting Code of Practice (SeRCOP) that was adopted in The Code update. Both of which are to be treated as changes in accounting policy in line with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors. The Council chose to revise its accounting policy for trading accounts to bring it in line with the Code and the SeRCOP, and found two material errors and one minor that would misstate the accounts. Again, all of these were restated in line with IAS 8. The first material error was in the treatment of grant income; £6.3m of grant income had been treated in the 2010/11 Statement of Accounts as receipts in advance. This income had been believed to have had conditions of usage attached to them and should be treated as short-term creditors under the Code (and the adaptations of IAS 20 Government Grants). However, during the preparation of the 2011/12 Statement of Accounts no evidence of conditions of usage could be found and the accounts were restated to show the grant income correctly, as part of an earmarked reserve. The second material error surrounds the categorisation of Section 106 agreements and commuted sums. In the 2010/11 Statement of Accounts these amounts had been categorised as short-term revenue creditors. However, during the preparation of the 2011/12 Statement of Accounts the contracts were reviewed and it was decided that a more correct categorisation was as long-term capital creditors (in line with the adaptations of IAS 20 Government Grants). This has resulted in £7.2m of creditors being re-categorised from short-term creditors to capital grants receipts in advance. The minor error surrounds the closure of property, plant and equipment. At the end of the audit last year the fixed asset system had not been closed due to technical problems. This has now been performed and a number of minor depreciation and revaluation adjustments were posted through to the accounts. The accounts have been restated for these in line with IAS8. The changes to the each of the main statements by the prior period adjustments outlined above are as follows:

Movement in Reserves Statement

General Fund

Balance £000

Earmarked General

Fund Reserves

£000

HRA Balance

£000

Earmarked HRA

Reserves £000


£000


£000

Capital Grants

Unapplied £000

Total Usable

Reserves £000


£000

Total Reserves

of the Authority

£000Balance as at 1 April 2010 (per 2010/11 Statement of Accounts) 976 23,307 2,421 841 345 1,709 11,859 41,458 367,157 408,615Change in Accounting Policy - Creation of Heritage Assets - - - - - - - - 12,338 12,338Restated Balance as at 1 April 2010 976 23,307 2,421 841 345 1,709 11,859 41,458 379,495 420,953Movement in reserves during the yearSurplus or (deficit) on provision of services (per 2010/11 Statement of Accounts) 33,228 - (245,580) (212,352) (212,352)Prior Period Error - Correction of Property, Plant and Equipment (1,187) (1,187) (1,187)

Prior Period Error - Correction of treatment of grant income 6,316 6,316 6,316Restated Surplus or (deficit) on provision of services 38,357 - (245,580) - - - - (207,223) - (207,223)

Other Comprehensive Income and Expenditure (per 2010/11 Statement of Accounts) - - - - - - - - 130,726 130,726Change in Accounting Policy - Revaluation of Heritage Assets - - - - - - - - 529 529Prior Period Error - Correction of Property, Plant and Equipment - - - - - - - - 1,384 1,384

Restated Other Comprehensive Income and Expenditure - - - - 132,639 132,639

Total Comprehensive Income and Expenditure 38,357 - (245,580) - - - - (207,223) 132,639 (74,584)Adjustments between accounting basis & funding basis under regulations (36,480) 245,466 149 392 1,482 211,009 (211,009) -Prior Period Error - Correction of Property, Plant and Equipment 1,187 1,187 (1,187) -Restated Adjustments between accounting basis & funding basis under regulations (35,293) - 245,466 - 149 392 1,482 212,196 (212,196) -Net Increase/Decrease before Transfers to Earmarked Reserves 3,064 - (114) - 149 392 1,482 4,973 (79,557) (74,584)

Transfer to or from earmarked reserves (per 2010/11 Statement of Accounts) 3,252 (3,537) (1) 1 285 - - - - -

Prior Period Error - Correction of treatment of grant income (6,316) 6,316 - - - - - - - -Restated Transfers to or from earmarked reserves (3,064) 2,779 (1) 1 285 - - - - -Restated Increase/Decrease in Year - 2,779 (115) 1 434 392 1,482 4,973 (79,557) (74,584)Restated Balance as at 31 March 2011 976 26,086 2,306 842 779 2,101 13,341 46,431 299,938 346,369

Comprehensive Income and Expenditure Statement

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£000

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£000

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£000

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£000

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£000

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£000

GrossExpenditure

£000

GrossIncome

£000

NetExpenditure

£000Central Services to the Public 85,241 (74,674) 10,567 0 0 0 792 792 0 85,241 (73,882) 11,359Cultural and Related Services 44,874 (13,199) 31,675 (33,966) 10,312 (23,654) 0 0 (401) (401) 6,963 (3,712) 3,251 17,871 (7,000) 10,871Environment and Regulatory Services 0 19,515 (4,173) 15,342 0 0 453 453 0 19,515 (3,720) 15,795Planning Services 0 14,451 (6,139) 8,312 0 0 (223) (223) 1,300 (1,324) (24) 15,751 (7,686) 8,065Childrens and Education Services 234,628 (187,798) 46,830 0 0 0 (6,020) (6,020) 3,979 (3,391) 588 238,607 (197,209) 41,398Highways, Roads and Transport Services 19,618 (3,656) 15,962 0 0 0 (31) (31) 1,050 (815) 235 20,668 (4,502) 16,166Local Authority Housing (Housing Revenue Account) 17,084 (21,577) (4,493) 0 0 0 0 0 17,084 (21,577) (4,493)Local Authority Housing (Housing Revenue Account) Exceptional Costs - Stock Transfer 309,590 (62,013) 247,577 0 0 0 0 0 309,590 (62,013) 247,577Other Housing Services 17,574 (5,682) 11,892 0 0 1,186 1,186 0 0 18,760 (5,682) 13,078Adult Social Care 83,727 (31,948) 51,779 0 0 0 (886) (886) 0 83,727 (32,834) 50,893Corporate and Democratic Core 6,125 (220) 5,905 0 0 0 0 0 6,125 (220) 5,905Non-Distributed Cost 539 0 539 0 0 0 0 0 539 0 539Non-Distributed Cost Exceptional Costs - Pensions Past Service Gain (53,858) 0 (53,858) 0 0 0 0 0 (53,858) 0 (53,858)Cost of Services 765,142 (400,767) 364,375 0 0 0 0 0 0 1,186 0 1,186 0 (6,316) (6,316) 13,292 (9,242) 4,050 779,620 (416,325) 363,295Other Operating Expenditure 5,795 5,795Financing & Investment Income & Expenditure 21,341 (4,050) 17,291Surplus or Deficit on Discountinued Operations 0 0Taxation and Non-Specific Grant Income (179,158) (179,158)

(Surplus) or Deficit on Provision of Services 212,353 0 0 1,186 (6,316) 0 207,223Surplus or Deficit on revaluation of non-current assets 4,527 (529) (1,384) 2,614Surplus or deficit on revaluation of available for sale financial assets 0Actuarial gains / losses on pension assets / liabilities (135,253) (135,253)Other Comprehensive Income and Expenditure (130,726) 0 (529) (1,384) 0 0 (132,639)

Total Comprehensive Income and Expenditure 81,627 0 (529) (198) (6,316) 0 74,584

Change in Service Expenditure Code of Practice

Prior Period ErrorCorrection of Property, Plant and

Equipment Restated 2010/112010/11Prior Period Error

Correction of treatment of grant incomePrior Period Error

Recategorisation of Trading AccountsChange in Accountancy PolicyRevaluation of Heritage Assets

Balance Sheet As At 31 March 2010

Notes

31 March 2010 £000

Change in Accountancy

Policy for Heritage Assets£000

Prior Period ErrorRecategorisation

of S106 & Commuted Sums

£000

Restated31 March

2010 £000

Property, Plant & Equipment 12/12a 744,361 - - 744,361Heritage Assets 12,338 - 12,338Investment Property 13 45,729 - - 45,729Intangible Assets 14 3,560 - - 3,560Assets Held for Sale 20 465 - - 465Long Term Investments 15 1,038 - - 1,038Long Term Debtors 18 33,613 - - 33,613Long Term Assets 828,766 12,338 - 841,104

Short Term Investments 15 60 - - 60Inventories 16 880 - - 880Short Term Debtors 18 45,416 - - 45,416Cash and Cash Equivalents 19 22,953 - - 22,953Assets Held for Sale 20 - - - -Current Assets 69,309 - - 69,309

Cash and Cash Equivalents 19 (10,528) - - (10,528)Short Term Borrowing 15 (2,143) - - (2,143)Short Term Creditors 21 (42,092) - 7,196 (34,896)Provisions 22 (1,127) - - (1,127)Liabilities in Disposal Groups 20 - - - -Donated Assets 38 - - - -Grants Receipts in Advance 38 - -Current Liabilities (55,890) - 7,196 (48,694)

Long Term Creditors 21 (5,163) - - (5,163)Capital Grants Receipts in Advance 38 (8,004) - (7,196) (15,200)Provisions 22 (1,105) - - (1,105)Long Term Borrowing 15 (151,881) - - (151,881)Other Long Term Liabilities 47 (267,417) - - (267,417)Long Term Liabilities (433,570) - (7,196) (440,766)

Net Assets 408,615 12,338 - 420,953

Usable Reserves 23 41,458 - - 41,458Unusable Reserves 24 367,157 12,338 - 379,495

Total Reserves 408,615 12,338 - 420,953

Balance Sheet As At 31 March 2011

Notes

31 March 2011 £000

Prior Period Error

Correction of Treatment

of Grants£000

Change in Accountancy

Policy for Heritage Assets£000

Prior Period Error

Correction of PPE£000

Prior Period ErrorRecategorisation

of S106 & Commuted Sums

£000

Restated31 March

2011 £000

Property, Plant & Equipment 12/12a 453,428 - - 197 - 453,625Heritage Assets - - 12,867 - - 12,867Investment Property 13 36,472 - - - - 36,472Intangible Assets 14 2,881 - - - - 2,881Assets Held for Sale 20 - - - - - -Long Term Investments 15 2,007 - - - - 2,007Long Term Debtors 18 33,917 - - - - 33,917Long Term Assets 528,705 - 12,867 197 - 541,769

Short Term Investments 15 5,046 - - - - 5,046Inventories 16 925 - - - - 925Short Term Debtors 18 50,014 - - - - 50,014Cash and Cash Equivalents 19 31,203 - - - - 31,203Assets Held for Sale 20 - - - - - -Current Assets 87,188 - - - - 87,188

Cash and Cash Equivalents 19 (8,366) - - - - (8,366)Short Term Borrowing 15 (3,234) - - - - (3,234)Short Term Creditors 21 (56,456) 6,316 - - 7,196 (42,944)Provisions 22 (2,016) - - - - (2,016)Liabilities in Disposal Groups 20 - - - - - -Donated Assets 38 - - - - - -Grants Receipts in Advance 38 - -Current Liabilities (70,072) 6,316 - - 7,196 (56,560)

Long Term Creditors 21 (5,476) - - - - (5,476)Capital Grants Receipts in Advance 38 (7,529) - - - (7,196) (14,725)Provisions 22 (1,531) - - - - (1,531)Long Term Borrowing 15 (116,219) - - - - (116,219)Other Long Term Liabilities 47 (88,077) - - - - (88,077)Long Term Liabilities (218,832) - - - (7,196) (226,028)

Net Assets 326,989 6,316 12,867 197 - 346,369

Usable Reserves 23 40,115 6,316 - - - 46,431Unusable Reserves 24 286,874 - 12,867 197 - 299,938

Total Reserves 326,989 6,316 12,867 197 - 346,369

Cash Flow Statement

2010/11£000

Prior Period Error

Correction of PPE£000

Prior Period Error

Correction of Treatment of

Grants£000

Restated2010/11

£000Net (surplus) or deficit on the provision of services 212,353 1,186 (6,316) 207,223Adjustments to net surplus or deficit on the provision of services for non-cash movements (323,499) (1,186) 6,316 (318,369)Adjust for items included in the net surplus or deficit on the provision of services that are investing or financing activities 48,670 48,670Net cash flows from Operating Activities (62,476) - (62,476)Investing Activities 16,145 16,145Financing Activities 35,918 35,918Net (increase) or decrease in cash and cash equivalents (10,413) - (10,413)Cash and cash equivalents at the beginning of the reporting period (12,425) (12,425)Cash and cash equivalents at the end of the reporting period (22,838) (22,838)


2010/11 £000

2011/12 £000

ExpenditureRepairs and maintenance 4,710 - Supervision and management 5,773 - Rents, rates, taxes and other charges 1,970 - Negative Housing Revenue Account Subsidy payable 3,844 - Depreciation of non-current assets 1,081 - Impairment of non-current assets 309,590 - Debt management costs 26 - Movement in the allowance for bad debts 534 - Sums directed by the Secretary of State that are expenditure in accordance with the Code 392 45

Total Expenditure 327,920 45

IncomeDwelling Rents (18,430) - Non-dwelling rents (164) - Charges for services and facilities (3,008) - Contributions towards expenditure (144) - Housing Revenue Account Subsidy receivable - (813)Sums Directed by the Secretary of State that are income in accordance with the Code (62,013) -

Total Income (83,759) (813)

Net Cost of Housing Revenue Account Services as included in the Comprehensive Income and Expenditure Statement

244,161 (768)

Housing Revenue Account service's share of Corporate & Democratic Core 22 -

Housing Revenue Account services share of other amounts included in the whole authority Cost of Services but not allocated to specific services

- -

Net Cost of Housing Revenue Account Services 244,183 (768)

Housing Revenue Account Share of the operating income and expenditure included in the Comprehensive Income and Expenditure Statement:(Gain) or loss on sale of Housing Revenue Account non-current assets (341) - Interest payable and similar charges 2,802 - Interest and investment income - - Pensions interest cost and expected return on pensions assets - Capital grants and contributions receivable - - Deficit for Year on Housing Revenue Account Services 246,644 (768)

2010/11 £000

2011/12 £000

Movement on Housing Revenue Account Statement:Balance on the Housing Revenue Account at the end of the previous year (3,169) (3,056)(Surplus) or deficit for the year on the Housing Revenue Account Income and Expenditure Statement 246,644 (768)Adjustments between Accounting basis and funding basis under statute

Difference between interest payable and similar charges including amortisation of premiums and discounts determined in accordance with the Code and those determined in accordance with statute

(26) (26)

Difference between any other items of income and expenditure determined in accordance with the Code and determined in accordance with statutory Housing Revenue Account requirements

- -

Gain or loss on sale of Housing Revenue Account non-current assets 341 -

Net share of contributions to or from the Pensions Reserve - - Capital expenditure funded by the Housing Revenue Account - - Sums directed by the Secretary of State to be debited or credited to the Housing Revenue Account that are not income and and expenditure in accordance with the Code

- -

Capital Expenditure funded by Housing Revenue Account - - Transfers to/from Major Repairs Reserve 3,375 - Transfer to/from Capital Adjustment Account (250,463) - Transfer to/from Housing Repairs Account - - Total Adjustments between Accounting basis and funding basis under statute (246,773) (26)

Net increase or decrease before transfers to or from reserves (129) (794)Transfers to General Fund 242 - Transfers to/from reserves - 794Decrease in year on Housing Revenue Account 113 0Balance on the Housing Revenue Account at the end of the current year (3,056) (3,056)

Explanatory Notes to the Housing Revenue Account 1 Housing Revenue Account The Housing Revenue Account is a record of expenditure on, and income from, the provision of Local Authority housing, and the form and content of the Account is prescribed by statute. The Housing Revenue Account is “ring-fenced” and must be self-supporting. Contributions both to and from the Housing Revenue Account (e.g. from the General Fund) are limited to special circumstances. 2 Housing Stock The number of dwellings in the Council's housing stock as at 31 March 2012, totalled 0 properties. Following the Large Scale Voluntary Transfer (LSVT) to Golden Gates Housing Trust in 2010/11, the Council transferred the remaining 28 properties into the General Fund with effect from 1 April 2011. 3 Major Repairs Reserve The Major Repairs Reserve Allowance is an element of Housing Revenue Account Subsidy. The movement on the Major Repairs Reserve during the year ended 31 March 2012 is summarised below:

2010/11 £000

2011/12 £000

(1,709) (2,101)

(3,375) - - -

(5,084) (2,101)2,442 80

Other Land and Buildings 40 - Community Assets 219 -

282 -

- -

Balance on Major Repairs Reserve at 31 March (2,101) (2,021)

Balance on Major Repairs Reserve at 1 April Depreciation:Dwelling HousesOtherTotalDwelling Houses

REFCUSAmount transferred from the Major Repairs Reserve for capital expenditure on HRA Land, Houses and Other Property

4 Housing Revenue Account Capital Expenditure

2010/11 £000

2011/12 £000

448 - 2,512 80

- -

306 - 3,266 80

283 - -

2,983 80

- - - -

3,266 80

Capital investmentLand & BuildingsDwellingsOther Revenue Expenditure funded from Capital under Statute

Sources of fundingSupported Borrowing Capital Receipts Major Repairs Reserve

Government grants and other contributions Direct Revenue Financing

During 2011/12 the Council had to fund extensive work to dwellings that were previously part of the HRA. This work was undertaken in 2010/11 prior to the stock transfer but was not invoiced until 2011/12. 5 Capital Receipts from Disposal of Land, Houses and Other

Property within the Housing Revenue Account

2010/11 £000

2011/12 £000

732 - 23 14

- -

- - - - - - 755 14

(532) (11)223 3

Council DwellingsRight to Buy Discounts repaid Non-Right to BuyOther ReceiptsLand sales Other property sales Mortgage Property

Less Pooled (Paid to Central Government)

6 Housing Revenue Account Subsidy Government Subsidy on the Housing Revenue Account is calculated based upon a notional account, which takes into account the housing stock numbers and local influences. The elements of expenditure are calculated for items such as management, day to day maintenance, capital financing charges etc. Offset against these costs is an element for notional income calculates on stock numbers and guideline rents.

Following the closure of the 2010/11 accounts that final housing subsidy claim was submitted for audit verification. This work subsequently indentified an overpayment of £813k this was repaid to the Council in 2011/12.

2010/11 £000

2011/12 £000

Management and Maintenance 8,993 - Major Repairs Allowance 3,375 -

1,823 - - - - -

(18,047) - (3,856) -

Previous years Adjustment 12 813(3,844) 813

Charges For Capital Other Items of Reckonable Expenditure Interest on Receipts Guideline Rent Income Total In year HRA Subsidy Payable

Total HRA Subsidy (Due to)/from CLG 7 Depreciation and Impairment of Fixed Assets

Depreciation

£000Impairment

£000Depreciation

£000Impairment

£000- - - -

1,081 313,224 - - - - - - - - - -

1,081 313,224 - -

2011/122010/11

Land Houses Other Property - Operational Assets Non Operational

8 Vacant Possession Value of dwellings within the HRA The vacant possession value and balance sheet value of dwellings within the HRA show the economic cost to the Government of the providing council housing at less than open market rents.

2010/11 £000

2011/12 £000

Vacant Possession value (open market value) 674 - Existing Use Value of Dwellings (236) -

438 - Difference between Vacant Possession and Existing Use Value 9 Housing Stock Valuation The total balance sheet value of the land, houses and other property within the Council’s Housing Revenue Account:

2010/11 £000

2011/12 £000

Dwellings 235,564 - Other Land & Buildings 2,610 - Total Operational Assets 238,174 -

Non Operational Assets - - Total Value of HRA assets 238,174 -

Collection Fund This account shows the income received from Council Tax payers, and Business Ratepayers.

2010/11£000

2011/12£000

(1) Balance Brought Forward (356)Income

(83,219) Income from Council Tax (83,701)

Transfers from General Fund(13,307) Council tax benefits (13,361)

- Transitional relief - - Discounts for prompt payment -

(92,004) Income collectable from business ratepayers (97,005)

Contributions- Towards previous year's Collection Fund deficit - - Adjustment of previous year's community charges -

(188,530) Total Income (194,067)ExpenditurePrecepts

10,067 Cheshire Police Authority 10,1404,627 Cheshire Fire Service 4,661

80,679 Warrington Borough Council and Parishes 81,264

Business rate90,922 Payment to national pool 96,699

302 Costs of collection 305

Bad and doubtful debts 1,745 Write-offs (6)(167) Provisions 766

Contributions- Towards previous year's estimated Collection Fund surplus 400- Adjustment of previous years' community charges -

188,175 Total Expenditure 194,229

(355) Movement on fund balance 162

(356) Balance Carried Forward (194)

Notes to the Collection Fund Statement 1. Council Tax Council Tax income derives from charges raised according to the value of residential properties, which have been classified into eight valuation bands by estimating 1 April 1991 values. Individual charges are set by calculating the amount of income to be achieved from Council Tax and dividing this by the Council Tax Base (the total number of properties in each band converted to an equivalent number of Band D properties). The tax for a Band D property is multiplied by the appropriate ratio to give an amount due for properties in each band.

Band Value Range

Number of Dwellings

after Discounts and

Exemptions RatioBand D

EquivalentsDisabled - 38 5/9 21

A Up to £40,000 22,159 6/9 14,772B £40,000 - £52,000 16,696 7/9 12,986C £52,000 - £68,000 16,785 8/9 14,920D £68,000 - £88,000 10,275 9/9 10,275E £88,000 - £120,000 6,123 11/9 7,484F £120,000 - £160,000 4,052 13/9 5,853G £160,000 - £320,000 2,401 15/9 4,002H £320,000 and over 151 18/9 302

78,680 70,615 The total number of Band D Equivalents is then adjusted for non-collection, new properties and other adjustments to produce the Council Tax Base. Calculation of Tax Base

Total properties converted to Band D equivalent 70,615 Changes in assumptions 87

70,702

Less allowance for non-collection (706)

Increase due to decrease of second home discount 161

Council Tax Base for Tax Setting 70,157

2. National Non-Domestic Rates (NNDR) NNDR is organised on a national basis. The Government specifies a rate in the pound (43.3p for 2011/12; 42.6p for small businesses) which is then multiplied by the rateable value to produce a charge to each business. The aggregate rateable value or total value of properties for Warrington is £256,882,927. The Council is responsible for collecting rates due from the ratepayers in its area but pays the proceeds into an NNDR pool administered by the Government. The Government redistributes the sums paid into the pool back to Local Authorities on the basis of a fixed amount per head of population. 3. Collection Fund Surplus An estimate is made on 15 January each year of the Surplus/Deficit on the Collection Fund which is then distributed between the billing authorities in the following year. Warrington Borough Council predicted a surplus of £400,000 in 2010/11 which was distributed as shown below:

2010/11£000

2011/12£000

- Warrington Borough Council 337- Cheshire Police Authority 43- Cheshire Fire Authority 20- Total 400

4. Movement on Collection Fund Adjustment Account The Collection Fund contains monies collected on behalf of Warrington Borough Council, Cheshire Police Authority and Cheshire Fire Authority. The table below shows how the movement in the Collection Fund balance is split between the three precepting bodies. Only the Council's share of the movement is shown in the Comprehensive Income and Expenditure Account, and the corresponding entry is shown in Note 7 (Adjustments Between Accounting Basis and Funding Basis under Regulations).

2010/11 £000

2011/12 £000

(355) Movement on Collection Fund Balance 162Less adjustments for:

37 - Cheshire Police Authority (16)17 - Cheshire Fire Authority (7)

(301) Total 139

Group Accounts Introduction The CIPFA Code of Practice requires that where a Council has material financial interests and a significant level of control over one or more entities, it should prepare Group Accounts. The aim of these accounts is to give an overall picture of the Council’s financial activities and the resources employed in carrying out those activities. Before group accounts can be produced, the following actions need to be carried out:

• Determine whether the Council has any form of interest in an entity

• Assess the nature of the relationship between the Council and the entity

Inclusion within the Group Accounts The Council has relationships with a number of entities over which it has varying degrees of control or influence. The Code of Practice requires these to be classified into the categories of subsidiaries, associates and joint ventures. The meanings of these are outlined below. Subsidiary “An entity is a subsidiary of the reporting Council if the Council is able to exercise control over the operating and financial policies of the entity and the Council is able to gain benefits from the entity or is exposed to the risk of potential losses arising from this control.” The following entities are classified as subsidiaries of the Council and have been consolidated:

• Warrington Borough Transport (WBT)

Warrington Borough Transport is a company set up in accordance with the provision of the Transport Act 1985 to take over the Council’s passenger transport undertaking. Warrington Borough Council wholly owns WBT but is not liable for any losses that it may make. Copies of the audited accounts can be obtained from the following address: Ann Marie Slavin Warrington Borough Transport Ltd Wilderspool Causeway Warrington WA4 6PT

• Golden Gates Housing (GGH) – until 28 November 2010

Golden Gates Housing Ltd (GGH) was an Arms Length Management Organisation, establish by Warrington Borough Council. The company was derecognised as a subsidiary of Warrington Borough Council in the 2010/11 accounts. Associate “An entity other than a subsidiary or joint venture in which the reporting Council has a participating interest and over whose operating and financial policies the reporting Council is able to exercise significant influence.” The following entities are classified as an associate of the Council and will be consolidated:

• Connexions

In October 2007 Cheshire County Council and Warrington Borough Council transferred its Youth Service to Connexions Cheshire and Warrington. As at 31 March 2011, WBC owned 25% of Connexions and the remaining 75% was owned by Chester & Cheshire West and Cheshire East. Connexions entered administration on 29th February 2012 and Warrington Borough Council was liable for approximately £70,000. Connexions has been derecognised from the Group Accounts in 2011/12. Joint Venture “An entity in which the reporting Council has an interest on a long term basis and which is jointly controlled by the reporting Council and one or more other entities under a contractual or other binding arrangement.” The Council currently has no Joint Venture arrangements with any other entities. Determining the Group Boundary To ensure that the Group entities incorporated into the Group Accounts are correct, a detailed exercise was carried out, but no companies, other than those detailed above, were determined to be a Group Entity. Please note that although Warrington Borough Council does have an investment in Warrington Wolves, it was determined that there is no Group Relationship as WBC does not have a significant influence over the organisation as our shareholding is less than 14% and we only have one board member who has a connection with the Council.

Main Statements The Group Accounts replicate the main statements in the single entity accounts, and narrative explanations are given on the single entity main statements. Group Movement in Reserves Statement This statement shows the adjustments from the single entity to the Group Movement in Reserves Statement. A full breakdown of the single entity statement is given in the main statements.

General Fund Balance

£000

Earmarked General Fund

Reserves £000

HRA Balance £000

Earmarked HRA

Reserves £000


£000


£000

Capital Grants

Unapplied £000

Total Usable Reserves

£000


£000

Total Reserves of

the Authority

£000

Authority's share of Reserves of Subsidiaries,

Associates and Joint Ventrers

£000

Total Reserves of the Group

£000Balance as At 1 April 2010 976 23,307 2,421 841 345 1,709 11,859 41,458 379,495 420,953 (14,563) 406,391Movement in reserves during the yearSurplus or (deficit) on the provision of services 38,357 (245,580) (207,223) (207,223) 4,053 (203,170)Other Comprehensive Income and Expenditure - - - (2,614) (2,614) 13,650 11,036Actuarial gains or (losses) on pensions reserve 135,253 135,253Total Comprehensive Income and Expenditure 38,357 0 (245,580) 0 0 0 0 (207,223) 132,639 (74,584) 17,703 (192,134)Adjustments between accounting basis & funding basis under regulations (35,293) 245,466 149 392 1,482 212,196 (212,196) - - - Net Increase/Decrease before Transfers to Earmarked Reserves 3,064 - (114) - 149 392 1,482 4,973 (79,557) (74,584) 17,703 (192,134)Transfers to or from earmarked reserves (3,064) 2,779 (1) 1 285.00 - - 0 - 0Increase/Decrease in Year - 2,779 (115) 1 434 392 1,482 4,973 (79,557) (74,584) 17,703 (192,134)Balance as at 31 March 2011 976 26,086 2,306 842 779 2,101 13,341 46,431 299,938 346,369 3,141 349,510Movement in reserves during the yearSurplus or (deficit) on provision of services (2,441) 794 (1,647) 28,313 26,666 25 26,691Other Comprehensive Income and Expenditure - - - (42,015) (42,015) (769) (42,784)Total Comprehensive Income and Expenditure (2,441) - 794 - - - - (1,647) (13,702) (15,349) (744) (16,093)Adjustments between accounting basis & funding basis under regulations 7,359 0 (779) (80) (1,949) 4,551 (4,551) - - - Net Increase/Decrease before Transfers to Earmarked Reserves 4,918 - 794 - (779) (80) 1,949.00- 2,904 (18,253) (15,349) (744) (16,093)Transfers to or from earmarked reserves (4,612) 4,612 (794) 794 - - - - - Increase/Decrease in Year 306 4,612 - 794 (779) (80) (1,949) 2,904 (18,253) (15,349) (744) (16,093)Balance Sheet As At 31 March 2012 1,282 30,698 2,306 1,636 - 2,021 11,392 49,335 281,685 331,020 2,397 333,417

Group Comprehensive Income and Expenditure Account

GrossExpenditure

£000

GrossIncome

£000

2010/11Net

Expenditure£000

GrossExpenditure

£000

GrossIncome

£000

2011/12Net

Expenditure£000

85,241 (73,882) 11,359 Central Services to the Public 78,603 (77,956) 64721,872 (7,000) 14,872 Cultural & Related Services 20,315 (7,295) 13,02019,515 (3,720) 15,795 Enviornment & Regulatory Services 20,446 (4,505) 15,94111,751 (7,686) 4,065 Planning Services 8,126 (3,196) 4,930

238,607 (197,210) 41,397 Childrens and Education Services 227,789 (171,853) 55,93630,300 (14,630) 15,670 Highways, Roads and Transport Services 29,275 (12,903) 16,37217,084 (21,577) (4,493) Local Authority Housing (HRA) (769) 0 (769)

309,590 (62,013) 247,577 HRA Exceptional Costs - Stock Transfer 0 0 019,004 (5,820) 13,184 Other Housing Services 10,047 (1,649) 8,39883,727 (32,834) 50,893 Adult Social Care 83,218 (30,288) 52,930

6,125 (220) 5,905 Corporate and Democratic Core 5,747 (5) 5,742(2,767) - (2,767) Non-Distributed Cost 2,062 - 2,062

(53,858) - (53,858) Non-Distribted Costs Excceptional Cots - Pensions Past Service Gain786,191 (426,592) 359,599 Surplus / Deficit on Continuing Operations 484,859 (309,650) 175,209

5,279 Other Operating Expenditure Note G7 2,64717,701 Financing & Investment Income & Expenditure Note G8 986

0 Surplus or Deficit on Discountinued Operations - (179,158) Taxation and Non-Specific Grant Income Note G9 (176,323)203,421 2,519

(601) Share of the surplus or deficit on the provision of services by associates 00 Deregonition of associates (225)

352 Tax expenses of subsidiaries 0(1) Tax expenses of associates 0

203,171 2,2942,638 Surplus or Deficit on revaluation of non-current assets (26,646)

0 Investment properties not prviously recognised (2,340)0 Surplus or deficit on revaluation of available for sale financial assets -

(146,627) Actuarial gains / losses on pension assets / liabilities 42,784(2,301) Share of other comprehensive income and expenditure of associates 0

(146,290) 13,79856,881 16,092

(Surplus) or Deficit on Provision of Services

Group (Surplus) / Deficit

Other Comprehensive Income and ExpenditureTotal Comprehensive Income and Expenditure

Group Balance Sheet

Notes

31 March 2010£000

31 March 2011£000

31 March 2012£000

Property, Plant and Equipment G10 752,415 461,546 487,948Heritage Assets 12,338 12,867 13,260Investment Property 45,730 36,472 38,439Intangible Assets G11 3,868 2,881 2,181Assets Held for Sale 465 0 - Long-term Investments 150 1,119 2,895Investments in Associates and Joint Ventures 0 0 - Long-term Debtors G13 33,544 33,917 36,063Deferred Tax Asset 0 - - Long-term Assets 848,510 548,802 580,786

Short-term Investments 0 5,046 7,204Inventories G12 1,122 1,055 986Short-term Debtors G13 46,040 50,584 43,749Cash and Cash Equivalents G14 24,319 31,744 22,675Assets Held for Sale 0 0 1,909.00 Current Tax Asset 0 0 - Current Assets 71,481 88,429 76,523

Cash and Cash Equivalents (10,528) (8,366) (9,362)Short Term Borrowing (2,143) (3,234) (1,930)Short-term Creditors G15 (37,196) (44,644) (38,068)Provisions G16 (1,127) (2,016) (1,889)Liabilities in Disposal Groups 0 0 - Donated Assets 0 0 - Group receipts in advance 0 0 - Current Liabilities (50,994) (58,260) (51,249)

Long-term Creditors G15 (6,355) (6,736) (6,357)Capital Grants Reciepts in Adance (15,200) (14,725) (14,449)Provisions G16 (1,354) (1,643) (1,365)Long-term Borrowing (151,947) (116,219) (120,353)Other Long Term Liabilities (287,285) (89,670) (129,649)Deferred Tax Liability (465) (469) (469)Long-term Liabilities (462,606) (229,462) (272,642)

Net Assets 406,391 349,509 333,418

Usable Reserves 45,559 48,945 50,899Unusable Reserves 360,832 300,564 282,519

Total Reserves 406,391 349,509 333,418

Group Cashflow

2010/11£000

2011/12£000

203,421 Net (surplus) or deficit on the provision of services 2,519(314,795) Adjustments to net surplus or deficit on the provision

of services for non-cash movements(49,296)

48,351 Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities

44,317

(63,023) Net cash flows from Operating Activities (2,460)16,424 Investing Activities Note G18 13,07536,834 Financing Activites Note G19 (606)

114 Corporation tax (received) / paid 56

(9,651)Net (increase) or decrease in cash and cash equivalents 10,065

64 Derecognition of Golden Gate Housing as a Group Entity 0

(13,791)Cash and cash equivalents at the beginning of the reporting period (23,378)

(23,378)Cash and cash equivalents at the end of the reporting period (Note 19) (13,313)

Explanatory Notes to the Group Accounts The notes below are specific to the Group Accounts. G1 De-recognition of Connexions as an Associate Connexions entered administration on 29th February 2012 and Warrington Borough Council was liable for approximately £70,000, though these figures have not yet been finalised. Connexions entered administration on 29th February 2012 and has therefore been derecognised as an associate of Warrington Borough Council. No financial details have been produced for Connexions so no accounts information has been included in the 2011/12 Group Accounts. The proportion of the net worth of Connexions included in the 2010/11 accounts has been recorded as a gain of £225k within the Other Comprehensive Income & Expenditure on the CIES.

G2 Reconciliation of Single Entity Deficit for the Year to the Group Deficit

2010/11

£0002011/12

£000

207,223 (Surplus)/Deficit on the authority's single entityIncome and Expenditure Account for the year

2,321

Less:0 Subsidiary dividend income and any other

distributions from group entities included in thesingle entity surplus or deficit on the Income andExpenditure Account

0

Add:Surplus or deficit arising from other entitiesincluded in the group accounts analysed into theamounts attributable to subsidiaries:

(1,128) WBT (Surplus)/Deficit 198(2,539) GGH (Surplus)/Deficit

217 Derecognition of Golden Gates Housing as a group entity

Add:Percentage of Surplus or deficit arising fromAssociates

(601) Connexions (25%) (225)

203,172 Group Account (Surplus)/Deficit for the year 2,294 G3 Summarised Financial Information of Associate Connexions has been included in the Group Accounts using the equity method. Under the equity method, only the Council’s share of net assets and results are included. The table below shows the Income and Expenditure Account for Connexions.

Connexions WBC 25% Connexions WBC 25%2010/11 2010/11 2011/12 2011/12

£000 £000 £000 £000

(11,218) (2,805) Turnover8,761 2,190 Administrative expenses(2,457) (614) 0 0

(139) (35) Other operating income

(2,596) (649) Operating Profit 0 0

(16) (4) Interest receiveable and similar income5 1 Interest payable and similar charges

205 51 Other finance costs194 49 0 0

(2,402) (601) Profit on ordinary activies before taxation 0 0

(3) (1) Tax on profit on ordinary activivies

(2,405) (601) Profit for the financial year 0 0

(9,266) (2,317) Actuarial (gain) / loss62 16 Revaluation of Fixed assets

(11,609) (2,902) Total Recognised Gains and Losses 0 0 This has then been incorporated into the Group Comprehensive Income and Expenditure as shown below:

2010/11 2011/12£000 £000

(600) Share of the surplus of deficit on the provision of services of associatesDerecognition of associates (225)

(1) Tax Expenses on associates(601) Group (Surplus) / Deficit (225)

(2,301) Share of other comprehensive income and expenditure of associates 0Derecognistion

(2,902) Total Adjustment to Group Account (225) The table below shows the Net Assets position of Connexions. Connexions WBC 25% Connexions WBC 25%

2010/11 2010/11 2011/12 2011/12£000 £000 £000 £000

374 94 Long Term Assets - - 956 239 Current Assets - -

(1,314) (329) Current Liabilities - - (914) (229) Long Term Liabilities - - (898) (225) Net Assets - -

G4 The recognised share of losses of an associate At 31 March 2011 Connexions had a negative balance sheet position of £898k. To recognise that Warrington Borough Council is responsible for any gains or losses in Connexions this has been reported in Other Long Term Liabilities in the Group Accounts in 2010/11.

G5 Financial Position of Subsidiaries The table below shows the financial positions of WBT and GGH.

2010/11 Warrington Borough Transport 2011/12£000 £000

(1,126) (Surplus) / Deficit in Year 198

7,085 Long Term Assets 6,7991,422 Current Assets 1,278(1,880) Current Liabilities (1,885)(3,209) Long Term Liabilities (3,741)3,418 Net Assets 2,451

2010/11 Golden Gates Housing 2011/12

£000 £000(2,539) (Surplus) / Deficit in Year -

- Long Term Assets - - Current Assets - - Current Liabilities - - Long Term Liabilities - - Net Assets -

Notes to the Group Financial Statements Where figures in the group accounts differ materially from the Council’s accounts, the relevant explanatory notes have been prepared on a consolidated basis. The notes below give information on the areas that have materially changed on consolidation of the group entities into the Council’s accounts. G6 Group Accounting Policies The Accounting Policies of Subsidiary and Associate companies have been aligned with the Council’s Accounting Policies. The Council’s Accounting Policies are contained in Note 1 - Accounting Polices of the Council’s Explanatory Notes to the Core Financial Statements, where applicable. Any statutory adjustments between accounting basis and funding basis included in the Council’s Accounting Policies do not apply to Subsidiary and Associated Companies. Notes to the Group Accounts have not been provided except where there are material differences to the single entity accounts Subsidiaries are consolidated on a ‘line-by line’ basis. Associates are consolidated using the equity method. G7 Other Operating Expenditure

2010/11 2011/12£000 £000

1,510 Parish council precepts 1,521532 Payments to the Government Housing Capital Receipts Pool 10

3,237 Gains/losses on the disposal of non current assets 1,0040 Levies 1110 Other 0

5,279 2,646

Other Operating Expenditure

G8 Financing and Investment Income and Expenditure

2010/11 2011/12£000 £000

10,669 Interest payable and similar charges 5,6177,113 Pensions interest cost and expected return on pensions

assets(383)

(2,895) Interest receivable and similar income (2,408)6,207 Income and expenditure in relation to investment properties

and changes in their fair value(1,840)

(3,393) GF Proportion of Stock Transfer OHD Calculation 00 Other investment income 0

17,701 Total 986

Financing and Investment Income and Expenditure

G9 Taxation and Non Specific Grant Income

2010/11 2011/12£000 £000

(80,981) Council Tax Income (81,464)(47,188) NNDR Redistribution (43,813)(21,032) Non-ringfenced government grants (30,225)(29,957) Capital Grants (20,821)

(179,158) Total Taxation and Non-Specific Grant Income (176,323)

Taxation and Non-Specific Grant Income

G10 Property, Plant & Equipment

Council Dwellings

£000

Land & Buildings

£000


£000

Vehicles, Plant &

Equipment £000



£000


Total PP&E £000


PP&E£000

Cost or ValuationBalance as at 1 April 2011 323,495 315,663 114,621 33,670 10,135 18,619 816,203 9,688Adjustments between cost/value & depreciation/impairment 1,059 1,059Adjusted opening balance 323,495 316,722 114,621 33,670 10,135 18,619 0 817,262 9,688Additions (Note 40) 6,756 7,235 4,521 299 14,150 32,961Donations 0Revaluation increases/decreases to Revaluation Reserve (145) 16,158 16,013 (158)


0

Derecognition - Disposals (1,033) (1,104) (2,137)Derecognition - Other 0Reclassifications & Transfers (12,474) 734 18,563 (6,823) 0Reclassified to Held for Sale (5,398) (5,398)Reclassified from Held for Sale 0Balance as at 31 March 2012 323,350 320,731 122,590 55,650 10,434 25,946 0 858,701 9,530Depreciation and ImpairmentBalance as at 1 April 2011 318,063 23,745 5,181 7,671 354,660 266Adjustments between cost/value & depreciation/impairment 0Adjusted opening balance 318,063 23,745 5,181 7,671 0 0 0 354,660 266Depreciation Charge 64 7,353 2,876 4,447 14,740 55Depreciation written out on Revaluation Reserve (29) (8,708) (8,737) (32)


0

Impairment losses/reversals to Revaluation Reserve 0Impairment losses/reversals to Surplus or Deficit on the Provision of Services

186 11,739 11,925 201

Derecognition - Disposals (832) (1,006) (1,838)Derecognition - Other 0Reclassifications & Transfers 0Eliminated on reclassification to Held for Sale 0Balance as at 31 March 2012 318,284 33,297 8,057 11,112 0 0 0 370,750 490Net Book ValueBalance as at 31 March 2012 5,066 287,434 114,533 44,538 10,434 25,946 0 487,951 9,040Balance as at 31 March 2011 5,432 291,918 109,440 25,999 10,135 18,619 0 461,543 9,422

Council Dwellings

£000

Land & Buildings

£000


£000

Vehicles, Plant &

Equipment £000



£000


Total PP&E £000


PP&E£000

Cost or ValuationBalance as at 1 April 2010 323,377 289,057 106,836 19,461 8,009 26,860 773,600 9,688Adjustments between cost/value & depreciation/impairment 0Adjusted opening balance 323,377 289,057 106,836 19,461 8,009 26,860 0 773,600 9,688Additions (Note 40) 2,512 16,657 7,785 5,645 2,126 14,353 49,078Donations - Revaluation increases/decreases to Revaluation Reserve 1,513 3,214 4,727Revaluation increases/decreases to Surplus or Deficit on the Provision of Services

(231) (231)

Derecognition - Disposals (6,639) (645) (7,284)Derecognition - Other 0Reclassifications & Transfers 13,385 9,209 (22,594) 0Reclassified to Held for Sale (3,907) 220 (3,687)Reclassified from Held for Sale 0Balance as at 31 March 2011 323,495 315,663 114,621 33,670 10,135 18,619 - 816,203 9,688Depreciation and ImpairmentBalance as at 1 April 2010 5,107 7,480 2,505 6,093 21,185 133Adjustments between cost/value & depreciation/impairment 0Adjusted opening balance 5,107 7,480 2,505 6,093 - - - 21,185 133Depreciation Charge 1,203 4,750 2,676 1,780 5 10,414Depreciation written out on Revaluation Reserve (5,236) (1,464) 31 (6,669) 133


0

Impairment losses/reversals to Revaluation Reserve 11,435 1,748 13,183Impairment losses/reversals to Surplus or Deficit on the Provision of Services

305,554 12,604 318,158

Derecognition - Disposals (1,064) (542) (1,606)Derecognition - Other 0Reclassifications & Transfers (309) 309 (5) (5)Eliminated on reclassification to Held for Sale 0Balance as at 31 March 2011 318,063 23,745 5,181 7,671 - - - 354,660 266Net Book ValueBalance as at 31 March 2011 5,432 291,918 109,440 25,999 10,135 18,619 0 461,543 9,422Balance as at 31 March 2010 318,270 281,577 104,331 13,368 8,009 26,860 0 752,415

G11 Intangible Assets


Assets £000

Other Assets £000

Total £000


Assets £000

Other Assets £000

Total £000

Balance at start of year:· Gross carrying amounts 4,494 4,494 4,222 4,222· Accumulated amortisation (626) (626) (1,341) (1,341)Net carrying amount at start of year 3,868 3,868 2,881 2,881Additions:· Internal development· Purchases 36 36 22 22· Acquired through business combinations

3,904 3,904 2,903 2,903Assets reclassified as held for saleOther disposals (308) (308)Revaluation increases/decreases to Revaluation ReserveRevaluation increases/decreases to Surplus or Deficit on the Provision of ServicesImpairment losses recognised or reversed directly in the Revaluation ReserveImpairment losses recognised in the Surplus/Deficit on the Provision of Services

Reversals of past impairment losses written back to the Surplus/Deficit on the Provision of ServicesAmortisation for the period (715) (715) (722) (722)Other changesNet carrying amount at end of year 2,881 2,881 2,181 2,181

Comprising:· Gross carrying amounts 4,222 4,222 4,244 4,244· Accumulated amortisation (1,341) (1,341) (2,063) (2,063)

2,881 2,881 2,181 2,181

2011/122010/11

G12 Inventories

2010/11 £00

2011/12 £000

2010/11 £00

2011/12 £000

2010/11 £000

2011/12 £000

Balance Outstanding at Start of Year 1,114 1,054 8 0 1,122 1,054Other Movement in Year (55) 21 0 0 (55) 21Purchases 115 3 0 0 115 3Recognised as an Expense in Year (25) (93) (8) 0 (33) (93)Written Off Balances (95) - 0 - (95) - Reversals of Write Offs in Previous Years - - - - - - Balance Outstanding at Year End 1,054 985 0 0 1,054 985

Consumable StoresClient Services in Work in Progress Totals

G13 Debtors

2009/10 £000

2010/11 £000

2011/12 £000

2009/10 £000

2010/11 £000

2011/12 £000

Central Government Bodies - - - 29,652 25,103 13,050Other Local Authorities - - - 1,426 1,826 859NHS Bodies - - - - 304 2,307Public corporations and trading funds - - - 1,085 - - Other entities and individuals 33,544 33,917 36,063 13,877 23,351 27,533Total 33,544 33,917 36,063 46,040 50,584 43,749

Long Term Debtors Short Term Debtors

G14 Cash and Cash Equivalents

2009/10 £000

2010/09 £000

2011/12 £000

Cash and Bank balances 5,616 645 258Short Term Investments 0 9,254 7,879Short Term Deposits with Building Societies 18,703 21,845 14,538Total 24,319 31,744 22,675

31/03/10£000

31/03/11£000

31/03/12£000

Bank Current Accounts (10,528) (8,366) (9,362) G15 Creditors

31/03/10£000

31/03/11£000

31/03/12£000

31/03/10£000

Restated 31/03/11

£00031/03/12

£000Central Government Bodies - - - 5,150 2,898 2,252 Other Local Authorities - - - 708 514 444 NHS Bodies - - - - 20 169 Public Corporations and Trading Funds - - - 2,184 120 44 Other Entities and Individuals 6,355 6,736 6,357 29,154 41,092 35,159 Total 6,355 6,736 6,357 37,196 44,644 38,068

Long Term Creditors Short Term Creditors

G16 Provisions

Outstanding Legal Cases

£000

Injury and Damage

Compensation Claims £000

Other Provisions £000

Total £000

Balance at 1 April 2011 - 1,530 2,129 3,659Additional Provisions Made in 2011/12 - 777 858 1,635Amounts Used in 2011/12 - - (898) (898)Unused Amounts Reversed in 2011/12 - (1,021) (121) (1,142)Unwinding of Discounts in 2011/12 - - - - Balance at 31 March 2012 - 1,286 1,968 3,254

G17 Cash Flow Statement – Operating Activities

2010/11£000

2011/12£000

(6,291) Interest received (2,254)10,807 Interest paid 5,577

0 Dividends received 04,516 3,323

G18 Cash Flow Statement – Investing Activities

2010/11£000

2011/12£000

44,698Purchase of property, plant and equipment, investment property and intangible assets

36,917

16,033 Purchase of short-term and long-term investments 23,8630 Other payments for investing activities 0

(3,141)

Proceeds from the sale of property, plant and equipment, investment property and intangible assets

(3,203)

(10,060)Proceeds from short-term and long-term investments (20,083)

(31,106) Other receipts from investing activities (24,419)16,424 13,075

G19 Cash Flow Statement – Financing Activities

2010/11£000

2011/12£000

(36,217) Cash receipts of short-term and long-term borrowing (5,898)0 Other receipts from financing activities 0

166

Cash payments for the reduction of the outstanding liabilities relating to finance leases and on-balance sheet PFI contracts (15)

72,165 Repayments of short-term and long-term borrowing 4,623720 Other payments for financing activities 684

36,834 (606)

G20 Reconciliation to Subjective Analysis As the results of the subsidiaries and associates are not reported as part of the Council’s management reporting, the income and expenditure relating to the Group Entities are shown in amounts not reported to management for decision making in the table below. For details of the directorate reporting see note 28.

2011/12Directorate

Analysis



making


in Cost of Services


Cost of Services


IncomeFees, charges & Other Service Income (147,421) (8,616) (794) - (156,831) - (156,831)Government Grants (155,724) 0 - - (155,724) 94,859.00- (250,583)Interest and investment income (590) 0 585 - (5) 2,408.00- (2,413)Internal Recharges (187,537) 0 - 187,537 0 - 0Income and Expenditure in relation to investment properties - 0 2,909 - 2,909 2,756.00- 153Income from Council Tax - 0 - - 0 81,464.00- (81,464)

(491,272) (8,616) 2,700 187,537 (309,651) (181,487) (491,138)ExpenditureEmployee expenses 211,865 3,730 215,595 - 215,595Other Service Expenditure 236,057 10,696 (4,020) 242,733 - 242,733Depreciation, amortisation and impairment 0 882 26,417 27,299 - 27,299Interest Payable 5,016 0 (5,016) 0 5,618.00 5,618Internal Recharges 187,537 0 (187,537) 0 - 0Parish Precepts 0 0 1,521.00 1,521Precepts & Levies 0 (111) (111) 111.00 0Housing Capital Receipts Pool 0 0 10.00 10Gain / Loss on disposal of Fixed Assets 0 0 1,005.00 1,005Pension Interest Cost and return on assets 0 0 383.00- (383)Income and Expenditure in relation to investment properties 0 (655) (655) 915.00 260Derecognition of associates 225.00- (225)

640,475 15,308 16,615 (187,537) 484,861 8,797 493,433Net 149,203 6,692 19,315 - 175,210 (172,690) 2,295

2010/11Directorate

Analysis


management for dection

making


in Cost of Services


Cost of Services


IncomeFees, Charges & Other Service Income (264,711) (10,266) - - (274,977) - (274,977)Interest & Investment Income (1,048) 0 1,048 - 0 - 0Government Grants (79,270) (6,273) - - (85,543) (2,895) (88,438)Internal Recharges (191,295) 0 - 189,871 (1,424) (98,177) (99,601)Income & Expenditure in Relation to Invesment Properties - (3,825) 3,013.00 - (812) 0 (812)Income from Council Tax - - - - 0 812 812Transfer to Capital Adjustment Account - LSVT - (63,836) - (63,836) (80,981) (144,817)

(536,324) (84,200) 4,061 189,871 (426,592) (181,240) (607,832)ExpenditureEmployee Expenses 228,345 (37,246) - - 191,099 0 191,099Other Service Expenditure 255,184 928 - - 256,112 0 256,112Depreciation, Amortisation and Impairment (5) 342,103 - - 342,098 0 342,098Interest Payable 5,247 0 (5,247) - 0 7,276 7,276Internal Recharges 191,295 0 - (189,871) 1,424 0 1,424Parish Precepts - - - - 0 1,510 1,510Housing Capital Receipts Pool - - - - 0 532 532Gain / Loss on disposal of Fixed Assets - - - - 0 3,595 3,595Pension Interest Cost and Return on Assets - - - - 0 7,113 7,113Income and Expenditure in Relation to Investment Properties - (7,211) (654) - (7,865) 5,036 (2,829)Transfer to Capital Adjustment Account - LSVT - 3,324 - - 3,324 0 3,324Share of the surplus or deficit on the provision of services by associates (600) (600)Tax expenses of subsidiaries 352 352Tax epenses of associates (1) (1)

680,066 301,898 (5,901) (189,871) 786,192 24,813 811,005Net 143,742 217,698 (1,840) - 359,600 (156,427) 203,173

G21 Defined Benefit Pension Schemes The tables below show the effect of the pension scheme on the Group Comprehensive Income & Expenditure and Group Balance Sheet

2010/11£000

2011/12£000

Comprehensive Income and Expenditure StatementCost of Services:- current service cost 20,087 14,601- past service costs (57,164) 56- settlements and curtailments 539 2,070

Financing and Investment Income and Expenditure:- interest cost 33,970 27,163- expected return on scheme assets (26,857) (26,927)

Total Post-employment Benefit Charged to the Surplus or Deficit on the Provision of Services (29,425) 16,963

Other Post-employment Benefit Charged to the Comprehensive Income and Expenditure Statement- actuarial gains and losses (122,141) 42,848

Total Post-employment Benefit Charged to the Comprehensive Income and Expenditure Statement (151,566) 59,811

Movement in Reserves Statement- reversal of net charges made to the Surplus or Deficit for the Provision of Services for post-employment benefits in accordance with the Code 45,653 2,135

Actual amount charged against the General Fund Balance for pensions in the year:- employers' contributions payable to scheme (16,228) (19,098)

TOTAL

2010/11£000

2011/12£000

Pension (Liability)/ Asset Bfwd (284,158) (89,445)Current Service Cost (18,258) (14,601)Past Service Cost 57,164 (56)Gains/(losses) on Settlements & Curtailments (539) (2,070)Interest Cost (33,970) (27,163)Expected Return on Assets 26,857 26,927Assets Acquired in a Business Combination (1,829) 0Payment of Pensions 17,390 19,098LSVT Disposal of Pension 1,554 0Movement in Deferred Tax Asset (883) 509Actuarial Gains/ (Losses) 147,227 (42,848)Pension (Liability)/ Asset Cfwd (89,445) (129,649)

Glossary of Terms AAA FITCH RATING Highest credit quality - ‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA FITCH RATING Very high credit quality - ‘AA’ ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A FITCH RATING High credit quality - ‘A’ ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. ACCOUNTING PERIOD The period of time covered by the accounts, normally a period of twelve months commencing on 1 April. The end of the accounting period is the Balance Sheet date. ACCRUALS Sums included in the final accounts to recognise revenue and capital income and expenditure earned or incurred in the financial year, but for which actual payment had not been received or made as at 31 March. ACTUARIAL GAINS AND LOSSES For a defined benefit pension scheme, the changes in actuarial surpluses or deficits that arise because:

• Events have not coincided with the actuarial assumptions made for the last valuation (experience gains and losses); or

• The actuarial assumptions have changed ASSET An item having value to the Council in monetary terms. Assets are categorised as either current or fixed:

• A current asset will be consumed or cease to have material value within the next financial year (e.g. cash and stock);

• A non-current asset provides benefits to the Council and to the services it provides for a period of more than one year and may be tangible e.g. a community centre, or intangible, e.g. computer software licences.

AUDIT OF ACCOUNTS An independent examination of the Council’s financial affairs. BALANCE SHEET A statement of the recorded assets, liabilities and other balances at the end of the accounting period.

BORROWING Government support for capital investment is described as either Supported Capital Expenditure (Revenue) known as SCE(R) or Supported Capital Expenditure (Capital Grant) known as SCE(C). SCE can be further classified as either Single Capital Pot (SCP) or ring-fenced. BUDGET The forecast of net revenue and capital expenditure over the accounting period. CAPITAL EXPENDITURE Expenditure on the acquisition of a non-current asset, which will be used in providing services beyond the current accounting period, or expenditure which adds to and not merely maintains the value of an existing non-current asset. CAPITAL FINANCING Funds raised to pay for capital expenditure. There are various methods of financing capital expenditure including borrowing, leasing, direct revenue financing, usable capital receipts, capital grants, capital contributions, revenue reserves and earmarked reserves. CAPITAL PROGRAMME The capital schemes the Council intends to carry out over a specific period of time. CAPITAL RECEIPT The proceeds from the disposal of land or other non-current assets. Proportions of capital receipts can be used to finance new capital expenditure, within rules set down by the Government but they cannot be used to finance revenue expenditure. CLAW-BACK Where average council house rents are set higher than the Government’s prescribed average limit rent, used in the calculation of rent rebates, the percentage difference reduces the amount of rent rebate subsidy due to the Council, i.e. it is “clawed-back” by the Government. CIPFA The Chartered Institute of Public Finance and Accountancy COLLECTION FUND A separate fund that records the income and expenditure relating to Council Tax and non-domestic rates. COMMUNITY ASSETS Assets that the Council intends to hold in perpetuity, that have no determinable useful life and that may have restrictions on their disposal. Examples of community assets are parks and historical buildings. CONSISTENCY The concept that the accounting treatment of like items within an accounting period and from one period to the next are the same.

CONTINGENT ASSET A contingent asset is a possible asset arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the Council’s accounts. CONTINGENT LIABILITY A contingent liability is either:

• A possible obligation arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the Council’s control; or

• A present obligation arising from past events where it is not probable that a transfer of economic benefits will be required, or the amount of the obligation cannot be measured with sufficient reliability.

CORPORATE AND DEMOCRATIC CORE The corporate and democratic core comprises all activities that Local Authorities engage in specifically because they are elected, multi-purpose Authorities . The cost of these activities are thus over and above those which would be incurred by a series of independent single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services. CREDITOR Amount owed by the Council for work done, goods received or services rendered within the accounting period, but for which payment has not been made by the end of that accounting period. CURRENT SERVICE COST (PENSIONS) The increase in the present value of a defined benefits pension scheme’s liabilities, expected to arise from employee service in the current period. DEBTOR Amount owed to the Council for works done, goods received or services rendered within the accounting period, but for which payment has not been received by the end of that accounting period. DEFERRED CHARGES Expenditure which can be properly deferred (i.e. treated as capital in nature), but which does not result in, or remain matched with, a tangible asset. Examples of deferred charges are grants of a capital nature to voluntary organisations. DEFINED BENEFIT PENSION SCHEME Pension schemes in which the benefits received by the participants are independent of the contributions paid and are not directly related to the investments of the scheme. DEPRECIATION The measure of the cost of wearing out, consumption or other reduction in the useful economic life of the Council’s non-current assets during the accounting period, whether from use, the passage of time or obsolescence through technical or other changes.

DISCRETIONARY BENEFITS (PENSIONS) Retirement benefits, which the employer has no legal, contractual or constructive obligation to award and are awarded under the Council’s discretionary powers such as the Local Government (Discretionary Payments) Regulations 1996. EQUITY The Council’s value of total assets less total liabilities. EVENTS AFTER THE BALANCE SHEET DATE Events after the Balance Sheet date are those events, favourable or unfavourable, that occur between the Balance Sheet date and the date when the Statement of Accounts is authorised for issue. EXCEPTIONAL ITEMS Material items which derive from events or transactions that fall within the ordinary activities of the Council and which need to be disclosed separately by virtue of their size or incidence to give fair presentation of the accounts. EXPECTED RETURN ON PENSION ASSETS For a funded defined benefit scheme, this is the average rate of return, including both income and changes in fair value but net of scheme expenses, which is expected over the remaining life of the related obligation on the actual assets held by the scheme. EXTRAORDINARY ITEMS Material items, possessing a high degree of abnormality, which derive from events or transactions that fall outside the ordinary activities of the Council and which are not expected to recur. They do not include exceptional items, nor do they include prior period items merely because they relate to a prior period. FAIR VALUE The fair value of an asset is the price at which it could be exchanged in an arm’s length transaction less, where applicable, any grants receivable towards the purchase or use of the asset. FINANCE LEASE A lease that transfers substantially all of the risks and rewards of ownership of a non-current asset to the lessee. GOING CONCERN The concept that the Statement of Accounts is prepared on the assumption that the Council will continue in operational existence for the foreseeable future. GOVERNMENT GRANTS Grants made by the Government towards either revenue or capital expenditure in return for past or future compliance with certain conditions relating to the activities of the Council. These grants may be specific to a particular scheme or may support the revenue spend of the Council in general.

HOUSING BENEFITS A system of financial assistance to individuals towards certain housing costs administered by Authorities and subsidised by central Government. HOUSING REVENUE ACCOUNT (HRA) A separate account to the General Fund, which includes the income and expenditure arising from the provision of housing accommodation by the Council. IMPAIRMENT A reduction in the value of a non-current asset to below its carrying amount on the Balance Sheet. INCOME AND EXPENDITURE ACCOUNT The revenue account of the Council that reports the net cost for the year of the functions for which it is responsible and demonstrates how that cost has been financed from precepts, grants and other income. INFRASTRUCTURE ASSETS Non-current assets belonging to the Council that cannot be transferred or sold, on which expenditure is only recoverable by the continued use of the asset created. Examples are highways, footpaths and bridges. INTANGIBLE ASSETS An intangible (non-physical) item may be defined as an asset when access to the future economic benefits it represents is controlled by the reporting entity. This Council’s intangible assets comprise computer software licences. INTEREST COST (PENSIONS) For a defined benefit scheme, the expected increase during the period of the present value of the scheme liabilities because the benefits are one period closer to settlement. INVENTORIES Items of raw materials and stores an Council has procured and holds in expectation of future use. Examples are consumable stores, raw materials and products and services in intermediate stages of completion. INVESTMENTS (PENSION FUND) The investments of the Pension Fund will be accounted for in the statements of that fund. However, Authorities are also required to disclose, as part of the disclosure requirements relating to retirement benefits, the attributable share of the pension scheme assets associated with their underlying obligations. LIABILITY A liability is where the Council owes payment to an individual or another organisation.

• A current liability is an amount which will become payable or could be called in within the next accounting period, e.g. creditors or cash overdrawn.

• A deferred liability is an amount which by arrangement is payable beyond the next year at some point in the future or to be paid off by an annual sum over a period of time.

LIQUID RESOURCES Current asset investments that are readily disposable by the Council without disrupting its business and are either:

• Readily convertible to known amounts of cash at or close to the carrying amount; or

• Traded in an active market LONG-TERM CONTRACT A contract entered into for the design, manufacture or construction of a single substantial asset or the provision of a service (or a combination of assets or services which together constitute a single project), where the time taken to substantially complete the contract is such that the contract activity falls into more than one accounting period. MATERIALITY The concept that the Statement of Accounts should include all amounts which, if omitted, or misstated, could be expected to lead to a distortion of the financial statements and ultimately mislead a user of the accounts. MINIMUM REVENUE PROVISION (MRP) The minimum amount which must be charged to the revenue account each year in order to provide for the repayment of loans and other amounts borrowed by the Council. NEGATIVE SUBSIDY If the Subsidy Housing Revenue Account produces a result, which assumes that the Council’s income is higher than its expenditure, a “negative subsidy” situation arises. In this case the Council must pay an amount equivalent to the deficit, from its Housing Revenue Account to the Government. NET BOOK VALUE The amount at which non-current assets are included in the Balance Sheet, i.e. their historical costs or current value less the cumulative amounts provided for depreciation. NET DEBT The Council’s borrowings less cash and liquid resources. NON-DISTRIBUTED COSTS These are overheads for which no user now benefits and as such are not apportioned to services NATIONAL NON-DOMESTIC RATES (NNDR) The National Non-Domestic Rate is a levy on businesses, based on a national rate in the pound set by the Government and multiplied by the assessed rateable value of the premises they occupy. It is collected by the Council on behalf of central Government and then redistributed back to support the cost of services.

NON-OPERATIONAL ASSETS Non-current assets held by the Council but not directly occupied, used or consumed in the delivery of services. Examples are investment properties, assets under construction or assets surplus to requirements pending sale or redevelopment. OPERATING LEASE A lease where the ownership of the non-current asset remains with the lessor. OPERATIONAL ASSETS Non-current assets held and occupied, used or consumed by the Council in the pursuit of its strategy and in the direct delivery of those services for which it has either a statutory or discretionary responsibility. PAST SERVICE COST (PENSIONS) For a defined benefit pension scheme, the increase in the present value of the scheme liabilities related to employee service in prior periods arising in the current period as a result of the introduction of, or improvement to retirement benefits. PENSION SCHEME LIABILITIES The liabilities of a defined benefit pension scheme for outgoings due after the valuation date. Scheme liabilities measured during the projected unit method reflect the benefits that the employer is committed to provide for service up to the valuation date. PRECEPT The levy made by precepting Authorities by billing Authorities , requiring the latter to collect income from Council Tax on their behalf. PRIOR YEAR ADJUSTMENT Material adjustments applicable to previous years arising from changes in accounting polices or from the correction of fundamental errors. This does not include normal recurring corrections or adjustments of accounting estimates made in prior years. PROVISION An amount put aside in the accounts for future liabilities or losses which are certain or very likely to occur but the amounts or dates of when they will arise are uncertain. PUBLIC WORKS LOAN BOARD (PWLB) A Central Government Agency, which provides loans for one year and above to Authorities at interest rates only slightly higher than those at which the Government can borrow itself. RATEABLE VALUE The annual assumed rental of a hereditament, which is used for NNDR purposes. RELATED PARTIES There is a detailed definition of related parties in IAS 24. For the Council’s purposes related parties are deemed to include the Council’s members, the Chief Executive, its Directors and their close family and household members.

RELATED PARTY TRANSACTIONS The Statement of Recommended Practice requires the disclosure of any material transactions between the Council and related parties to ensure that stakeholders are aware when these transactions occur and the amount and implications of such. REMUNERATION All sums paid to or receivable by an employee and sums due by way of expenses allowances (as far as those sums are chargeable to UK income tax) and the money value of any other benefits. Received other than in cash. Pension contributions payable by the employer are excluded. RESERVES The accumulation of surpluses, deficits and appropriations over past years. Reserves are split into usable, those available to be spent on either capital or revenue items; and unusable reserves, which are technical adjustments or specific capital reserves. RESIDUAL VALUE The net realisable value of an asset at the end of its useful life. RETIREMENT BENEFITS All forms of consideration given by an employer in exchange for services rendered by employees that are payable after the completion of employment. REVENUE EXPENDITURE The day-to-day expenses of providing services. REVENUE SUPPORT GRANT A grant paid by Central Government to Authorities , contributing towards the general cost of their services. TEMPORARY BORROWING Money borrowed for a period of less than one year. TRUST FUNDS Funds administered by the Council for such purposes as prizes, charities, specific projects and on behalf of minors. USEFUL ECONOMIC LIFE (UEL) The period over which the Council will derive benefits form the use of a non-current asset. WORK IN PROGRESS (WIP) The cost of work performed on an uncompleted project at the year end.

Agenda Item 8

WARRINGTON BOROUGH COUNCIL AUDIT & CORPORATE GOVERNANCE COMMITTEE 28 JUNE 2012 Report of the: Chief Finance Officer Report Author: Lynton Green, Chief Finance Officer Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: DRAFT FINAL STATEMENT OF ACCOUNTS 2011/12 1. PURPOSE OF THE REPORT 1.1 To present the Audit & Corporate Governance Committee the Council’s draft

statement of accounts for 2011/12. 2. BACKGROUND 2.1 The Council has recently prepared its statement of accounts for 2011/12. The

Accounts and Audit Regulation 2011 require that these accounts be approved by the Section 151 Officer by 30 June and the final audited version needs to be approved by members by 30 September each year. After the Accounts have been approved on 30 June they will be submitted to the Audit Commission to be audited.

2.2 Local government accounts are extremely technical in nature and at the time of preparing this report the accounts are still subject to an extensive quality assurance process. Appendix 1 to this report presents a draft copy of the 2011/12 Statement of Accounts. Please note that these accounts may be subject to further change before they are approved by the Section 151 Officer on 30 June 2012. Any significant changes to the draft accounts will be reported to members at their meeting of 28 June 2012.

2.3 The Council has improved the production of the accounts this year to allow more

time for quality assurance. This has been achieved by earlier and closer working with the Audit Commission, effective leadership and project planning, greater input by directorates and the senior management team and the continued dedication and hard work of staff / teams.

2.4 Members will approve the accounts at their meeting of 27 September 2012.

Agenda Item 8

3. REVENUE OUTTURN 3.1 For 2011/12 the Council is recording a underspend of £0.306m, a small variance to

that reported at quarter 4 due to the correction of minor errors identified during the quality assurance process. A summary of the underspend at directorate level is given in the table below:

Directorate Original Budget

Revised Budget Actual Spend Variance £

Environment & Regeneration 27,755 32,320 32,310 -10Neighbourhood & Community 71,316 70,901 70,855 -46Assistant Chief Executive 13,724 8,694 7,823 -871Children & Young People 38,451 54,211 54,282 71Corporate Financing 3,576 -16,618 -16,068 550

154,822 149,508 149,202 -306

4. 2011/12 CAPITAL OUTTURN & FUNDING POSITION

4.1 The tables below provide a synopsis of the Council’s 2011/12 Capital Programme. 2011/12 Capital Expenditure Original Revised Actual %

MTFP (Dec) Spend Spent£m £m £m £m %

Children & Young People Directorate 12.567 9.216 8.412 91% 0.804- -9%Neighbourhood & Community Directorate 0.901 0.550 0.482 88% 0.068- -12%Corporate Finance 4.000 - - 0% - -100%People & Improvement Directorate 5.900 8.584 4.203 49% 4.381- -51%Environment & Regeneration Directorate 45.469 32.179 24.318 76% 7.861- -24%Invest to Save Programme 18.300 10.084 5.308 53% 4.776- -47%Total 87.137 60.613 42.723 70% 17.890- -30%

Variance

ActualCAPITAL PROGRAMMEFUNDING £m

Council Unsupported Borrowing 15.434 Council Capital Grants and Reserves 23.153 Council Capital Receipts 4.056 Council Revenue Funding 0.080 TOTAL - Capital Funding Plans 42.723

4.2 The tables show that the Council had a fully funded capital programme in 2011/12.

The Council recorded a 30% underspend on its 2011/12 capital programme, caused in the main by slippage within the existing programme. The majority of expenditure

Agenda Item 8

and related financing connected to these delays will however need to be reprofiled into 2012/13. This will be subject to review within the 2012/13 financial year. This underspend does not create any financial issue for the Council as the funding will be rolled forward into 2012/13 to ensure that the Council’s Capital Programme is fully funded. A comprehensive capital programme report will be presented to the Executive Board in August 2012.

5. TREASURY MANAGEMENT

5.1 The Council recorded an overspend of £0.139m on its 2011/12 treasury management activities. This overspend is primary the result of Warrington Borough Transport (WBT) not paying a dividend in 2011/12, due to WBT making a loss in 2011/12 and a slightly higher than expected Minimum Revenue Provision (MRP) charge due to the capitalisation of redundancy and pension costs.

5.2 The Council operated within its 2011/12 Treasury Management Strategy agreed at Full Council in March 2011. The Council’s investment and debt portfolio also exceed key industry benchmarks. Which continues to ensure the Council gets a higher rate of interest on its investments and a lower rate on interest on its borrowings compared to other Councils. In line with the CIPFA 2011 Treasury Management Code, a full treasury outturn report will be reported to Full Council on 3 September 2012.

6. CHANGES IN ACCOUNTING POLICY 6.1 The Council is required to prepare an annual Statement of Accounts by the

Accounts and Audit (England) Regulations 2011, this requires accounts to be prepared in accordance with proper accounting practices. From year to year changes in accounting practices take place.

For 2011/12 the following changes have been incorporated:

1. The adoption of Financial Reporting Standard (FRS) 30 - Heritage Assets.

Heritage assets are recorded as a separate category on the Balance Sheet for the first time and there is a restatement of the opening balance sheet at 1 April 2010 to include such assets and to re-state the 2010/11 accounts.

The Council has incorporated £13.260m of Heritage Assets into Long Term Assets in the 2011/12 Balance Sheet. More detailed information on Heritage Assets is included in Notes 52 to 55 of the accounts.

2. There is a new disclosure requirement in relation to staff exit packages. The 2011/12 Code introduced a requirement to disclose the number and cost of staff exit packages agreed in the financial year to be disclosed grouped in rising bands of £20,000 up to £100,000, thereafter bands of £50,000. Notes 35 & 45 of the accounts set out this information.

Agenda Item 8

3. In the 2011/12 accounts Carbon Reduction Commitment (CRC) emissions

give rise to a liability to purchase and surrender CRC carbon allowances. The Council have raised a £0.258m provision for this in 2011/12 accounts.

4. There is a change in the definition of what constitutes a related party. In relation to close members of the family or person and revising the core definition. There is also a change in disclosure with less disclosure being required in respect of central government departments, government agencies, National Health Service bodies and other Local Authorities. These changes are incorporated into note 39 to the accounts.

5. As a result of the reintroduction of a previous reporting requirement, the Code now requires that information is included on the nature and amount of Trust Funds and this is presented at Note 56 to the accounts.

7. STATEMENT OF ACCOUNTS 2011/12 (UNAUDITED) SYNOPSIS 7.1 The following provides a synopsis of the key parts of the Statement of Accounts and

the key 2011/12 financial figures contained therein; 7.2 The Explanatory Foreword of the Statement of Accounts is the Chief Finance

Officer’s summary of the main accounting statements together with an overview of the Council’s financial performance during 2011/12. The key points are:

• A £0.306m underspend was recorded on the General Fund (revenue

expenditure); • The Council recorded an underspend on The Dedicated Schools Grant

budget (ring fenced schools budget) of £0.098m; • General Fund Balances amounted to £1.282m at the 31st March 2011 an in-

year increase of £0.306m; • The Council saw an in year increase of £4.612m in earmarked reserves

(reserves held for a specific purpose); • Capital spend was £42.723m (30% less than budget); • The Council saw an increase in Long Term Assets of £32.272m • The Housing Revenue Account (HRA) was closed in year, • The Collection Fund recorded a surplus of £0.194m; • The Council’s borrowing increased by £2.514m in 2011/12 to £114.858m, • The Council’s pension liability at 31st March 2012 was £127.498m an in-year

increase of £39.421m; • Redundancy costs of £2.340m and pension costs of £1.863m were

capitalised in 2011/12 7.3 Movement in Reserves Statement This shows the movement in the year on the

different reserves held by the Council, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves.

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7.4 The usable reserve balance at 31 March 2012 was £49.335m (£46.431 31 March

2011) which is made up of the general fund balance, earmarked reserves, capital receipts reserve and capital grants unapplied reserve.

7.5 The unusable reserves balance at 31 March 2012 was £281.685m (£299.938m 31

March 2011), made up of the revaluation reserve, pensions reserve, capital adjustment account, financial instrument adjustment account, collection fund adjustment account, short-term compensated absences account and deferred capital receipts reserve.

7.6 Comprehensive Income & Expenditure Account Statement (CI&E) identifies the

income and expenditure on all services the Council provides and brings together all the recognised gains and losses of the Authority during the period 1 April 2011 to 31 March 2012. The statement shows the 2011/12 cost of Council Services was £175.187m and the Council recorded a deficit on the provision of its services of £15.350m. This deficit represents the amount the Council’s net worth has fallen over the year. This is shown on the Balance Sheet as a reduction in net assets less liabilities between 31st March 2011 and 31st March 2012. In addition to the in year underspend of £0.306m there are four main factors which have contributed to this reduction in the net worth of the Council:

• Charging of changes to the pension deficit to the CI&E account • The CI&E account incurs a charge for the depreciation of fixed assets • The CI&E account also recognises gains and losses on the disposal of fixed

assets • Under International Financial Reporting Standards any grants for which any

conditions imposed by the granting body have been met or where there is a reasonable expectation that the conditions will be met must be recognised in the CI&E account.

7.7 The Balance Sheet shows the balances and reserves at the Authority’s disposal, its long term indebtedness and the fixed and current net assets employed in its operations, together with summarised information on the fixed assets held. It includes the School Balances and the Collection Fund. The main 2011/12 Balance Sheet movements are:

• Long Term Assets increased by £32.272m in 2011/12 and this is primarily

due to the revaluation of school buildings; • The Council’s borrowings increased by £2.514m in 2011/12, due to borrowing

to fund the Council’s Capital Programme, • Short Term Debtors have reduced by £7.062m this is mainly the result of a

decrease in Collection Fund and Capital Debtors; • Short Term Creditors have decreased by £6.596m, principally due a

reduction in sundry creditors and capital creditors,

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• The Council’s Net Pension Liability at 31st March 2012 was £127.498m, an increase of £39.421m on 2010/111. This increase in due to changes in actuarial valuation assumptions;

• Provisions reduced by £0.371m this is largely the result of a reduction in the redundancy and insurance provisions;

• School balances stood at £5.080m at 31st March 2012 (£1.954 2010/11). Which is an increase of £3.126m in 2011/12. The increase in balances was largely the consequence of including in the balance substantial residues of additional funding streams (standards funds), which had previously been excluded, but this year increased the figures after the cessation of those sources of funding;

• Earmarked Reserves increased by £4.612m; • The General Fund Balance (reserve held by the Council to meet any

unforeseen demands) stood at £1.282m at 31 March 2012 an in-year increase of £0.306m;

• The Council holds a number of non-usable reserves, which are accountancy adjustment reserves and not cash backed reserves. At 31st March 2012 these reserves stood at £281.685m;

• The Net Worth of the Council reduced by £15.349m in 2011/12 to £331.020m at 31st March 2012. The main cause of this was the increase in the Council’s pension liability;

7.8 There are detailed notes on various items to help explain the changes and provide an explanation of significant items within the Balance Sheet.

7.9 The Cash Flow Statement shows the changes in cash and cash equivalents of the

Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income, or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital, i.e. borrowing, to the Council. The statement shows the Council recorded a cash flow net decrease of £9.684m in 2011/12.

7.10 The Housing Revenue Account (HRA) In November 2010 the Authority transferred

ownership of its Housing Stock and associated land to Golden Gates Housing Trust under a Large Scale Voluntary Transfer (LSVT).

Following the transfer the Authority was required to maintain a Housing Revenue Account for a minimum of 12 months afterwards to account for any residual income and expenditure that may be received or incurred. Therefore during 2011-12 the

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Housing Revenue Account remained operational and the statement and notes are shown in the accounts.

At the 31st March 2011 28 properties remained within the Authority's ownership. These properties were transferred to the General Fund on 1 April 2011.

In June 2011 the Authority applied to the Department for Communities and Local Government for permission to formally close the HRA as of 31st March 2012, and written approval was received in July 2011.

7.11 The Collection Fund is the account into which income due from Council Tax,

Business Rates and Residual Poll Tax is paid. Money is paid out to Government for Business Rates and to the Council, Fire and Police Authorities in respect of amounts required by their budgets for that financial year. Provision is made for uncollectible Council Tax and any surplus on the accounts is paid over to the Council and preceptors in subsequent years. The Collection Fund recorded a surplus of £0.194m.

7.12 Segmental Reporting the Comprehensive Income and Expenditure Account is

produced under accounting standards and differs from the financial management reporting the Council uses in year (same for all Councils). The Segmental reporting note (Note 28) to the Accounts reconciles the Comprehensive Income and Expenditure Account with the Council’s internal management accounts reporting format.

7.13 Group Accounts the Council is required to prepare Group Accounts where the

Council has an interest in subsidiaries, associates and/or jointly controlled entities subject to the consideration of materiality. These statements consolidate the Council’s accounts with those of Warrington Borough Transport (WBT). WBT reported a 2011/12 loss of £0.198m.

7.14 Glossary of Terms a Statement of Accounts inevitably contains technical language

and a brief glossary has been provided to help explain some of the terms used. 8. MINIMUM REVENUE PROVISION POLICY STATEMENT (MRP) 8.1 The Council entered into the Local Authority Mortgage Scheme in August 2011. This

resulted in a £2m advance being placed with Lloyds Bank as a guarantee to underwrite 20% of mortgages for first time buyers. The Council under the Local Government Finance 2003 is treating this expenditure as capital expenditure. The Council will not charge MRP on this expenditure because it expects the £2m to be returned to the Council after five years. The Council’s MRP Policy has been amended for this and is attached at appendix 2 for members approval. The highlighted paragraphs are the change to that which was previously agreed by members. This approach has been discussed with the District Auditor.

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9. CONFIDENTIAL OR EXEMPT 9.1 Not confidential. 10. FINANCIAL CONSIDERATIONS

10.1 Within existing resources. 11. RISK ASSESSMENT 11.1 A key requirement in producing the Statement of Accounts is the accounts are

approved by the Section 151 Officer by 30 June and members by 30 September each year and that the accounts receive an unqualified audit opinion. Failure to meet any of these criteria would put the Council’s reputation for sound financial standing at risk.

11.2 As previously reported to this Committee, the Council’s accounts have over the last

few years had to meet more rigorous and demanding disclosure requirements, and the associated accounting processes are becoming more and more complex. In order to continue to meet these requirements at a time when budgets are under increasing pressure, the combination of more efficient processes, greater early working with The Audit Commission, improved training and robust quality assurance have been implemented this year.

12. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT 12.1 The Finance Service undertakes Equality Impact Assessment in its wider functions

and an impact assessment is not required in the annual accounts.

13. CONSULTATION

13.1 Consultation has taken place with the Strategic Management Board and the portfolio holder.

14. CONCLUSION 14.1 The Council’s 2011/12 Accounts have been prepared. They will be signed and

approved by the Section 151 Officer on 30 June and will be submitted to the Audit Commission for audit.

15. REASONS FOR RECOMMENDATIONS 15.1 To meet the Council’s statutory obligations that the draft statement of accounts is

approved by the Section 151 Officer by 30th June each year.

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16. RECOMMENDATIONS 16.1 That the Committee note the final accounts and the items referred to in the

Report.

16.2 That the Committee approve the Council’s revised Minimum Revenue Provision (MRP) Policy contained within appendix 2 to this report.

17. BACKGROUND PAPERS • Closure Files. Contacts for Background Papers:

Name E-mail Telephone Danny Mather Corporate Finance Manager

[email protected]

01925 442344


Consulted Yes No SMB Assistant Chief Executive Katherine

Fairclough

13/6/12 Chief Finance Officer Lynton Green 13/6/12 Solicitor to the Council Timothy Date 13/6/12

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Appendix 1

To be supplied under a separate cover..

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Appendix 2

Minimum Revenue Provision (MRP) Policy Statement The Authority is required to make an annual provision from revenue to contribute towards the repayment of borrowing. This requirement arises under the Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2008, which simplifies earlier MRP requirements by placing a duty on the Authority to determine each year an amount of minimum revenue provision, which it considers to be prudent. In order to assist the Authority with this determination, Guidance for assessing what would represent a prudent provision has been issued under S.21(1A) of the Local Government Act 2003(The Guidance). The Authority is required to have regard to the Guidance when considering the amount of their annual “prudent” MRP. The Council has resolved to have regard to the Guidance when determining the amount of its annual MRP. The major proportion of MRP for 2009/10 related to the more historic debt liability that was outstanding at the time the Guidance was adopted. This will continue to be charged at the rate of 4%, in accordance with option 1 of the Guidance. New capital expenditure for each subsequent year will in general be charged in accordance with Option 3 of the Guidance, which recommends that the annual charge should broadly equate to the anticipated life, or period of benefit, which is reflective of the nature of the expenditure. The annual charge will represent an equal annual instalment relative to the assessed life period. The determination of which expenditures should be charged under Option 3, and the life periods considered to be applicable to these, will be carried out under delegated powers.

The major proportion of the MRP for 2011/12 will relate to the more historic debt liability, and will continue to be charged at the rate of 4%, in accordance with option 1 of the Guidance. Certain expenditures reflected within the debt liability at 31 March 2010 will under delegated powers be subject to MRP under Option 3 of the Guidance, and will be charged over a period which is reasonably commensurate with the estimated useful life applicable to the nature of expenditure, using the equal annual instalment method. For example, capital expenditure on a new building, or on the refurbishment or enhancement of a building, will be related to the estimated life of that building. The use of this option for certain schemes/expenditures will also result in there being no MRP charge until the year after that in which all expenditures on a scheme, project or other item of capital expenditure have been fully accrued under proper practices, regardless of

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the extent of such expenditure that has not been accrued at the end of the previous financial year. Items of capital expenditure will only be considered to represent separate amounts in cases where two or more major components have substantially different useful economic lives. Assets will not be transferred into the asset register and fixed assets account until complete, in accordance with Accounting Code principles. To the extent that expenditure does not create an asset, and is of a type that is subject to estimated life periods that are referred to in the Guidance, these recommended periods will generally be adopted by the Council. However, in the case of long term debtors arising from loans or other types of capital expenditure made by the Council which will be repaid under separate arrangements, there will be no minimum revenue provision made. The Council are satisfied that a prudent provision will be achieved after exclusion of these capital expenditures. A similar type of policy will apply in the case of the Golden Square Shopping Centre, except that instead of relying solely upon principal element of repayments to satisfy the MRP liability, the annual MRP charge that will in effect be made will equate to the principal amount that has been assessed by the Council’s advisers, Price Waterhouse Coopers, to be included each year within the repayments received by the Authority under the lease. Rather than resulting in a fixed annual MRP charge over the period of the lease, the nominal amount of MRP charge each year will be regarded as met by the element of the lease rental which serves to write down the outstanding long term debtor created as a consequence of the lease having been granted. This approach mirrors that which is recommended within paragraph 20 of the MRP Guidance with regard to leases where the authority is a lessee. Other finance leases and PFI assets will have their MRP liability determined according to the life of the financial instrument, which will act as a proxy for asset life. MRP on these instruments will be accounted for with reference to IFRS accounting principles. For those types of capital expenditure incurred by the Council which are not capable of being related to an individual asset (e.g. capitalising revenue items), asset lives will be assessed on a basis which most reasonably reflects the anticipated period of benefit that arises from the expenditure. Also, whatever type of expenditure is involved, it will be grouped together in a manner which reflects the nature of the main component of expenditure, and will only be divided up in cases where there are two or more major components with substantially different useful economic lives. MRP will not be charged on the Local Authority Mortgage Scheme. This is because any deposit in the scheme is expected to be repaid after a five year period. The capital receipt of which will be used to reduce the CFR by the original deposit amount.

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The policy will be reviewed on an annual basis. If it is ever proposed to vary the terms of the original Policy Statement during any year, a revised statement should be put to members at that time.

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 26 June 2012 Report of: Kathryn Griffiths, Assistant Director – Partnerships & Performance Report Author: Theresa Whitfield, Risk & Resilience Manager Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANNUAL RISK MANAGEMENT REPORT 2011-12 1. PURPOSE OF THE REPORT 1.1 To provide the Committee with an overview of the Risk Management arrangements

within Warrington Borough Council and to demonstrate that robust systems are in place to identify, assess, manage and monitor risks at Strategic and Directorate level. The report summarises the risk management activities from 1 April 2011 to 31 March 2012

1.2 To provide, for information, the draft 2012-13 Risk Management Policy and Strategy

documents. 2. CONFIDENTIAL OR EXEMPT Not confidential. 3. RISK MANAGEMENT ARRANGEMENTS 3. Background 3.1 To ensure there are effective corporate governance arrangements in place it is essential that risk management is embedded into the culture of the organisation and is considered to be an integral part of the business planning and performance management process to ensure the delivery of the Council’s objectives. 3.2 Risk Management is undertaken at a corporate level, with the Risk & Resilience Manager having the responsibility to monitor and maintain the Strategic Risk Register which captures the key corporate risks. At a Directorate level, Directorate Risk Registers are maintained and the Risk and Resilience Manager working in collaboration with Risk Owners and lead officers co-ordinates the monitoring and maintenance of the registers. 3.3 In 2011 as part of the Partnerships & Performance service re-design the Risk Management function was incorporated within the newly formed Risk and Resilience Service. The Risk & Resilience Manager assumed the direct responsibility for the co-ordination of strategic risk management activity; and with the support of the Resilience Adviser (Risk and Business Continuity) has focussed on reviewing and enhancing the risk management arrangements to create greater linkages with the business planning and reporting process to support the delivery of the organisations objectives.

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4.0 Developments 4.1 Risk Management Policy & Strategy

The Draft Policy and Strategy documents for 2012-13 are attached with this report for information. The documents have been to Senior Management Board for Approval on 26/6/12. The Policy, supported by the Risk Management Strategy and associated guidance provides a clear explanation of risk management, and outlines the expectations placed on Officers and Elected Members, and in turn supports the delivery of the Council’s stated vision, pledges to the community and statutory responsibilities.

5.0 Risk Management Arrangements 5.1 Risk management has formed part of the Councils key business processes during 2011-12 including:

• Performance Management / Business Planning

• Financial Management

• Project Management

• Development of Policies and Strategies

• Partnership Working 5.2 Risk recording and monitoring arrangements have continued to be strengthened with a common template in use for Directorate Risk Registers. The Strategic Risk Register is monitored and maintained with quarterly reviews of scoring, control strategies and risk movement commentary provided by the Directorate lead officers in order to support the overall risk management and reporting process. 6.0 Risk Reporting 6.1 At a Directorate level, quarterly meetings aligned with the performance reporting timeframes are scheduled to review the risk registers, consider necessary revisions to existing risks and importantly to undertake horizon scanning to determine whether any emerging risks require inclusion at Directorate or Strategic level. 6.2 SMB receives a quarterly report relating to the strategic risk register with supporting commentary to determine any necessary actions. Horizon Scanning has been an important element of the risk management process over the year. 6.3 Regular reports are also submitted to the Executive Board and the Audit & Corporate Governance Committee in line with the arrangements set out in the Risk Management Policy. In addition, the Corporate Risk & Business Continuity group meets quarterly to review and progress matters relating to risk registers and general risk management across the Directorates.

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7.0 Analysis of the Overall Strategic Risk Environment 2011-12 7.1 Appendix 1 provides an overview of risk movement and overall direction of travel throughout the year; together with the level of the strategic risks identified during the year and supporting commentary. Summary of Key Changes in the Strategic Risk Environment 2011-12 Number of Strategic Risks (at 31.2.12)

13

New Risks Risk 12 - The increasing demands on social care and the potential instability / collapse of the external provider market compromising the Council’s capacity to provide essential services as a result

2 New Risks in 2011/12 Risk 13 – “Schools converting to Academy status, impacting on

our ability to plan resources and deliver our statutory responsibilities to schools” (note for one quarter (Q2) this risk had been recorded as two separate risks 13 & 14 which were subsequently merged to form risk 13)

Revised Risks Risk 2 – “Inadequate Delivery of the Closing the Gap Programme and Local Integrated Services Project”. At the end of 2010/11 the risk had been described as “Inability to close inequalities gap and engage effectively with communities”.

3 risks revised in 2011/12

Risk 5 – “Emergency Planning” this risk was refocused to concentrate on “Inconsistent level of Business Continuity plans in place corporately in line with the corporate Business Continuity” Risk 11 - “Robustness of Health & Safety policies, procedures & monitoring arrangements in place within the organisation to protect the Council, staff & customers” replaced the previous risk “Staff Personal Safety – risk of death, injury or emotional distress”

Increased Risks Risk 12 - Inadequate Delivery of the Closing the Gap Programme and Local Integrated Services Project

3 Risks saw increases in level in 2011/12

Risk 4 - “Ineffective use of management information from the new SAP accounting system leading to poor budgetary control.” Risk 11 - “Robustness of Health & Safety policies, procedures & monitoring arrangements in place within the organisation to protect the Council, staff & customers

Reduced Risks Risk 13 - Schools converting to Academy status, impacting on our ability to plan resources and deliver our statutory responsibilities to schools”

1 risk reduced level during 2011/12

Number of Static Risks (no change to risk level throughout the year) 8

7.2 The movement of risks and fluctuation in scoring demonstrates that the registers are being maintained, reviewed and used as part of good business management processes. 7.3 8 of the 13 risks have remained static throughout each reporting cycle. 1 has a clear strategy in place to recommend the removal of the risk once the assurances have been provided that adequate arrangements are in place (Inconsistent level of Business

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Continuity Plans) and the risk is no longer valid. 7.4 The remaining 7 risks will be reviewed by SMB to determine whether they remain valid

strategic risks, whether they require monitoring / attention at strategic level, or whether the risks are deemed to be at a tolerable threshold with adequate control measures in place, so that it will be more appropriate to monitor at a Directorate level until any change in position requires an escalation and SMB attention and consideration.

8.0 Embedding & Developing a Risk Awareness Culture 8.1 Risk management training has been provided throughout 2011/12 to various forums, including the Council’s senior leaders via the Skills for Leaders programme, New Managers via the New Managers Course and an awareness raising session delivered via the Welcome to Warrington course in addition to specific training for Elected Members. 8.2 It is intended to build on this programme of training for 2012-13 as we promote and raise awareness of the new suite of Policy, Strategy and Guidance documents and also develop the Risk and Resilience Intranet pages to allow access to risk management information to all staff. 9.0 Conclusion 9.1 The on-going work across the Directorates during 2011-12 provides assurance that risk management is in the process of being embedded within culture of the organisation. Work will continue in 2012-13 with more risk awareness and risk training sessions, the development of the intranet information, in addition to the continual review and improvement of the risk management processes. 9.2 There are strong links in place across the Directorate Risk leads, and further work is planned to ensure that risk management is fully integrated to the business planning process and has the ability to influence the decision making and innovative thinking as the shape of the organisation changes. 10. FINANCIAL CONSIDERATIONS

4.1 Effective risk management procedures can have a positive impact on the Council’s

financial position by maintaining a sound system of internal control. 11. RISK ASSESSMENT 11.1 The Council must ensure that it has appropriate risk management arrangements in place

in order to manage its risks and maintain a sound system of internal control. A key requirement for the Audit and Corporate Governance Committee in order for the Committee to meet its Terms of Reference is to monitor and review the Council’s arrangements for risk management and review the Council’s strategic risks.


7.1 The risk management policy attached to this report applies equally to all officers and

Members of the Council. The Strategic Risk Register is compiled in accordance with the Council’s risk management policy and the underlying Directorate risk registers. There

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are no specific equalities issues in relation to the content of this report. 8. CONSULTATION

N/A

9. REASONS FOR RECOMMENDATIONS 8.1 To ensure that the Council maintains an effective framework of internal control and

manages its key risks, and to ensure the continued review of the Council’s strategic risks. 9. RECOMMENDATION 9.1 That the Audit and Corporate Governance Committee reviews and comments on

following:

• Review and comment upon the Annual Risk Management report • Note the revised Risk Management Strategy and Policy


Strategic Risk Register Directorate Risk registers

Contacts for Background Papers: Name E-mail Telephone Theresa Whitfield Risk & Resilience Manager


11. Clearance Details Name Consulted Date Consulted

Yes No Relevant Executive Board Member

Cllr Patel Y 19.6.12

SMB N Assistant Chief Executive K Fairclough Y 18.6.12 Chief Finance Officer L Green Y 18.6.12 Solicitor to the Council T Date Y 18.6.12

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Strategic Risks 2011/12 APPENDIX 1

Risk Description

(Risk Owner) Commentary

Q1 Commentary

Q2 Commentary

Q3 Commentary

Q4

Direction of Travel

over 2011/12

RIS

K 2

Inadequate delivery of the Closing the Gap Programme and Local Integrated Services Project. (Assistant Chief Executive)

Risk has been reframed (from 2010/11) to focus on the CTG programme and has increased due to an increase (from 9) in the potential impact of the risk occurring. Risk controls strategy is in place and includes ongoing Monitoring of CTG Programme and LIS project plan

Progress has been reviewed in September and we see good progress across the key performance measures for CtG. The major stumbling block on LIS which was data sharing with DWP now has a plan for resolution.

CtG performance indicates most progress is being made in 'area based targeted activity', with community involvement the biggest catalyst for change. Governance arrangements to be explored over the next quarter. Data sharing issues for DWP around LIS have now been resolved. Final push to sign up all other partners to data sharing agreement.

CtG Annual report suggests partners beginning to realign resource towards deprived areas. Performance trends suggest narrowing of gap in crime, mortality, smoking cessation and early years. Gap in NEETs and alcohol related hospital admissions has widened. Research into potential effects of welfare reforms suggests deprived communities could be disproportionally hit. Cumulative effect of reduced benefits, tax credits and high unemployment could push more people into poverty. Hence risk increased.

12 12 12 16

RIS

K 3

Unstable financial position in the medium to long term. Savings are not delivered as planned within the agreed timescales without slippage. Unexpected budgetary pressures or deficits occur. (Assistant Chief Executive)

No change in position At Q2 an overspend is being reported and not all MTFP savings are on track to be delivered in year. Rigorous monitoring is ongoing to mitigate the overspend and alternative savings are being proposed but this still remains a high risk for the authority

At the November reporting period an improved position was being reported to that of Q2 but this still represented an overspend of £467k which is as a result of unachievable savings targets. Alternative savings proposals are still being progressed and it is hoped that these will enable a balanced budget at the end of the year.

A small underspend is being reported at the end of February however the budget will report as balanced at the end of the year as any underspends will be taken to the MTFP reserve.

12 15 15 12

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Risk Description


Q1 Commentary

Q2 Commentary

Q3 Commentary

Q4

Direction of Travel

over 2011/12

RIS

K 4

Ineffective use of management information from the new SAP accounting system leading to poor budgetary control. (Assistant Chief Executive)

No change in position Following a budget monitoring review and additional training provided in Q1 it is evident that SAP is not being used effectively by all budget holders. Extensive reliance is still placed on Finance staff to assist and this presents a high risk if finance support is reduced as part of redesign. A report to SMB in December will highlight the issues and solutions

No improvement has been reported in Q3 from the Q2 position as some budget holders are still not using SAP effectively and some reports are not available for central tasks. Meetings have been diarised for Q4 testing new reports and a report to SMB or DMT’s will highlight actions t be taken to ensure budget holders effective use of SAP

SMB have agreed that compliance reporting on the use of procurement will commence from April 2012 and non compliance will be managed via line management. Additional support is still being provided to budget holders from Accountancy staff where they are not completely fulfilling their responsibility to avoid additional work as a result of failure demand. This will be addressed through compliance reporting from April 2012

6 15 15 15

RIS

K 5

Q1: Emergency Planning. Q3 Onwards: Inconsistent level of Business Continuity plans in place corporately in line with the corporate Business Continuity planning framework (Assistant Chief Executive)

Robust Arrangements in place for preparing & responding to emergency situations. Suggest the risk be removed from the SRR and monitored at Directorate level. Suggest risk is replaced with a risk relating to corporate Business Continuity planning.

Corporate BC planning framework and guidance in place and refreshed annually by the Risk & Resilience Team (RRT). Monthly monitoring reports also issued by the RRT to Directorate BC leads. Due to service re-designs there are changes required to plans and critical services need to confirmed / new services identified as the organisations profile has changed. Work is ongoing within Directorates and is being closely monitored and reported on to the RRT. Scoring will be reviewed at Q3 to reflect the position once the deadline for Directorates to complete the planning process has passed. At this point can assurance be provided corporately that plans are in place on the required templates.

BC plans were renewed across Directorates in preparation for Industrial Action & Christmas closure. To date a de-brief has been undertaken relating to Industrial Action & a further de-brief is scheduled to consider the impact of Christmas closures. Focus for 2012/13 will be to gain assurance lessons learnt have been incorporated into planning, at which point it may be appropriate to recommend the reduction or removal of the risk from the 12/13 register.

BC planning continues to be reviewed / enhanced, further reviews will occur whilst preparing for potential Fuel disruption and Christmas Closures. Progress continues to be monitored at Directorate & Corporate Risk & BC group. Once assurance is obtained that arrangements have been reviewed adequately it may be appropriate to reduce the score or suggest removal of the risk from the SRR.

9 9 9 9

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Risk Description


Q1 Commentary

Q2 Commentary

Q3 Commentary

Q4

Direction of Travel

over 2011/12

RIS

K 10

Inadequate Governance arrangements leading to failure to deliver the Council's objectives / statutory duties. (Assistant Chief Executive)

Internal Audit Corporate Governance Review underway. Production of Annual Governance Statement

Internal Audit Corporate Governance Review underway. Production of Annual Governance Statement

Corporate Governance Group continue to focus on improvements to Information Governance. SAP controls were flagged as the Council's significant issues in its 2010/11 annual Governance Statement. The group also gather assurance on Corporate Governance and report this to Audit & CGov Committee.

Update Q4: Audit Commission Annual Governance report Sept 2011 acknowledged improvements made in last year. Improvement action plan continues to be implemented. Internal Governance Group and reporting of key risks to Audit & Corporate Governance have helped to mitigate this risk further throughout 2011/12.

15 15 15 15

RIS

K 11

Q1: Staff personal safety - risk of death, injury or emotional distress. Q2 Onwards: Review robustness of Health & Safety policies, procedures & monitoring arrangements in place within the organisation to protect the Council, staff & customers (Assistant Chief Executive)

Score to be reviewed once review of H&S policies, & arrangements has been undertaken as part of current benchmarking exercise

New risk focus - score based on current findings in the review of the service. Review of guidance, introduction of standard operating procedures and review of training packages linked to guidance already commenced. Expect the score to reduce by Q4

A thorough review of all H&S guidance documents, training packages & processes is currently being undertaken. To date 5 standard operating procedures have been introduced (Sop’s) for key risk areas. Directorate wide H&S audits will re-commence in April 2012 to gain assurance Sop’s & guidance is being followed. It may be possible to reduce/ recommend removal of this risk once the audits are complete. -Possibly Q2 of 12/13 reporting period.

A thorough review of all H&S guidance documents, training packages & processes is ongoing. A programme of Directorate H&S Audits has been scheduled for 2012-13 to gain assurance those H&S policies, systems; arrangements are adequately being implemented throughout the organisation. It may be possible to reduce/ recommend removal of this risk once the audits are complete. Subject to findings risk to be reviewed and scoring revised quarterly as appropriate.

5 15 15 15

Agenda Item 10

Risk Description


Q1 Commentary

Q2 Commentary

Q3 Commentary

Q4

Direction of Travel

over 2011/12

RIS

K 9

Safeguarding - Failure of safeguarding arrangements leading to the death or serious harm of a vulnerable adult in Warrington. (Director Neighbourhood & Community Services)

No commentary No change to risk scoring. The risk is currently being reviewed in the light of current safeguarding activity, the externally commissioned market and mitigating actions.

Focus is on minimising the likelihood of the risk through effective control and mitigation. The overall scores are unchanged. The control strategy will be reviewed alongside next year's Development Plan to ensure they remain aligned

No change in overall assessed risk however the control strategy has been amended to improve mitigation through improved auditing and training of senior practitioners and chairs involved in investigations. A new health and social care strategic integrated planning meeting has also been introduced to coordinate actions in response to local intelligence.

15 15 15 15

RIS

K 12

Increasing demands on social care and potential instability/collapse of external provider market compromising capacity to provide essential services (Director Neighbourhood & Community Services)

New June 2011 Control strategy has been reviewed and further detail added, risk scoring still the same.

Continuing to manage risk via MTFP process and ASC Efficiency Delivery Board. Regular market monitoring and dialogue with providers.

The identified risk rating remains at its current level of 16. Market stability and provider capacity remains at its existing level with their currently being sufficient current capacity to manage risks or service pressures around any individual service types or specific provision. Robust contract monitoring and provider engagement is currently identifying or managing risks in this area. Further review of risk measure will be undertaken in light of formal consultation proposals around future Residential and Nursing Care Placement fees that long term may impact of whole market stability.

16 16 16 16

Agenda Item 10

Risk Description


Q1 Commentary

Q2 Commentary

Q3 Commentary

Q4

Direction of Travel

over 2011/12

RIS

K 8

Safeguarding - Vulnerable children are not appropriately safeguarded (Director Children & Young Peoples Services)

Due to the extensive work undertaken within the directorate and with partner organisations, the likelihood of this risk occurring has reduced from very high to high. Work is ongoing to further minimise the likelihood of this risk occurring.

The scoring was revised by CYPS DMT shortly after the register was approved at SMB. Therefore for Q2 the scoring is reporting no change in position. Due to the extensive work undertaken within the Directorate and with partner agencies the likelihood of this risk occurring has reduced. Work is ongoing to further minimise the likelihood of this risk occurring and will be reviewed again at Q3

Continued work undertaken within the Directorate and with partner agencies means the likelihood of this risk occurring is maintained from the previous Quarter. Work is ongoing to further minimise the likelihood of this risk occurring and will be reviewed again at Q4

The risks and mitigations remain the same. It is noted, however, that the welfare reforms, economic climate and their impact on family breakdown and stress appear to be increasing demand in other LAs. Whilst this is not yet the case here, the risk will continue to be monitored.

12 12 12 12

RIS

K 13

Q2 Only: Ability to manage school organisation and pupil admission numbers if schools convert to academy status Q3 Onwards Schools converting to Academy status, impacting on our ability to plan resources and deliver our statutory responsibilities to schools. (Director Children & Young Peoples Services)

N/A Risk added in October 2011 risk to be monitored and control strategies reviewed accordingly

As Secondary Schools continue to assess their positions on conversion the risk (added in October 2011) continues to be reviewed accordingly

Increased number of schools are undertaking consultation on conversion to academy status. This risk continues to be monitored and will be reviewed again in Q1 2012.

9 12 10

Agenda Item 10

Risk Description


Q1 Commentary

Q2 Commentary

Q3 Commentary

Q4

Direction of Travel

over 2011/12

RIS

K 14

Q2 Only: Significant reduction in funding available to the council to provide a range of statutory and support services to schools (Director Children & Young Peoples Services)

N/A Risk added in October 2011 risk to be monitored and control strategies reviewed accordingly

Q3 – merged with risk 13 N/A

12

RIS

K 6

The Council will incur a failure of its Information assurance (Director Environment & Regeneration)

No commentary received Risk and control strategy have been reviewed and still apply.

Risk and control strategy have been reviewed and still apply.

Risk and control strategy have been reviewed and still apply.

16 16 16 16

RIS

K 7

ICT infrastructure/systems unable to support service delivery. (Director Environment & Regeneration)

No commentary received Control strategy has been updated to reflect the ongoing work on the second data centre. At this stage the scoring remains stable.

Control strategy has been updated to reflect the ongoing work on the second data centre. At this stage the scoring remains stable.

Control strategy has been updated to reflect the ongoing work on the second data centre. At this stage the scoring remains stable.

12 12 12 12

RIS

K 1

Inadequate delivery of Transformation Programme and Impact on Organisational Development (Assistant Chief Executive)

Risk and control strategy have been reviewed. Existing scoring is still applicable, as control strategies and improvement actions reduce the likelihood rather than impact.

Risk and control strategy have been reviewed. Existing scoring is still applicable, as control strategies and improvement actions reduce the likelihood rather than impact.

There has been no change to this risk and the control strategy is valid and up to date

This risk remains valid (and the scores are unchanged) given the continuing level of organisational change. The control strategy has been updated and this will need to be reviewed upon formation of the improvement and efficiency programme in line with the business plan.

15 15 15 15

Agenda Item 10

1

Risk Management

Policy

June 2012

Agenda Item 10

2

DOCUMENT CONTROL Description and Purpose This policy aims to provide a clear explanation of Risk Management and the expectations placed on Elected Members and Officers of the Council to ensure and maintain effective risk management arrangements in place throughout the Council Record of Amendments Active date Review date Amendment

reference Reasons for Change

Version Number of pages

March 2012 March 2013 Draft Re-written 1 whole June 2012 Revised to

account for amendment

2

whole

Author Approved by T Whitfield / K Griffiths K Griffiths

Contact Email Telephone ext. Risk & Resilience Manager

[email protected]

01925 44 2657

Assistant Director Policy, Partnerships & Performance

[email protected] 01925 44 2797

Target audience All Elected Members

Y

Strategic Management Board

Y

Assistant Directors

Y

Officers of WBC

Y

Partnerships / Commissioned Services

Y

Relevant legislation Accounts & Audit Regulations Civil Contingencies Act 2004 (CCA)

Agenda Item 10

3

The Council’s risk management policy, strategy and guidance are in place to support the Council in the delivery of its stated vision, pledges to the community and statutory responsibilities as stated in the Council Strategy 2012-15. Our vision: “Putting the people of Warrington first - enabling them to thrive now and in the future” To enable us to deliver on this vision we will make best use of the resources and assets available to us and our local communities to improve the quality of life for the people of Warrington 1.0 Introduction

Warrington Borough Council provides a diverse range of services, and it is essential that the Council protects and preserves its ability to continue to provide these services by ensuring its assets, both tangible and intangible, are protected against loss and damage.

The management of risk is central to the achievement of the Council’s pledges and key business activity. If risks are not controlled or managed properly, it could have an adverse effect on the Council’s ability to discharge its statutory duties and achieve its pledges outlined in the Council strategy. The effective management of risk is also crucial in ensuring good corporate governance of the Council.

2.0 Defining Risk and Risk Management

Risks are events which may affect, both negatively and positively, the operation, reputation or assets of the Council and the provision of services to the public. Risk Management is a framework which helps the Council to identify, quantify, monitor and mitigate “risks”.

3.0 Warrington Borough Council’s Approach to Risk Management

The Council acknowledges that in everyday activity there is always an element of risk, therefore it is important the organisation is not risk averse when conducting and developing its business for the future.

The Council will adopt a proactive approach to risk management, accepting that risk also provides opportunities in addition to posing potential threats to business activity. Whilst it must be accepted that risk cannot be totally eliminated, the Council is committed to the effective management of risk in order to: • Ensure the delivery of Council Strategy • Ensure statutory duties and regulations are complied with • Ensure that the organisations policies are put into practice • Ensure organisational values are met • Ensure the Council is able to deliver high quality efficient services • Safeguard members, employees, customers, service users, pupils and all other

persons to whom the Council has a duty of care

Agenda Item 10

4

• Protect its property including buildings, equipment, vehicles and all other assets and resources

• Maintain effective control of public funds and ensure that human, f inancial and other resources are managed efficiently and effectively

• Protect and improve the environment • Protect and promote the reputation of the Council.

The Council’s risk management objectives are to:

• Ensure risk management is embedded in everyday business processes; and that roles, responsibilities and accountabilities are clear

• Ensure a best practice approach is taken in the management of risk throughout the cycle of identifying, assessing, managing, monitoring and reporting risks

• Take account of threats and opportunities associated with internal and external changes that may impact on the Council’s risk profile

• Respond to risk in a balanced way, mindful of the risk level, risk reduction potential and the relationship between the cost of risk reduction and the benefit accruing

• Raise awareness of the need for risk management and ensure that members and officers have the knowledge and skills to effectively manage risks

• Review the effectiveness of the risk management process on a regular basis

This policy and supporting strategy aim to provide a clear explanation of Risk Management and the expectations placed on Elected Members and Officers of the Council with regard to the assessment, management, monitoring and mitigation of risk. The intention is not to constrain Elected Members or Officers from innovation, identifying methods for alternative but effective and efficient service delivery but aims to assist them in their consideration and decision making activities

4.0 Risk Management Policy & Strategy Review - Timescales

This policy statement and supporting strategy document will be reviewed on an annual basis. The responsibility for ensuring the review is undertaken lies with the Assistant Director Partnerships & Performance with any significant changes being referred to and approved by the Senior Management Board and the Executive Board.

Agenda Item 10

1

Risk Management

Strategy

This Strategy Document underpins the Council’s Risk Management Policy and is supported by the Risk Management Guidance it should be read in conjunction with both

documents

2012 – 2013

Version 2

Agenda Item 10

2

March 2012

DOCUMENT CONTROL Description and Purpose This strategy aims to provide a clear explanation of Risk Management and the expectations placed on Elected Members and Officers of the Council to ensure and maintain effective risk management arrangements in place throughout the Council Record of Amendments Active date Review date Amendment

reference Reasons for Change

Version Number of pages

March 2012 March 2013 Draft Re-written 1 June 2012 June 2013 Draft Revised due

to amendments

2

Author Approved by T Whitfield / K Griffiths K Griffiths

Contact Email Telephone ext. Risk & Resilience Manager

[email protected]

01925 44 2657

Assistant Director Policy, Partnerships & Performance

[email protected] 01925 44 2797

Target audience All Elected Members

Y

Strategic Management

Y

Agenda Item 10

3

Board Assistant Directors

Y

Officers of WBC

Y

Partnerships / Commissioned Service

Relevant legislation Accounts & Audit Regulations (2003) Civil Contingencies Act 2004 (CCA)

Contents Page No 1.0 Purpose of the Strategy 4 2.0 Importance of Risk Management 4 - 5 3.0 Benefits of Effective Risk Management 5 4.0 Roles & Responsibilities 5 - 8 5.0 Links to Corporate Process 8 – 9 6.0 Partnership / Commissioned Services Related Risks 9 7.0 Fraud & Corruption 9 8.0 Information and Data Management 10 9.0 Financing risk management 10 10. Risk Management Methodology 10 - 13 11. Risk Escalation / De-escalation 14 12. Guidance and Training 14 13. Risk Management Policy & Strategy Review – Timescales 14 14. Accountability and Management Responsibility 14

Agenda Item 10

4

1. Purpose of the Strategy

The purpose of the risk management strategy is to ensure the Council’s risk management policy and it stated objectives (see below) are implemented in practice.

The Council’s risk management objectives are to:

• Ensure risk management is embedded in everyday business processes; and that roles, responsibilities and accountabilities are clear

• Ensure a best practice approach is taken in the management of risk throughout the cycle of identifying, assessing, managing, monitoring and reporting risks

• Take account of threats and opportunities associated with internal and external changes that may impact on the Council’s risk profile

• Respond to risk in a balanced way, mindful of the risk level, risk reduction potential and the relationship between the cost of risk reduction and the benefit accruing

• Raise awareness of the need for risk management and ensure that members and officers have the knowledge and skills to effectively manage risks

• Review the effectiveness of the risk management process on a regular basis

The strategy details:

• Statutory and organisational imperatives for risk management • Benefits of risk management • Roles and responsibilities • The links to corporate processes • Th Council’s risk appetite • The risk management methodology (identification, assessment, control

management, review and reporting) • Guidance and training

2. The Importance of Risk Management

Regulatory Requirement The Accounts and Audit Regulations 2003 state: “the relevant body shall be responsible for ensuring that the financial management of the body is adequate and effective and that the body has a sound system of internal control which facilitates the effective exercise of that body’s functions and which includes arrangements for the management of risk” The Council’s Risk Management processes are an integral element in the production of an Annual Governance Statement.

Agenda Item 10

5

Civil Contingencies Act 2004 The Civil Contingencies Act 2004 places a duty on the Council to plan and prepare to respond and recover from major emergency situations; in addition, it also requires the Council to have in place robust Business Continuity plans to ensure the most critical services are able to continue in the event of a business disruption.

When preparing such plans, it is paramount that the risks which may impact on normal service delivery are first identified, analysis undertaken to understand the impact and then feasible measures implemented as part of the contingency planning arrangements to mitigate (where possible) and manage the risk as appropriate.

3. Benefits of Effective Risk Management Risk management is an integral part of operational management: through the identification of opportunities and threats to achieving our business objectives it supports the delivery of the pledges within the Council strategy.

Effective Risk Management will:

• Assist in ensuring the Council is able to deliver it’s pledges • Provide a framework for the organisation that enables future activity to take

place in a consistent and controlled manner. • Assist in improving decision making, planning and prioritisation through a

comprehensive and structured understanding of business activity, volatility and project opportunity / threat.

• Contribute to a more efficient use and allocation of capital and resource • Reduce volatility in the non essential areas within the authority • Protect and enhance the assets and image of the Council • Optimise operational efficiency.

4. Roles & Responsibilities

The Executive Board will: • Identify a lead Member for Risk Management (Executive Member Resources

and a Member of the Audit and Corporate Governance Committee) • Have a collective responsibility to understand the Strategic Risks the authority

faces and to oversee the effective management of these risks undertaken by officers

• Ensure all relevant identified risks have been considered in the decision making process

• Approve the Risk Management Policy and Strategy and review its effectiveness • Approve the Council’s Strategic Risk Register taking account of any concerns

raised by the Audit and Corporate Governance Committee • Receive an annual report on Risk Management The Audit and Corporate Governance committee will: • Monitor the effectiveness of the authority’s Risk Management arrangements

Agenda Item 10

6

• Receive regular reports relating to the Council’s Strategic Risk Register and review the Risk Management Annual Report

• Seek assurances that action is being taken on risk related issues identified by auditors and inspectors

• Comment upon the Council’s Strategic Risk Register and inform the identification of key strategic risks

• Be satisfied that the authority’s Annual Governance Statement incorporating the Statement on Internal Control properly reflects the risk environment and any actions required to improve it

All Elected Members will:

• Have a responsibility to understand the Strategic Risks that the authority faces • Use the Strategic Risk Register to help select items for Overview & Scrutiny

reviews The Chief Executive will:

• Sign off the Annual Governance Statement incorporating the Statement on Internal Control (SIC) in conjunction with the Leader of the Council

• Ensure that risks are fully considered in all strategic decision making and that the Risk Management Policy serves to assist the Council to achieve its objectives and protection of its assets

• Review and approve the Strategic Risk Register at Strategic Management Board on a quarterly basis and oversee the effective management of these risks undertaken by officers

Executive Directors will:

• Act as Strategic owners of the Risk Management Policy & Strategy • Provide leadership to ensure the Council’s risk management process are

embedded throughout the organisation • Ensure all risks in the Strategic & Directorate Risk Register are reviewed on a

quarterly basis with their Directorate Management team (DMT) and oversee the effective management of these risks undertaken by officers

• Ensure any (new) corporate risks identified are fed into the Strategic Risk Register

• Undertake regular horizon scanning to understand both the internal and external environments in order to identify new / emerging threats to be included in the Strategic or Directorate Risk Registers

• Ensure Directorate & Strategic risk registers are used to inform considerations and decision making within their areas of responsibility and such risks are identified in all reports to Strategic Directors and Elected Members

• Ensure that the requirements of this policy are complied with within Directorates • Identify a lead Risk Champion for the Directorate who will chair Directorate Risk

& Business Continuity groups, reporting regularly (at least quarterly) to DMT and to the Corporate Risk and Business Continuity Group

Agenda Item 10

7

Assistant Director Partnerships & Performance will:

• Act as the lead officer for risk management in the Council and as corporate owner of the Risk Management Policy

• Attend the Governance Group and advise the Audit and Corporate Governance Committee

• Carry out an annual review of the Risk Management Strategy and Policy • Support managers in the monitoring and review of risks

Assistant Directors will:

• Act as operational owners of the Risk Management Policy & Strategy • Cascade the principles of good risk management to their sections • Report potential Directorate or Strategic Risks to their management team and

manage the risks associated with their service • Ensure that all risks are fully considered in the decision making processes and

in all reports to Strategic Directors and Elected Members • Ensure that key operational risks are reviewed on a regular basis • Ensure that risks are managed appropriately in any projects and partnerships

that they are responsible for or are involved with • Ensure that any policies or procedures for which they are responsible make the

appropriate linkages to risk management • Ensure that risk mitigation is reviewed and the outcomes of risk management

are recognised and recorded • Identify Risk Champions for each service area

Risk & Resilience Manager / Risk and Resilience Team will:

• Maintain the authority’s Strategic Risk Register, monitor and provide quarterly reports to the Strategic Management Board; Executive Board, the Audit and Corporate Governance committee; and the Governance Group

• Carry out and facilitate training and awareness for Members and Officers on Risk Management issues

• Support and raise awareness of the authority’s Risk Management Policy & Strategy with all employees

• Benchmark and compare with other Local Authorities in order to continuously improve practices

• Undertake day to day management of the insurance function, including arrangement and claims

• Monitor claims experience and suggest ways that the authority could target resources in order to ensure that claims experience/levels are minimised

• Assess insurance risk areas and liaise with the Chief Finance Officer and the Assistant Director Partnerships & Performance on recommended solutions and action required

• Identify risk control strategies relating to the insurance function

Service Managers and Managers of Partnerships / Commissioned Services will:

• Use the Council’s Risk Management Methodology / scoring & reporting to identify, manage and monitor relevant risks

Agenda Item 10

8

• Take reports on risk management to the appropriate Partnership / Project Board on a regular basis, identifying the risks, mitigation and effectiveness of mitigation at key intervals in the project timetable

• Ensure that project or Partnership risks are included in the appropriate Directorate Risk Register and if necessary the Strategic Risk Register

• Analyse the impact of the Risk Management process on the outcomes of the partnership or project.

The Corporate Risk and Business Continuity Group will:

• Be responsible for the oversight of the operational management of the Risk Management Policy & Strategy

• Assist with the implementation of the Risk Management Strategy on behalf of the Assistant Director, Policy, Partnerships & Performance

• Assist with the reporting to Members on Risk Management, the Strategic Risk Register and the Annual Risk Management report

• Support management teams to ensure that risk management continues to be an integral part of the service and financial planning process

• Review and escalate risks to the strategic risk register where appropriate. Line Managers and Employees will:

• Have a responsibility for identifying and managing the risks that they face on a day to day basis.

Chief Internal Auditor / Internal Audit will:

• Provide an independent and objective opinion to the Council on the Risk Management & control environment, by evaluating its effectiveness in achieving the organisation’s objectives

• The Internal Audit team will objectively examine, evaluate and report on the adequacy of the control environment as a contribution to the proper, economic, efficient and effective use of resources.

5.0 Links to Corporate Process 5.1 Business Planning

Performance Management and Risk Management should be considered in tandem. Business Planning, as part of the performance management process, identifies what activity is needed to achieve our priorities. Whereas risk management focuses on events that may occur to prevent the Council achieving its priorities and defines activity to control the risk and mitigate its impact. The ultimate outcome is that roles support the achievement of the Council’s vision and pledges. As part of the business planning process Directorates are required to consider risk and ensure that risk registers are maintained and updated, and that key risk control activity and the associated resource allocation are reflected in business plans.

Agenda Item 10

9

5.2 Project and Programme Management Projects within the authority are managed in accordance with recognised Project Management methodology. A successful project requires effective risk management. Risks must be identified, monitored, reviewed and reported to the relevant Project Board accordingly. Risks attached to Projects should be managed in accordance with the Council’s Risk Management Policy, Strategy and guidance and identified in all associated decision reports to Strategic Directors, Elected Members or Boards.

6.0 Partnership / Commissioned Services Related Risks

Partnerships should have an agreed set of objective and commissioined services should have an agreed set of outcome or outputs. The risks attached to all significant Partnerships in which the Council is involved must be identified, monitored, reviewed and reported to the relevant Board accordingly. Risks attached to Partnerships or Commissioned services, should be managed in accordance with the Council’s Risk Management Policy & Strategy and identified in all associated decision making reports to Directors, Elected Members or partnerhsip board members.

7.0 Fraud & Corruption

The Council adopts a Zero Tolerance approach to fraud, bribery and corruption and is committed to making sure that opportunities for fraud, bribery and corruption are minimised. Fraud risk should be identified and effectively managed, as all risks, in accordance with the Council’s Risk Management Policy & Strategy and in accordance with the Anti-Fraud, Bribery and Corruption Policy.

8.0 Information and Data Management

Information risk management is an essential component of broader information governance, with the aim of minimising information risk and safeguarding the interests of citizens, staff and the Council itself. The aim is not to eliminate risk, but rather to provide a structured framework of supporting management systems and education to ensure that risk is identified, prioritised and managed within all Council activities. A balanced approach must be taken to the inherent risk associated with retaining, processing and sharing information. Whilst the risk must be known and controlled, it must be considered in parallel to the anticipated benefits that would be derived

Agenda Item 10

10

9.0 Financing risk management Evaluating and costing the impact of a risk and also the associated mitigating actions ensures that any decisions to implement controls are proportionate to organisational objectives, priorities and available resource. The Council needs to be able to justify decisions linked to resource allocation and therefore these should be supported by an assessment of risk.

Effective risk management can lead to improved insurance management and in turn a reduction in insurance premiums, reduction in the number and level of claims resulting in lower value of uninsured losses. 10. Risk Management Methodology

The Council has a methodology for the effective management of risk, in accordance with Council Policy, which incorporates the following processes:

• Risk identification and assessment • Risk control and management • Risk review and reporting

Guidance on the application of the risk management methodology is contained within the “Risk Management Guidance Document”.

10.1 Risk Appetite The risk appetite is the amount of risk an organisation is prepared to accept, tolerate or be exposed to at any point in time. It is important as an organisation to identify the risk tolerance threshold because the Council does not have sufficient capacity to manage every risk, therefore it is good practice to identify the level of risk below which the amount of monitoring and intervention is minimised. The councils’ “risk appetite” or tolerance of risk is determined by Strategic Management Board for strategic risks, this threshold will then inform the basis for risk tolerance thresholds at Directorate and service level. However, the Assistant Director / Service Manager has the discretion to set the tolerance threshold for a particular service if deemed more appropriate.

10.1 Risk Identification and assessment

In identifying risks, services need to consider what may prevent the achievement of council pledges, priorities and service objectives. Risks may be internally or externally generated (from local, national or internaltional sources). The risks may relate to strategic or operational matters; may arise from partnership arrangement, relate to specific projects or ongoing service provision. Once risks are identified the level of the risk should be assessed. The assessment of the level of risk is informed by two key factors – the likelihood of the risk actually occurring and the impact that occurrence would have on the ability of the

Agenda Item 10

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organisation to achieve Council pledges, organisational priorities and service objectives. The Council uses a five-by-five matrix to determine the risk score (refer to the supporting Risk Guidance document for further detail on the risk management / scoring process). At this point a decision needs to be made about the level of risk that is acceptable; taking into consideration the “risk appetite” of the organisation. This will inform the level of subdequent control, management and reporting of the risk

10.2 Risk Control and Management

It is the responsibility of SMB to maintain a register of the strategic risks to the organisation – this will incorporate the most significant risks to the delivery of Council Pledges and Organisational development priorities. Individual directorates are required to also maintain directorate risk register detailing the risks to the achievement of directorate priorities. It is good practice for services/ business units to maintain risk registers and for key projects and programmes to operate effective risk logs. There are four general responses to an identified risk: tolerate the risk, transfer the risk to another organisation or body; terminate the activity that is generating the risk approach; or treat the risk by taking action to mitigate it. (Further explanation of considerations for each of these approaches is outlined in the supporting Risk Management guidance document) Each identified risk requires a supporting control strategy, detailing the existing risk treatment/ controls already in place and any improvement actions identified to further mitigate the risk. The control strategies should include target completion dates for the implementation of mitigation measures. The methods and actions chosen to manage risks should be reflected in business plans and the necessary resources required to do so should be identified and allocated accordingly.

10.3 Risk Review and Reporting

Risks should be managed and monitored on an ongoing basis and re-evaluated as appropriate. The risk management process requires a robust reporting and review process to ensure key risks to the organisation are accurately identified, considered and managed at the appropriate levels. There are a number of review and reporting channels within the process, they are as follows:

• Identification, consideration & review of Directorate risks takes place at

Directorate Management Teams (DMTs) on a quarterly basis. A report with the accompanying directorate risk register for the relevant quarter is reviewed at DMT’s and the register amended and approved accordingly. This

Agenda Item 10

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review should also take into account any emerging risks identified form the performance management process.

• Risks identified at Directorate level with a strategic importance or impact are

escalated to SMB for consideration for inclusion in the Strategic Risk Register. Strategic Management Board receive quarterly reports with accompanying strategic risk register for amendment and approval accordingly.

• Quarterly reports relating to the Strategic Risk environment are submitted to

the Executive Board and Audit and Corporate Governance Committee will also receive regular monitoring reports.

• An annual Risk Management report detailing progress on Risk Management

is submitted to Strategic Management Board, Executive Board and the Audit and Corporate Governance Committee.

Risk implications should be reported and considered in all Executive Decisions.

11. Risk Escalation / De-escalation

It is at this monitoring stage that consideration should be given to propose and agree the escalation of a risk from Directorate to Strategic Risk registers; if the risk is considered to require wider corporate consideration It is also at this stage, through the regular monitoring of the risk, associated scoring and control strategies that consideration is given to the approval to remove a risk from the register if the risk is deemed to be at a manageable (tolerbale) level.

12. Guidance and Training The supporting guidance to the Council’s Risk Policy & Strategy clearly explains the Council’s Risk Management process and the methodologies used to score and manage risk accordingly.

In addition, each Directorate has a Risk & Business Continuity lead, whose role isto promote risk management within the Directorate and provide a day to day focal point for advice and guidance.

Training on the Council’s Risk Management process is available for Elected Members, the Council’s Senior Managers via the Leadership Programme and to new managers via the New Managers Programme. 13. Risk Management Policy & Strategy Review - Timescales

This strategy, the risk management policy and supporting guidance documents will be reviewed on an annual basis. The responsibility for ensuring the review is undertaken lies with the Assistant Director Partnerships & Performance with any significant changes being referred to and approved by the Senior Management Board and the Executive Board.

Agenda Item 10

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The Council’s Risk Management framework should be independently assessed on a three year cycle, with an annual self-assessment undertaken in the interim period. To ensure that an effective process is maintained it is essential that as an organisation we investigate risk incidents, undertake de-briefs and capture lessons learned to inform future working practices.

Agenda Item 11

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 28 JUNE 2012 Report of the: Chief Finance Officer Report Author: Simon Bleckly, Audit Manager Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANTI-FRAUD, BRIBERY AND CORRUPTION ANNUAL REPORT: 2011-12 1. PURPOSE OF THE REPORT

1.1 The purpose of this report attached at Appendix A is to present the

work carried out during the past year to minimise the risk of fraud, bribery and corruption occurring in the Council. This supports the requirements of the Accounts and Audit Regulations (England) 2011, which state that the Council must have measures in place “to enable the prevention and detection of inaccuracies and fraud.” In this context, we have taken fraud also to refer to cases of bribery and corruption.

1.2 The report also sets out planned work for 2012-13, highlights some of

the current areas of fraud risk and provides a conclusion on the effectiveness of controls in place to minimise the risk of fraud occurring in the Council.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. FINANCIAL CONSIDERATIONS

3.1 Effective procedures to counter fraud, bribery and corruption can have

a positive impact on the Council’s financial position, through recovery of overpayments or financial penalties imposed on fraudsters. These outcomes are quantified and included in the report.

4. RISK ASSESSMENT 4.1 The risk of fraud, bribery or corruption occurring applies to virtually all

Council services. Internal Audit carry out an annual assessment of the risk of fraud occurring within the Council’s services. This is used to determine the scope of proactive anti-fraud work to be included in the annual Audit Plan. The impact of any cases of fraud, bribery or corruption that do occur can be mitigated by this work and by effective

Agenda Item 11

implementation of the policies and procedures now in place within the Council.

4.2 This report summarises the work being carried out by Internal Audit,

and by other services within the Council, to manage these risks. 5. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT

5.1 There are no specific equalities issues in relation to the content of this

report. 6. CONSULTATION

N/A

7. REASONS FOR RECOMMENDATIONS 7.1 To ensure that the Council adheres to the requirements of the

Accounts and Audit Regulations in relation to its responsibilities for preventing and detecting fraud.

7.2 To ensure that members are kept up to date with the work carried out

in this area and are aware of the fraud risks that may affect the Council. 8. RECOMMENDATION 8.1 That the Audit and Corporate Governance Committee considers and

comments upon the annual fraud report as part of its monitoring role. 9. BACKGROUND PAPERS

Internal Audit working papers and reports “Fighting Fraud Locally: The Local Government Fraud Strategy” - Home Office (May 2012) “Protecting the Public Purse 2011” – Audit Commission (November 2011) “The Resilience to Fraud of the UK Public Sector” – PKF (2011) Bribery Act 2010 NAFN Bulletins CIPFA “Managing the Risk of Fraud” checklist

Agenda Item 11


Name E-mail Telephone Simon Bleckly Audit Manager

[email protected]

01925 442217




19/6/12 SMB 19/6/12 Assistant Chief Executive Katherine

Fairclough 15/6/12



The National Fraud Initiative Council members' briefing, May 2012

The Audit Commission is a public corporation set up in 1983 to protect the public purse. The Commission appoints auditors to councils, NHS bodies (excluding NHS foundation trusts), local police bodies and other local public services in England, and oversees their work. The auditors we currently appoint are either Audit Commission employees (our in-house Audit Practice) or one of the private audit firms. Our Audit Practice also audits NHS foundation trusts under separate arrangements. We also help public bodies manage the financial challenges they face by providing authoritative, unbiased, evidence-based analysis and advice.

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Introduction This briefing for elected members outlines the benefits from participating in the National Fraud Initiative (NFI), the Audit Commission’s data matching exercise. It explains how the NFI helps councils fight fraud and sets out how the Commission plans to improve the NFI. It includes a checklist for members on page 9.

Fraud is a serious problem 1 In its recent Annual Fraud Indicator, the National Fraud Authority (NFA) estimates that fraud in the public sector costs £20.3 billion a year. This amounts to £390 for every adult in the UK. The cost of fraud to local government is estimated at £2.2 billion a year.

2 Councils need strong anti-fraud cultures and effective counter-fraud policies and procedures that stress the unacceptability of fraud and its serious consequences. Members have a key role in ensuring that their council checks regularly the effectiveness of its arrangements for preventing and detecting fraud.

3 The NFIi combats the threat of fraud by comparing information held by different organisations to identify potentially fraudulent claims and overpayments.

4 The key strength of the NFI is that it brings together a wide range of different organisations, working together in partnership to tackle fraud. Fraudsters will often target different organisations at the same time, using the same fraudulent identities.

The Audit Commission runs the NFI to help detect fraud, overpayments and error 5 Since 1996, the Audit Commission has run the NFI data matching exercise every two years, helping to identify nearly £939 million of fraud, overpayments and error across England, Scotland, Wales and Northern Irelandii. Of this total, £813 million has been detected in England.

6 We run the NFI in partnership with the public audit agencies in Northern Ireland, Scotland and Wales. Aggregate outcomes for bodies in Scotland,

i The government has confirmed it intends to continue the NFI after the Audit Commission’s abolition.

ii Where applicable, amounts included in this report have been rounded to an integer, 0.5 and above were rounded up and under 0.5 rounded down.

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Wales and Northern Ireland since they first started to run the NFI are £127 million.

7 Some 1,300 participating organisations from across the public and private sectors provide data, and key data sets are provided by government departments and other national agencies.

8 Participants include all local councils, police authorities, and fire and rescue authorities and local NHS bodies, who are required by law to provide data for the NFI. A number of other public sector and private sector bodies also participate on a voluntary basis.

9 Table 1 shows examples of the data matches that we undertake and why. Where a match is found it indicates that there is an inconsistency that requires further investigation by the body. The investigation may detect instances of fraud, over or underpayments, and other errors. For example, payroll to housing benefit matches can identify employees who may be committing benefit fraud by not declaring their earnings; pension matches may identify a person as being listed as dead, but still in receipt of a pension.

10 A match does not automatically mean there is a fraud. Often there is a straightforward explanation for a data match that prompts bodies to update their records and to improve their systems.

Table 1: Examples of the data matches the NFI undertakes

Data match Possible fraud or error

Pension payments to records of deceased people.

Obtaining the pension payments of a dead person.

Housing benefit payments to payroll records. Claiming housing benefit by failing to declare an income.

Payroll records to records of failed asylum seekers and records of expired visas.

Obtaining employment while not entitled to work in the UK.

Blue badges records to records of deceased people.

A blue badge being used by someone who is not the badge holder.

Housing benefit payments to records of housing tenancy.

Claiming housing benefit despite having a housing tenancy elsewhere.

Council tax records to electoral register. A council taxpayer gets single person discount (SPD) because the person is living with other countable adults, which means the council taxpayer does not qualify for a discount.

Payroll records to other payroll records. An employee is working for one organisation while being on long-term sick leave at another.

Source: Audit Commission

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The NFI operates within a strong legal framework using secure web applications and systems 11 The NFI works within a strong legal framework, including the Data Protection Act 1998, which protects individuals’ personal data.

12 Data matching exercises are carried out under statutory powers in Part IIA of the Audit Commission Act 1998, which contains important safeguards on the use and disclosure of data, including the requirement for a statutory Code of Data Matching Practice.

13 The Code helps ensure that all those involved in the NFI exercises comply with the law, especially the provisions of the Data Protection Act 1998. It sets out the expected data security and privacy standards that the Commission has always considered essential to the effectiveness of the NFI. It also promotes good practice.

14 The NFI’s data matching systems and processes comply with all relevant government information security standards.

Secure data transfer process ■ Datasets are transferred by participants to the Audit Commission

via a secure NFI website using an electronic transfer process which encrypts data on upload.

■ All the matches are provided back to participants using the same secure tool.

■ Access to the tool and NFI matches is controlled by secure password, and strict controls exist to ensure access is only provided to authorised individuals.

The NFI has helped participants find record levels of fraud, overpayment and error 15 Since we last reported in May 2010, the NFI has identified fraud, overpayments and errors in England totalling almost £229 million. This represents a 25 per cent increase on the total for the previous reporting period (£183 million)i.

16 The total comprises outcomes already delivered of £91 million and estimated outcomes of £137 million. These estimated outcomes represent expenditure that would have been incurred in future years had the fraud or errors gone undetected.

17 The main categories of fraud identified by the NFI in England since May 2010 continue to relate to pensions (£90 million), council tax (£50 million) and housing benefit (£31 million).

i For national reporting purposes, outcomes are collated at two-yearly intervals as at 31 March. Outcomes submitted by participants after this date are included in subsequent reports.

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The exercise also produced other significant results ■ 164 employees were dismissed or asked to resign because they had no

right to work in the UK. ■ 235 properties were recovered for social housing. ■ 321 false applications were removed from housing waiting lists following

a pilot with London borough councils. ■ 731 people were prosecuted. ■ 31,937 blue badges and 51,548 concessionary travel permits were

cancelled.

Making the most of the NFI 18 Data matching showing little or no fraud and error assures councils about the effectiveness of their control arrangements. It also strengthens the evidence for their Annual Governance Statement. It can identify fraud, and therefore fraud risks, which the council was unaware of; and help identify fraud against other NFI participants.

19 The NFI’s full potential is only realised if the bodies that take part (a) supply all the required data on time; and (b) undertake appropriate follow-up investigations of the matches promptly and thoroughly.

20 The more effectively councils follow up their NFI matches, the more benefits they get.

21 For each exercise we consider how well councils use the NFI taking into account the views of the external auditor. While most councils have sound arrangements in place for managing the NFI and for investigating data matches, there is still scope to do better. ■ The NFI matches are not seen by some councils as a valuable source

of intelligence and therefore they are not being given appropriate priority.

■ Not all councils are making use of the tools within the web application to help them identify high-priority matches linked to local risks.

■ Some councils are using alternative matching services from commercial providers before they have followed up their NFI matches.

Role of members 22 Councils that have the most successful counter-fraud strategies are generally those where there is strong support at a senior level, led by elected members, chief executives and directors of finance. These councils also have an effective anti-fraud culture in place, so employees have a clear understanding of the role they can play in tackling fraud.

23 We welcome increased engagement by elected members in the NFI. A checklist has been included on page 9, which contains a series of questions that members can put to the director of finance/NFI senior responsible officer. The responses will help members understand how the NFI is being used within their organisation and importantly identify if the benefits of participation are being maximised.

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Looking to the future 24 Following the announcement, in August 2010, of its intention to abolish the Audit Commission, the government has confirmed it intends to continue the NFI. The Commission will work closely with the Department for Communities and Local Government and other stakeholders to secure the most appropriate home for the NFI.

25 While the Commission retains oversight of the NFI it will continue to develop the NFI to address emerging fraud risks, with an increasing focus on fraud prevention.

Real-time and flexible data matching

26 The NFI launched a real-time service in September 2011, marking an important shift from fraud detection to fraud prevention.

27 The Commission has consulted councils on how the real-time service should be expanded to help them target fraud prevention – for example, to identify the anomalies that may signal fraud before an application for a benefit or service is approved. The new service will offer a flexible range of options, including real-time and flexible batch data matching, and councils will be able to decide locally on the data they want to supply for matching.

28 These new approaches to real-time and flexible batch matching could help councils identify potential fraud in a wide range of areas. These could include: ■ housing waiting lists – by submitting details of an individual near or at

the top of the list for matching against the NFI datasets to confirm the individual is not ineligible for social housing before offering a tenancy;

■ housing benefit – by submitting benefit claimant details for matching against the Metropolitan Police’s Amberhill information on known stolen/false identities before awarding benefit; and

■ blue badges – by submitting applications for matching against deceased person records before issuing the badge.

29 These flexible services could be used by councils to deliver many of the recommendations made by NFA in its Fighting Fraud Locally strategy.

New fraud risks

30 In the Audit Commission’s annual survey of detected fraud in local government, councils have reported significant new fraud risks from the move to personal budgets in social services. In response, we are looking to develop a pilot data match in this area as part of the NFI 2012/13.

Widening the NFI for other purposes

31 We believe the NFI could secure even better outcomes if it were extended to cover non-fraud purposes, as the legislation already allows any Secretary of State to do. These other purposes are defined as being to assist in the: ■ prevention and detection of crime other than fraud:

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■ apprehension and prosecution of offenders; and ■ recovery of debt owing to public bodies.

Want to find out more about the NFI? 32 To find out more about the NFI, go to our web page, where you will find a copy of the May 2012 national report as well as other useful information.

www.audit-commission.gov.uk/fraud/nfi/

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http://www.audit-commission.gov.uk/fraud/nfi/pages/default.aspx

Table 2: The NFI – A checklist for members Question Answers/action

required

The NFI in our council ■ What is the role/post of the senior responsible officer accountable for

the NFI in our council? ■ Do we have a lead elected member for counter-fraud activity,

including the NFI? ■ What role does our audit committee play? ■ How are other elected members or non-executive members kept

informed of the NFI? ■ What governance arrangements do we have in place to ensure the

organisation achieves the best possible outcomes from the NFI? ■ Who decides and monitors this approach? ■ How is the NFI reflected in the governance training and development

provided for officers and board/elected members?

Maximising results ■ What resources do we invest in the NFI? ■ What were our outcomes from the most recent NFI? ■ Are we ensuring we maximise the benefits of the NFI – for example,

following up data matches promptly, recovering funds and prosecuting where possible?

■ What assurances have we drawn about the effectiveness of internal controls and the risks faced by the organisation?

■ What changes have we made as a result? ■ Do those responsible for the NFI in the council feel they get

appropriate support from other managers in the council when investigating matches?

Broadening our council’s engagement with the NFI ■ Are we taking advantage of the opportunity to suggest and participate

in NFI pilot data matching? ■ Have we considered how we could use the new flexible batch and

real-time matching services?

Data Security ■ What is our strategy/policy for data security? ■ Is there any specific reference to the NFI data security in the strategy

The NFI fit with wider counter-fraud policies ■ How does the NFI influence the focus of our counter-fraud work? ■ Does our counter-fraud policy include reference to the council’s

participation in the NFI? ■ Do we publicise the outcomes from the NFI? ■ How does the NFI influence how and what we communicate to the

public about our approach to counter-fraud? ■ Are the outcomes from the NFI used to inform our wider decision

making – for example, internal audit risk assessments, data quality improvement work or anti-fraud and corruption policy?

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Internal Audit Service Appendix A

ANTI-FRAUD, BRIBERY AND CORRUPTION ANNUAL REPORT: 2011/12

JUNE 2012


Internal Audit 4th Floor Quattro New Town House Buttermarket Street Warrington WA1 2NH http://w2kwebint/audit

CONTENTS Section Page 1. Purpose of the report 1 2. Policies and procedures 1 3. Planning to minimise the risk of fraud 2 4. Reporting and awareness raising 2 5. Work carried out in 2011-12 3 6. Future developments and areas of risk 6 7. Conclusion and audit opinion 7 Internal Audit Anti-fraud, Corruption and Bribery Plan 2012/13 Appendix 1

NFI Annual Report Members Briefing Appendix 2


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1. Purpose of the report 1.1 The purpose of this report is to present the work carried out during the past year to

minimise the risk of fraud, bribery and corruption occurring in the Council. This supports the requirements of the Accounts and Audit Regulations (England) 2011, which state that the Council must have measures in place “to enable the prevention and detection of inaccuracies and fraud.” In this context, we have taken fraud also to refer to cases of bribery and corruption.

1.2 The report also sets out planned work for 2012-13, highlights some of the current areas

of fraud risk and provides a conclusion on the effectiveness of the Council’s arrangements to minimise the risk of fraud.

2. Policies and procedures 2.1 Effective policies and procedures are essential to ensure that all officers and members

are aware of their roles and responsibilities in identifying and managing the risk of fraud. We continue to review and update these on an ongoing basis. Recent work has included:

Corporate and Schools Fraud Response Plans

2.2 The Corporate Fraud Response Plan was approved by the Audit and Corporate Governance Committee in April 2011, creating a structured approach to the investigation of allegations of fraud, bribery or corruption in the Council. A Schools Fraud Response Plan has been developed from this document and was circulated to all schools in May 2012. Whistleblowing Procedure

2.3 The Council's Whistleblowing Procedure had not been updated since the passing of the Bribery Act and the introduction of the Corporate Fraud Response Plan so a major revision has been undertaken, which is currently out to consultation. The Procedure aims to encourage staff working for or on behalf of the Council to report any serious concerns they may have. It also includes a dedicated reporting phone line and web form that will be monitored by Internal Audit. A Schools Whistleblowing Procedure will also be created in 2012-13 to take into account the specific responsibilities of headteachers and governors. Anti-money Laundering Procedure

2.4 The Council needs to ensure that it complies with the relevant legislation relating to money laundering and the proceeds of crime. Although the likelihood of the Council being subject to the money laundering of proceeds of crime is considered to be low, the penalties can be severe, so we will be creating a new procedure for approval this year. Anti-Fraud, Bribery and Corruption Statement and Policy

2.5 The existing Anti-Fraud and Corruption Statement and Policy was updated and approved by the Audit and Corporate Governance Committee in April 2011, to take into account the requirements of the Bribery Act 2010. The next review of the Policy will take place later in 2012-13 to account for any changes relating to the new Whistleblowing and Money Laundering procedures.


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3. Planning to minimise the risk of fraud 3.1 The Internal Audit planning process includes a specific fraud risk assessment to ensure

that all relevant risks are identified and to support the development of a programme of proactive anti-fraud work that minimises the risk of loss to the Council. The detailed plan of work for 2012-13 is included as Appendix 1 to this report. In summary the following areas will be covered:

• Use of IDEA software to identify potential frauds or errors on major financial systems • Short notice visits to establishments to carry out reconciliations and cash-ups • Concessionary travel / blue badges • Related party transactions testing • Work on the National Fraud Initiative • Development of a schools fraud testing programme (carried forward from 2011/12

Fraud Plan) • Fraud reporting and awareness raising

3.2 There is also an element of anti-fraud work in a number of other planned Internal Audit

reviews, for example in housing and council tax benefits, client finances, cash and banking. Any findings from these reviews will be included within the Internal Audit progress reports.

3.3 We liaise closely with the Corporate, and Directorate, Risk and Business Continuity

Groups to ensure that managers give proper consideration to identifying fraud risks and include them on risk registers if they deem them to be significant.

4. Reporting and awareness raising 4.1 Internal Audit report to the Audit and Corporate Governance Committee twice a year on

corporate fraud issues, in line with the agreed actions arising from the Committee’s self-assessment against the CIPFA checklist “Managing the Risk of Fraud”. Any ongoing investigations or major incidents are also included within the regular Internal Audit progress reports taken to the Strategic Management Board (SMB) and the Committee.

4.2 The Council subscribes to the National Anti-Fraud Network (NAFN), which promotes the

sharing of information between Authorities and publishes regular bulletins on fraud cases and attempted scams. During 2011-12, nine bulletins were issued and appropriate measures were taken to address the identified risks.

4.3 Other awareness raising activity during the year included:

• Articles in Your Voice on “Fighting the fraudsters” and the Bribery Act 2010 • Items in School News - May 2011, highlighting current frauds and scams and May

2012 publicising the schools fraud response plan • Item in the Director’s Briefing to Headteachers (Summer Term 2012) on fraud risks

for schools. • Report to SMB in March 2012 on the Council’s response to the Bribery Act

4.4 During 2011-12, Internal Audit worked closely with the Benefits Fraud Team, Public

Protection and HR to develop a co-ordinated approach to identifying and investigating fraud. We are also developing links with the Adults’ and Children’s Safeguarding teams to ensure effective reporting of any cases of financial abuse.


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4.5 In 2012-13, we intend to develop fraud awareness training for managers and staff as part of a general review of financial training provision.

4.6 We liaise with the Audit Commission on NFI work (see section 5 below) and complete

their annual survey, providing details on the number and value of all identified cases of fraud, bribery or corruption. The data for this survey essentially creates a “fraud register” for the Council – any new cases identified during 2012-13 will be added to this record and reported to the Audit and Corporate Governance Committee on a regular basis. The figures reported by the Council for 2011-12 are included under the relevant areas in section 5 below.

5. Work carried out in 2011-12

Internal Audit Proactive work

5.1 The following pieces of work were carried out as part of the Internal Audit anti-fraud plan for 2011-12.

Client finances

5.2 The main piece of proactive work carried out in 2011-12 was a series of short notice visits to establishments where social workers and staff manage or handle monies on behalf of clients. The establishments visited were in the following services:

• Supported Tenancies • Mental Health clients • Sheltered Housing – Older People

5.3 Although there was no direct evidence of fraudulent activity, there were insufficient

controls in place to reduce the risk of fraud occurring. In particular, there was a lack of regular management checks on records and inadequate audit trails to provide evidence that clients had received all monies issued for their use.

5.4 Action plans have been agreed for each establishment and the Assistant Director, Adult

Social Care for Older People and People with a Physical Disability, has requested a follow up review of these areas in July 2012.

Bribery Act 2010

5.5 The purpose of the review was to assess the Council’s compliance with the conditions of the Bribery Act 2010, which came into force on 1 July 2011. The report gave Substantial assurance about the Council’s response to the Act, with a number of recommendations to ensure that all policies and procedures were updated appropriately. In response to these recommendations, the Contract Procedure Rules and Corporate Procurement Guide have been revised and the Whistleblowing Procedure is currently being updated to encourage reporting of any suspicions of bribery or corruption.

Related Party Transactions

5.6 Internal Audit review the declarations of members’ and officers’ interests each year, to support the production of the Council’s statement of accounts. This covers submission of declarations and testing of a sample of payments made to related parties to ensure that there are no conflicts of interest in the procurement and ordering processes. The work for the 2011-12 accounts has just been completed and there were no major


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issues, although some recommendations have been made to improve the level of detail provided in the declarations.

Data matching and analysis

5.7 Internal Audit’s data analysis software (IDEA) has been used to provide information to managers on potential data quality or fraud issues. In 2011-12, this has included VAT transactions and schools ordering and payments. These exercises did not directly identify any fraudulent activity, but did provide useful management information, for example identifying potential VAT overpayments. Unplanned and Responsive work

5.8 Internal Audit were not involved in any major fraud investigations in 2011-12. A number of other pieces of work were carried out, summarised below: IOCCO inspection follow-up

5.9 The Council was subject to an inspection by the Interception of Communications Commissioner’s Office (IOCCO) in July 2011 in relation to information requests from telecommunications providers. This is subject to Chapter II of Part I of the Regulation of Investigatory Powers (RIPA) act 2000. Internal Audit were asked to investigate the findings from the review which had highlighted errors in the reporting process. The inspector issued a formal report to the Council in September 2011 which contained a number of recommendations to strengthen controls.

5.10 The work undertaken by Internal Audit noted that a full response to the Inspector’s

report was provided by the Council, and the use of the National Anti-Fraud Network’s Single Point of Contact facility addressed the majority of the recommendations in the report. Recommendations contained in the Internal Audit report focused on further strengthening of controls within the Council and action was agreed to incorporate the recommendations into the inspection action plan. The Audit & Corporate Governance Committee received a full update around the inspection at their meeting in in February 2012 and these applications will be included in future RIPA reports to the Committee. A further inspection was carried out by IOCCO in April 2012 which reported no adverse comments.

Data Security

5.11 The Chief Internal Auditor was asked to review the arrangements in place over security of personal files in the Employee Services area. The investigation reviewed the arrangements in place in the Employee Services area for security of personal files and for access to information in files by Employee Services staff and other staff as required.

5.12 The review revealed that security of personal files had been raised as an issue along

with exploration of types of storage for personal files. Controls over the security of personal files have been improved and the action taken to re-locate the files and restrict access will improve control and provide more robust security. The longer term solution for security of personal files is under review.

5.13 Whistleblowing referrals

• An anonymous whistleblower raised concerns about the management of clients’ monies at a care home run by one of our contracted providers. Internal Audit investigated the matter with the co-operation of the provider, but found no evidence of any irregularity.

• A further anonymous referral is currently being looked into – more details will be provided on conclusion of the investigation.


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5.14 Thefts of cash - three incidents were reported to Internal Audit during the year. In all cases, further investigation failed to produce sufficient evidence to identify the perpetrators, therefore police involvement was not considered appropriate. Recommendations were made to the relevant managers to improve security arrangements.

5.15 Counterfeit cheques

• Two primary schools fell victim to counterfeit cheques being presented on their bank accounts. Both cases were identified in a timely manner, by the schools carrying out regular bank reconciliations, and the amounts were reimbursed by the bank. These incidents were identified by the police and the banks’ fraud teams as part of a national counterfeiting operation and arrests have been made in connection with this case.

5.16 Unauthorised use of Purchase Card

• A high school had one of their procurement cards “hacked” and used to purchase plane tickets. The bank has reimbursed the transaction and their fraud team are currently investigating the circumstances surrounding this incident.

Benefit Fraud Team

5.17 In 2011-12 the Team investigated 368 suspected fraudulent benefit claims. Of these, 45 prosecutions were made with a successful outcome in 41 cases. In total, Housing Benefit and Council Tax Benefit of £363,781 was fraudulently overpaid. This compares with a total figure of £445,708 for 2010-11. Authorisation was obtained in 18 cases to undertake directed surveillance under RIPA legislation on suspected benefit cheats, as part of the investigation.

5.18 The Team reviews data matches received from the Housing Benefit Matching Service

(HBMS) and from the Experian Credit Reference Agency. A Number of pro-active exercises are planned for 2012-13, including lone parents (with possible resident partner), contrived tenancy fraud and some work on Council Tax Benefit where benefit has been applied to new properties.

5.19 The Team faces a major change with the proposed introduction of the Single Fraud

Investigation Service, which will combine investigators from local authorities’ benefits teams, the DWP and HMRC. The move to a fully-integrated service has been delayed until at least 2015, until then, all investigation teams will work together more closely, but will continue in their current employment.

Council Tax Single Person Discount

5.20 The Revenues Team carry out an annual exercise to identify potential overclaiming of Council Tax Single Person Discount (SPD). Letters are sent to all claimants asking them to confirm their continuing entitlement; those that do not respond have their entitlement withdrawn. The 2011-12 exercise resulted in 653 claimants having their entitlement to SPD withdrawn. In 2012-13, this exercise will be supplemented by the NFI data, matching SPD claimants to the Electoral Register (see para 5.25 below). Non-domestic (Business) Rates

5.21 In 2011-12 the Revenues Team identified 34 cases where businesses attempted to claim reliefs on Business Rates to which they were not entitled, mostly in relation to incorrect claims for empty property discounts. Recovery action in these cases totalled £258,987.

Trading Standards


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5.22 Warrington and Halton Trading Standards are working with Cheshire Police Economic Crime Unit on a proactive project targeting Publishing Houses (PH’s) that are based within the Warrington and Halton geographical area. They perpetrate frauds through either issuing bogus invoices or by negotiating publishing contracts that are not what they seem. Often reference is made to a real charity and emphasis put on donations made to that charity as a result of those that sign up to a contract. Financial loss to businesses and Council Services can be hundreds or thousands of pounds per contract, and once duped those business and Council services can be repeatedly targeted. The North West appears to host a considerable number of PH’s and as such discussions are ongoing across the Trading Standards North West Region to focus on next steps with regards to those rogue PH’s.

5.23 Following a pilot data matching exercise between Internal Audit and Trading Standards

two matches of interest were identified, a potential doorstep criminal and a counterfeiter. Currently under consideration is an extension of this exercise to also use data from the Revenue and Benefits Service.

National Fraud Initiative

5.24 During 2011-12, the Council completed all follow up work on the 2010-11 NFI data matching exercise. The final outcomes are summarised in the table below, with the results of the previous exercise in 2008-09 also included for comparison:

2010-11 2008-09 Number of frauds identified 15 72 Number of errors identified 58 11 Overpayments identified (£) 70,626 99,239 Amount recovered / in recovery (£) 68,986 79,000

5.25 In February 2012, the Council received new datasets from the NFI for Council Tax Single Person Discount (SPD) claims and the Electoral Register. This generates matches where SPD is being claimed, but the Electoral Register shows that more than one person is resident at the relevant address. Work is currently in progress within the Revenue Section to investigate these matches and progress will be reported to the Audit and Corporate Governance Committee during the year.

5.26 In May 2012, the Audit Commission published its national report on the outcomes of the

2010-11 exercise and future developments for NFI. The Council Members’ Briefing, a summary of the key findings from the report, is attached at Appendix 2 for information. This contains the national figures for the number and value of cases identified through the exercise.

6. Future developments and areas of risk 6.1 The economic downturn continues to have a significant impact on the risk of fraud

occurring within organisations. The past year has seen a continued upward trend in the numbers of incidents and attempted frauds and scams, showing that risks facing the Council come from both within and outside the organisation.

6.2 An emerging issue this year has been what may be classed as “third party” fraud risk.

This includes cases where any loss that arises may not initially fall directly on the council, but ends up having an ultimate cost. For example, financial abuse of a client in


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care by a relative is effectively a fraud committed on the client. However, if the client is then unable to pay their contributions towards their cost of care, the unpaid debt becomes a cost to the Council. We have identified a number of potential cases in this area and will be working closely with safeguarding teams in 2012-13 to identify the extent of this risk and to ensure that the Council responds appropriately.

6.3 2011-12 also saw the National Fraud Authority launch “Fighting Fraud Locally”, the first

fraud strategy for local government. The aim is to strengthen the counter-fraud response across local government and the strategy has the following key messages:

• A strategic approach across local government is required to promote a “tougher

response” to tackle fraud • More collaborative working between local and central government • More emphasis on fraud prevention through better use of data analysis and

information sharing • Ensuring that there are appropriate safeguards where local authorities transfer

services out of their direct control. 6.4 Implementation of the strategy is still in its early stages, but the content of this report

shows that the Council has already taken on board many of the suggestions in its approach to counter-fraud work. A copy of the full report is available on request from the Internal Audit section.

7. Conclusion 7.1 The wide range of the activities and incidents covered in this report highlights the extent

to which fraud and error exist as risks to the achievement of the Council’s objectives. Although the number of reported cases continues to be low in comparison with other authorities, there is no complacency within the Council; there are programmes of work in place to identify and investigate fraud risks and there is effective communication between the services involved.

7.2 Our conclusion is that the Council had effective measures in place during 2011-12 to

enable the prevention and detection of inaccuracies and fraud. Work will continue in 2012-13 to ensure that the Council has all the necessary policies and procedures to create and promote an environment where fraud, bribery and corruption are not tolerated.

Item 11 Appendix 1

Internal Audit Anti-fraud, Corruption and Bribery Plan 2012/13

Area Plan days

IDEA testing Use of IDEA software to identify potential fraud or error. This will include the following: • Identification of duplicate transactions • Matches between vendor and payroll bank accounts • Analysis of whole population data to identify statistical anomalies • VAT errors This work will be used to direct further detailed testing to establish whether the results indicate fraud, system error, or have a reasonable explanation.

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Establishment visits / imprest and petty cash reviews Visits undertaken at short notice to carry out reconciliations and cash-ups of imprest and petty cash accounts, client finances, cash income held, etc. The establishments to be visited will be selected on the basis of the fraud risk scores assigned at the planning stage for the Audit Plan. This will include a follow-up of the visits carried out in 11/12. Note that these will not be full establishment reviews (i.e. will not cover budgetary control, ordering etc)

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Blue Badges / Parking Permits Identified by the Audit Commission as the area with the largest number of cases of fraud nationally after benefits fraud. To identify the risk of fraud to the Council, assess controls and identify areas to improve data quality and data matching. .

10

NFI SPD matches and 12/13 Exercise To support the follow-up of matches generated from the 11/12 exercise (Council Tax Single Person Discounts to Electoral Register). To manage data submission for the 12/13 exercise and an initial review of matches when published in February 2013. To collate and report findings and to follow up on any issues raised by the exercises, for example in terms of fraud risk, system controls and data integrity.

15

Schools fraud programme To develop a programme of work to identify and minimise the risk of fraud in schools. This recognises that schools present a number of different risks to other council establishments (carried forward from 11-12 Plan).

10

Related Party Transactions Work to support the production of the Council’s annual accounts. Reviewing officer and member declarations of interest to ensure that all relevant declarations have been made. Testing transactions to ensure that officers or members do not have undue influence over the use by the Council of organisations in which they have declared an interest.

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Item 11 Appendix 1

Internal Audit Anti-fraud, Corruption and Bribery Plan 2012/13

Fraud Reporting To generate reports to senior managers and the Audit and Corporate Governance Committee on anti-fraud, bribery and corruption activity within the Council during the year. To work with other authorities within the AGMA Fraud and Irregularity Group, developing information-sharing and training.

10

Work for Sefton MBC To provide anti-fraud resource to Sefton, including developing policies and procedures and assisting in any investigations. This work is being carried out on a reciprocal basis, with Sefton providing 40 days of IT audit in return.

40

TOTAL DAYS

140

Agenda Item 12

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 28 JUNE 2012 Report of the: Chair of the Audit and Corporate Governance Committee Report Author: Louise Murtagh, Democratic Services Officer Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: AUDIT AND CORPORATE GOVERNANCE DRAFT COMMITTEE WORK PROGRAMME 2012/13 1. PURPOSE OF THE REPORT

The purpose of the report, attached as Appendix 1, is to set out the work programme for the Audit and Corporate Governance Committee. This is scheduled into a timetable of meetings. In order to fulfil its Terms of Reference attached at Appendix 2, the Committee needs to agree what assurances it requires and needs a clear view of its programme across the year.

2. CONFIDENTIAL OR EXEMPT Not confidential. 3. FINANCIAL CONSIDERATIONS

N/A

4. RISK ASSESSMENT

The Council must ensure that it has an appropriate governance framework in place to comply with legislative requirements. A key requirement for the Audit and Corporate Governance Committee in order for the Committee to meet its Terms of Reference is to agree what assurances it requires and when these should be received.


The workplan is derived from best practice guidance which seeks to include all potential areas of assurance that the Committee may seek to review in line with its Terms of Reference. There are no specific equalities issues in relation to the content of this report. However, section one of the Equality Impact Assessment (EIA) asks for information on the directorate, department and assessment lead responsible for the policy / service / function that is being assessed and whether it is a ‘new’ or ‘existing’ development. Also requested is background information on the policy/service/function. Headline questions for each of the items presented to the Audit and Corporate Governance Committee should include:

Agenda Item 12

1. What are the main aims and objectives of the policy/service/function?

2. Who are the main stakeholders? 3. What outcomes are delivered as a result? 4. How is the service promoted/explained to those it might affect

directly or indirectly? 5. Is there evidence of any complaints on grounds of

discrimination? If yes, how were these resolved? Answers to these questions need to be clearly stated and documented at the outset of an E.I.A.

6. CONSULTATION

N/A

7. REASONS FOR RECOMMENDATIONS

To ensure the Audit and Corporate Governance committee gains assurance on the governance and assurance processes in place on which the Council places reliance.

8. RECOMMENDATION

That the Audit and Corporate Governance Committee comments upon and approves the attached workplan.


Audit and Corporate Governance Committee Terms of reference.


Name E-mail Telephone Louise Murtagh [email protected]

01925 442111



SMB Assistant Chief Executive Katherine

Fairclough

Chief Finance Officer Lynton Green April 2012 Solicitor to the Council Timothy Date April 2012


Item 14

Agenda Item/ReportResponsible Section 28/06/12 27/09/12 13/12/12 17/01/13 21/02/13 21/03/13 25/04/13

TRAINING risk training

INFORMAL MEETING WITH IA/XA Produce annual report of the Audit and Corporate Governance Committee (to Full Council)

Chair

Review of effectiveness of the Audit and Corporate Governance Committee – complete self assessment

Committee Working Party draft final

Review Audit and Corporate Governance Committee work programme

Democratic Services

Review Audit and Corporate Governance Committee training requirements

Legal & Audit within

self assessment

item

Review of the Audit and Corporate Governance Committee’s terms of reference

Legal

Review draft Annual Governance Statement (AGS)

Governance Group &CIA

Review reports from Governance Group and implementation of AGS action plan items

Governance Group &CIA

Review of strategic risk register

P'ships & Perfmnce

Audit & Corporate Governance Committee Work Programme

Item 14


Review annual Risk Management report

P'ships & Perfmnce

Review of Code of Corporate Governance

Legal

Review draft statement of accounts

Finance Review of final statement of accounts

Finance Management letter of representation

Finance Review of the authority’s accounting policies / major changes

Finance

Write Offs of Irrecoverable Debt

Finance Treasury management strategy

Finance Treasury management quarterly monitoring report

Finance

Treasury management practices statement

Finance Annual Treasury Outturn Report

Finance Approve Council Tax base Finance Review of changes to Financial and Contract procedure rules

CIA

Annual report of the Chief Internal Auditor on the system of internal control.

CIA

Item 14


Review the effectiveness of Internal Audit / compliance with the Code of Practice

Committee

Review and approve strategic and annual internal audit plans

CIA draft final

Internal audit monitoring reports including monitoring of implementation of recommendations

CIA

Anti-fraud bribery and corruption strategy

CIA & Solicitor

Implementation of actions in response to “Managing the Risk of Fraud”

CIA

Regulation of Investigatory Powers report & grant of authorisations

Legal

Agree External Audit plan External Audit

Audit Commission - agreement of Fees

External Audit

External Audit Update External Audit

Annual Governance Report

External Audit

Annual Audit Letter External Audit

Certification of claims and returns

External Audit

Item 12 Appendix 2

Terms of Reference of the Audit & Corporate Governance Committee

1. to discharge the responsibilities set out in the Accounts and Audit

Regulations 2003; 2. to develop, maintain, monitor and review the Council’s Code of

Corporate Governance and to undertake, as appropriate, an assessment of wider governance issues, including the Constitution and the administration and conduct of the Council’s business and report to Council as necessary;

3. to oversee, monitor and review the Finance Procedure Rules and report to Council as necessary;

4. to monitor and review the Council’s audit functions and requirements in 5. relation to both internal and external audit; 6. to agree, monitor and review the Council’s Risk Management Strategy

and to ensure that effective Risk Management is embedded throughout the Council;

7. to ensure the Council has in place appropriate policies and processes 8. to safeguard the Council’s resources and their use including

appropriate mechanisms for anti-fraud and corruption; 9. to monitor and review the Section 151 Officer (the Council’s Chief

Finance Officer) and his/her appointed Deputies in the performance of their duties and responsibilities;

10. to approve the Council’s Statement of Accounts and Statement of Internal Control as authorised by the full Council and as required under the relevant Account and Audit Regulations;

11. to approve the Council’s Council Tax base each year.

Terms of Reference of the Constitutional Sub-Committee

To make recommendations to the Audit and Corporate Governance Committee upon the development and maintenance of, and amendments to, the Council’s Constitution.