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STATEMENT OF ACCOUNTS
FOR THE
YEAR ENDED 31 MARCH 2011
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CONTENTS
P A G E
Explanatory Foreword 1
Council Approval 1 4
Statement of Responsibilities for the Statement of Accounts 1 5
Movement in Reserves Statement 1 6
Comprehensive Income and Expenditure Statement 1 9
Balance Sheet 2 0
Cash Flow Statement 2 2
Notes to the Accounts 2 3
Housing Revenue Account Income and Expenditure Statement 1 0 6
Movement on the Housing Revenue Account Statement 1 0 7
Notes to the Housing Revenue Account 1 0 8
Collection Fund 1 2 1
Notes to the Collection Fund 1 2 2
Independent Audit Opinion and Certificate 1 2 5
Glossary 1 2 6
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E X P LA N A T O R Y F O R E W O R D
The Statement of Accounts
The purpose of the Accounts, which follow, are to give electors, those subject to
locally levied taxes and charges, Members of the Council, employees and other
interested parties clear information about the Council‟s finances. The Accounts
show the financial performance for 2010/11 and the financial position at 31 March
2011. The Accounts present expenditure and income incurred by the Council in the
financial year 2010/11 and highlight changes in the financial position of the Council
over the course of the year.
The financial statements have been prepared in accordance with the Code of
Practice on Local Authority Accounting in the UK (the code) published by the
Chartered Institute of Public Finance and Accountancy (CIPFA).
The Statement of Accounts comprise of various sections and statements, which are
briefly explained below:
An Explanatory Foreword – this provides information on the format of this Statement
of Accounts as well as a review of the financial position of the Council for the
financial year.
The Statement of Responsibilities – this details the responsibilities of the Council and
the S151 Officer concerning the Council‟s financial affairs and the actual Statement
of Accounts.
The Audit Opinion and Certificate – this is provided by the Audit Commission
following the completion of the annual audit.
The Accounting Policies – this statement explains the basis for the recognition,
measurement and disclosure of transaction and other events in the accounts.
The Core Financial Statements, comprising:
The Movements in Reserves Statement – this statement shows the movement
in year on the different reserves held by the Council, analysed into „usable‟
(i.e. those that can be applied to fund expenditure or reduce local taxation)
and other reserves.
The Comprehensive Income and Expenditure Statement – this statement
shows the accounting cost in the year of providing services in accordance
with generally accepted accounting practices, rather than the amount
funded from taxation. The Council raises taxation to cover the cost of
expenditure in accordance with regulations; this may be different from the
accounting cost. The taxation position is shown in the Movement in Reserves
Statement.
The Balance Sheet – the Balance Sheet shows the value as at the Balance
Sheet date of the assets and liabilities recognised by the authority. The net
assets of the Council are (assets less liabilities) matched by the reserves held
by the Council.
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The Cash Flow Statement – this statement shows the changes in cash and
cash equivalents of the Council during the year. It shows how the Council
generates and uses cash and cash equivalents by classifying cash flows as
operating, investing and financing activities.
The Supplementary Statements, comprising:
The Housing Revenue Income and Expenditure Statement - this statement
shows the economic cost in the year of providing housing services in
accordance with generally accepted accounting practices, rather than the
amount to be funded from rents and government grants. The Council
charges rents to cover expenditure in accordance with regulations, this may
be different from the accounting cost. The increase or decrease in the year,
on the basis of which rents are raised, is shown in the Movement on the HRA
Statement
The Movement on the HRA Statement – this statement takes the outturn on the
HRA Income and Expenditure Statement and reconciles it to the surplus or
deficit for the year on the HRA Balance, calculated in accordance with the
requirements of the Local Government and Housing Act 1989.
The Collection Fund Statement- this statement is an agents statement that
reflects the statutory obligation for billing authorities to maintain a separate
Collection Fund. The statement shows the transactions of the Council in
relation to the collection from taxpayers and distribution to Lincolnshire
County Council, Lincolnshire Police Authority and Government of council tax
and non-domestic rates.
The Notes to the Financial Statements – these provide supporting and explanatory
information on the Financial Statements Financial Summary 2010/11
2010/11 has been another challenging year financially as the economic climate
remained largely unchanged from the previous and so continued to present difficult
circumstances with regards to the financial management of the Council. Despite
early growth in the UK economy during 2010 the overall recovery remains weak and
made no significant improvements to the performance of the financial and property
markets. Hence, the most challenging areas continued to be treasury management,
asset values and the use of, and demand for, Council services, coupled with a real
terms decrease in Central Government funding
The continued difficult condition in the economy gave risk to a number of specific
issues for the Council, as follows;
Lower interest rates by the Bank of England to combat the liquidity crisis have
had a significant effect on the Council‟s income from investments.
Investment counterparty risk remained higher than normal so that
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there continues to be a very limited range of counterparties available to the
Council for investment purposes.
The continuing poor performance of the property market has resulted in a
further reduction in the market value of the Council‟s property holdings. In
2010/11 there were downward revaluations of £88.680m, of which £87.994m
was required to be charged to the Comprehensive Income and Expenditure
Statement, with £87.051m relating to HRA assets (primarily Council Houses).
Council houses are valued by applying a Social Housing discount factor to
the market valuation of the properties. The discount factor decreased from
50% in 2009/10 to 34% in 2010/11 resulting in a large decrease in valuation of
£79.476m.
The poor performance of the property market has also reduced the Council‟s
ability to generate capital receipts affecting the affordability of the
Investment Programmes with the financing of schemes being reliant on the
sales of Council assets.
Demand for services such as Council tax and Housing Benefits has continued
to increase, with currently 11,500 household (27%) in the City in receipt of
Housing and/or Council Tax Benefit. Services including Council Housing and
Customer Services are also continuing to experience high levels of demand.
Income has continued to remain at historically low levels in a number of areas
e.g. planning regulation fees, local land charges and car parking.
In spite of the challenges the Council has faced it has maintained sound financial
management and has delivered spending within budget in both the General Fund
and the Housing Revenue Account, whilst over achieving its target for the delivery of
revenue savings; and has delivered over £16.8m of capital investment. Revenue Income and Expenditure General Fund
The General Fund account covers all net spending by the Council on services other
than those accounted for in the Housing Revenue Account. General Fund services
are partly paid for by Government Grants and contributions from Business Rates, with
the balance being funded from Council Tax.
For 2010/11, the approved net expenditure budget for General Fund services was
£16.931m. After allowing for planned contributions of £0.99m from non-earmarked
general reserves the total Net General Fund Budget for 2010/11 was £16.832m.
The Net General Fund Budget of £16.832m assumed the achievement of a £1.7m
savings target to be delivered as part of the Council‟s Service Review Programme,
which was launched in 2008/09. The Programme has been successful in delivering
the required savings with £2.168m secured in 2010/11, an overachievement of the
target by £0.468m. The target for savings increases to £2m in 2011/12 and £2.5m
2012/13 ongoing, this will be achieved by the implementation of the remaining
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reviews which are estimated to deliver a further £0.192m pa in 2011/12 and £0.236m
from 2012/13.
The table below provides a summary of the final outturn position for the General
Fund, against the net budget.
This has been prepared after applying International Financial Reporting Standards
(IFRS), which are applicable for the first time this financial year. The impact of IFRS is
that there are a number of adjustments of a technical nature which has resulted in
significant variances in individual service lines. These adjustments are however, in
line with IFRS, reversed out so that there is a nil impact on the Council tax payer.
ACTUAL
2010/11
£’000
BUDGET
2010/11
£’000
VARIANCE
2010/11
£’000
Chief Executive & Town Clerk 255 242 13
Directorate of Development &
Environmental Sustainability
5,353 5,122 231
Directorate of Resources 2,476 2,965 (489)
Directorate of Housing 10,201 10,846 (645)
Corporate (12,717) 2,828 (15,545)
Net Operational Expenditure 5,568 22,003 (16,435)
IAS 19 Pension & Compensated
Absences
11,598 0 11,598
Capital Financing 941 (3,003) 3,944
Contingencies 0 384 (384)
Earmarked Reserves (1,335) (2,453) 1,118
CMS Repatriation 14 0 14
Total Expenditure 16,786 16,931 (145)
Contribution to general reserves 46 (99) 145
Total Net Budget 16,832 16,832 0
Council Tax Payer 6,223 6,223 0
Council Tax Surplus 20 20
RSG & NNDR 10,589 10,589 0
Total Resources 16,832 16,832 0
The outturn position for the general Fund is better than expected due to a
combination of management actions to control potential overspends,
overachievement of the Service Review Programme savings and one off corporate
windfalls. Actual service costs for the financial year 2010/11 were £16.786m
compared to the equivalent approved budget of £16.931m, resulting in an under
spend of £0.145m, or 2.76%.
This overall under spend of £0.145m for the year includes the following major
variances:
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£’000
Increased Income
Rental Income - City Hall (56)
Local Public Service Agreement reward grant (60)
Reduced Income
Car Parking Fees and Charges 290
Reduced Expenditure
Collaborative Central Lincolnshire Joint Planning Unit (116)
Industrial Promotions (90)
Corporate Repair and Maintenance (62)
IT Management/Projects (50)
Capital financing costs (60)
Increased Expenditure
Bad debt provision 112
In addition to the variances analysed In the table above, the variance of £15.545m
on Corporate includes a credit adjustment for the IAS 19 past service cost (the
effect of future pension increases being linked to CPI as opposed to RPI) of
£11.465m.
As at 31 March 2011, the Council held £8.087m General Fund revenue reserves,
comprising £6.302m earmarked reserves (to cover specific or potential financial risks
and liabilities) and £1.785m non-earmarked general reserves. This latter balance
represents 12.3% of the 2011/12 annual net service budget and provides an
adequate level of reserves to cover for unforeseen financial risks.
Housing Revenue Account
The Housing Revenue Account, which has to be kept as a separate account for all
the expenditure and income relating to the landlord functions associated with the
provision, management and maintenance of Council owned dwellings.
For 2010/11, the approved net operating surplus for the Housing Revenue Account
was £0.001m. Actual net expenditure for 2010/11 showed a surplus of £0.183m, a
variance of £0.182m.
The table below provides a summary of the final outturn position for the Housing
Revenue Account, against the net budget.
ACTUAL
2010/11
£’000
BUDGET
2010/11
£’000
VARIANCE
2010/11
£’000
Operational Expenditure
Repairs & Maintenance 6,967 7,292 (325)
Supervision & Management 3,061 6,810 (3,749)
Provisions (incl Bad Debt) 105 175 (70)
Capital Financing 91,167 4,977 86,190
Sub Total 101,300 19,254 82,046
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ACTUAL
2010/11
£’000
BUDGET
2010/11
£’000
VARIANCE
2010/11
£’000
Add:
Subsidy Limitation Transfer 366 394 (28)
CMS Repatriation (IAS 19 & Insurance Fund) 115 0 115
Interest Payable & Similar Charges 1,442 1,359 83
Amortisation of Premiums & Discounts 231 231 0
Total Expenditure
103,454 21,238 82,216
Income
Rents & Service Charges (23,900) (23,978) 78
Interest (38) (26) (12)
Net Expenditure 79,516 (2,766) 82,282
Less:
Direct Revenue Financing 1,546 1,546 0
Capital Accounting Adjustment (86,581) 0 (86,581)
Appropriation to/(from) Major Repairs Reserve 623 84 539
Appropriation to/(from) Pension Fund Liability 3,114 0 3,114
Appropriations to/(from) Earmarked Reserves 1,599 1,135 464
Net HRA (Surplus)/Deficit* (183) (1) (182)
The variance of £3.749m on Supervision and Management includes a credit
adjustment for the IAS 19 past service cost (the effect of future pension increases
being linked to CPI as opposed to RPI) of £2.866m in addition the variance of
£86.581m on the Capital Accounting Adjustment includes downward revaluations of
which £87.050m relating to HRA assets (primarily Council Dwellings). This is as a
consequence of the Social Housing discount factor applied to the market value
decreasing from 50% in 2009/10 to 34% in 2010/11resulting in a large decrease in
valuation.
The overall under spend of £0.182 m for the year includes the following major
variances:
£’000
Reduced Income
Dwelling Rents 50
Reduced Expenditure
Utility costs (64)
Negative HRA Subsidy (65)
Bad Debt Provision (70)
Increased Expenditure
Loan Charges Interest 83
As at 31 March 2011, the Council held £6.114m HRA revenue reserves, comprising
£4.931m earmarked reserves (to cover identified specific, potential financial risks
and liabilities) and £1.183m non-earmarked general reserves.
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Capital Expenditure
Capital expenditure on the provision of new or enhanced assets is largely met from
capital receipts, government grants, contributions from third parties and revenue
contributions.
The Council‟s capital spending in the year was £16.834m compared to the revised
programme budget of £16.654m, representing a net variance of £(0.180)m. The
main reason for the variance in 2010/11 was mainly due to underspends on
renovation grants and private sector decent homes grants, offset by the settlement
payment for the Public Realm programme. The 2010/11 capital spending and
funding position is summarised as follows:
ACTUAL
2010/11
£’000
BUDGET
2010/11
£’000
VARIANCE
2010/11
£’000
Capital Expenditure
General Fund (GIP) 6,506 6,402 (104)
Housing Revenue (HIP) 10,328 10,252 (76)
Total Expenditure 16,834 16,654 (180)
Financed by:
Supported Borrowing 1,020 1,020 0
Unsupported Borrowing 760 866 106
Capital receipts 3,861 4,072 211
Capital Grants and
Contributions
4,076 3,862 (214)
Major Repairs Reserve 4,983 4,983 0
Revenue Contributions 2,134 1,851 (283)
Total Financing 16,834 16,654 (180)
Major Capital works carried out during 2010/11 are set out in the following table:
£’000
Housing
Decent Homes Improvements 8,060
Other Major Works 2,192
General Fund
Planned capitalised works – Health & Safety etc 279
Usher Gallery improvements 1,094
Customer Access strategy works 187
Improvement & Renovation Grants 1,387
Pathways Centre 1,006
Children‟s Play areas – new equipment 128
Yarborough LC Pavilion 885
Yarborough LC Car Parking 220
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Other Schemes 1,396
Total 16,834
In June 2011 the Council reached a settlement in respect of a dispute with the
contractor of the „Public Realm‟ capital improvement programme to the City‟s
streets, which had been ongoing since 2007/08. The settlement figure represented a
full and final settlement and resulted in an additional liability of £0.337m being
incurred by the Council. As final agreement of the settlement was not reached until
June 2011 it has been treated as a post balance sheet event and the Accounts
have been adjusted to reflect this fact. Long Term Borrowing
The Council undertakes long term borrowing, for periods in excess of one year, in
order to finance capital expenditure. The Council satisfies its borrowing requirement
for this purpose by securing external loans. This borrowing takes the form of being
either supported or unsupported.
Supported borrowing levels are issued annually by Central Government (£1.020m in
2010/11), which give the Council authority to borrow monies to cover capital
expenditure, the costs of which will be funded by Central Government. Any other
borrowing that the Council undertakes is unsupported borrowing, the costs of which
must be funded by the Council itself.
Although the Council requires long term borrowing in order to finance capital
expenditure, it is able to temporarily defer the need to borrow externally by using
the cash it has set aside for longer term purposes; this practice means that there is
no immediate link between the need to borrow to pay for capital spend and the
level of external borrowing. The effect of using the cash set aside for longer term
purposes to temporarily defer external borrowing is to reduce the level of cash that
the Council has available for investment.
The Council‟s level of total debt outstanding, as at 31 March 2011 increased by £34k
to £50.457m, which was due to interest-free Salix loans to fund energy-efficient
projects.
Total Outstanding
Source of loan
31/03/11
£’000
31/03/10
£’000
PWLB - Maturity 33,862 33,862
Money Market 16,000 16,000
Other 595 561
Total 50,457 50,423
No other long-term borrowing was undertaken during 2010/11 and the Council
remains under borrowed by £5.219m i.e. the Council‟s actual borrowing is £5.219m
less than the Capital Financing Requirement (CFR) at 31 March 2011.
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Additional long-term borrowing will be taken in 2011/12 or future years to bring levels
up to the Capital Financing Requirement, subject to liquidity requirements, if
preferential interest rates are available. Pension Costs
The Council accounts for retirement benefits when it is committed to give them,
even if the actual giving will be many years into the future. This means that:
The financial statements reflect the liabilities arising from the Council‟s
retirement obligations.
The costs of providing retirement benefits to employees are recognised in the
accounting period in which the benefits are earned by employees, and the
related finance costs and any other changes in value of assets and liabilities
are recognised in the accounting periods in which they arise.
The financial statements disclose the cost of providing retirement benefits
and related gains, losses, assets and liabilities
The Balance Sheet presents a significant reduction in the estimated Pension Fund
Reserve net liability over the 2009/10 year of £38.95m, down from £78.277m at 1 April
2010 to £39.327m at 31 March 2011. This reduction in the Pension Fund deficit
resulted from the move to up-rate pensions from April 2011 by reference to CPI
instead of RPI, the impact of the pay freeze for local authority employers, offset by
more favourable assumptions about life expectancy.
The statutory arrangements for funding the remaining liability of £39.327m means
that this deficit will be made good by the increased level of annual employer
contributions payable to the Pension Fund over the remaining estimated average
working life of our employees in the Pension Scheme. The latest triennial review of
the Pension Fund was completed as at 31 March 2010 and although the results
identified that there had been a deterioration in the funding position from a 83%
funding level to 72%, this review did not indicate that any immediate changes in the
annual contributions were required. The next triennial review is due as at 31 March
2013, when a stabilisation approach will be implemented so that in any three year
period rates will only be increased or decreased by a maximum of 1%, thus avoiding
any unaffordable increases in employer contributions. Any changes identified as a
result of the next triennial review will be effective from 1 April 2014.
Future Plans
General Fund
The Council, along with all other public sector bodies, will continue to face an
unprecedented and extremely challenging short and medium term financial
environment as it responds to; the Coalition Government‟s Spending Review,
announced in October 2010; existing financial pressures, principally the current
economic climate; and the new requirements and burdens resulting from
implementation of the Government‟s Programme for Government.
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The most significant impact has been the unprecedented reductions in Central
Government funding, the toughest Local Government Finance Settlement for a
generation, which has seen the Council‟s grant funding reduced by 24.4% over the
period 2011/12 – 2012/13, equating to a loss of funding of £1.25m in 2011/12 and a
further £0.92m in 2012/13. As a result the Council will have to reduce revenue
spending by £0.750m in 2011/12 and currently anticipates the need to increase this
to £2.75m pa over the following four financial years.
This challenge is not new to the Council and it has in recent years already become
accustomed to working within tight budgets and has demonstrated excellent
progress in the delivery of its Service Review Programme, already securing £2.3m pa
and on track to achieve the target of £2.5m during 2011/12. Because of the
responsible action taken in managing its budget the Council is in a strong position to
ensure any new savings are achieved in a considered way.
However, it should be made clear that, as a result of the level of spending reduction
the Council is going to have to make it will go beyond anything that conventional
efficiency drives, such as collaboration and transactional system reviews, can alone
achieve. The fact is that, given the level of grant reduction imposed by the Coalition
Government, there will inevitably be cuts in services.
The delivery of the spending reductions required will be achieved through the
Council‟s „Next Steps Programme‟ which brings together into a co-ordinated
programme a single unified approach, focussing on four core strands:
Lean Systems Interventions
Collaborative Working
Income Generation
Cost Reductions
By bringing together these four core strands into a single unified programme, the
outcome should result in those services that are provided directly by, or
commissioned by, the Council remaining „lean and fit‟, achieving the standards
agreed with customers and delivering the best possible value for money to the
taxpayer.
Housing Revenue Account
The HRA self financing system is due for implementation in April 2012. In return for
abolition of the HRA subsidy system the Council will be required to „buy itself out‟ of
the current system by making a capital payment to the Government. The precise
impact is not yet known but it is expected that the HRA debt will increase by
approximately £19m. The Council is currently developing a 30-year Housing Business
Plan and will revise its Medium Term Financial Strategy in response.
Capital Expenditure
The Council‟s capital programmes will deliver projects to the value of £62.6m over
the next five years, with £17m estimated to be spent in 2011/12. This
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includes significant investment and improvement to Council dwellings, and Council
buildings, completion of the Pathways Centre (emergency homeless
accommodation), housing assistance grant aid and further improvements to leisure
facilities.
Capital resources for the next five years include capital receipts, government grants,
contributions from third parties and revenue contributions.
The General Fund element of the programme is heavily reliant upon capital receipts
with a target of £9.5m over the period, 70% of the overall programme. The
continued poor performance of property markets increases the risk to the Council of
not generating the required level of capital receipts. In response to this the
Council‟s Asset Management Plan includes a major review programme of assets to
identify potential disposals. Additionally, ongoing capital commitments will be
reviewed regularly to ensure that the capital programme remains affordable. This
will require strong integration of the Council‟s Capital Strategy, Asset Management
Plan, Treasury Management Strategy and balancing the impact of any changes on
the revenue position.
The Housing element of the capital programme is predominately reliant upon
revenue contributions from the Housing Revenue Account. This places enormous
pressure on the revenue budget and will require careful consideration in the
development of the 30-year business plan, responding to the introduction of the HRA
self financing system in April 2012, if both the revenue and capital budgets are to
remain sustainable.
Summary
Despite the challenging financial environment the Council has continued to
maintain sound, prudent financial management and remains in a good financial
position, balances remain at prudent levels and the necessary provisions have been
set aside for future liabilities or losses. However due to the level of uncertainty and
risks facing the Council, particularly the significant reductions in Central Government
funding, it needs to continue to respond positively to these challenges and continue
to manage its affairs in such a way as to ensure the economic, efficient and
effective use of its resources, and to safeguard its assets for the future.
Group Accounts
The increasing scope and scale of local authorities moving away from traditional
ways of providing services makes it increasingly difficult for the Council‟s own
financial statements to present fairly all the aspects of control over service provision
and accountability for all resources and exposure to risks that the Council has taken
on. A consolidated set of group accounts can make a vital contribution towards
giving users a full picture of the Council‟s sphere of control and influence.
The Council has identified that the interest that it holds in Investors in Lincoln Ltd
meets the test of „joint control‟ and as such should be accounted for as a Joint
Venture. However, after assessing the criteria for materiality, has concluded that
the amounts are not material to the fair presentation of the financial position
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and transactions of the Council and to the understanding of the Statement of
Accounts by a reader. Investors in Lincoln Ltd has therefore not been consolidated
into the Council‟s accounts. Details of transactions and relevant balances with
Investors in Lincoln Ltd can be found in note 37 (related parties) on pages 86.
Additionally during 2010/11 the Council entered into a collaborative arrangement
with North Kesteven and West Lindsey District Councils to establish the Central
Lincolnshire Joint Planning Unit. This arrangement is hosted by North Kesteven District
Council and is governed through a Joint Committee representing each of the
partner authorities. This arrangement is considered as a Jointly Controlled
Operation, where ventures use their own resources to undertake an activity subject
to joint control, and as such does not require consolidation into the Council‟s
accounts. The Council‟s proportion of activity is accounted for separately within the
Core Financial Statements.
Changes in Accounting Policies
The 2010/11 Statement of Accounts is now based on International Financial
Reporting Standards (IFRS) and therefore there have been fundamental changes to
the format of the accounts. The key changes are as follows:
Grants and contributions for capital purposes will be recognised as income
immediately rather than being deferred and released to revenue to match
depreciation.
The main financial statements have changed, and there are additional
requirements regarding segmental reporting.
There is a greater emphasis on component accounting, and a greater
emphasis on de-recognising parts of an asset that are replaced.
Property leases are classified and accounted for as separate leases of land
and buildings.
Local authorities will also need to assess whether other arrangements contain
the substance of a lease.
Investment properties are measured at fair value, with gains and losses
recognised in the Comprehensive Income and Expenditure Statement rather
than through the revaluation reserve.
Impairment losses will be taken initially to the revaluation reserve to the extent
that there is a balance on that reserve relating to the specific asset.
The Code introduces a new classification of non-current assets held for sale.
Specific criteria apply to this classification.
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All employee benefits are accounted for as they are earned by the
employee. This will require accruals for items such as holiday pay.
The definition of associates is based on the ability to control rather than
actual control, and may lead to a change in the group boundary.
Further Information
Further information about the accounts is available on request from the Directorate
of Resources, City Hall, Beaumont Fee Lincoln LN1 1DB. In addition, local electors
have a statutory right to inspect the accounts before the audit is completed. The
availability of the accounts for inspection is advertised in the local press and on the
Council‟s website.
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C O U N C I L A P P R O V A L The Statement of Accounts for the year 1 April 2010 to 31 March 2011 has been
prepared and I confirm that these Accounts were approved by the City of Lincoln
Council, at the meeting held on 27 September 2011.
Councillor Kathleen Brothwell
Chairman of Council
Date:
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E M E N T O F R E S P O N S I B I L I T I E S F O R T H E S T A T E M E N T O F A C C O U N T S
The Authority’s Responsibilities
The Authority is required:
to make arrangements for the proper administration of its financial affairs and to
ensure that one of its officers has the responsibility for the administration of those
affairs. In this Authority, that officer is the Director of Resources;
to manage its affairs to ensure economic, efficient and effective use of resources
and safeguard its assets;
to approve the Statement of Accounts.
The Director of Resources Responsibilities
The Director of Resources is responsible for the preparation of the Authority‟s
Statement of Accounts in accordance with proper practices as set out in the Code
of Practice on Local Authority Accounting in the UK („the code ‟).
In preparing this Statement of Accounts, the Director of Resources has:
selected suitable accounting policies and then applied them consistently;
made judgements and estimates that were reasonable and prudent;
complied with the Code of Practice.
The Director of Resources has also:
kept proper accounting records which were up to date;
taken reasonable steps for the prevention and detection of fraud and other
irregularities.
The Accounts present a true and fair view of the financial position of the Authority at
31 March 2011 and its income and expenditure for the year ended on that date.
SIGNED ANGELA ANDREWS
A ANDREWS, CPFA,
Director of Resources
DATE: 27 SEPTEMBER 2011
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S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
M O V E M E N T I N R E S E R V E S S T A T E M E N T T I N S E R V E S S T A T E M E N T General Earmarked Housing CMS Major Capital Capital Total Unusable Total
Fund Revenue Repair Receipts Grants Usable Reserves Authority Balance Account Reserve Reserve Unapplied Reserves Reserves
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 31 March 2009 2,135 11,064 2,408 0 0 9,752 530 25,889 279,903 305,792
Movement in reserves during 2009/10
Surplus or (deficit) on provision of services (1,431) 0 (34,368) 0 0 0 (35,799) 0 (35,799)
Other Comprehensive Income and Expenditure 0 0 0 0 0 0 0 (48,582) (48,582)
Total Comprehensive Expenditure and Income (1,431) 0 (34,368) 0 0 0 0 (35,799) (48,582) (84,381)
Adjustments between accounting basis & funding basis under regulations (Note 8) 1,751 0 31,885 0 0 (3,116) 65 30,585 (30,535) 50 Net Increase/Decrease before Transfers to Earmarked Reserves 320 0 (2,483) 0 (3,116) 65 (5,214) (79,117) (84,331)
17
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
M O V E M E N T I N R E S E R V E S S T A T E M E N T T I N S E R V E S S T A T E M E N T General Earmarked Housing CMS Major Capital Capital Total Unusable Total
Fund Revenue Repair Receipts Grants Usable Reserves Authority Balance Account Reserve Reserve Unapplied Reserves Reserves
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Transfers to/from Earmarked
Reserves (716) (97) 1,075 (262) 0 0 0 0 0 0
Increase/Decrease (movement) in 2009/10 (396) (97) (1,408) (262) 0 (3,116) 65 (5,214) (79,117) (84,331)
Balance at 31 March 2010 carried forward 1,739 10,967 1,000 (262) 0 6,636 595 20,675 200,787 221,462
Movement in reserves during 2010/11
Surplus or (deficit) on provision of
services 8,363 0 (79,805) 0 0 0 (71,442) 0 (71,442) Other Comprehensive Expenditure and Income 0 0 0 0 0 0 0 25,172 25,172
Total Comprehensive Expenditure and Income 8,363 0 (79,805) 0 0 0 0 (71,442) 25,172 (46,270)
Adjustments between accounting basis & funding basis under regulations (note 8) (9,596) 0 81,587 0 (3,237) 823 69,577 (69,586) (9)
Other adjustments 0 9 9
18
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
M O V E M E N T I N R E S E R V E S S T A T E M E N T T I N S E R V E S S T A T E M E N T General Earmarked Housing CMS Major Capital Capital Total Unusable Total
Fund Revenue Repair Receipts Grants Usable Reserves Authority Balance Account Reserve Reserve Unapplied Reserves Reserves
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Net Increase/Decrease before
Transfers to Earmarked Reserves (1,233) 0 1,782 0 0 (3,237) 823 (1,865) (44,405) (46,270)
Transfers to/from Earmarked Reserves
1,279 266 (1,599) 55 0 0 0 0 0 0
Increase/Decrease in Year 46 266 183 55 0 (3,237) 823 (1,864) (44,405) (46,270)
Balance at 31 March 2011 carried forward 1,785 11,233 1,183 (207) 0 3,399 1,418 18,811 156,382 175,193
19
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2 0 1 0 / 1 1
C O M P R E H E N S I V E I N C O M E A N D E X P E N D I T U R E S T A T E M E N T 2 0 1 0 / 1 1
31 March 2010 Note 31 March 2011
Gross Gross Net Gross Gross Net
Expenditure Income Expenditure Expenditure Income Expenditure
£'000 £'000 £'000 £'000 £'000 £'000
9,263 (8,293) 970 Central services to the public 1 9,621 (8,698) 923
20,220 (7,569) 12,651
Cultural, environmental, regulatory
and planning services
1 20,232 (4,758) 15,474
4,498 (5,053) (555) Highways and transport services 1 4,597 (5,225) (628)
55,344 (22,618) 32,726 Local authority housing (HRA) 1 24,689 (23,533) 1,156
0 0 0
Local authority housing –
exceptional item, decrease in Social
Housing discount factor applied to
asset valuations
6 79,476 0 79,476
30,356 (28,275) 2,082 Other housing services 1 34,411 (30,101) 4,310
1,766 0 1,766 Corporate and democratic core 1,33,35 1,772 0 1,772
10 0 10 Non distributed costs 1,43 43 0 43
0 0 0
Non distributed costs – exceptional
item, negative pension past service
cost
6 (14,331) 0 (14,331)
121,457 (71,807) 49,650 Cost Of Services 30 160,510 (72,315) 88,195
785 Other Operating Expenditure 10 773
4,282
Financing and Investment Income
and Expenditure 1,11,16
4,574
(762) Surplus/deficit on trading accounts
(not applicable to a service)
1,31 (541)
0
Surplus or deficit of Discontinued
Operations
0
(18,156)
Taxation and Non-Specific Grant
Income 1,12
(21,559)
35,799
(Surplus) or Deficit on Provision of
Services
71,442
7,158 Surplus or deficit on revaluation of
non current assets
1,362
(430) Surplus or deficit on revaluation of
available for sale financial assets
0
41,853 Actuarial gains / losses on pension
assets / liabilities
43 (26,534)
48,581 Other Comprehensive Income and
Expenditure
(25,172)
84,380 Total Comprehensive Income and
Expenditure
46,270
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2 0 1 0 / 1 1
B A LA N C E S H E E T A S A T 3 1 M A R C H 2 0 1 1
1 April
2009
31 March
2010 Notes
31 March
2011
£'000 £'000 £'000
334,845 306,427 Property, Plant & Equipment 1,5,6,13,
38,40 223,698
24,936 29,032 Investment Property 1,
7,13,38 29,276
587 536 Intangible Assets 13,38 451
420 311 Assets held for sale (> 1yr) 1,13 65
5,019 1,449 Long Term Investments 16,46 449
181 165 Long Term Debtors 156
365,988 337,920 Long Term Assets 254,095
14,129 15,744 Short Term Investments 16,46 15,579
0 0 Assets held for sale (<1yr) 0
149 183 Inventories 17 140
12,285 9,916 Short Term Debtors 16,18,46 7,191
591 0 Cash and Cash Equivalents 19 396
27,154 25,843 Current Assets 23,306
0 (978) Cash and Cash Equivalents 0
(686) (868) Short Term Borrowing (965)
(9,706) (9,466) Short Term Creditors 1,5,16,21 (9,582)
0 0 Liabilities in disposal groups 0
(10,392) (11,312) Current Liabilities (10,547)
(2,909) (1,376) Long Term Creditors 1 (1,342)
(368) (476) Provisions 1,22 (545)
(37,923) (50,423) Long Term Borrowing 16 (50,447)
(35,758) (78,714) Other Long Term Liabilities 1,5,43 (39,327)
0 0 Donated Assets Account 0
0 0 Capital Grants Receipts in Advance 0
(76,958) (130,989) Long Term Liabilities (91,661)
305,792 221,462 Net Assets 175,193
21
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
B A LA N C E S H E E T A S A T 3 1 M A R C H 2 0 1 1
1 April
2009
31 March
2010 Notes
31 March
2011
£'000 £'000 £'000
25,889 20,675 Usable reserves 18,811
2,135 1,739 General Fund 8 1,785
9,371 8,878 Earmarked reserves 1,9 9,289
2,408 1,000 Housing Revenue Account 8 1,183
0 (262) CMS (207)
0 0 Major Repairs Reserve 8 0
9,752 6,636 Capital Receipts Reserve 8 3,399
530 595 Capital Grants Unapplied 1,8 1,418
1,693 2,089 Insurance Fund 9 1,944
279,903 200,787 Unusable Reserves 8 156,382
19,971 12,290 Revaluation Reserve 1,24 10,647
(35,740) (78,277) Pensions Reserve 24,43 (39,327)
296,860 267,134 Capital Adjustment Account 1,24 185,289
81 66 Deferred Capital Receipts 1 57
(1,053) (739) Financial Instruments Adjustment Account 24 (505)
0 430 Available-for-Sale Financial Instruments Reserve 1,24 430
(20) 86 Collection Fund Adjustment Account 24 65
(196) (203) Accumulated Absences Account 1,24 (274)
305,792 221,462 Total Reserves 175,193
22
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C A S H F LO W S T A T E M E N T
31 March
2010
Notes
31 March
2011
£'000 £'000
35,800 Net (surplus) or deficit on the provision of services 71,442
(46,152)
Adjustments to net surplus or deficit on the provision of
services for non-cash movements 26 (90,301)
(242)
Adjustments for items included in the net surplus or deficit
on the provision of services that are investing and
financing activities 27 5,028
(10,594) Net cash flows from Operating Activities 25 (13,831)
24,096 Investing Activities 28 11,974
(11,933) Financing Activities 29 483
1,569 Net (increase) or decrease in cash and cash equivalents (1,374)
591
Cash and cash equivalents at the beginning of the
reporting period (978)
(978)
Cash and cash equivalents at the end of the reporting
period 19 396
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N O T E S T O T H E A C C O U N T S
Note 1 – First Time Adoption of International Financial Reporting Standards (IFRS)
The Statement of Accounts for 2010/11 is the first to be prepared on an IFRS basis.
Adoption of the IFRS based code has resulted in the restatement of various
balances and transactions, with the result that some amounts presented in the
financial statements are different from the equivalent figures presented in the
Statement of Accounts for 2009/10.
The following tables explain the material differences between the amounts
presented in the 2009/10 financial statements and the equivalent amounts
presented in the 2010/11 financial statements.
Comprehensive Income and Expenditure Statement
2009/10 UK
GAAP 2009/10 IFRS
Net
Expenditure
Accumulated
Short Term
Absences
Capital
&
Revenue
Grants
Capital
Charges
and
Leasing
Net
Expenditure
£'000 £'000 £'000 £'000 £'000
Central services to the
public
967 (6) 9 0 970
Cultural, environmental,
regulatory and planning
services
12,747 11 298 (405) 12,651
Highways and transport
services
(615) 0 63 (3) (555)
Local authority housing
(HRA)
32,601 1 304 (180) 32,726
Other housing services 2,235 (13) (140) 0 2,082
Corporate and
democratic core
1,765 1 0 0 1,766
Non distributed costs 10 0 0 0 10
Net Cost of Services 49,710 (6) 534 (588) 49,650
Other Operating Income
and Expenditure 785 0 0 0 785
Financing and Investment
Income and Expenditure 4,135 0 0 147 4,282
Surplus/ deficit on trading
accounts (not applicable
to a service)
(448) 13 0 (327) (762)
Taxation and Non Specific
Grant Income (17,323) 0 (833) 0 (18,156)
(Surplus) or Deficit on
Provision of Services
36,859 7 (299) (768) 35,799
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S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Balance Sheet
2009/10 UK
GAAP 2009/10 IFRS
Accumulated
Short Term
Absences
Capital
&
Revenue
Grants
Capital
Charges
and
Leasing
£'000 £'000 £'000 £'000 £'000
Property Plant &
Equipment
300,980 0 0 5,447 306,427
Investment Property 29,810 0 0 (778) 29,032
Intangible Assets 536 0 0 0 536
Assets Held for Sale 1,271 0 0 (960) 311
Long Term Investments 1,449 0 0 0 1,449
Long Term Debtors 165 0 0 0 165
Long Term Assets 334,211 0 0 3,709 337,920
Short Term Investments 15,744 0 0 0 15,744
Inventories 183 0 0 0 183
Short Term Debtors 9,916 0 0 0 9,916
Cash and Cash
Equivalents
0 0 0 0 0
Current Assets 25,843 0 0 0 25,843
Cash and Cash
Equivalents
(978) 0 0 0 (978)
Short Term Borrowing (868) 0 0 0 (868)
Short Term Creditors (9,982) 0 1,052 (536) (9,466)
Current Liabilities (11,828) 0 1,052 (536) (11,312)
Long Term Creditors 0 0 0 (1,376) (1,376)
Provisions (273) (203) 0 0 (476)
Long Term Borrowing (50,423) 0 0 0 (50,423)
Other Long Term Liabilities (78,277) 0 0 (437) (78,714)
Government Grants
Deferred
(14,870) 0 14,870 0 0
Deferred Capital Receipts (66) 0 0 66 0
Usable Capital Grants (595) 0 0 595 0
Long Term Liabilities (144,504) (203) 14,870 (1,152) (130,989)
Net Assets 203,722 (203) 15,922 2,021 221,462
Usable Reserves 19,028 0 1,052 595 20,675
General Fund 1,739 0 0 0 1,739
Earmarked Reserves 7,826 0 1,052 0 8,878
Housing Revenue Account 1,000 0 0 0 1,000
CMS (262) 0 0 0 (262)
Major Repairs Reserve 0 0 0 0 0
Capital Receipts Reserve 6,636 0 0 0 6,636
Capital Grants Unapplied 0 0 0 595 595
Insurance Fund 2,089 0 0 0 2,089
25
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10 UK
GAAP 2009/10 IFRS
Accumulated
Short Term
Absences
Capital
&
Revenue
Grants
Capital
Charges
and
Leasing
£'000 £'000 £'000 £'000 £'000
Unusable Reserves 184,694 (203) 14,870 1,426 200,787
Revaluation Reserve 14,989 0 0 (2,699) 12,290
Pensions Reserve (78,277) 0 0 0 (78,277)
Capital Adjustment
Account
248,206 0 14,870 4,058 267,134
Deferred Capital Receipts 0 0 0 66 66
Financial Instruments
Adjustment Account
(739) 0 0 0 (739)
Available for Sale
Financial Instruments
Reserve
429 0 0 1 430
Collection Fund
Adjustment Account
86 0 0 0 86
Accumulated Absences
Account
0 (203) 0 0 (203)
Total Reserves 203,722 (203) 15,922 2,021 221,462
Note 2 – Accounting Policies 1. General Principles
The Statement of Accounts summarises the Council‟s transactions for the 2010/11
financial year and its position at the year-end of 31 March 2011. The Statement of
Accounts have been prepared in accordance with proper accounting practices.
These practices primarily comprise the Code of Practice on Local Authority
Accounting in the United Kingdom 2010/11 (the Code) and the Best Value
Accounting Code of Practice 2010/11, supported by International Financial
Reporting Standards (IFRS) and statutory guidance issued under section 7 of the
Accounts and Audit Regulations 2011.
These are the first set of accounts prepared under the Code, based on International
Financial Reporting Standards. Comparative figures for the year ended 31 March
2010 have been restated to comply with the Code and the balance sheet as at 1
April 2009 has also been restated on this basis for the purposes of transition.
The accounting convention adopted in the Statement of Accounts is historic cost,
modified by the revaluation of certain categories of non-current assets and financial
instruments 2. Accruals of Income and Expenditure
The revenue accounts of the Council are maintained on an accruals basis
26
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
meaning that activity is accounted for in the year that it takes place, not simply
when cash payments are made or received. In particular:
Revenue from the sale of assets is recognised when the Council transfers the
significant risks and rewards of ownership to the purchaser and it is probable
that economic benefits or service potential associated with the transaction
will flow to the Authority.
Revenue from the provision of services is recognised when the Council can
measure reliably the percentage of completion of the transaction and it is
probable that economic benefits or service potential associated with the
transaction will flow to the Authority.
Supplies are recorded as expenditure when they are consumed – where
there is a gap between the date supplies are received and their
consumption they are carried as inventories on the Balance Sheet.
Expenses in relation to services received (including services provided by
employees) are recorded as expenditure when the services are received
rather than when payments are made.
Interest receivable on investments and payable on borrowings is accounted
for respectively as income and expenditure on the basis of the effective
interest rate for the relevant financial instrument rather than the cash flows
fixed or determined by the contract.
Where revenue and expenditure have been recognised but cash has not
been received or paid, a debtor or creditor for the relevant amount is
recorded in the Balance Sheet. Where debts may not be settled, the balance
of debtors is written down and a charge made to revenue for the income
that might not be collected.
3. Cash and Cash Equivalents
Cash is represented by cash in hand and deposits with financial institutions
repayable without penalty on notice of not more than 24 hours. Cash equivalents
are investments that mature within three months or less from the date of acquisition
and that are readily convertible to known amounts of cash with insignificant risk of
change in value.
In the Cash Flow Statement, cash and cash equivalents are shown net of bank
overdrafts that are repayable on demand and form an integral part of the
Authority‟s cash management.
4. Exceptional Items
When items of income and expense are material, their nature and amount is
disclosed separately, either on the face of the Comprehensive Income and
Expenditure Statement or in the notes to the accounts, depending on how
significant the items are to an understanding of the Council‟s financial
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S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
performance. 5. Prior Period Adjustments, Changes in Accounting Policies and Estimates and Errors
Prior period adjustments may arise as a result of a change in accounting policies or
to correct a material error. Changes in accounting estimates are accounted for
prospectively i.e. in the current and future years affected by the change and do not
give rise to prior period adjustment.
Changes in accounting policies are only made when required by proper
accounting practices or the change provides more reliable or relevant information
about the effect of transactions, other events and conditions on the Council‟s
financial position or financial performance. Where a change is made, it is applied
retrospectively (unless stated otherwise) by adjusting opening balances and
comparative amounts for the prior period as if the new policy had always been
applied.
Material errors discovered in prior period figures are corrected retrospectively by
amending opening balances and comparative amounts for the prior period. 6. Charges to Revenue for Non-Current Assets
Service revenue accounts, central support services and trading accounts are
charged with the following amounts to reflect the cost of holding fixed assets during
the year:
depreciation of the assets used by the service
revaluation and impairment losses on assets used by the service where there
are no accumulated gains in the Revaluation Reserve against which losses
can be written off
amortisation of intangible fixed assets used by the service.
The Council is not required to raise Council Tax to fund depreciation, revaluation
and impairment losses or amortisation. However, it is required to make an annual
contribution from revenue towards the reduction in its overall borrowing requirement
equal to an amount calculated on a prudent basis determined by the Council in
accordance with statutory guidance. This is referred to as the Minimum Revenue
Provision (MRP) and Voluntary Revenue Provision (VRP). The Council‟s policy on MRP
is:
For capital expenditure incurred before 1 April 2009, or which from 1 April 2009
is supported borrowing, the MRP is based on 4% of the opening capital
financing requirement (with adjustments allowed for in DCLG Regulations).
For all unsupported borrowing from 1 April 2009, the MRP is based on the
estimated life of the asset which the borrowing has been used to
fund.
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VRP will be charged if considered prudent for individual asset financing.
Depreciation, revaluation and impairment losses and amortisation are replaced by
the MRP and VRP, by way of an adjusting transaction between the Capital
Adjustment Account and the General Fund Balance in the Movement in Reserves
Statement, for the differences between the two. 7. Employee Benefits Benefits payable during employment
Short-term employee benefits are those due to be settled within 12 months of the
year-end. They include such benefits as wages and salaries, paid annual leave and
paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current
employees and are recognised as an expense for services in the year in which
employees render service to the Council. An accrual is made for the cost of holiday
entitlements or time off in lieu, earned by employees but not taken before the year-
end, which employees can carry forward into the next financial year. The accrual is
made at the wage and salary rates applicable in the following accounting year,
being the period in which employee take the benefit. The accrual is charged to
Surplus or Deficit on the Provision of Services, but then reversed out through the
Movement in Reserves Statement so that holiday benefits are charged to revenue in
the financial year in which the holiday absence occurs.
Termination benefits
Termination benefits are amounts payable as a result of a decision by the Council to
terminate an officer‟s employment before the normal retirement date or an officer‟s
decision to accept voluntary redundancy and are charged on an accruals basis to
the Non Distributed Costs line in the Comprehensive Income and Expenditure
Statement when the Council is demonstrably committed to the termination of the
employment of an officer or group of officers or making an offer to encourage
voluntary redundancy.
Where termination benefits involve the enhancement of pensions, statutory
provisions require the General Fund balance to be charged with the amount
payable by the Council to the pension fund or pensioner in the year, not the amount
calculated according to relevant accounting standards. In the Movement in
Reserves Statement, transfers are required to and from the Pensions Reserve to
remove notional debits and credits for pension enhancement termination benefits
and replace them with debits for the cash paid to the pension fund and pensioners
and any such amounts payable but unpaid at the year-end.
Post Employment Benefits
Employees of the Council are members of the Local Government Pension Scheme,
administered by Lincolnshire County Council. This scheme provides defined benefits
to members (retirement lump sums and pensions), earned as employees worked for
the Council.
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The Local Government Pension Scheme
The Local Government Scheme is accounted for as a defined benefits scheme:
The liabilities of the Lincolnshire County Council pension fund attributable to the
Council are included in the Balance Sheet on an actuarial basis using the protected
unit method – i.e. an assessment of the future payments that will be made in relation
of retirement benefits earned to date by employees, based on assumptions about
morality rates, employee turnover rates, etc, and projections of projected earnings
for current employees.
Liabilities are discounted to their value at current prices, using a discount rate of
5.4% (based on the indicative rate of return on high quality corporate bond (iBoxx
Sterling Corporates AA over 15 year Index).
The assets of the Lincolnshire County Council pension fund attributable to the
Council are included in the Balance Sheet at their fair value:
Quoted securities – current bid price
Unquoted securities – professional estimate
Unitised securities – current bid price
Property – market value.
The change in the net pensions liability is analysed into seven components:
Current service cost – the increase in liabilities as a result of years of service
earned this year – allocated in the Comprehensive Income and Expenditure
Statement to the services for which the employees worked
Past service cost – the increase in liabilities arising from current year decisions
whose effect relates to years of service earned in earlier years – debited to
the Surplus or Deficit on the Provision of Services in the Comprehensive
Income and Expenditure Statement as part of Non Distributed Costs
Interest cost – the expected increase in the present value of liabilities during
the year as they move one year closer to being paid – debited to the
Financing and Investment Income and Expenditure line in the
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 and Expenditure
line in the Comprehensive Income and Expenditure Statement
Gains or losses on settlements and curtailments – the result of actions to
relieve the Council of liabilities or events that reduce the expected future
service or accrual of benefits of employees – debited or credited to the
Surplus or Deficit on the Provision of Services in the Comprehensive
Income and Expenditure Statement as part of Non Distributed
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2 0 1 0 / 1 1
Costs
Actuarial gains and losses – changes in the net pensions liability that arise
because events have not coincided with assumptions made at the last
actuarial valuation or because and the actuaries have updated their
assumptions – debited to the Pensions Reserve
Contributions paid to the Lincolnshire County Council pension fund – cash
paid as employer‟s contributions to the pension fund in settlement of liabilities;
not accounted for as an expense.
In relation to retirement benefits, statutory provisions require the General Fund
balance to be charged with the amount payable by the Council to the pension
fund or directly to pensioners in the year, not the amount calculated according to
the relevant accounting standards. In the Movement in Reserves Statement, this
means that there are transfers to and from the Pensions Reserve to remove the
notional debits and credits for retirement benefits and replace them with debits for
the cash paid to the pension fund and pensioners and any such amounts payable
but unpaid at the year-end. The negative balance that arises on the Pension
Reserve thereby measures the beneficial impact to the General Fund of being
required to account for retirement benefits on the basis of cash flows rather than as
benefits are earned by employees.
Discretionary Benefits
The Council also has restricted powers to make discretionary awards of retirement
benefits in the event of early retirements. Any liabilities estimated to arise as a result
of an award to any member of staff are accrued in the year of decision to make the
award and accounted for using the same policies as are applied to the Local
Government Pension Scheme. 8. Events After the Balance Sheet Date
Events after the Balance Sheet date are those events, both favourable and
unfavourable, that occur between the end of reporting period and the date when
the Statement of Accounts is authorised for issue. Two types of events can be
identified:
Those that provide evidence of conditions that existed at the end of the
reporting period – the Statement of Accounts is adjusted to reflect such
events
Those that are indicative of conditions that arose after the reporting period –
the Statement of Accounts is not adjusted to reflect such events, but where
category of events would have a material effect, disclosure is made in the
notes of the nature of the events and their estimated financial effect.
Events taking place after the date of authorisation for issue are not reflected in the
Statement of Accounts.
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9. Financial Instruments Financial Liabilities
Financial liabilities are recognised on the Balance Sheet when the Council becomes
a party to the contractual provisions of a financial instrument. They are initially
measured at fair value and carried at their amortised cost. Annual charges for
interest payable are shown in the Financing and Investment Income and
Expenditure line in the Comprehensive Income and Expenditure Statement, and are
based on the carrying amount of the liability, multiplied by the effective rate of
interest for the instrument. The effective interest rate is the rate that exactly discounts
estimated future cash payments over the life of the instrument to the amount at
which it was originally recognised.
For most of the borrowings that the Council has, this means that the amount
presented in the Balance Sheet is the outstanding principal repayable, with
accrued interest due within one year shown under short term borrowings; and
interest charged to the Comprehensive Income and Expenditure Statement is the
amount payable for the year according to the loan agreement.
Gains and losses on the repurchase or early settlement of borrowing are credited
and debited to the Financing and Investment Income and Expenditure line in the
Comprehensive Income and Expenditure Statement in the year of
repurchase/settlement. However, where repurchase has taken place as part of a
restructuring of the loan portfolio that involves the modification or exchange of
existing instruments, any premium or discount is respectively deducted from or
added to the amortised cost of the new or modified loan and the write-down to the
Comprehensive Income and Expenditure Statement is spread over the life of the
loan by an adjustment to the effective interest rate.
Where premiums and discounts have been charged to the Comprehensive Income
and Expenditure Statement, regulations allow the impact on the General Fund
Balance to be spread over future years. The Council has a policy of spreading the
gain or loss over the unexpired life of the original loan. The reconciliation of amounts
charged to the Comprehensive Income and Expenditure Statement to the net
charge required against the General Fund Balance is managed by a transfer to or
from the Financial Instruments Adjustment Account in the Movement in Reserves
Statement.
Financial Assets
Financial assets are classified into two types:
Loans and receivables – assets that have fixed or determinable payments but
are not quoted in an active market
Available for sale assets – assets that have a quoted market price and/or do
not have fixed or determinable payments.
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Loans and receivables
Loans and receivables are recognised on the Balance Sheet when the Council
becomes a party to the contractual provisions of a financial instrument. They are
initially measured at fair value and carried at their amortised cost. Annual credits to
the Financing and Investment and Expenditure line in the Comprehensive Income
and Expenditure Statement for interest receivable are based on the carrying
amount of the asset multiplied by the effective rate of interest for the instrument. For
most of the loans that the Council has made, this means that the amount presented
in the Balance Sheet is the outstanding principal receivable, with interest receivable
within one year shown under short term investments and interest credited to the
Comprehensive Income and Expenditure Statement is the amount receivable for
the year in the loan agreement.
However, occasionally the Council may make loans to other parties (e.g. voluntary
organisations) at less than market rates (soft loans). When soft loans are made, a loss
is recorded in the Comprehensive Income and Expenditure Statement for the
present value of the interest that will be foregone over the life of the instrument,
resulting in a lower amortised cost than the outstanding principal. Interest is credited
to the Financing and Investment Income and Expenditure line in the Comprehensive
Income and Expenditure Statement at a marginally higher effective rate of interest
than the rate receivable, with the difference serving to increase the amortised cost
of the loan in the Balance Sheet. Statutory provisions require that the impact of soft
loans on the General Fund Balance is the interest receivable for the financial year –
the reconciliation of amounts debited and credited to the Comprehensive Income
and Expenditure Statement to the net gain required against the General Fund
Balance as managed by a transfer to or from the Financial Instruments Adjustment
Account in the Movement in the Reserves Statement.
Where assets are identified as impaired because of a likelihood arising from a past
event that payments due under the contract will not be made, the asset is written
down and a charge made to the Financing and Investment Income and
Expenditure line in the Comprehensive Income and Expenditure Statement. The
impairment loss is measured as the difference between the carrying amount and
the present value of the revised future cash flows discounted at the asset‟s original
effective interest rate.
Any gains and losses that arise on the de-recognition of an asset are credited or
debited to the Financial and Investment Income Expenditure line in the
Comprehensive Income and Expenditure Statement.
Available-for-Sale Assets
Available-for-sale assets are recognised on the Balance Sheet when the Council
becomes a party to the contractual provisions of a financial instrument and are
initially measured and carried at fair value. Where the asset has fixed or
determinable payments, annual credits to the Financing and Investment Income
and Expenditure line in the Comprehensive Income and Expenditure Statement for
interest receivable are based on the amortised cost of the asset multiplied by the
effective rate of interest for the instrument. Where there are no fixed or
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determinable payments, income (e.g. dividends) is credited to the Comprehensive
Income and Expenditure Statement when it becomes receivable by the Council.
Assets are maintained in the Balance Sheet at fair value. Values are based on the
following principles:
Instruments with the quoted market prices – the market price
Other instruments with fixed and determinable payments – discounted cash
flow analysis
Equity shares with no quoted market prices – independent appraisal of
company valuation or most recent price at which the shares changed hands.
Changes in fair value are balanced by an entry in the Available-for-Sale Reserve
and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available
for Sale Financial Assets. The exception is where impairment losses have been
incurred – these are debited to the Financial and Investment Income and
Expenditure line in the Comprehensive Income and Expenditure Statement, along
with any net gain or loss for the asset accumulated in the Available-for-Sale Reserve.
Where assets are identified as impaired because of a likelihood arising from a past
event that payments due under the contract will not be made (fixed or
determinable payments) or fair value falls below cost, the asset is written down and
a charge made to the Financing and Investment Income and Expenditure line in the
Comprehensive Income and Expenditure Statement. If the asset has fixed or
determinable payments, the impairment loss is measured as the difference between
the carrying amount and the present value of the revised future cash flows
discounted at the asset‟s original effective interest rate. Otherwise, the impairment
loss is measured as any shortfall of fair value against the acquisition cost of the
instrument (net of any principal repayment and amortisation).
Any gains and losses that arise on de-recognition of the asset are credited or
debited to the Financing and Investment Income and Expenditure line in the
Comprehensive Income and Expenditure Statement, along with any accumulated
gains or losses previously recognised in the Available-for-Sale Reserve.
Where fair value cannot be measured reliably, the instrument is carried at cost (less
any impairment losses).
10. Foreign Currency Translation
Where the Council has entered into a transaction denominated in a foreign
currency, the transaction is converted into sterling at the exchange rate applicable
on the date the transaction was effective. Where material amounts in foreign
currency are outstanding at the year-end, they are reconverted at the spot
exchange rate at 31 March. Resulting gains or losses, if material, are recognised in
the Financing and Investment Income and Expenditure line in the Comprehensive
Income and Expenditure Statement.
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11. Government Grants and Contributions
Whether paid on account, by instalments or in arrears, government grants and the
third party contributions and donations are recognised as due to the Council when
there is reasonable assurance that:
The Council will comply with the conditions attached to the payments and
The grants or contributions will be received.
Amounts recognised as due to the Council are not credited to the Comprehensive
Income and Expenditure Statement until conditions attached to the grant or
contribution have been satisfied. Conditions are stipulations that specify that the
future economic benefits or service potential embodied in the asset acquired using
the grant or contribution are required to be consumed by the recipient as specified,
or future economic benefits or service potential must be returned to the transferor.
Monies advanced as grants and contributions for which conditions have not been
satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied,
the grant or contribution is credited to the relevant service line (attributable revenue
grants and contributions) or Taxation and Non-Specific Grant Income (non ring-
fenced revenue grants and all capital grants) in the Comprehensive Income and
Expenditure Statement.
Where capital grants are credited to the Comprehensive Income and Expenditure
Statement, they are reversed out of the General Fund Balance in the Movement in
Reserves Statement. Where the grant has yet to be used to finance capital
expenditure, it is posted to the Capital Grants Unapplied reserve. Where it has been
applied, it is posted to the Capital Adjustment Account. Amounts in the Capital
Grants Unapplied reserve are transferred to the Capital Adjustment Account once
they have been applied to fund capital expenditure.
Area Based Grant
Area Based Grant (ABG) is a general grant allocated by central government directly
to local authorities as additional revenue funding. ABG is non-ringfenced and is
credited to Taxation and Non-Specific Grant Income in the Comprehensive Income
and Expenditure Statement.
Business Improvement Districts
A Business Improvement District (BID) scheme applies across the whole of the
Council. The scheme is funded by BID levy paid by non-domestic ratepayers. The
Council acts as a principal under the scheme, and accounts for income received
and expenditure incurred (including contributions to the BID project) within the
relevant services within the Comprehensive Income and Expenditure Statement. 12. Intangible Assets
Intangible assets are assets that do not have physical substance but are identifiable
and controlled by the Council (e.g. software licences). Expenditure on
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intangible assets is capitalised when it is expected that future economic benefits or
service potential will flow from the intangible asset to the Council for a period of
more than one year.
Internally generated intangible assets are capitalised where it is demonstrable that
the project is technically feasible and is intended to be completed and the Council
will be able to generate future economic benefits or deliver service potential by
being able to sell or use the asset. Expenditure is capitalised where it can be
measured reliably as attributable to the asset and is restricted to that incurred during
the development phase (research expenditure cannot be capitalised).
Expenditure on the development of the Council‟s website is not capitalised as the
website is primarily intended to promote or advertise the Council‟s services.
Intangible assets are measured initially at cost. Amounts are only re-valued where
the fair value of the assets can be determined by reference to an active market. In
practice, no intangible asset held by the Council meets this criterion, and they are
therefore carried at amortised cost.
Intangible assets are amortised over their useful life and charged to the relevant
service lines in the Comprehensive Income and Expenditure Statement and are
subject to impairment reviews. Any gain or loss arising on the disposal or
abandonment of an intangible asset is posted to the Other Operating Expenditure
line in the Comprehensive Income and Expenditure Statement.
Where expenditure on intangible assets qualifies as capital expenditure for statutory
purposes, amortisation, impairment losses and disposal gains and losses are not
permitted to have an impact on the General Fund Balance. The gains and losses
are therefore reversed out of the General Fund Balance in the Movement in
Reserves Statement and posted to the Capital Adjustment Account and (for any
sale proceeds greater than £10,000) the Capital Receipts Reserve. 13. Interests in Companies and other Entities
Councils are required to produce Group Accounts to include services offered to
Council Tax payers by organisations other than the Council itself but in which the
Council has an interest. There are a number of criteria set out by which the Council
must determine whether the value of the company and the Council‟s interest is
significant enough for Group Accounts to be produced. The Council has complied
with the Code of Practice on Local Authority Accounting, and while it has identified
a company over which it has joint control, it has concluded that the company does
not meet the criteria that would require consolidation into the Council‟s accounts. 14. Inventories and Long Term Contracts
Inventories are included in the Balance Sheet at the lower of cost and net realisable
value. The cost of inventories is assigned using either the FIFO or weighted average
costing formula.
Long term contracts are accounted for on the basis of charging the Surplus and
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Deficit on the Provision of Services with the value of works and services received
under the contract during the financial year. 15. Investment Property
Investment properties are those that are used solely to earn rentals and/or for
capital appreciation. The definition is not met if the property is used in any way to
facilitate the delivery of services or is held for sale.
Investment properties are measured initially at cost and subsequently at fair value,
based on the amount at which the asset could be exchanged between
knowledgeable parties at arm‟s-length. Properties are not depreciated but are re-
valued annually according to market conditions at year-end. Gains and losses on
revaluation are posted to the Financing and Investment Income and Expenditure
line in the Comprehensive Income and Expenditure Statement. The same treatment
is applied to gains and losses on disposal.
Rentals received in relation to investment properties are credited to the Financing
and Investment Income line and result in a gain for the General Fund Balance.
However, revaluation and disposal gains and losses are not permitted by statutory
arrangements to have an impact on the General Fund Balance. The gains and
losses are therefore reversed out of the General Fund Balance in the Movement in
Reserves Statement and posted to the Capital Adjustment Account and (for any
sale proceeds greater than £10,000) the Capital Receipts Reserve. 16. Jointly Controlled Operations and Jointly Controlled Assets
Jointly controlled operations are activities undertaken by the Council in conjunction
with other ventures that involve the use of the assets and resources of the ventures
rather than the establishment of a separate entity. If and when these exist the
Council recognises on its Balance Sheet the assets that it controls and the liabilities
that it incurs and debits and credits the Comprehensive Income and Expenditure
Statement with the expenditure it incurs and the share of income it earns from the
activity of the operation.
Jointly controlled assets are items of property, plant or equipment that are jointly
controlled by the Council and other ventures, with the assets being used to obtain
benefits for the ventures. The joint venture does not involve the establishment of a
separate entity. The Council accounts for only its share of the jointly controlled
assets, the liabilities and expenses that it incurs on its own behalf or jointly with others
in respect of its interest in the joint venture and income that it earns from the
venture. 17. Leases
Leases are classified as finance leases where the terms of the lease transfer
substantially all the risks and rewards incidental to ownership of the property, plant or
equipment from the lessor to the lessee. All other leases are classified as operating
leases.
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Where a lease covers both land and buildings, the land and buildings elements are
considered separately for classification.
Arrangements that do not have the legal status of a lease but convey a right to use
an asset in return for payment are accounted for under this policy where fulfilment
of the arrangement is dependant on the use of specific assets.
The Council as Lessee Finance Leases
Property, plant and equipment held under finance leases is recognised on the
Balance Sheet at the commencement of the lease at its fair value measured at the
lease‟s inception (or the present value of the minimum lease payments, if lower). The
asset recognised is matched by a liability for the obligation to pay the lessor. Initial
direct costs of the Council are added to the carrying amount of the asset. Premiums
paid on entry into a lease are applied to writing down the lease liability. Contingent
rents are charged as expenses in the periods in which they are incurred.
Lease payments are apportioned between:
A charge for the acquisition of the interest in the property, plant or equipment
– applied to write down the lease liability, and
A financing charge (debited to the Financing and Investment Income and
Expenditure line in the Comprehensive Income and Expenditure Statement).
Property, Plant and Equipment recognised under finance leases is accounted for
using the policies applied generally to such assets, subject to depreciation being
charged over the lease term if this is shorter than the asset‟s estimated useful life
(where ownership of the asset does not transfer to the Council at the end of the
lease period).
The Council is not required to raise council tax to cover depreciation or revaluation
and impairment losses arising on leased assets. Instead, a prudent annual
contribution (Voluntary Revenue Provision - VRP) is made from revenue funds
towards the deemed capital investment in accordance with statutory requirements.
Depreciation and revaluation and impairment losses are therefore substituted by the
VRP in the General Fund Balance, by way of an adjusting transaction with the
Capital Adjustment Account in the Movement in Reserves Statement for the
difference between the two.
Operating Leases
Rentals paid under operating leases are charged to the Comprehensive Income
and Expenditure Statement as an expense of the service benefiting from use of the
leased asset. Charges are made on a straight-line basis over the term of the lease.
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The Council as Lessor Finance Leases
Where the Council grants a finance lease over a property or an item of plant or
equipment, the relevant asset is written out of the Balance Sheet as a disposal. At
the commencement of the lease, the carrying amount of the asset in the Balance
Sheet is written off to the Other Operating Expenditure line in the Comprehensive
Income and Expenditure Statement as part of the gain and loss on disposal. A gain,
representing the Council‟s net investment in the lease, is credited to the same line in
the Comprehensive Income and Expenditure Statement also as part of the gain or
loss on disposal (i.e. netted off against the carrying value of the asset at the time of
disposal), matched by a long-term lease debtor in the Balance Sheet.
Lease rentals receivable are apportioned between:
A charge for the acquisition of the interest in the property – applied to write
down the lease debtor (together with any premiums received), and
Finance income (credited to the Financing and Investment Income and
Expenditure line in the Comprehensive Income and Expenditure Statement).
The gain credited to the Comprehensive Income and Expenditure Statement on
disposal is not permitted by statute to increase the General Fund Balance and is
required to be treated as a capital receipt. Where a premium has been received,
this is posted out of the General Fund Balance to the Capital Receipt Reserve in the
Movement in Reserves Statement. Where the amount due in relation to the leased
asset is to be settled by the payment of rentals in future financial years, this is posted
out of the General Fund Balance to the Deferred Capital Receipts Reserve in the
Movement in Reserves Statement. When the future rentals are received, the
element for the capital receipt for the disposal of the asset is used to write down the
lease debtor. At this point, the deferred capital receipts are transferred to the
Capital Receipts Reserve.
The written-off value of disposals is not a charge against council tax, as the cost of
fixed assets is fully provided for under separate arrangements for capital financing.
Amounts are therefore appropriated to the Capital Adjustment Account from the
General Fund Balance in the Movement in Reserve Statement.
Operating Leases
Where the Council grants an operating lease over a property or an item of plant or
equipment, the asset is retained in the Balance Sheet. Rental income is credited to
the Other Operating Expenditure line in the Comprehensive Income and
Expenditure Statement. Credits are made on a straight-line basis over the life of the
lease. Initially direct costs incurred in negotiating and arranging the lease are
added to the carrying amount of the relevant asset and charged as an expense
over the lease term on the same basis as rental income.
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18. Overheads and Support Services
The costs of overheads support services are charged to those that benefit from the
supply or service in accordance with the costing principles of the CIPFA Best Value
Accounting Code of Practice 2010/11 (BVACOP). The total absorption costing
principle is used – the full cost of overheads and support services are shared
between users in proportion to the benefits received, with the exception of:
Corporate and Democratic Core – costs relating to the Authority‟s status as a
multi-functional, democratic organisation.
Non Distributed Costs – the cost of discretionary benefits awarded to
employees retiring early and impairment losses chargeable on Assets Held for
Sale.
These two cost categories are defined in BVACOP and accounted for as separate
headings in the Comprehensive Income and Expenditure Statement, as part of Net
Expenditure on Continuing Services. 19. Non-Current Assets - Property, Plant and Equipment
Assets that have physical substance and are held for use in the supply of services,
for rental to others, or for administrative purposes and that are expected to be used
during more than one financial year are classified as Property, Plant and Equipment.
Recognition
Expenditure on the acquisition, creation or enhancement of Property, Plant or
Equipment is capitalised on an accruals basis, provided that it is probable that the
future economic benefits or service potential associated with the item will flow to
the Council and the cost of the item can be measured reliably. Expenditure that
maintains but does not add to an asset‟s potential to deliver future economic
benefits or service potential (i.e. Repairs and maintenance) is charged as an
expense when it is incurred.
Measurement
Assets are initially measured at cost, comprising:
The purchase price
Any costs attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by
management
The initial estimate of the costs of dismantling and removing the item and
restoring the site on which it is located.
The Council does not capitalise borrowing costs incurred whilst assets are under
construction.
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The cost of assets acquired other than by purchase is deemed to be its fair value,
unless the acquisition does not have commercial substance (i.e. it will not lead to a
variation in the cash flows of the Council). In the latter case, where an asset is
acquired via an exchange, the cost of the acquisition is the carrying amount of the
asset given up by the Council.
Donated assets are measured initially at fair value. The difference between fair
value and any consideration paid is credited to the Taxation and Non-Specific
Grant Income line of the Comprehensive Income and Expenditure Statement, unless
the donation has been made conditionally. Until conditions are satisfied, the gain is
held in the Donated Assets Account. Where gains are credited to the
Comprehensive Income and Expenditure Statement, they are reversed out of the
General Fund Balance to the Capital Adjustment Account in the Movement in
Reserves Statement.
Assets are then carried in the Balance Sheet using the following measurement bases:
Infrastructure, community assets and assets under construction – depreciated
historical cost
Dwellings – fair value, determined using the basis of existing use value for
social housing (EUV-SH)
All other assets – fair value, determined as the amount that would be paid for
the asset in its existing use (existing use value – EUV).
Where there is no market-based evidence of fair value because of the specialist
nature of an asset, depreciated replacement cost (DRC) is used as an estimate of
fair value.
For non-property assets that have short useful lives or low values (or both),
depreciated historical cost basis is used as a proxy for fair value.
Assets included in the Balance Sheet at fair value are re-valued sufficiently regularly
to ensure that their carrying amount is not materially different from their fair value at
the year-end, but as a minimum every five years. Increases in valuations are
matched by credits to the Revaluation Reserve to recognise unrealised gains.
However, in exceptional circumstances, gains may be credited to the
Comprehensive Income and Expenditure Statement where they arise from the
reversal of a loss previously charged to services.
When decreases in value are identified, they are accounted for as follows:
Where there is a balance of revaluation gains for the asset in the Revaluation
Reserve, the carrying amount of the asset is written down against that
balance, up to the amount of the accumulated gains.
Where there is no balance in the Revaluation Reserve or an insufficient
balance, the carrying amount of the asset is written down against
the relevant service lines in the Comprehensive Income and
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Expenditure Statement.
The Revaluation Reserve contains revaluation gains recognised since 1 April 2007
only, the date of its formal implementation. Gains arising before that date have
been consolidated into the Capital Adjustment Account.
Impairment
Assets are reviewed at each year-end for evidence of reductions in value i.e.
impairment. Where impairment is identified, the recoverable amount of the asset is
estimated and, where this is less than the carrying amount of the asset, an
impairment loss is recognised for the shortfall.
When impairment losses are identified, they are accounted for as follows:
Where there is a balance in the revaluation gains for the asset in the
Revaluation Reserve, the carrying amount of the asset is written down against
that balance, up to the amount of the accumulated gains.
Where there is no balance in the Revaluation Reserve or an insufficient
balance, the carrying amount of the asset is written down against the
relevant service line(s) in the Comprehensive Income and Expenditure
Statement.
Where an impairment loss is reversed subsequently, the reversal is credited to the
relevant service line in the Comprehensive Income and Expenditure Statement, up
to the amount of the original loss, adjusted for depreciation that would have been
charged if the loss had not been recognised.
Depreciation
Depreciation is provided for on all Property, Plant and Equipment assets by the
systematic allocation of their depreciable amounts over their useful lives. An
exception is made for assets without a determinable finite useful life (i.e. freehold
land and certain Community Assets) and assets that are not yet available for use
(i.e. assets under construction).
Depreciation is calculated on the following bases:
Dwellings and other buildings – straight-line allocation over the useful life of
the property as estimated by the Valuer
Vehicles, plant, furniture and equipment – straight-line allocation over the
useful life of each class of asset, as advised by a suitably qualified officer
Where an item of Property, Plant of Equipment asset has major components whose
cost is significant in relation to the total cost of the item, the components are
depreciated separately. A major component is defined as comprising at least 20%
of the value and having a useful life of 50% or less of that of the parent asset.
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Revaluation gains are also depreciated, with an amount equal to the difference
between the current value depreciation charge on assets and the depreciation
that would have been charged based on their historical cost, being transferred
each year from the Revaluation Reserve to the Capital Adjustment Account. 20. Disposals and Non-current Assets Held for Sale
When it becomes probable that the carrying amount of an asset will be recovered
principally through a sale transaction rather than through its continuing use, it is
reclassified as an Asset Held for Sale. The asset is re-valued immediately before
reclassification and then carried at the lower of this amount and fair value less costs
to sell. Where there is subsequent decrease to fair value less costs to sell, the loss is
posted to the Other Operating Expenditure line in the Comprehensive Income and
Expenditure Statement. Gains in fair value are recognised only up to the amount of
any previously losses recognised in the Surplus and Deficit on Provision of Services.
Depreciation is not charged on Assets Held for Sale.
If assets no longer meet the criteria to be classified as Assets Held for Sale, they are
reclassified back to non-current assets and valued at the lower of their carrying
amount before they were classified as held for sale; adjusted for depreciation,
amortisation or revaluations that would have been recognised had they not been
classified as Held for Sale, and their recoverable amount at the date of the decision
not to sell.
Assets that are abandoned or scrapped are reclassified as Assets Held for Sale.
When an asset is disposed of or decommissioned, the carrying amount of the asset
in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale)
is written off to the Other Operating Expenditure line in the Comprehensive Income
and Expenditure Statement as part of the gain or loss on disposal. Receipts from the
disposal (if any) are credited to the same line in the Comprehensive Income and
Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off
against the carrying value of the asset at the time of disposal). Any revaluation
gains accumulated for the asset in the Revaluation Reserve are transferred to the
Capital Adjustment Account.
Amounts received for a disposal in excess of £10,000 are categorised as capital
receipts. A proportion of receipts relating to housing disposals (75% for dwellings, 50%
for land and other assets, net of statutory deductions and allowances) is payable to
the Government. The balance of receipts is required to be credited to the Capital
Receipts Reserve, and can then only be used for new capital investment or set aside
to reduce the Council‟s underlying need to borrow. Receipts are transferred to the
Reserve from the General Fund Balance in the Movement in Reserves Statement.
The written-off value of disposals is not a charge against council tax, as the cost of
fixed assets is fully provided under separate arrangements for capital financing.
Amounts are transferred to the Capital Adjustment Account in the General Fund
Balance in the Movement in Reserves Statement.
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21. Provisions, Contingent Liabilities and Contingent Assets Provisions
Provisions are made where an event has taken place that gives the Council a legal
or constructive obligation that probably requires settlement by a transfer of
economic benefits, and reliable estimate can be made of the amount of the
obligation. For instance, the Council may be involved in a court case that could
eventually result in the making of a settlement or the payment of compensation.
Provisions are charged as an expense to the appropriate service line in the
Comprehensive Income and Expenditure Statement in the year that the authority
becomes aware of the obligation, and are measured at the best estimate at the
balance sheet date of the expenditure required to settle the obligation, taking into
account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in
the Balance Sheet. Estimated settlements are reviewed at the end of each financial
year – where it becomes less than probable that a transfer of economic benefits will
not now be required (or a lower settlement than anticipated is made), the provision
is reversed and credited back to the relevant service.
Where some or all of the payment required to settle a provision is expected to be
recovered from another party (e.g. from an insurance claim), this is only recognised
as income for the relevant service if it is virtually certain that the reimbursement will
be received if the Council settles the obligation.
Contingent Liabilities
A contingent liability arises where an event has taken place that gives the Council a
possible obligation whose existence will only be confirmed by the occurrence or
otherwise of uncertain future events not wholly within the control of the Council.
Contingent liabilities also arise in circumstances where a provision would otherwise
be made but either it is not probable that an outflow of resources will be required or
the amount of the obligation cannot be measured reliably.
Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note
to the accounts.
Contingent Assets
A contingent asset arises where an event has taken place that gives the Council a
possible asset whose existence will only be confirmed by the occurrence or
otherwise of uncertain future events not wholly within the control of the Council.
Contingent assets are not recognised in the Balance Sheet but disclosed in a note
to the accounts where it is probable that there will be an inflow of economic
benefits. 22. Reserves
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The Council sets aside specific amounts as reserves for future policy purposes or to
cover contingencies. Reserves are created by transferring amounts out of the
General Fund Balance in the Movement in Reserves Statement. When expenditure
to be financed from a reserve is incurred, it is charged to the appropriate service in
that year to score against the Surplus or Deficit on the Provision of Services in the
Comprehensive Income and Expenditure Statement. The reserve is then
appropriated back into the General Fund Balance in the Movement in Reserves
Statement so that there is no net charge against council tax for the expenditure.
Certain reserves are kept to manage the accounting processes for non-current
assets, financial instruments, and retirement and employee benefits and do not
represent usable resources for the Council – these reserves are explained in the
relevant policies. 23. Revenue Expenditure Funded from Capital under Statute
Expenditure incurred during the year that may be capitalised under statutory
provisions but that does not result in the creation of a non-current asset has been
charged as expenditure to the relevant service in the Comprehensive Income and
Expenditure Statement in the year. Where the Council has determined to meet the
cost of this expenditure from existing capital resources or by borrowing, a transfer in
the Movement in Reserves Statement from the General Fund Balance to the Capital
Adjustment Account then reverses out the amounts charged so that there is no
impact on the level of council tax. 24. VAT
VAT payable is included as an expense only to the extent that it is not recoverable
from HM Revenue and Customs. VAT receivable is excluded from income.
Note 3 – Accounting Standards Issued, Not Adopted
Heritage Assets
Heritage Assets will be required to be recognised as a separate class of assets for
the first time in the 2011/12 financial statements in accordance with FRS 30. It is not
possible to make a reasonable estimate of the value of heritage assets held by the
Council at the current date, as the majority of these assets are not currently
recorded in the Balance Sheet. The Council will carry out a full review of potential
heritage assets during 2011/12, however, examples of known heritage assets held at
present are as follows:
Civic regalia
Monks Abbey ruins Note 4 – Critical Judgements in Applying Accounting Policies
In applying the accounting policies in Note 2, the Council has had to make certain
judgements about complex transactions or those involving uncertainty about future
events.
45
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
The critical judgements made in the Statement of Accounts are:
There is a high degree of uncertainty about the future levels of funding for
local government. However, the Council has determined that this uncertainty
is not yet sufficient to provide an indication that the assets of the Council
might be impaired as a result of a need to close facilities or reduce levels of
service provision.
The Council has previously recognised a contingent liability in respect of a
dispute with the contractor of the „Public Realm‟ capital improvement
programme to the City‟s streets. A settlement agreement on the main
contract costs was reached in June 2011 and the Accounts have been
adjusted to reflect this. Despite resolution of the main contract cost there
remains a dispute with the contractor in relation to scheme defects.
Following an adjudication decision it has been found that no liability rests with
the Council. On this basis the Council has made no financial provision for the
costs required to rectify the scheme defects, neither has it recognised a
contingent liability in the Accounts.
In May 2011 the Council entered into a collaborative arrangement with North
Kesteven and West Lindsey District Councils to establish the Central
Lincolnshire Joint Planning Unit. This arrangement is hosted by North Kesteven
District Council and is governed through a Joint Committee representing
each of the partner authorities. The Council has therefore determined that
this arrangement is classified as a Jointly Controlled Operation, and as such
does not require consolidation into the Council‟s accounts. The Council‟s
proportion of activity remains to be accounted for separately within the Core
Financial Statements. Note 5 – Assumptions Made about the Future and Other Major Sources of Estimation Uncertainty
The Statement of Accounts contains estimated figures that are based on
assumptions made by the Council about the future or that are otherwise uncertain.
Estimates are made taking into account historical experience, current trends and
other relevant factors. However, because balances cannot be determined with
certainty, actual results could be materially different from the assumptions and
estimates.
The items in the Council‟s Balance Sheet as at 31 March 2011 for which there is a
significant risk of material adjustment in the forthcoming financial year are as follows:
Item Uncertainties Effect if Actual Results Differ
from Assumptions
46
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Item Uncertainties Effect if Actual Results Differ
from Assumptions
Property, Plant and
Equipment
Assets are depreciated over
useful lives that are
dependent on assumptions
about the levels of repairs
and maintenance that will
be incurred in relation to
individual assets. The current
economic climate makes it
uncertain that the Council
will be able to sustain it‟s
current spending on repairs
and maintenance, bringing
doubt the useful lives
assigned to the assets
If the useful lives of the assets
reduce, depreciation
increases and the carrying
amount of the assets falls. It is
estimated that the annual
depreciation charge for
buildings would increase by
£0.64m for every year that
the useful lives had to be
reduced.
Pension Liability Estimation of the net liability
to pay pensions depends on
a number of complex
judgements relating to the
discount rate used, the rate
at which salaries are
projected to increase,
changes in retirement ages,
mortality rates and the
expected return on pension
fund assets. A firm of
consulting actuaries (Hymans
Robertson LLP) is engaged to
provide the Council with
expert advice about the
assumptions to be applied.
For more information on the
Defined Benefit Pension
Scheme please refer to note
43 on page 93
The effects on the net
pensions liability of changes
in individual assumptions can
be measured. For instance, a
0.5% increase in the discount
rate assumption would result
in a decrease in the pension
liability of £11.515m
A 1 year increase in member
life expectancy would results
in an increased liability of
£3.854m
Arrears As at 31 March 2011, the
Council had a balance on
sundry debtors of £2.459m. A
review of significant
balances suggested that an
impairment of doubtful debts
of £1.191m was required.
If collection rates were to
deteriorate by 5% the
amount of the impairment of
doubtful debts would require
an additional £0.123m to be
set aside as an allowance.
Note 6 – Material Items of Income and Expense
The following items of income and expense within the Comprehensive Income and
Expenditure Statement that require separate disclosure are set out in the following
table:
47
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Item
Value £’000
IAS 19 Past Service Cost in respect of changes to pension increases
introduced in the Chancellor‟s budget statement (Future pension increases
being linked to Consumer Price Index (CPI) and not Retail Prices Index (RPI).
The effect of this comes through as a negative past service cost within Non
Distributed Costs
14,331
In 2010/11 there were downward revaluations charged to the
Comprehensive Income and Expenditure of which £87.051m relates to HRA
assets (primarily Council Dwellings). Of this, £79.476m is as a consequence of
the Social Housing discount factor applied to the market value decreasing
from 50% in 2009/10 to 34% in 2010/11, with the remainder resulting from
further falls in property market prices.
87,994
Note 7 – Events after the Balance Sheet Date
The Statement of Accounts was authorised for issue by the Director of Resources on
27th September 2011. Events taking place after this date are not reflected in the
financial statements or notes. Where events taking place before this date provided
information about conditions existing at 31st March 2011, the figures in the financial
statements and notes have been adjusted in all material respects to reflect the
impact of this information.
The financial statements and notes have not been adjusted for the following events
which took place after 31 March 2011 as they provide information that is relevant to
an understanding of the Council‟s financial position but do not relate to conditions
at that date:
The Investment Property line in the Balances Sheet contains valuations
totalling £2.536m for a number shops and land holdings in the Lindongate
development area of the City. On 12 April 2011 the Council disposed of these
assets, including all of the freeholds, leaseholds and all other interests, to the
Lincolnshire Co-Operative in exchange for a capital receipt of £3.55m. The
subsequent loss of revenue income associated with these investment
properties is £0.170m pa.
Note 8 – Adjustment between Accounting Basis and Funding Basis under Regulations
This note details the adjustments that are made to the total comprehensive income
and expenditure recognised by the Council in year in accordance with proper
accounting practice to the resources that are specified by statutory provisions as
being available to the Council to meet future capital and revenue expenditure.
48
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2010/11 Usable Reserves
Unusable
Reserves
General Housing CMS Major Capital Capital Total Total
Fund Revenue Repair Receipts Grants
Balance Account Reserve Reserve Unapplied
£000 £000 £000 £000 £000 £000 £000 £000
Reversal of items debited or credited to the Comprehensive Income and
Expenditure Statement
Depreciation (excl HRA depreciation) 1,674 0 0 0 0 0 1,674 (1,674)
Amortisation of intangible assets (excl HRA ) 164 164 (164)
HRA Depreciation 0 0 0 4,341 0 0 4,341 (4,341)
HRA amortisation of intangible assets 19 19 (19)
Impairment/revaluation losses (charged to I&E) 1,103 87,063 0 0 0 0 88,166 (88,166)
Capital grant and contributions applied 0 0 0 0 0 0 0 0
Donated assets fair value less consideration 0 0 0 0 0 0 0 0
Revenue Expenditure Funded from Capital under Statute 3,478 0 0 0 0 0 3,478 (3,478)
Movement in market value of investment property (160) (12) 0 0 0 0 (172) 172
Movement in value of held for sale assets 0 0 0 0 0 0 0 0
Amounts of non current assets written off on disposal or sale as part of the
gain/loss on disposal to the CIES
388 304 0 0 0 0 692 (692)
Capital grant and contributions unapplied credited to I&E (4,592) (307) 0 0 0 4,899 0 0
Use of capital grants and contributions to finance capital expenditure 0 0 0 (4,076) (4,076) 4,076
Transfer of sale proceeds credited as part of the gain/loss on disposal to the
CIES
(391) (625) 0 0 1,016 0 0 (9)
Use of capital receipts reserve to finance capital expenditure 0 0 (3,861) 0 (3,861) 3,861
Reversal of items relating to retirement benefits debited or credited to the
Comprehensive Income and Expenditure Statement
(8,047) (1,118) 0 0 0 0 (9,165) 9,165
49
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2010/11 Usable Reserves
Unusable
Reserves
General Housing CMS Major Capital Capital Total Total
Fund Revenue Repair Receipts Grants
Balance Account Reserve Reserve Unapplied
£000 £000 £000 £000 £000 £000 £000 £000
Differences between statutory debits/credits and amounts recognised as
income and
expenditure in relation to financial instruments e.g. Soft loans
(2) (231) 0 0 0 0 (233) 233
Gain/loss on revaluation of Available for sale Financial Instruments 0 0 0 0 0 0 0 0
Amount by which council tax income and residual community charge
adjustment included in the Comprehensive Income and Expenditure
Statement is different from the amount taken to the General Fund in
accordance with regulation
21 0 0 0 0 21 (21)
Amount by which officer remuneration charged to the CIES on an accruals
basis is different from remuneration chargeable in the year in accordance
with statutory requirements
70 0 0 0 0 0 70 (70)
(Amounts excluded in I&E to be included for determining movement in
general fund)
Statutory Provision for the repayment of debt - (MRP) (631) 0 0 0 0 0 (631) 631
Statutory Repayment of Debt (Finance Lease Liabilities) 0 0 0 0 0 0 0 0
Voluntary provision above MRP (379) (163) 0 0 0 0 (542) 542
Contribution to disposal costs of capital sales 0 0 0 0 0 0 0 0
HRA capital receipts to housing central pool 392 0 0 0 (392) 0 0 0
Revenue contribution to finance capital (588) (1,546) 0 0 0 0 (2,134) 2,134
Employers contributions to pension schemes (2,096) (1,155) 0 0 0 0 (3,251) 3,251
Reversal of Major Repairs Allowance credited to the HRA 0 (623) 0 623 0 0 0 0
Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 (4,983) 0 0 (4,983) 4,983
Total Adjustments (9,596) 81,587 0 0 (3,237) 823 69,577 (69,586)
50
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10 Usable Reserves
Unusable
Reserves
General Housing CMS Major Capital Capital Total Total
Fund Revenue Repair Receipts Grants
Balance Account Reserve Reserve Unapplied
£000 £000 £000 £000 £000 £000 £000 £000
Reversal of items debited or credited to the Comprehensive Income and
Expenditure Statement
Depreciation/amortisation (excl HRA depreciation) 2,415 0 0 0 0 0 2,415 (2,415)
HRA Depreciation/amortisation 0 22 0 6,214 0 0 6,236 (6,236)
Impairment/revaluation losses (charged to I&E) (509) 35,918 0 0 0 0 35,409 (35,409)
Capital grant and contributions applied (20) 20 0 0 0 0 0 0
Donated assets fair value less consideration 0 0 0 0 0 0 0 0
Revenue Expenditure Funded from Capital under Statute 1,059 0 0 0 0 0 1,059 (1,059)
Movement in market value of investment property (402) 39 0 0 0 0 (363) 363
Movement in value of held for sale assets 0 0 0 0 0 0 0 0
Amounts of non current assets written off on disposal or sale as part of the
gain/loss on disposal to the CIES
157 689 0 0 0 0 846 (846)
Capital grant and contributions unapplied credited to I&E (558) (275) 0 0 0 833 0 0
Use of capital grants and contributions to finance capital expenditure 0 0 0 0 0 (768) (768) 833
Transfer of sale proceeds credited as part of the gain/loss on disposal to the
CIES
(209) (784) 0 0 993 0 0 (15)
Use of capital receipts reserve to finance capital expenditure 0 0 0 0 (3,868) 0 (3,868) 3,868
Reversal of items relating to retirement benefits debited or credited to the
Comprehensive Income and Expenditure Statement
3,027 1,251 0 0 0 0 4,278 (4,278)
Differences between statutory debits/credits and amounts recognised as
income and
expenditure in relation to financial instruments e.g. Soft loans
(2) (311) 0 0 0 0 (313) 314
51
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10 Usable Reserves
Unusable
Reserves
General Housing CMS Major Capital Capital Total Total
Fund Revenue Repair Receipts Grants
Balance Account Reserve Reserve Unapplied
£000 £000 £000 £000 £000 £000 £000 £000
Gain/loss on revaluation of Available for sale Financial Instruments 0 0 0 0 0 0 0 0
Amount by which council tax income and residual community charge
adjustment included in the Comprehensive Income and Expenditure
Statement is different from the amount taken to the General Fund in
accordance with regulation
(106) 0 0 0 0 0 (106) 106
Amount by which officer remuneration charged to the CIES on an accruals
basis is different from remuneration chargeable in the year in accordance
with statutory requirements
(6) 13 0 0 0 0 7 (7)
(Amounts excluded in I&E to be included for determining movement in
general fund)
Statutory Provision for the repayment of debt - (MRP) (359) 0 0 0 0 0 (359) 359
Statutory Repayment of Debt (Finance Lease Liabilities) (380) 0 0 0 0 0 (380) 380
Voluntary provision above MRP (16) (201) 0 0 0 0 (217) 217
Contribution to disposal costs of capital sales 0 0 0 0 0 0 0 0
HRA capital receipts to housing central pool 241 0 0 0 (241) 0 0 0
Revenue contribution to finance capital (156) (4,598) 0 0 0 0 (4,754) 4,754
Employers contributions to pension schemes (2,425) (1,169) 0 0 0 0 (3,594) 3,594
Reversal of Major Repairs Allowance credited to the HRA 0 1,271 0 (1,271) 0 0 0 0
Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 (4,943) 0 0 (4,943) 4,943
Total Adjustments 1,751 31,885 0 0 (3,116) 65 30,585 (30,535)
52
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Note 9 – Transfers to/from Earmarked Reserves
These amounts are held to meet expenditure in future financial years. The
movement on these Reserve Accounts during the year have been as follows:
Balance Appropriations Balance
@ 31.03.10 To Reserve From Reserve @ 31.03.11
£'000 £'000 £'000 £'000
General Fund
Western Growth Corridor 76 48 (121) 3
2007/08 Carry Forwards 135 0 (111) 24
CMT Contingency 24 10 (34) 0
Concessionary Fares 387 192 (545) 34
Unused DRF 534 17 (291) 260
IT Security Reserve 307 100 (210) 197
Invest to Save 1,324 1,437 (321) 2,440
Maternity/Staff Advertising 114 0 (114) 0
Mayoral car 28 4 (16) 16
Member training 6 0 0 6
Managed Workspace 70 0 0 70
Office Moves 17 0 (17) 0
Car Parking Strategy 25 0 0 25
Planning Delivery Grant 52 0 0 52
Private Sector Stock
Condition Survey
61 0 0 61
Strategic Plan 7 Approved
Bids
1,331 0 (657) 674
Stronger, Safer Communities
Fund
293 73 (168) 198
Uphill/ Downhill Bus 44 19 0 63
Mercury Abatement 72 74 0 146
2008/09 Carry Forwards 155 0 (65) 90
2009/10 Carry Forwards 86 0 (67) 19
Homelessness Case Worker 0 12 0 12
Empty Shops Revival Fund 53 0 (53) 0
Boston Audit Contract 5 5 (8) 2
Think Tank 239 0 (239) 0
Commons Parking 4 2 0 6
Violent Crime 20 0 (20) 0
Backdated pay claim 135 50 (35) 150
Loss of income on asset
Sales
0 123 0 123
Grants & Contributions
Cemeteries Request 8 0 (8) 0
CCTV Maintenance 7 0 (7) 0
Supporting People 36 0 0 36
Communities Against Drugs 14 0 0 14
Empty Homes 38 0 (7) 31
Handy Persons Scheme 10 0 (5) 5
Eurosocial 52 0 (52) 0
53
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Balance Appropriations Balance
@ 31.03.10 To Reserve From Reserve @ 31.03.11
£'000 £'000 £'000 £'000
NRF Administration 26 0 (16) 10
Local Enterprise Growth
Initiative
14 0 (12) 2
Neighbourhood Renewals
Fund
25 0 (18) 7
Safer Communities 8 0 0 8
Single Pot 17 0 (17) 0
Single Regeneration Budget 23 0 (23) 0
Department of Health 304 0 (165) 139
Planning Delivery Grant 76 0 (4) 72
Horticultural Apprenticeship 12 0 (10) 2
Court Desk Advocacy 15 20 (10) 25
Gypsy Traveller 8 0 0 8
Homelessness 27 0 0 27
Local Crime Reduction 1 0 0 1
Mortgage Rescue 29 0 (2) 27
Smokefree 169 0 (165) 4
Free Swimming (DCMS) 12 0 0 12
Free Swimming (LSP) 26 5 0 31
Choice Based Lettings 94 0 0 94
Revenues & Benefits shared
service
0 42 0 42
Recycling Reserve 0 25 (10) 15
Tree Risk Assessment 0 90 0 90
Olympic Event - 2012 0 50 0 50
2010/11 Budget Carry
Forwards
0 169 (45) 124
6,648 2,567 (3,668) 5,547
HRA
Unused DRF 1,987 850 0 2,837
Office Moves - HRA 66 0 (66) 0
HRA Repairs Account 17 7,700 (6,967) 750
HRA Survey Works 139 3 (9) 133
Stock Retention 22 0 0 22
2,231 8,553 (7,042) 3,742
Insurance Fund 2,088 334 (478) 1,944
Total Earmarked Reserves 10,967 11,454 (11,188) 11,233
Insurance Reserve
The insurance fund has been set up to ensure adequate funding for the insurance
risk covered by the City of Lincoln Council. In 2010/11 the risk in respect of Public
Liability Insurance had an excess of £100,000 (per claim) with no cap ceiling. The
movements on the fund are as follows:
54
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10 2010/11
£'000 £'000
1,693 Opening Balance 2,088
(180) Funding of claims/losses (478)
575 Contributions from revenue 334
0 Release of reserve 0
2,088 Closing Balance 1,944
Note 10 – Other Operating Expenditure
2009/10 2010/11
£'000 £'000
690 Levies 705
241
Payments to the Government Housing Capital
Receipts Pool
392
(146) Gains/ losses on the disposal of non-current assets (324)
785 Total 773
Note 11 - Financing and Investment Income and Expenditure
2009/10 2010/11
£'000 £'000
1,976 Interest payable and similar charges 2,449
2,738
Pensions interest cost and expected return on pension
assets
2,366
(432) Interest Receivable and similar income (241)
0
Income and expenditure in relation to investment
properties and changes in their fair value
0
4,282 Total 4,574
Note 12 – Taxation and Non-Specific Grant Income
2009/10 2010/11
£'000 £'000
(6,004) Council tax income (6,222)
(8,561) Non domestic rates (9,247)
(2,758) Non ring-fenced government grants (1,499)
(833) Capital grants and contributions (4,591)
(18,156) Total (21,559)
55
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Note 13 – Non Current Assets including Property, Plant and Equipment, Investment Properties, Intangible Assets and Non Current Assets Held for Sale
The movement in the Council‟s Fixed Assets during the year was as follows:
Movements in 2010/11
Council
dwellings
Land &
Buildings
Vehicles
Plant &
Equip.
Community
Assets Surplus Assets
Assets Under
Construction
Property Plant
& Equipment
Investment
Property
Intangible
Assets
Non
Current
Assets Held
for Sale TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Cost or Valuation
At 1 April 2010 246,785 54,908 7,992 543 635 1,032 311,895 29,032 855 311 342,093
Additions 10,236 1,531 368 159 0 1,206 13,500 72 98 0 13,670
Donations 0 0 0 0 0 0 0 0 0 0 0
Revaluation
increases/(decreases)
recognised in the
Revaluation Reserve
(799) 723 0 0 (500) 0 (576) 0 0 0 (576)
56
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Movements in 2010/11
Council
dwellings
Land &
Buildings
Vehicles
Plant &
Equip.
Community
Assets Surplus Assets
Assets Under
Construction
Property Plant
& Equipment
Investment
Property
Intangible
Assets
Non
Current
Assets Held
for Sale TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revaluation
increases/(decreases)
recognised in the
Surplus/Deficit on the
Provision of Services
(91,741) (1,379) 0 0 0 0 (93,120) 172 0 29 (92,919)
De-recognition-
disposals (311) (121) (308) 0 0 0 (740) 0 0 (275) (1,015)
De-recognition- other 0 0 0 0 0 (313) (313) 0 0 0 (313)
Other movements in
cost or valuation 0 0 64 9 0 0 73 140 0 (140) 73
At 31 March 2011 164,170 55,662 8,116 711 135 1,925 230,719 29,276 953 65 261,013
Depreciation &
Impairments
At 1 April 2010 (1,259) (858) (3,351) 0 0 0 (5,468) 0 (319) 0 (5,787)
57
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Movements in 2010/11
Council
dwellings
Land &
Buildings
Vehicles
Plant &
Equip.
Community
Assets Surplus Assets
Assets Under
Construction
Property Plant
& Equipment
Investment
Property
Intangible
Assets
Non
Current
Assets Held
for Sale TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Depreciation for year (3,998) (913) (1,104) 0 0 0 (6,015) 0 (183) 0 (6,198)
0
Depreciation written out
to the Revaluation Reserve 0 614 0 0 0 0 614 0 0 0 614
Depreciation written out
to the Surplus/Deficit on
the Provision of Services
3,987 214 0 0 0 0 4,201 0 0 0 4,201
Impairment
losses/(reversals)
recognised in the
Revaluation Reserve
0 (1,400) 0 0 0 0 (1,400) 0 0 0 (1,400)
Impairment
losses/(reversals)
recognised in the
Surplus/Deficit on the
Provision of Services
724 0 0 0 0 0 724 0 0 0 724
De-recognition -
disposals 7 8 308 0 0 0 323 0 0 0 323
At 31 March 2011 (539) (2,335) (4,147) 0 (7,021) 0 (502) 0 (7,523)
58
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Movements in 2010/11
Council
dwellings
Land &
Buildings
Vehicles
Plant &
Equip.
Community
Assets Surplus Assets
Assets Under
Construction
Property Plant
& Equipment
Investment
Property
Intangible
Assets
Non
Current
Assets Held
for Sale TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Net book value of assets
at 31.03.11 163,631 53,327 3,969 711 135 1,925 223,698 29,276 451 65 253,490
Net book value of assets
at 31.03.10 245,526 54,050 4,641 543 635 1,032 306,427 29,032 536 311 336,306
Nature of asset holding
Owned 163,631 48,734 2,416 711 135 1,925 217,552 29,276 451 65 247,344
Finance lease 4,593 1,553 6,146 6,146
59
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Comparative movements in 2009/10
Council
dwellings
Land &
Buildings
Vehicles
Plant &
Equip.
Community
Assets Surplus Assets
Assets Under
Construction
Property Plant
& Equipment
Investment
Property
Intangible
Assets
Non
Current
Assets Held
for Sale TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Cost or Valuation
At 1 April 2009 276,952 54,238 7,195 357 150 707 339,599 24,995 750 420 365,764
Additions 13,066 12,634 776 135 0 620 27,231 6 105 0 27,342
Revaluation increases/(decreases)
recognised in the Revaluation
Reserve (2,238) (7,854) 0 0 485 0 (9,607) 0 0 0 (9,607)
Revaluation increases/(decreases)
recognised in the Surplus/Deficit on
the Provision of Services (40,648) (39) 0 0 0 0 (40,687) 326 (45) (40,406)
De-recognition - disposals (347) 0 (30) 0 0 0 (377) (400) 0 (100) (877)
60
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Comparative movements in 2009/10
Council
dwellings
Land &
Buildings
Vehicles
Plant &
Equip.
Community
Assets Surplus Assets
Assets Under
Construction
Property Plant
& Equipment
Investment
Property
Intangible
Assets
Non
Current
Assets Held
for Sale TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
De-recognition - other 0 0 0 0 0 (123) (123) 0 0 0 (123)
Other movements in cost or
valuation 0 (4,070) 51 51 0 (172) (4,140) 4,104 0 36 0
At 31 March 2010 246,785 54,909 7,992 543 635 1,032 311,896 29,032 855 311 342,093
Depreciation & Impairments
At 1 April 2009 (2,235) (195) (2,324) (4,754) (58) (163) (4,975)
Depreciation for year (5,940) (958) (1,051) (7,949) (3) (156) (8,108)
Depreciation written out to the
Revaluation Reserve 2,154 295 2,449 2,449
Depreciation written out to the
Surplus/Deficit on the Provision of
Services 3,778 3,778 61 3,839
61
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Comparative movements in 2009/10
Council
dwellings
Land &
Buildings
Vehicles
Plant &
Equip.
Community
Assets Surplus Assets
Assets Under
Construction
Property Plant
& Equipment
Investment
Property
Intangible
Assets
Non
Current
Assets Held
for Sale TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Impairment losses/(reversals)
recognised in the Revaluation
Reserve 0 0
Impairment losses/(reversals)
recognised in the Surplus/Deficit on
the Provision of Services 978 978 978
De-recognition - disposals 7 24 31 31
De-recognition - other 0 0
At 31 March 2010 (1,258) (858) (3,351) 0 0 0 (5,467) 0 (319) 0 (5,786)
Net book value of assets at
31.03.10 245,527 54,051 4,641 543 635 1,032 306,427 29,032 536 311 336,307
Net book value of assets at
31.03.09 274,717 54,043 4,871 357 150 707 334,845 24,936 587 420 360,789
62
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Fixed Asset Valuation
The Authority carries out a rolling programme that ensures that all Property, Plant
and Equipment and Investment Properties required to be measured at fair value are
re-valued at least every five years. The statement below shows the progress of the
Council‟s rolling programme of fixed asset revaluations.
Council
Dwellings
Operational
Land &
Buildings
Vehicles Plant
& Equip.
Investment
Properties
£'000 £'000 £'000 £'000
Valuation at historical cost 8,534
Valued at current value as at:
01/04/10 169,280 55,755 29,032
01/04/09 247,721 43,418 26,982
01/04/08 291,936 39,471 31,320
01/04/07 295,046 33,945 26,764
01/04/06 300,251 33,116 27,874
The valuations of the Council‟s freehold and leasehold properties have been carried
out in accordance with the Statements of Asset Valuation Practice and Guidance
Notes of the Royal Institute of Chartered Surveyors. All valuations are either
undertaken by the following Council Officers, or by the District Valuer.
Principal Property Surveyor Mr P Clifton MRICS
Senior Property Surveyor Mr A Wiswould MRICS
Property Surveyor Mrs L A East MRICS Fixed Assets Depreciation
Tangible Fixed Assets
Depreciation, as stated in the Accounting Policies, is calculated on a straight-line
basis. Non-operational assets are treated as investment properties and as such are
not depreciated. The standard useful lives of assets, used for depreciation purposes
(unless overwritten by asset valuations), are as follows:
Category Of Asset Useful Economic Life
Council Dwellings 34 years
Other Land & Buildings
- Council Buildings 50 years
- Car Parks 100 years
- Cemeteries 50 years
63
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
- Crematorium 100 years
- Community Centres 50 years
- Offices 50 years
- Depots & Workshops 50 years
- Public Conveniences 50 years
- Recreation Grounds 50 years
- Sports Centres 50 years
Vehicles, Plant & Equipment
- Computers 5 years
- Equipment 10 years
- Fixtures and Fittings 5 years
- Plant 7/10 years
- Vehicles 5/7 years
Intangible Assets
Intangible fixed assets are amortised in the Income and Expenditure Account on a
straight-line basis, as stated in the Accounting Policies. The standard useful life, used
for amortisation purposes is:
Category Of Asset Useful Economic Life
Intangible Asset
- Software 5 years
Note 14 – Investment Properties
Movements in Investment Properties are shown in note 13, page 55.
The following items of income and expenditure have been accounted for in the
Comprehensive Income and Expenditure Statement:
2009/10 2010/11
£'000 £'000
1,123 Rental income from investment property 1,077
(412)
Direct operating expenses arising from investment
property
(452)
711 Net gain/(loss) 625
There are no restrictions on the Council‟s ability to realise the value inherent in its
investment property or on the Council‟s right to the remittance of income and the
proceeds of disposal. The Council has no contractual obligations to purchase,
construct or develop investment property or repairs, maintenance or enhancement. Note 15 – Intangible Assets
Movements in Intangible Assets are shown in note 13, page 55. Note 16 – Financial Instruments
64
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
The borrowings and investments disclosed in the Balance Sheet are made up of the
following categories of financial instruments:
Long-Term Current
31/03/11 31/03/10 31/03/11 31/03/10
£’000 £’000 £’000 £’000
Financial Liabilities (principal amount)* 50,447 50,423 43 33
Accrued Interest due within 12 months 0 0 922 835
Financial Liabilities at Amortised Cost 50,447 50,423 43 33
Financial Liabilities at Fair Value through
the CIES**
0 0 0 0
Total Borrowings 50,447 50,423 965 868
Financial Assets (principal amount)* 449 1,449 15,297 15,111
Accrued Interest due within 12 months 0 0 282 633
Loans and Receivables 0 1,000 15,297 15,111
Available-for-Sale Financial Assets 449 449 0 0
Financial Assets at Fair Value through the
CIES
0 0 0 0
Total Investments 449 1,449 15,579 15,744
* This is the actual principal value of loans/investments not arising from any adjustments. From
1st April 2009 the carrying amounts of liabilities and assets in the Balance Sheet exclude
accrued interest due within the next 12 months i.e. principal +/- adjustments for breakage
costs or stepped rates if applicable. Accrued interest is shown separately under short-term
investments/borrowing if due within one year.
** Fair value has been measured by direct reference to published price quotations in an
active market; and/or estimated using a valuation technique.
Financial Instrument Gains/Losses
The gains and losses recognised in the Comprehensive Income and Expenditure
Statement in relation to financial instruments are made up as follows:
2010/11 Financial
Liabilities
Financial Assets Total
65
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Liabilities
measured
at
amortised
cost
Loans and
Receivables
Available-
for-Sale
Assets
Fair
Value
through
the CIES
£’000 £’000 £’000 £’000 £’000
Comprehensive Income &
Expenditure Statement
Interest expense 2,449 0 0 0 2,449
Impairment losses 0 0 0 0 0
Interest payable and similar
charges
2,449 0 0 0 2,449
Interest income 0 (265) (14) 0 (279)
Interest and investment income 0 (265) (14) 0 (279)
Gains on revaluation 0 0 0 0 0
Surplus arising on revaluation of
Financial assets
0 0 0 0 0
Net (gain)/loss for the year 2,449 (265) (14) 0 2,170
2009/10 Financial
Liabilities
Financial Assets Total
Liabilities
measured
at
amortised
cost
Loans and
Receivables
Available-
for-Sale
Assets
Fair
Value
through
the CIES
£’000 £’000 £’000 £’000 £’000
Comprehensive Income &
Expenditure Statement
Interest expense 1,976 0 0 0 1,976
Impairment losses 0 0 0 0 0
Interest payable and similar
charges
1,976 0 0 0 1,976
Interest income 0 (434) (14) 0 (448)
Interest and investment income 0 (434) (14) 0 (448)
Gains on revaluation (429) (429)
Surplus arising on revaluation of
Financial assets
0 0 (429) 0 (429)
Net gain/loss for the year 1,976 (434) (443) 0 1,099
Fair Value of Assets and Liabilities carried at Amortised Cost
66
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Financial liabilities and financial assets represented by loans and receivables are
carried on the Balance Sheet at amortised cost. Their fair value can be assessed by
calculating the present value of the cash flows that take place over the remaining
life of the instruments, using the following assumptions:
For loans from the Public Works Loan Board (PWLB) and other loans payable,
premature repayments rates from the PWLB have been applied to provide
the fair value under PWLB debt redemption procedures;
For loans receivable prevailing benchmark market rates have been used to
provide the fair value;
No early repayment or impairment is recognised;
Where an instrument has a maturity of less than 12 months, or is a trade or
other receivable, the fair value is taken to be the principal outstanding or the
billed amount;
The fair value of trade and other receivables is taken to be the invoiced or
billed amount.
The fair values calculated are as follows: Financial Liabilities
31/03/10 31/03/11
Carrying
Amount
Fair Value Carrying
Amount
Fair Value
£’000 £’000 £’000 £’000
33,862 35,158 PWLB Debt 33,862 36,482
16,000 17,139 Money Market Debt 16,000 19,162
561 353 Stock 561 369
33 33 Other 57 57
50,456 52,683 Total Debt 50,490 56,070
9,324 9,324 Creditors 9,095 9,095
59,780 62,007 Total Financial Liabilities 59,585 65,165
The fair value is greater than the carrying amount because the Council‟s portfolio of
loans includes a number of fixed rate loans where the interest rate payable is higher
than the rates available for similar loans in the market at the Balance Sheet date.
This is to be expected given that the current rates of interest are at a historically low
level.
Financial Assets
31/03/10 31/03/11
67
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Carrying
Amount
Fair
Value Carrying
Amount
Fair
Value
£’000 £’000 £’000 £’000
15,111 15,553 Money Market Investments <1 year 15,297 15,579
1,000 1,257 Money Market Investments >1 year 0 0
16,111 16,810 Total Investments 15,297 15,579
7,492 7,492 Debtors 6,358 6,358
23,603 24,302 Total Loans and receivables 21,655 21,937
The differences are attributable to fixed interest instruments payable being held by
the Authority, whose interest rate is higher than the prevailing rate estimated to be
available at 31 March. This increases the fair value of financial assets and raises the
value of loans and receivables.
The fair values for financial liabilities have been determined by reference to the
(PWLB) redemption rules and prevailing PWLB redemption rates as at each Balance
Sheet date, and include accrued interest. The fair values for non-PWLB debt have
also been calculated using the same procedures and interest rates and this
provides a sound approximation for fair value for these instruments.
Similarly, the fair values for loans and receivables have also been determined by
reference to the PWLB redemption rules, which provide a good approximation for
the fair value of a financial instrument and includes accrued interest. The
comparator market rates prevailing have been taken from indicative investment
rates at each Balance Sheet date. In practice, rates will be determined by the size
of the transaction and the counterparty, but it is impractical to use these figures,
and the difference is likely to be immaterial. Note 17 – Inventories
In undertaking its work the Council holds reserves of inventories together with
amounts of uncompleted work (work in progress). The figure shown in the Balance
Sheet may be subdivided as follows:
Consumable
Stores
City Maintenance
Services Materials
City Maintenance
Services Work in
Progress Total
2010/11 2009/10 2010/11 2009/10 2010/11 2009/10 2010/11 2009/10
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance
outstanding at
the start of the
year 55 52 87 52 41 45 183 149
Purchases 4 16 0 37 0 0 4 53
68
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Consumable
Stores
City Maintenance
Services Materials
City Maintenance
Services Work in
Progress Total
2010/11 2009/10 2010/11 2009/10 2010/11 2009/10 2010/11 2009/10
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Recognised as
an expense in
the year (6) (14) (19) (1) (22) (4) (47) (19)
Written off
balances 0 0 0 0 0 0 0 0
Balance
outstanding at
the year-end 53 54 68 88 19 41 140 183
Note 18 – Debtors
Debtors listed under current assets are monies due which the Council expects to
collect within one year of the Balance Sheet date and are analysed as follows:
31/03/10 31/03/11
£’000 £’000
4,642 Central Government Bodies 2,190
997 Other Local Authorities 1,015
40 NHS Bodies 65
0 Public Corporations and Trading Funds 0
6,400 Other Entities and Individuals 6,068
12,079 Total 9,338
Debtors balances are shown gross of impairment of doubtful debts (£2.147m in
2010/11, £2.163m in 2009/10) Note 19 – Cash and Cash Equivalents
The balance of Cash and Cash Equivalents is made up of the following elements:
31/03/10 31/03/11
£’000
£’000
0 Cash held by the Council 1
(978) Bank Current accounts 395
(978) 396
Note 20 – Assets Held for Sale
Movements in Assets Held for Sale are shown in note 13, page 55. Note 21 – Creditors
Creditors shown as current liabilities are amounts payable by the Council within one
year of the Balance Sheet date and are analysed as follows:
69
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
31/03/10 31/03/11
£’000 £’000
(1,069) Central Government Bodies (1,371)
(541) Other Local Authorities (426)
(5) NHS Bodies 0
(83) Public Corporations and Trading Funds (30)
(7,768) Other Entities and Individuals (7,755)
(9,466) Total (9,582)
Note 22 – Provisions
These amounts are set aside to provide for potential liabilities relating to specific
occurrences and comprise the following balances:
Balance
31/03/10
£’000
Transfers
(From)
£’000
Transfers
To
£’000
Balance
31/03/11
£’000
Cory Pension (165) 0 0 (165)
CLAU Legacy Work (7) 0 0 (7)
Licensing Application Fee (9) 0 0 (9)
Environmental Searches (20) 0 0 (20)
CoLC Legal Dispute (37) 37 0 0
Asbestos Claims (35) 22 0 (13)
Business Rates Rateable
Value reduction
– Think Tank
0 0 (23) (23)
Business Rates Rateable
Value reduction
– The Terrace
0 0 (35) (35)
Accumulated Absences (203) 203 (274) (274)
Total (476) 262 (332) (545)
Note 23 – Usable Reserves
Movements in the Councils usable reserves are detailed in the Movement in
Reserves Statement and Note 9. Note 24 – Unusable Reserves
The Council keeps a number of unusable reserves in the Balance Sheet. Some are
required to be held for statutory reasons; some are needed to comply with proper
accounting practice.
70
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Reserve Balance
31/03/10
Net
Movement
in Year
Balance
31/03/11
Purpose of Reserve Further Details of
Movements
£'000 £'000 £'000
Revaluation
Reserve 12,290 (1,643) 10,647 Store of gains on
revaluation of fixed
assets
a) below
Capital Adjustment
Account
267,134 (81,845) 185,289 Store of capital
resources set aside to
meet past
expenditure
b) below
Financial
Instruments
Adjustment
Account
(739) 234 (505) Balancing
mechanism between
the rates at which
gains and losses are
recognised under the
Code of Practice
c) below
Deferred Capital
Receipts
66 (9) 57 Expected future
repayments from
sales of assets
received in
instalments
h) below
Available for Sale
Financial
Instruments
Account
430 0 430 Store of gains on
revaluation of
investments not yet
realised through sales
d) below
Collection Fund
Adjustment
Account
86 (21) 65
Store of Council‟s
share of
accumulated
surpluses and deficits
on the Collection
Fund
e) below
Pensions Reserve (78,277) 38,950 (39,327) Balancing account
to allow inclusion of
Pensions Liability in
the Balance Sheet
Note 43 to the
financial
statements
71
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Reserve Balance
31/03/10
Net
Movement
in Year
Balance
31/03/11
Purpose of Reserve Further Details of
Movements
£'000 £'000 £'000
Accumulated
Absences Account
(203) (71) (274) Absorbs the
differences that
would otherwise arise
on the General Fund
balance from
accruing for
compensated
absences earned but
not taken in the year
(i.e. annual leave
entitlement carried
forward at 31 March
200,787 (44,405) 156,382
a) Revaluation Reserve
The Revaluation Reserve contains the gains made by the Authority arising from
increases in the value of its Property, Plant and Equipment and Intangible Assets. The
balance is reduced when assets with accumulated gains are:
re-valued downwards or impaired and the gains are lost
used in the provision of services and the gains are consumed through
depreciation, or
disposed of and the gains are realised.
The Reserve contains only revaluation gains accumulated since 1 April 2007, the
date that the Reserve was created.
2009/10
£’000
2010/11
£’000
(19,971) Balance 1 April (12,290)
(1,920) Upward Revaluation of assets (1,337)
9,079 Downward revaluation of assets and impairment losses
not charged to the Surplus/Deficit on Provision of
Services
2,699
7,159 Surplus or deficit on revaluation of non-current assets not
posted to the Surplus or Deficit on the Provision of
Services
1,362
463 Difference between fair value depreciation and
historical cost depreciation
281
72
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
59 Accumulated gains on assets sold or scrapped
0
522 Amount written off to the Capital Adjustment Account
281
(12,290) Balance 31 March
(10,647)
b) Capital Adjustment Account
The Capital Adjustment Account absorbs the timing differences arising from the
different arrangements for accounting for the consumption of non-current assets
and for financing the acquisition, construction or enhancement of those assets
under statutory provisions. The Account is debited with the cost of acquisition,
construction or enhancement as depreciation, impairment losses and amortisations
are charged to the Comprehensive Income and Expenditure Statement (with
reconciling postings from the Revaluation Reserve to convert fair value figures to a
historical cost basis). The Account is credited with the amounts set aside by the
Authority as finance for the costs of acquisition, construction and enhancement.
The Account contains accumulated gains and losses on Investment Properties and
gains recognised on donated assets that have yet to be consumed by the Authority.
The Account also contains revaluation gains accumulated on Property, Plant and
Equipment before 1 April 2007, the date that the Revaluation Reserve was created
to hold such gains.
Note 7 provides details of the source of all the transactions posted to the Account,
apart from those involving the Revaluation Reserve.
2009/10
£’000
2010/11
£’000
(296,861) Balance 1 April (267,134)
Reversal of items relating to capital expenditure
debited or credited to the Comprehensive Income
and Expenditure Statement:
8,108 - Charges for depreciation and amortisation of non-
current assets
6,198
35,588 - Revaluation losses and impairments on Property,
Plant and Equipment
87,993
1,059 - Revenue expenditure funded from capital under
statute
3,478
910 - Amounts of non-current assets written off on
disposal or sale as part of the gain/loss on disposal to
the Comprehensive Income and Expenditure
Statement
693
73
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10
£’000
2010/11
£’000
1 Other adjustments
(9)
45,666
98,353
(463) Adjusting amounts written out of the Revaluation
Reserve
(281)
45,203 Net written out amount of the cost of non-current
assets consumed in the year
98,072
Capital Financing applied in year:
(3,990) Use of Capital Receipts to finance new capital
expenditure
(3,861)
(4,943) Use of the Major Repairs Reserve to finance new
capital expenditure
(4,983)
(4,754) Capital expenditure charged against the General
Fund and HRA balances
(2,134)
(833) Application of Capital Grants to finance new capital
expenditure
(4,076)
(956) Statutory Provision for the financing of capital
investment charged against the General Fund and
HRA balances (MRP/VRP)
(1,173)
(15,476) (16,227)
(267,134) Balance 31 March
(185,289)
c) Financial Instruments Adjustment Account
The Financial Instruments Adjustment Account provides a balancing mechanism
between the rates at which gains and losses (such as premiums on the early
repayment of debt) are recognised under the Code of Practice and are required by
statute to be met from the General Fund and HRA balances.
2009/10
£’000
2010/11
£ ’000
1,052 Balance 1 April 739
58 Proportion of discounts incurred in previous financial
years to be credited to the General fund Balance in
accordance with statutory requirements
51
74
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
(371) Proportion of premiums incurred in previous financial
years to be charged against the General fund Balance
in accordance with statutory requirements
(285)
739 Balance 31 March 505
d) Available for Sale Financial Instruments Account
The Available for Sale Financial Instruments Account contains the gains and losses
arising from movements in fair value of Available for Sale investments, which are
recognised in the Comprehensive Income and Expenditure Statement.
2009/10
£’000
2010/11
£’000
0 Balance 1 April (430)
430 Gain on revaluations in year 0
(430) Balance 31 March (430)
e) Collection Fund Adjustment Account
The Collection Fund Adjustment Account was introduced on 1 April 2009 to comply
with the new accounting requirements for the Collection Fund contained within the
Statement of Recommended Practice 2009/10 (SORP 2009). The difference between
accrued income for the year as shown in the Income and Expenditure Account and
the amount required to be credited to the General Fund is taken to the Collection
Fund Adjustment Account. The balance on the account represents the Council‟s
share of the accumulated surpluses and deficits on the Collection fund at the
Balance Sheet date.
2009/10
£’000
2010/11
£’000
20 Balance 1 April (86)
(106) Council‟s share of (surplus)/deficit for the year 21
(86) Balance 31 March (65)
f) Usable Capital Receipts
These are cash receipts from the sale of Council assets, which have not yet been
used to finance capital expenditure.
2009/10
£’000 2010/11
£’000
(9,753) Balance 1 April (6,636)
(993) Capital Receipts in year (1,017)
(10,746) (7,653)
75
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Less:
241 Capital Receipts Pooled 392
3,991 Capital Receipts used for financing 3,861
(122) Capital Receipts previously used for financing released 0
(6,636) Balance 31 March (3,400)
g) Accumulated Absences Account
The Accumulated Absences Account absorbs differences that would otherwise arise
on the General Fund Balance from accruing for compensated absences earned
but not taken in year, e.g. annual leave entitlement carried forward at 31 March.
Statutory arrangements require that the impact on General Fund Balance is
neutralised by transfers to or from this account.
2009/10
£’000
2010/10
£’000
(196) Balance 1 April (203)
196 Settlement or cancellation of accrual made at the end
of the preceding year
203
(203) Amounts accrued at the end of the current year (274)
7 Amount by which officer remuneration charged in the
Comprehensive Income and Expenditure Statement on
an accruals basis is different from remuneration
chargeable in the year in accordance with statutory
requirements
71
(203) Balance 31 March (274)
h) Deferred Capital Receipts
This account contains the expected future repayments of capital from sales of
assets which will be received in instalments over an agreed period of time. They
arise principally from mortgages on sold Council Houses. When made, these
payments are regarded as being of a capital nature and transactions during the
year were as follows:
2009/10
£’000
2010/11
£’000
(81) Balance 1 April (66)
15 Council‟s share of (surplus)/deficit for the year 9
(66) Balance 31 March (57)
76
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Note 25 – Cash Flow Statement - Operating Activities The cash flows for operating activities include the following items:
2009/10 2010/11
£'000 £'000
(726) Interest received (592)
1,825 Interest paid 2,353
Note 26 – Cash Flow Statement – Adjustment to surplus or deficit on provision of services for non-cash movements 2009/10 2010/11
£'000 £'000
(8,109) Depreciation (6,198)
(35,952)
Revaluation losses and impairments recognised in
Comp I&E
(88,883)
363
Revaluation gains and reversal of impairments
recognised in Comp I&ES
888
(101)
Contribution (to)/from provisions
(69)
(685) Movement on Pension Reserve 5,914
(13)
RTB admin charges deducted for purposes of pooling
(19)
(847)
Carrying amount of non-current assets sold
(692)
134 Other non-cash transactions (983)
(1,485) (Decrease)/increase in debtors (1,456)
1,213 (Increase)/decrease in creditors 2,860
34 (Decrease)/increase in stock (43)
(462) Movement in Collection Fund balances (1,228)
(241) Housing pooled capital receipts (392)
(46,151) (90,301)
77
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Note 27 – Cash Flow Statement – Adjustment to surplus or deficit on provision of services for non-cash movements 2009/10 2010/11
£'000 £'000
1918 Increase in short term investments 186
(3,999) Decrease in long term investments (1,000)
1,007
Proceeds from sale of PPE, investment property and
intangible assets
1,040
833 Capital Grants recognised in CI&ES 4,899
(1) (Increase)/decrease in short term borrowing (97)
(242) 5,028
Note 28 – Cash Flow Statement - Investing Activities 2009/10 2010/11
£'000 £'000
27,673
Purchase of property, plant and equipment, investment
property and intangible assets
13,774
(991) Proceeds from sale of non-current assets (1,040)
(2,586) Other receipts from investing activities (760)
24,096 Net cash flows from investing activities 11,974
Note 29 – Cash Flow Statement - Financing Activities 2009/10 2010/11
£'000 £'000
(12,500) Cash receipts of short-term and long-term borrowing
(39)
0 Repayments of short and long-term borrowing 5
567
Cash payments for the reduction of outstanding
liabilities relating to finance leases
517
(11,933) Net cash flows from investing activities 483
78
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Note 30 – Amounts Reported for Resource Allocation Decisions 2010/11
Service Information
Corporate
Chief
Executive
Directorate of
Development &
Environmental
Services
Directorate of
Housing &
Community
Services
Directorate of
Resources HRA Total
£000s £000s £000s £000s £000s £000s £000s
Fees, charges & other service income 0 (2,161) (6,617) (10,835) (13,231) (23,899) (56,743)
Government grants (4,749) 0 (43) (121) (38,505) (307) (43,725)
Total Income (4,749) (2,161) (6,660) (10,956) (51,736) (24,206) (100,468)
Employee expenses 437 1,273 3,660 3,800 5,212 3,148 17,530
Other operating expenses (8,623) 516 2,655 13,592 42,504 97,055 147,699
Support Service Recharges 218 627 5,698 3,765 6,496 1,769 18,573
Total operating expenses (7,968) 2,416 12,013 21,157 54,212 101,972 183,802
Net Cost of Services (12,717) 255 5,353 10,201 2,476 77,766 83,334
Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure
Statement
£000s
Cost of Services in Service Analysis 83,334
Add amounts not reported in service
management accounts 4,861
Net Cost of Services in Comprehensive
Income and Expenditure Statement 88,195
79
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Reconciliation to Subjective Analysis
Service
Analysis
Services not
in Analysis
Note reported in
service
management
a/c's
Not included
in CIES
Allocation of
recharges
Net Cost of
Services
Corporate
Amounts Total
£000s £000s £000s £000s £000s £000s £000s £000s
Fees, charges & other service income (56,743) 0 1,392 0 22,012 (33,339) 0 (33,339)
Surplus or deficit on associates and joint
ventures 0 0 0 0 0 0 (540) (540)
Interest and investment income 0 0 0 0 0 0 (241) (241)
Income from council tax 0 0 0 0 0 0 (6,222) (6,222)
Government grants and contributions (43,725) 0 4,749 0 0 (38,976) (15,338) (54,314)
Pension - expected return on assets 0 0 0 0 0 0 (6,137) (6,137)
Total Income (100,468) 0 6,141 0 22,012 (72,315) (28,478) (100,793)
Employee expenses 17,530 0 (54) 0 0 17,476 0 17,476
Other service expenses 147,699 0 (1,053) 0 (16,668) 129,978 0 129,978
Support Service recharges 18,573 0 (321) 0 (5,344) 12,908 0 12,908
Depreciation, amortisation and
impairment 0 0 148 0 0 148 0 148
Interest Payments 0 0 0 0 0 0 2,449 2,449
Precepts & Levies 0 0 0 0 0 0 705 705
Payments to Housing Capital Receipts Pool 0 0 0 0 0 0 392 392
Gain or Loss on Disposal of Fixed Assets 0 0 0 0 0 0 (324) (324)
Pension - interest on pension liabilities 0 0 0 0 0 0 8,503 8,503
Total operating expenses 183,802 0 (1,280) 0 (22,012) 160,510 11,725 172,235
Surplus or deficit on the provision of
services 83,334 0 4,861 0 0 88,195 (16,753) 71,442
80
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10 comparator figures
Service Information
Corporate
Chief
Executive
Directorate of
Development &
Environmental
Services
Directorate of
Housing &
Community
Services
Directorate of
Resources HRA Total
£000s £000s £000s £000s £000s £000s £000s
Fees, charges & other service income (887) (2,012) (8,956) (9,402) (15,093) (23,419) (59,769)
Government grants (1,266) 0 (313) (535) (35,931) 0 (38,045)
Total Income (2,153) (2,012) (9,269) (9,937) (51,024) (23,419) (97,814)
Employee expenses 381 1,294 3,719 3,506 5,182 3,008 17,090
Other operating expenses 1,256 296 3,815 10,488 41,193 48,675 105,723
Support Service Recharges 1,007 653 5,931 3,776 6,629 4,496 22,492
Total operating expenses 2,644 2,243 13,465 17,770 53,004 56,179 145,305
Net Cost of Services 491 231 4,196 7,833 1,980 32,760 47,491
Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure
Statement
£000s
Cost of Services in Service Analysis 47,491
Add amounts not reported in service
management accounts 2,159
Net Cost of Services in Comprehensive
Income and Expenditure Statement 49,650
81
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Reconciliation to Subjective Analysis
Service
Analysis
Services not
in Analysis
Note reported in
service
management
a/c'
Not included
in CIES
Allocation of
recharges
Net Cost
of Services
Corporate
Amounts Total
£000s £000s £000s £000s £000s £000s £000s £000s
Fees, charges & other service income (59,769) 0 1,707 0 22,685 (35,377) (35,377)
Surplus or deficit on associates and joint
ventures 0 0 0 0 0 0 (762) (762)
Interest and investment income 0 0 0 0 0 0 (432) (432)
Income from council tax 0 0 0 0 0 0 (6,004) (6,004)
Government grants and contributions (38,045) 0 1,615 0 0 (36,430) (12,153) (48,583)
Pension - expected return on assets 0 0 0 0 0 0 (4,374) (4,374)
Total Income (97,814) 0 3,322 0 22,685 (71,807) (23,724) (95,531)
Employee expenses 17,090 0 (79) 0 0 17,011 0 17,011
Other service expenses 105,723 0 (1,171) 0 (17,160) 87,392 0 87,392
Support Service recharges 22,492 0 (270) 0 (5,525) 16,697 0 16,697
Depreciation, amortisation and
impairment 0 0 357 0 0 357 0 357
Interest Payments 0 0 0 0 0 0 1,976 1,976
Precepts & Levies 0 0 0 0 0 0 690 690
Payments to Housing Capital Receipts Pool 0 0 0 0 0 0 241 241
Gain or Loss on Disposal of Fixed Assets 0 0 0 0 0 0 (146) (146)
Pension - interest on pension liabilities 0 0 0 0 0 0 7,112 7,112
Total operating expenses 145,305 0 (1,163) 0 (22,685) 121,457 9,873 131,330
Surplus or deficit on the provision of
services 47,491 0 2,159 0 0 49,650 (13,851) 35,799
82
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Note 31 – Trading Operations
The Council operates City Maintenance Services (CMS), which carries out day to
day maintenance on Council Housing and other public buildings as well as
environmental works, street furniture etc. The Council also owns and manages a
fruit, vegetable and retail market situated within the City Centre and also operates
and manages a bus station and several car parks located throughout the city. It
also manages a number of industrial estates and commercial properties. The Printing
Unit provided graphic design, general printing and duplicating to both internal and
external clients.
2010/11 2009/10
Exp. Inc. Net Exp. Inc. Net
£'000 £'000 £'000 £'000 £'000 £'000
Markets * 224 (277) (53) 254 (262) (8)
Car Parks ** 1,790 (3,979) (2,189) 1,799 (3,938) (2,139)
(Surplus)/ Deficit
applicable to a service
2,014 (4,256) (2,242) 2,053 (4,200) (2,147)
CMS 5,496 (5,422) 74 5,606 (5,464) 142
City Bus Station 176 (78) 98 177 (73) 104
Industrial Estates 259 (383) (124) (73) (437) (510)
Lincoln Properties 290 (882) (592) 176 (700) (524)
Printing Unit *** 3 0 3 191 (165) 26
(Surplus)/ Deficit not
applicable to a service
6,224 (6,765) (541) 6,077 (6,839) (762)
Total (Surplus)/Deficit 8,238 (11,021) (2,783) 8,130 (11,039) (2,909)
2009/10 comparator figures have been restated under IFRS
* Trading Operations included within Cultural, Environmental and Planning Services
* * Trading Operations included within Highways, Roads and Transport Services
* * * Service discontinued at the end of 2009/10, residual costs only in 2010/11
Note 32 – Agency Services
In accordance with the Code of Practice on Local Authority Accounting in the UK,
the collection and distribution of National Non-Domestic Rates (NNDR) and Council
Tax is deemed to be an agency arrangement. The cost of collection of NNDR and
the surplus or deficit on the Collection Fund for the year, are shown in the Collection
Fund Statement on page 121. Note 33 – Members Allowances
The Local Authorities (Members‟ Allowances)(Amendment) Regulations 1995 requires
local authorities to publish the amounts paid to members made under the members‟
allowance scheme.
The payments made to the City Council members during 2010/11 totalled £215,516
(£213,767 in 2009/10).
83
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2 0 1 0 / 1 1
Payments are defined as:
i. Basic Allowance
ii. Special Responsibility Allowance. Note 34 – Officers Remuneration
The Accounts and Audit Regulations 2011 requires the Council to disclose
remuneration paid to senior employees.
For the purposes of the regulation senior employees are persons whose salary is in
excess of £150,000 per year or whose salary is £50,000 or more and is deemed to
have responsibility for the management of the Council to the extent that they have
the power to direct or control the major activities. The remuneration paid to the
Council‟s senior employees is as follows:
Officers’ Emoluments – Senior Employees
2010/11
Post Title Salary Bonuses
Expense
Allowances
Benefits in
Kind
Total
Remuneration
excluding
Pension
Contributions
2010/11
Pension
Contributions
Total
Remuneration
including
Pension
Contributions
2009/10
£ £ £ £ £ £ £
Chief Executive 118,911 0 2,590 0 121,501 27,944 149,445
Director of Housing
& Community
Services 86,235 0 1,669 0 87,904 20,265 108,169
Director of
Development &
Environmental
Services 86,235 0 1,813 0 88,048 20,265 108,313
Director of
Resources 86,235 0 2,434 0 88,669 20,265 108,934
Total 377,616 0 8,506 0 386,122 88,739 474,861
2009/10
Post Title Salary Bonuses
Expense
Allowances
Benefits in
Kind
Total
Remuneration
excluding
Pension
Contributions
2009/10
Pension
Contributions
Total
Remuneration
including
Pension
Contributions
2009/10
£ £ £ £ £ £ £
Chief Executive 117,674 0 1,502 0 119,176 26,977 146,153
84
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10
Post Title Salary Bonuses
Expense
Allowances
Benefits in
Kind
Total
Remuneration
excluding
Pension
Contributions
2009/10
Pension
Contributions
Total
Remuneration
including
Pension
Contributions
2009/10
£ £ £ £ £ £ £
Director of Housing
& Community
Services 86,235 0 2,116 0 88,351 20,265 108,616
Director of
Development &
Environmental
Services 86,235 0 1,966 0 88,201 20,265 108,466
Director of
Resources 86,235 0 1,170 0 87,405 20,265 107,670
Total 376,379 0 6,754 0 383,133 87,772 470,905
The number of Council employees, inclusive of the senior employees in the table
above, receiving more than £50,000 remuneration for the year (excluding
employer‟s pension contributions) were paid the following amounts:
Remuneration Band Number of
£ Employees
2010/11 2009/10
50,000 - 54,999 3 4
55,000 - 59,999 4 5
60,000 - 64,999 5 3
65,000 – 69,999 1 0
70,000 – 74,999 0 0
75,000 – 79,999 0 0
80,000 – 84,999 0 1
85,000 – 89,999 3 3
90,000 – 94,999 0 0
95,000 – 99,999 0 0
100,000 – 104,999 1 0
105,000 – 109,999 0 0
110,000 – 114,999 0 0
115,000 – 119,999 0 1
120,000 – 124,999 1 0
Note 35 – External Audit Costs
In 2010/11 the following fees relating to External Audit and Inspection were incurred
and paid to the Audit Commission:
2009/10 2010/11
£'000 £'000
85
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
101 Fees Payable with regard to external audit services
carried out by the appointed auditor
99
8 Fees payable in respect of statutory inspection 0
23 Fees payable for the certification of grant claims and
returns
25
0 Fees payable for other services 0
132 Total 124
Note: the fees relating to grant claims can vary from year to year depending on the
number of claims to be audited. The figure for 2010/11 is an estimate, as the work will
be carried out in the period August to December 2011. Note 36 – Grant Income
The Council credited the following grants, contributions and donations to the
Comprehensive Income and Expenditure Statement in 2010/11.
Credited to Taxation and Non Specific Grant Income
2009/10 2010/11
£'000 £'000
(1,976) Revenue Support Grant (1,343)
(258) Safer Stronger Communities 0
0 LPSA2 performance grant (60)
(49) Cohesion (57)
(22) Climate Change Levy (23)
(55) Local Area Business Growth Incentive 0
(398) Housing and Planning Delivery Grant 0
0 Other Government Grants (16)
0 Pathways Centre for the homeless (1,960)
0 Private Sector Decent Homes (563)
0 Disabled Facilities Grants (252)
0 Energy efficiency grants (36)
(42) Sports Facilities & play areas (443)
0 Affordable Housing (70)
0 Usher Gallery (1,094)
0 Public Realm Contribution (111)
0 Natural England - Open spaces & parks (62)
(274) Decent Homes 0
(142) Innovation Centre 0
(95) SDO Creative Industries/Terrace 0
(19) CCTV and security schemes 0
(113) Telephone and IT systems 0
(44) DEFRA Green Waste (GE0153) 0
(25) Uphill Down Hill Link (GT0853) 0
(28) Walk & Ride Vehicle 0
(26) Brayford Moorings 0
(25) Other capital grants 0
(3,591) Total (6,090)
86
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10 Credited to Services 2010/11
£'000 £'000
(12,483) Rent Allowances (14,216)
(7,370) Council Tax Benefit (7,803)
(13,707) Rent Rebates (14,163)
(55) Discretionary Housing Payments (35)
(998) Housing Benefit Administration (907)
(155) Business Rates Administration (153)
(398) Housing & Planning Delivery Grant 0
(554) Concessionary Fares (766)
(175) Communities for Health 0
(152) Homelessness (93)
(200) Smokefree 0
(53) Empty Shops 0
0 New Burdens Grant Determination (34)
(123) Innovation Lincolnshire (41)
(100) DCLG - Outreach 0
(220) Interreg IIC 0
(94) Choice Based Lettings 0
(103)
Department for Culture, Media & Sport - Free
Swimming Grant (25)
(69) Lincolnshire Sports Partnership - Free Swimming Grant (20)
(29) Mortgage Rescue Scheme 0
(70) English Heritage 0
(42) Supporting People (42)
0 UK Parliamentary Elections (90)
0 Decent Homes (307)
(128) Other Grants (115)
(37,278) Total (38,810)
2009/10 2010/11
£'000 Revenue Grants Received in Advance £'000
0 Innovation Lincolnshire (130)
0 Discretionary Housing Payments (24)
0 Rent Rebates (320)
0 Total (474)
There were no capital grants received in advance in 2010/11.
Note 37 – Related Parties
It is a requirement for the Council to disclose any transactions with a related party,
including non-financial transactions. A „related party‟ is defined as being an
organisation with which the Council has dealings and where Officers or
87
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Members of the Council have a controlling interest or influence in the activities of
that organisation. The „Code of Practice on Local Authority Accounting in the UK‟
requires local authorities to disclose material transactions with „related parties‟. The
disclosure is required in order that the true and fairness of the accounts can be
understood by the reader of the accounts having knowledge of any „related
parties‟ of the authority.
Members/Officers - For 2010/11 the Council sent a letter, dated 1 April 2011, to all
Members, Chief Officers and Heads of Service, requesting disclosure of any „related
party transactions‟. All letters were returned, no Members or Officers declared
pecuniary interests in accordance with section 117 of the Local Government Act
1972.
Members/Officers - For 2010/11 the Council sent a letter, dated 1 April 2011, to all
Members, Chief Officers and Heads of Service, requesting disclosure of any „related
party transactions‟. All letters were returned, no Members or Officers declared
pecuniary interests in accordance with section 117 of the Local Government Act
1972.
In addition, the table below details both Member and Officer representation on the
boards of levying bodies, assisted organisations with which the Council makes
material financial assistance and Joint Ventures.
Name of Organisation Member
Representative
Officer Representative
Upper Witham – Drainage Board Cllr Kirby, Cllr Hills, Cllr
Jones
N/A
Witham Third – Drainage Board Cllr Clark N/A
Lincoln Arts Trust Leader of Council N/A
Lincoln Dial-a-Ride Cllr Clark Director of Resources
Citizens Advice Board Cllr Bodger N/A
Investors in Lincoln Cllr Grice, Cllr Jones N/A
None of the above Members or Officers took part in the decision making of any
financial assistance awarded to any of the organisations.
Central Government - has effective control over the general operations of the
Council. It is responsible for providing the statutory framework within which the
Council operates, provides the majority of it‟s funding in the form of grants and
prescribes the terms of many of the transactions that the Council has with other
parties (e.g. housing benefits).
Details of transactions with government departments are set out in note 36.
Other Bodies - transactions with other bodies levying demands on the Council Tax -
Levying bodies in 2010/11 were as follows:
2009/10 2010/11
£'000 £'000
366 Upper Witham Drainage Board 373
88
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
110 Witham 1st Drainage Board 113
214 Witham 3rd Drainage Board 219
690 Total 705
Assisted Organisations - the Council made material financial assistance to the
following organisations during the year:-
2009/10 2010/11
£'000 £'000
275 Lincoln Arts Trust 303
45 Lincoln Dial-a-Ride 46
70 Citizens Advice Bureau 48
Joint Ventures – The Council holds 5.6% (£14,000) of the ordinary share capital of
£250,000 of Investors in Lincoln Ltd. (IIL)
The principal activity of the company is the promotion of economic regeneration
and the development and expansion of industry, commerce and enterprise of all
forms for the benefit of the community in and around the City of Lincoln. Investors in
Lincoln Ltd grants the Council the sole and exclusive right to licence and manage its
managed workspace development at Greetwell Place.
The company's accounting year-end is 31st March and the latest (audited)
accounts are for the year ended 31st March 2010, showing net assets of £3,647,516
and a profit of £243,214 before taxation, £188,697 after tax (£148,324 before tax and
£112,078 after tax in 2008/09).
The Council is fully responsible for meeting the first £100,000 of any cumulative deficit
on operating the managed workspace units. In the event that the cumulative
deficiency exceeds £100,000 the Council shall meet 75% of the deficiency. In
2010/11 a surplus on the managed workspace units of £162 was attributable to the
Council.
Details of amounts received from IIL during 2010/11 are shown below:
2009/10 2010/11
£'000 £'000
185 Property Management costs 179
90 Facility Fee 90
13 Management Fee 0
An amount of £26,243 was owed to IIL at 31st March 2011 in respect of property
management costs, facility fees and management fees. This is included in the
creditors balance in the Council‟s Balance Sheet on page 20.
The accounts of the company may be obtained from The Company Secretary, 5
Beck Hall, Welton, LN2 3LJ.
89
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
Joint Venture - the Council has a joint venture with North Kesteven District Council
and West Lindsey District Council, Joint Planning Unit, which is a Jointly Controlled
Operation and accounts for its proportion of the activity within the Cultural,
Environmental, Regulatory and Planning services.
Note 38 – Capital Expenditure and Capital Financing
The total amount of capital expenditure incurred in the year is shown in the table
below (including the value of assets acquired under finance leases), together with
the resources that have been used to finance it. Where capital expenditure is to be
financed in future years by charges to revenue as assets are used by the Authority,
the expenditure results in an increase in the Capital Financing Requirement (CFR).
The Capital Financing Requirement (CFR) is a measure of the capital expenditure
incurred historically that has yet to be financed. The CFR is analysed in the second
part of this note.
Total Capital expenditure and financing during the year:
2009/10 2010/11
£’000 £’000
Capital investment
27,721 Property, Plant and Equipment 13,500
6 Investment Properties 72
105 Intangible Assets 97
1,730 Revenue Expenditure Funded from Capital under Statute** 3,165
29,562 16,834
Sources of finance
(3,990) Capital Receipts (3,861)
(1,504) Government grants and other contributions (4,076)
(4,754) Revenue Contributions (2,134)
(4,943) Major Repairs Reserve (4,983)
14,371 Capital Financing Requirement 1,780
Capital Financing Requirement - Funded by:
1,020 Supported Borrowing 1,020
13,351 Unsupported Borrowing 760
14,371 1,780
Analysis of movements in the Capital Financing Requirement
in Year:
43,131 Opening CFR 56,882
1,020 Supported borrowing 1,020
13,351 Unsupported borrowing 760
90
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
2009/10 2010/11
£’000 £’000
336 Adjustments in respect of embedded leases reflected within
non-current assets
65
(956) Minimum Revenue Provision/Voluntary Revenue Provision (1,173)
56,882 Closing CFR 57,554
**Revenue Expenditure Funded from Capital under Statute £3,478K less £313K relating to prior years
balances written off, funded in previous years = £3,165K.
The Council has a five-year Housing Investment programme, of which £3.818m is
contractually committed. This is for a period of investment of three years and relates
to a partnership arrangement to ensure that all our properties continue to meet
Decent Homes Standard.
In addition, the Council also has a five-year General Investment programme, of
which £0.401m is contractually committed.
£ 000
Allotments Asbestos Works 86
Land for the Provision of Burial Space 315
Total 401
Note 39 – Leases Authority as Lessee Finance Leases
The implementation of IFRS in 2010/11 has resulted in a substantial increase in the
number and value of leases classified as finance leases and therefore, carried on
the balance sheet. The lease of Broadgate Car Park, previously accounted for as an
operating lease, has been reclassified as a finance lease at an asset valuation of
£1.750m at the IFRS transition date of 1 April 2009, with an associated lease liability of
£0.463m. In addition, vehicles, plant and equipment contained within embedded
leases under service contracts, have been brought on to the balance sheet at 1
April 2009 at a value of £2.243m and with an associated lease liability of £2.132m.
The Council has acquired two car parks and the Bus Station and fleet vehicles under
finance leases. The assets acquired under these leases are carried as Property, Plant
and Equipment in the Balance Sheet at the following amounts:
1/04/2009 31/03/2010 31/03/2011
£000 £000 £000
5,245 5,187 Other Land and Buildings 4,593
2,243 2,067 Vehicles, Plant and Equipment 1,553
91
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
7,488 7,254 6,146
The Council is committed to making minimum payments under these leases
comprising settlement of the long term liability for the interest in the property
acquired and finance costs that will be payable by the Council in future years while
the liability remains outstanding. The minimum lease payments are made up of the
following amounts:
1/04/2009 31/03/2010 31/03/2011
£000 £000 £000
Finance lease liabilities (net present value of
minimum lease payments)
512 522 current 536
2,084 1,829 non-current 1,342
864 787 Finance costs payable in future years 614
3,460 3,138 Minimum lease payments 2,492
Minimum Lease Payments Finance Lease Liabilities
31/03/2011 31/03/2010 31/03/2011 31/03/2010
£000 £000 £000 £000
Not later than one year 693 708 536 522
Later than one year and not later
than five years
1,257 1,815 994 1,443
Later than five years 542 615 348 386
2,492 3,138 1,878 2,351
Operating leases
The Council has acquired the use of a number of assets, such as vehicles and
buildings, under operating leases.
The future minimum lease payments due under non-cancellable leases in future
years are:
31/03/2010
31/03/2011
£000 £000
127 Not later than one year 125
92
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
484
Later than one year and not later than
five years 484
311 Later than five years 190
922 799
The expenditure charged to the Comprehensive Income and Expenditure
Statement during the year in relation to these leases was:
2009/10 2010/11
£000 £000
5 Vehicles Plant & Equipment 5
146 Land and Buildings 146
151 Minimum lease payments 151
Authority as Lessor
Finance Leases
The Council has granted a long-term lease to Lincolnshire County Council for the use
of The Collection (City and County Museum) accounted for as a finance lease.
Rental is at a peppercorn, meaning no rentals are receivable. There was no net
investment in this asset in 2010/11.
Operating Leases
The Authority leases out property under operating leases for the following purposes:
for the provision of community services, such as sports facilities and
community centres
for economic development purposes to provide suitable affordable
accommodation for local businesses
for income generation purposes (investment properties)
The future minimum lease payments receivable under non-cancellable leases in
future years are:
2009/10 2010/11
£000 £000
217 Not later than one year
502
93
S T A T E M E N T O F A C C O U N T S
2 0 1 0 / 1 1
1,707
Later than one year and not later than
five years 1,510
3,712 Later than five years 3,354
5,636 5,366
The minimum lease payments do not include rents that are contingent on events
taking place after the lease was entered in to, such as rent reviews. In 2010/11,
£0.217m contingent rents were received by the Authority (2009/10 £0.139m).
Note 40 – Impairment Losses
During 2010/11, the Council has recognised impairment losses on two assets as
shown below:
Lucy Tower Street Car Park £0.9m
Thornbridge Car Park £0.5m
The car parks are in urgent need of extensive restoration works to maintain full
capacity usage and hence income generating potential. The values of the car
parks have been revised to reflect this impairment of their service potential and the
impairments have been charged to the Revaluation Reserve, reducing the balance
of previous accumulated gains in respect of these assets. The value of the
impairments were determined by consideration of the value of the capital works
required to restore full service potential. Note 41 – Capitalisation of Borrowing Costs
As permitted by the Code of Practice 2010/11, the Council has adopted a policy of
accounting for borrowing costs in the Comprehensive Income and Expenditure
Statement as they arise. No borrowing costs are capitalised. Note 42 – Termination Benefits
The Council terminated the contracts of a number of employees in 2010/11,
incurring the following liabilities.
2009/10 2010/11
£'000
£'000
34 Payment in Lieu of Notice 109
189 Redundancy Pay 135
185 Pension Enhancements 33
408 277
Note 43 – Defined Benefit Pension Scheme Participation in Pension Schemes
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As part of the terms and conditions of employment of its officers and other
employees, the Council offers retirement benefits. Although these benefits will not
actually be payable until employees retire, the Council has a commitment to make
the payments that needs to be disclosed.
The Authority participates in the Local Government Pension Scheme, administered
by Lincolnshire County Council. This is a funded scheme, meaning that the Council
and employees pay contributions into a fund, calculated at a level intended to
balance the pensions liability with investment assets.
Transactions Relating to Retirement Benefits
We recognise the cost retirement benefits in the Net Cost of Services when they are
earned by employees, rather than when the benefits are eventually paid as
pensions. However, the charge that is required to go against Council Tax is based on
the cash payable in the year, so the real cost of retirement benefits is reversed out in
the Movement in Reserves Statement. The following transactions have been made
in the Comprehensive Income & Expenditure Statement and the General Fund
Balance via the Movement in Reserves Statement during the year:
31/03/10
31/03/11
£’000 £’000
Comprehensive Income & Expenditure Statement
Net Cost of Services:
1,530 Current Service Cost 2,757
0 Past Service Costs* (14,331)
10 Curtailment and Settlements (NDC) 43
Decrease in irrecoverable surplus
Net Operating Expenditure:
(4,374) Expected Return on Employer Assets (6,137)
7,112 Interest on Pension Scheme Liabilities 8,503
4,278 Net Charge to the Comprehensive Income & Expenditure
Statement
(9,165)
Movement in Reserves Statement
(4,278) Reversal of net charges made for retirement benefits in
accordance with IAS 19
(9,165)
3,594 Actual amount charged against the General Fund Balance
for pensions in year
3,252
* The past service cost in 2010/11 includes £14.331m, in respect of changes to pension increases introduced in the
Chancellor‟s budget statement (future pension increases are linked to CPI and not RPI). The effect is shown as a
negative past service cost in the Comprehensive Income & Expenditure Statement.
In addition to the recognised gains and losses included in the Income & Expenditure
Account, actuarial gain of £26.534m where included in the Comprehensive Income
& Expenditure Statement.
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Assets and Liabilities in Relation to Retirement Benefits
Reconciliation of present value of scheme liabilities:
2009/10 2010/11
£'000 £'000
(104,294) 1 April (166,460)
(1,530) Current Service Cost (2,757)
(7,112) Interest Cost (8,503)
(884) Contributions by Members (852)
(57,528) Actuarial Losses/Gains 30,786
0) Past Service Costs/Gains 14,331
(10) Losses/Gains on Curtailments (43)
228 Estimated Unfunded Benefits Paid 223
4,670 Estimated Benefits Paid
4,813
(166,460) 31 March (128,461)
Reconciliation of fair value of the of the scheme assets:
2009/10 2010/11
£'000 £'000
68,554 1 April 88,183
4,374 Expected rate of return 6,137
884 Contributions by scheme participants 852
3,352 Employer contributions 3,031
228 Contributions in respect of Unfunded Benefits 223
15,689 Actuarial Gains/Losses (4,255)
(228) Unfunded Benefits Paid (223)
(4,670) Benefits paid
(4,813)
88,183 31 March 89,135
The expected return on scheme assets is determined by considering the expected
returns available on the assets underlying the current investment policy. Expected
yields on fixed interest investments are based on gross redemption yields as at the
Balance Sheet date. Expected returns on equity investments reflect long-term real
rates of return experienced in the respective markets. Scheme History
2010/11 2009/10 2008/09 2007/08 2006/07
£'000 £'000 £'000 £'000 £'000
Fair value of employer
assets
89,135 88,183 68,554 85,298 95,535
Present value liabilities (128,461) (166,460) (104,293) (107,602) (122,526)
Surplus/(Deficit) (39,327) (78,277) (35,740) (22,304) (26,991)
The total liability of £39.327m has a substantial impact on the net worth of the
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Council as recorded in the Balance Sheet, resulting in an overall balance of
£175.530m. However, statutory arrangements for funding the deficit mean that the
financial position of the Council remains healthy. The deficit on the scheme will be
made good by increased contributions over the remaining working life of
employees, as assessed by the scheme‟s actuary.
The total contributions expected to be made to the Local Government Pension
Scheme by the Council in the year to 31 March 2012 is £2.828m Basis for estimating assets and liabilities
Liabilities have been assessed on an actuarial basis using the projected unit method,
an estimate of the pensions that will be payable in future years dependent on
assumptions about mortality rates, salary levels etc. The liabilities have been
assessed by Hymans Robertson, an independent firm of actuaries.
The principal assumptions used by the actuary have been:
2009/10 2010/11
Long-term expected rate of return on assets in the scheme:
7.8% Equity Investments 7.5%
5.0% Bonds 4.9%
5.8% Property 5.5%
4.8% Cash 4.6%
Mortality Assumptions:
Longevity at 65 for current pensioners:
20.8 yrs Men 21.2 yrs
24.1 yrs Women 23.4 yrs
Longevity at 65 for future pensioners:
22.3 yrs Men 23.7 yrs
25.7 yrs Women 25.7 yrs
3.8% Rate of inflation (CPI) 2.8%
5.3% Rate of increase in salaries 5.1%
3.8% Rate of increase in pensions 2.8%
5.5% Rate of discounting scheme liabilities 5.5%
Take-up of option to convert annual pension into retirement
lump sum:
25.0% Membership prior to 1 April 25.0%
63.0% Membership post 1 April 63.0%
The pension scheme‟s assets consist of the following categories, by proportion of the
total assets held:
2009/10 2010/11
70% Equities 76%
18% Bonds 12%
11% Property 11%
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2009/10 2010/11
1% Cash 1%
History of experience gains and losses
The actuarial gains identified as movements on the Pension Reserve can be
analysed into the following categories, measured as a percentage of assets or
liabilities:
2010/11 2009/10 2008/09 2007/08 2006/07
% % % % %
Differences between the
expected and actual
return on assets
(4.77) 17.79 (32.52) (19.89) 0.27
Experience gains and
losses on liabilities
(8.96) 0.08 0.01 (2.49) 0.04
Further information can be found in the County Council‟s Superannuation Fund
Annual Report which is available on request from the County Treasurer‟s
Department, County Offices, Newland, Lincoln LN1 1YG. Note 44 – Contingent Liabilities
A contingent liability is a possible liability arising from past events whose existence
will be confirmed only by the occurrence of one or more uncertain future events not
wholly within the Council‟s control. Where a material loss can be estimated with
reasonable accuracy a provision is accrued within the financial statements. If,
however a loss cannot be accurately estimated or the event is not considered
sufficiently certain, a contingent liability will be disclosed in a note to the Balance
Sheet.
Concerns exist around the application of the Council‟s current employment terms
and conditions and their impact on equality legislation. If it is determined that the
terms and conditions have not been applied correctly there will be an obligation on
the Council to correct these. The amount of liability is not known and cannot be
estimated at this time with any reliability. The Council has however set aside an
earmarked reserve of £0.150m to meet such future costs.
The Council currently has a claim pending against it in respect of the application of
equality legislation. The Council does not accept the extent of the claimant‟s
assertions and disputes the claim. If the claimant is successful in this claim then the
amount of damages awarded will be limited to a maximum of £0.002m, however
the cost of legal expenses to be met by the Council are unlimited. It is therefore not
possible to ascertain the cost of any settlement at this time. Note 45 – Contingent Assets
The Council has no Contingent Assets as at 31st March 2011 Note 46 – Nature and Extent of Risks Arising from Financial Instruments
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The Council‟s activities expose it to a variety of financial risks. The key risks are:
Credit risk – the possibility that other parties might fail to pay amounts due to
the Council.
Liquidity risk – the possibility that the Council might not have funds available
to meet its commitments to make payments.
Re-financing risk – the possibility that the Council might be requiring to renew
a financial instrument on maturity at disadvantageous interest rates or terms.
Market risk - the possibility that financial loss might arise for the Council as a
result of changes in such measures as interest rates movements.
Overall Procedures for Managing Risk
The Council‟s overall risk management procedures focus on the unpredictability of
financial markets, and implementing restrictions to minimise these risks. The
procedures for risk management are set out through a legal framework set out in the
Local Government Act 2003 and the associated regulations. These require the
Council to comply with the CIPFA Prudential Code, the CIPFA Treasury Management
in the Public Services Code of Practice and Investment Guidance issued through
the Act. Overall these procedures require the Council to manage risk in the
following ways:
by formally adopting the requirements of the Code of Practice;
by the adoption of a Treasury Management Policy Statement and treasury
management clauses within its standing orders;
by approving, annually in advance, prudential indicators for the following
three years limiting:
o The Council‟s overall borrowing;
o Its maximum and minimum exposures to fixed and variable rates;
o Its maximum and minimum limits on the maturity structure of its debt;
o Its maximum annual exposures to investments maturing beyond a year.
by approving an investment strategy for the forthcoming year setting out its
criteria for both investing and selecting investment counterparties in
compliance with the Government Guidance;
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These are required to be reported and approved at or before the Council‟s annual
Council Tax setting budget. These items are reported with the annual Treasury
Management Strategy, which outlines the detailed approach to managing risk in
relation to the Council‟s financial instrument exposure. Actual performance is also
reported semi-annually to Members.
The annual Treasury Management Strategy which incorporates the prudential
indicators was approved by Council on 2nd March 2010 and the prudential
indicators were revised on 2nd March 2010 and is available on the Council‟s website
(www.lincoln.gov.uk). The key issues within the strategy were:
The Authorised Limit for 2010/11 was set at £55.5m. This is the maximum limit of
external borrowings or other long term liabilities during the year.
The Operational Boundary was expected to be £53.4m. This is the expected
level of debt and other long term liabilities during the year.
The maximum amounts of fixed and variable interest rate exposure were set
at £52.6m and £22.3m based on the Council‟s net debt.
The maximum and minimum exposures to the maturity structure of debt are
shown within this note.
These policies are implemented by the Treasury team in Financial Services. The
Council maintains written principles for overall risk management, as well as written
policies covering specific areas, such as interest rate risk, credit risk, and the
investment of surplus cash through Treasury Management Practices (TMPs). These
TMPs are a requirement of the Code of Practice and are reviewed regularly.
Credit risk
Credit risk arises from deposits with banks and financial institutions, as well as credit
exposures to the Council‟s customers. This risk is minimised through the Annual
Investment Strategy, which requires that deposits are not made with financial
institutions unless they meet identified minimum credit criteria, in accordance with
the Fitch, Moody‟s and Standard & Poors Ratings Services. The Annual Investment
Strategy also imposes maximum amounts and time limits in respect of each
financial institution. Deposits are not made with banks and financial institutions
unless they meet the minimum requirements of the investment criteria outlined
above. Details of the Investment Strategy can be found on the Council‟s website
(www.lincoln.gov.uk). The key areas are that the minimum criteria for investment
counterparties in 2010/11 included:
Credit ratings of Short Term of F1, Long Term AA, Support 2 and Individual B
(Fitch or equivalent rating), with the lowest available rating being applied to
the criteria.
Top 30 UK Building Societies ranked by asset size.
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The full Investment Strategy for 2010/11 was approved by full Council on 2nd March
2010 and is available on the Council‟s website.
The following analysis summarises the Authority‟s potential maximum exposure to
credit risk, based on experience of default assessed by Fitch credit rating agency
(based on details of global corporate finance average cumulative default rates
(including financial organisations) for the period 1990-2009 on investments out to 5
years) and the Council‟s experience of its customer collection levels over the last
five financial years, adjusted to reflect current market conditions:
Amount at
31/03/11
Historical
experience of
default**
Adjustment for
market
conditions at
31/03/11
Estimated
maximum
exposure to
default
£’000 % % £’000
a b c (a * c)
Deposits with banks and financial
institutions
AAA* rated counterparties
(investments up to 1 year) 8,197 0.00 0.00 0
AA* rated counterparties
(investments up to 1 year) 6,100 0.0030 0.03 2
A* rated counterparties (investments
1-2 years) 0 0.80 0.08 0
BBB rated counterparties
(investments up to one year) 1,000 0.24 0.24 2
Other Investments 449 9.87 9.87 44
Debtors 7,191 7.17 7.17 516
22,848 564
*See Glossary for a definition of AAA, AA and A ratings
No breaches of the Council‟s counterparty criteria occurred during the reporting
period and the Council does not expect any losses from non-performance by any of
its counterparties in relation to deposits and bonds.
Whilst the current credit crisis in international markets has raised the overall possibility
of default, the Council maintains strict credit criteria for investment counterparties.
As a result of these high credit criteria, historical default rates have been used as a
good indicator under these current conditions.
Analysis of Investments by country of origin
Short term Long term
Principal
invested
Fixed
rate
Variable
rate
Fixed
rate
Variable
rate
£’000 £’000 £’000 £’000 £’000
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Short term Long term
Principal
invested
Fixed
rate
Variable
rate
Fixed
rate
Variable
rate
£’000 £’000 £’000 £’000 £’000
UK Banks & Building Societies
Coventry Building Society 1,000 1,000 0 0 0
Bank of Scotland Call Account 100 100 0 0 0
Santander Call Account 3,000 3,000 0 0 0
Natwest Call Account 3,000 3,000 0 0 0
UK Money Market Funds
Black rock MMF 100 0 100 0 0
Standard Life Investments MMF 100 0 100 0 0
Ignis MMF 832 0 832 0 0
Prime Rate MMF 2,065 0 2,065 0 0
Goldman Sachs MMF 100 0 100 0 0
UK Local Authorities
Northamptonshire County Council 2,000 2,000 0 0 0
Newcastle City Council 2,000 2,000 0 0 0
Aberdeen City Council 1,000 1,000 0 0 0
15,297 12,100 3,197 0 0
The Council allows credit for its trade debtors, an age analysis of those debtors as at
31 March 2011 is as follows:
31/03/09
£’000
31/03/10
£’000
564 Less than one month 290
209 One to three months 136
125 Three to six months 68
327 Six months to one year 111
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672 More than one year 881
1,897 Total 1,486
Collateral – During the reporting period the Council held no collateral as security.
Liquidity risk
The Council manages its liquidity position through the risk management procedures
above (the setting and approval of prudential indicators and the approval of the
Treasury Management and Investment Strategy reports), as well as through a
comprehensive cash flow management system, as required by the Code of
Practice. This seeks to ensure that cash is available when it is needed.
The Council has ready access to borrowings from the Money Markets to cover any
day to day cash flow need, and whilst the PWLB provides access to longer term
funds, it also acts as a lender of last resort to councils (although it will not provide
funding to a council whose actions are unlawful). The Council is also required to
provide a balanced budget through the Local Government Finance Act 1992,
which ensures sufficient monies are raised to cover annual expenditure. There is
therefore no significant risk that it will be unable to raise finance to meet its
commitments under financial instruments.
Refinancing and Maturity Risk
The Council maintains a significant debt and investment portfolio. Whilst the cash
flow procedures above are considered against the refinancing risk procedures,
longer term risk to the Council relates to managing the exposure to replacing
financial instruments as they mature. This risk relates to both the maturing of longer
term financial liabilities and longer term financial assets.
The approved prudential indicator limits for the maturity structure of debt and the
limits placed on investments placed for greater than one year in duration are the
key parameters used to address this risk. The Council approved treasury and
investment strategies address the main risks and the central treasury team addresses
the operational risks within the approved parameters. This includes:
monitoring the maturity profile of financial liabilities and amending the profile
through either new borrowing or the rescheduling of the existing debt; and
monitoring the maturity profile of investments to ensure sufficient liquidity is
available for the Council‟s day to day cash flow needs, and the spread of
longer term investments provide stability of maturities and returns in relation to
the longer term cash flow needs.
The maturity analysis of financial liabilities (principal amount) is as follows:
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31/03/10 31/03/11
£’000 £’000
33 Less than one year 43
0 Between one and two years 10
0 Between two and seven years 14
7,500 Between seven and 15 years 8,397
42,923 More than fifteen years 42,026
50,456 Total borrowing 50,490
The maturity analysis of financial assets (principal amount) is as follows:
All trade and other payables that are due to be paid in less than one year of
£9.582m and trade and other debtors of £7.191m are not shown in the table above.
Market risk
Interest rate risk - The Council is exposed to interest rate movements on its
borrowings and investments. Movements in interest rates have a complex impact
on the Council, depending on how variable and fixed interest rates move across
differing financial instrument periods. For instance, a rise in variable and fixed
interest rates would have the following effects:
borrowings at variable rates – the interest expense charged to the Income
and Expenditure Account will rise;
borrowings at fixed rates – the fair value of the borrowing liability will fall;
investments at variable rates – the interest income credited to the Income
and Expenditure Account will rise; and
investments at fixed rates – the fair value of the assets will fall.
Borrowings are not carried at fair value on the Balance Sheet, so nominal gains and
losses on fixed rate borrowings would not impact on the Comprehensive Income
and Expenditure Statement. However, changes in interest payable and receivable
on variable rate borrowings and investments will be posted to the
31/03/10 31/03/11
£’000 £’000
15,111 Less than one year 15,297
1,000 Between one and two years 0
0 Between two and three years 0
449 More than three years 449
16,560 Total Investments 15,746
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Comprehensive Income and Expenditure Statement and affect the General Fund
Balance, subject to influences from Government grants. Movements in the fair
value of fixed rate investments will be reflected in other Comprehensive Income
and Expenditure, unless the investments have been designated as Fair Value
through the Income and Expenditure Account, in which case gains and losses will
be posted to the Surplus/Deficit on Provision of Services.
The Council has a number of strategies for managing interest rate risk. The Annual
Treasury Management Strategy draws together the Council‟s prudential indicators
and its expected treasury operations, including an expectation of interest rate
movements. From this Strategy a prudential indicator is set which provides
maximum and minimum limits for fixed and variable interest rate exposure. The
central treasury team will monitor market and forecast interest rates within the year
to adjust exposures appropriately. For instance, during periods of falling interest
rates, and where economic circumstances make it favourable, fixed rate
investments may be taken for longer periods to secure better long term returns,
similarly the drawing of longer term fixed rate borrowing would be postponed.
In the HRA the risk of interest rate loss is partially mitigated by Government grant
payable on financing costs.
If all interest rates had been 1% higher with all other variables held constant the
financial effect would be:
2009/10 2010/11
£’000 £’000
0 Increase in interest payable on variable rate borrowings 0
(134) Increase in interest receivable on variable rate
investments
(157)
(134) Impact on Income and Expenditure Account (157)
0 Increase in Government grant receivable for financing
costs
0
(30) Share of overall impact credited to the HRA (22)
(104) Share of overall impact credited to the General Fund (135)
(134) Total (157)
The approximate impact of a 1% fall in interest rates would be as above but with the
movements being reversed. These assumptions are based on the same
methodology as used for Fair Value of Assets and liabilities carried at Amortised
Cost.
Price risk - The Council does not generally invest in equity shares but does have
shareholdings to the value of £0.449m in a number of joint ventures and in local
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industry. Whilst these holdings are generally illiquid, the Council is exposed to losses
arising from movements in the prices of the shares.
As the shareholdings have arisen in the acquisition of specific interests, the Council is
not in a position to limit its exposure to price movements by diversifying its portfolio.
The majority of the shareholdings are in the Dunham Bridge Company (£0.430m) and
Investors in Lincoln (£0.014m). A representative of the Council sits on the Investors in
Lincoln Board, enabling the Council to monitor factors that might cause a fall in the
value of specific shareholdings.
The shares are all classified as Available-for-Sale, meaning that all movements in
price will impact on gains and losses recognised in Other Comprehensive Income
and Expenditure.
Foreign exchange risk - The Council has no financial assets or liabilities denominated
in foreign currencies. It therefore has no exposure to loss arising from movements in
exchange rates.
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H R A I N C O M E A N D E X P E N D I T U R E S T A T E M E N T F O R T H E Y E A R E N D I N G 3 1 M A R C H 2 0 1 1
2009/10
Notes 2010/11 2010/11
£’000 £’000 £’000
Expenditure
(12,193) Management and Maintenance 3 (14,843)
0 Management and Maintenance – exceptional
item, negative pension past service cost
2,866
(37) Rents, rate, taxes and other charges (20)
(1,058) Negative HRA Subsidy payable 6 (1,058)
(497) Negative HRA subsidy transferable to the General
Fund
(366)
(41,899) Depreciation and impairment of non-current
assets
(11,465)
0 Exceptional item, decrease in Social Housing
discount factor applied to asset valuations
(79,476)
(54) Debt management costs (64)
(186) Movement in the allowance for bad debts (105)
(55,924) Total Expenditure (104,531)
Income
22,409 Dwelling rents 7 22,961
464 Non-dwelling rents 461
546 Charges for services and facilities 477
23,419 Total Income 23,899
(32,505) Net Cost of HRA Services as included in the
Comprehensive Income and Expenditure
Statement
(80,632)
0 HRA Services‟ share of Corporate and
Democratic Core
0
0 HRA share of other amounts included in the
whole authority Net Cost of Services but not
allocated to specific services
2,866
85 Transfer from CMS (115)
(32,420) Net Cost for HRA Services (77,881)
HRA share of the operating income and
expenditure included in the Comprehensive
Income and Expenditure Statement
95 Gain or loss on the sale of HRA assets 321
(1,252) Interest payable and similar charges (1,442)
100 Interest and investment income 38
(891) Pensions interest cost and expected return on
pensions assets
8 (841)
(34,368) Surplus or (deficit) for the year on HRA services (79,805)
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M O V E M E N T O N T H E H O U S I N G R E V E N U E A C C O U N T S T A T E M E N T
2009/10 2010/11
£'000 £'000
2,408 Balance on the HRA at the end of the previous year 1,000
(34,368) Surplus or (deficit) for year on the HRA Income and Expenditure
Statement
(79,805)
31,885 Adjustments between accounting basis and funding basis under
statute
81,587
(2,483) Net increase or (decrease) before transfers to or from reserves 1,782
1,075 Transfers (to) or from reserves (1,599)
(1,408) Increase or (decrease) in year on the HRA 183
1,000 Balance on the HRA at the end of the current year 1,183
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N O T E S T O T H E H O U S I N G R E V E N U E A C C O U N T
Note 1 – Fixed Assets
The number of dwellings in the Authority‟s housing stock, as at 31 March 2011,
totalled 7,932 properties. The type of properties and the period in which they were
built, were as follows:
<1945 1945-64 1965-74 >1974 TOTAL
No. No. No. No. No.
Property Type
Low Rise Flats
(Blocks up to 2 Storeys)
1 Bed 44 663 379 361 1,447
2 Bed 6 98 35 42 181
3 Bed 0 - 13 1 14
Sub-Total 50 761 427 404 1,642
Medium Rise Flats
(Blocks of 3 up to 5 Storeys)
1 Bed 2 299 464 383 1,148
2 Bed - 29 161 163 353
3 Bed - 1 1 3 5
Sub-Total 2 329 626 549 1,506
High Rise Flats
(Blocks of 6 Storeys or more)
1 Bed - 58 138 0 196
2 Bed - 30 74 0 104
Sub-Total 0 88 212 0 300
Houses / Bungalows
1 Bed 159 146 32 9 346
2 Bed 768 1061 112 268 2,209
3 Bed 874 621 82 225 1,802
4 or more Beds 101 21 0 5 127
Sub-Total 1,902 1,849 226 507 4,484
Total Dwellings 31 March 2011 1,954 3,027 1,491 1,460 7,932
The Council‟s in-house Valuation Officers, and the District Valuer, have undertaken
the valuations of HRA dwellings, land, and other property in accordance with Royal
Institute of Chartered Surveyor guidelines.
The balance sheet value of council dwellings is calculated by applying a Social
Housing discount factor (currently 34%) to the open market or vacant possession
value as determined by the District Valuer, as shown below:
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£ 000
Vacant possession value of council dwellings at 31 March 2011 481,679
Balance sheet valuation applying the Social Housing discount factor (34%) 163,772
The movement in fixed assets during the year was as follows:
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Movements in 2010/11
HRA
Council
Dwellings
Land &
buildings
Vehicles
Plant &
Equip.
Surplus
assets
Property
Plant &
Equipment
Investment
Properties
Non
current
assets
held for
sale
Intangible
assets TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000
Cost or Valuation
At 1 April 2010 246,392 6,062 983 135 253,572 6,202 0 84 259,858
Additions 10,231 23 4 0 10,258 0 0 65 10,323
Donations 0 0 0 0 0 0 0 0 0
Revaluation
increases/(decreases)
recognised in the Revaluation
Reserve (799) 87 0 0 (712) 0 0 0 (712)
Revaluation
increases/(decreases)
recognised in the
Surplus/Deficit on the Provision
of Services (91,741) (39) 0 0 (91,780) 12 0 0 (91,768)
De-recognition - disposals (311) 0 0 0 (311) 0 0 0 (311)
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Movements in 2010/11
HRA
Council
Dwellings
Land &
buildings
Vehicles
Plant &
Equip.
Surplus
assets
Property
Plant &
Equipment
Investment
Properties
Non
current
assets
held for
sale
Intangible
assets TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000
De-recognition - other 0 0 0 0 0 0 0 0 0
Other movements in cost or
valuation 0 0 55 0 55 0 0 0 55
At 31 March 2011 163,772 6,133 1,042 135 171,082 6,214 0 149 177,445
Depreciation & Impairments
At 1 April 2010 (1,258) (206) (239) 0 (1,703) 0 0 (8) (1,711)
Depreciation for year (3,994) (156) (192) 0 (4,342) 0 0 (19) (4,361)
Depreciation written out to
the Revaluation Reserve 0 55 0 0 55 0 0 0 55
Depreciation written out to
the Surplus/Deficit on the
Provision of Services 3,987 7 0 0 3,994 0 0 0 3,994
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Movements in 2010/11
HRA
Council
Dwellings
Land &
buildings
Vehicles
Plant &
Equip.
Surplus
assets
Property
Plant &
Equipment
Investment
Properties
Non
current
assets
held for
sale
Intangible
assets TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000
Impairment losses/(reversals)
recognised in the Revaluation
Reserve 0 0 0 0 0 0 0 0 0
Impairment losses/(reversals)
recognised in the
Surplus/Deficit on the Provision
of Services 724 0 0 0 724 0 0 0 724
De-recognition - disposals 7 0 0 0 7 0 0 0 7
De-recognition - other 0 0 0 0 0 0 0 0 0
At 31 March 2011 (534) (300) (431) 0 (1,265) 0 0 (27) (1,292)
Net book value of assets at
31.03.11 163,238 5,833 611 135 169,817 6,214 0 122 176,153
Net book value of assets at
31.03.10 245,134 5,856 744 135 251,869 6,202 0 76 258,147
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Comparative movements in
2009/10
HRA
Council
Dwellings
Land &
buildings
Vehicles
Plant &
Equip.
Surplus
assets
Property
Plant &
Equipment
Investment
Properties
Non
current
assets
held for
sale
Intangible
assets TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000
Cost or Valuation
At 1 April 2009 276,507 5,954 683 150 283,294 6,223 0 43 289,560
Additions 13,062 19 300 0 13,381 0 0 41 13,422
Donations 0 0 0 0 0 0 0 0 0
Revaluation
increases/(decreases)
recognised in the Revaluation
Reserve (2,238) 89 0 (15) (2,164) 0 0 0 (2,164)
Revaluation
increases/(decreases)
recognised in the
Surplus/Deficit on the Provision
of Services (40,644) 0 0 0 (40,644) (21) 0 0 (40,665)
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Comparative movements in
2009/10
HRA
Council
Dwellings
Land &
buildings
Vehicles
Plant &
Equip.
Surplus
assets
Property
Plant &
Equipment
Investment
Properties
Non
current
assets
held for
sale
Intangible
assets TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000
De-recognition - disposals (295) 0 0 0 (295) (400) 0 0 (695)
De-recognition - other 0 0 0 0 0 0 0 0 0
Other movements in cost or
valuation 0 0 0 0 0 400 0 0 400
At 31 March 2010 246,392 6,062 983 135 253,572 6,202 0 84 259,858
Depreciation & Impairments
At 1 April 2009 (2,235) (56) (108) 0 (2,399) 0 0 0 (2,399)
Depreciation for year (5,935) (161) (131) 0 (6,227) 0 0 (9) (6,236)
Depreciation written out to
the Revaluation Reserve 2,153 11 0 0 2,164 0 0 0 2,164
Depreciation written out to
the Surplus/Deficit on the
Provision of Services 3,776 0 0 0 3,776 0 0 0 3,776
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Comparative movements in
2009/10
HRA
Council
Dwellings
Land &
buildings
Vehicles
Plant &
Equip.
Surplus
assets
Property
Plant &
Equipment
Investment
Properties
Non
current
assets
held for
sale
Intangible
assets TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000
Impairment losses/(reversals)
recognised in the Revaluation
Reserve 0 0 0 0 0 0 0 0 0
Impairment losses/(reversals)
recognised in the
Surplus/Deficit on the Provision
of Services 978 0 0 0 978 0 0 0 978
De-recognition - disposals 6 0 0 0 6 0 0 0 6
De-recognition - other 0 0 0 0 0 0 0 0 0
At 31 March 2010 (1,257) (206) (239) 0 (1,702) 0 0 (9) (1,711)
Net book value of assets at
31.03.10 245,135 5,856 744 135 251,870 6,202 0 75 258,147
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Comparative movements in
2009/10
HRA
Council
Dwellings
Land &
buildings
Vehicles
Plant &
Equip.
Surplus
assets
Property
Plant &
Equipment
Investment
Properties
Non
current
assets
held for
sale
Intangible
assets TOTAL
Subtotal
£000 £000 £000 £000 £000 £000 £000 £000 £000
Net book value of assets at
31.03.09 274,272 5,898 575 150 280,895 6,223 0 43 287,161
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Note 2 – Major Repairs Reserve
The Major Repairs Reserve details the Major Repairs Allowance (MRA) received by
the Council. The MRA is based on national average unit costs for each of the
property types and represents the estimated long-term average amount of capital
spending required to maintain a local authority‟s stock in its current condition. The
MRA received in the year totalled £4,983,161 all of which was used to finance
capital spend in the Housing Investment Programme in 2010/11.
2009/10 2010/11
£’000 £’000
0 Balance on 1 April 0
Amount transferred from the HRA
- Depreciation
(5,935) Dwellings (3,994)
(153) Other Assets (366)
0 - Appropriations from HRA (623)
(6,088) (4,983)
4,943 - HRA Capital Expenditure 4,983
1,145 - Appropriations to HRA 0
6,088 4,983
0 Balance on 31 March 0
Note 3 – Housing Repairs Account
The Housing Repairs Account was set up on 1 April 2001 in order to assist with the
longer term planning of repairs and maintenance expenditure. The following
analysis details the movement on the Housing Repairs Account during the year.
2009/10 2010/11
£’000 £’000
(102) Balance on 1 April (17)
Expenditure in year
3,982 Tenant Notified Repairs 3,622
1,477 Void Repairs 1,276
1,479 Servicing Contracts 1,476
138 Painting Programme 93
0 Asbestos Removal/Surveys 178
448 Aids & adaptations 278
30 Decoration Grants 20
32 Other Expenditure 24
48 Contribution to HRA 0
7,634 6,967 Income in year
(7,490) Contribution from HRA (7,677)
(55) Contribution from Insurance Reserve (18)
0 Contribution from Leaseholders (2)
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(4) Interest Received in year (3)
(7,549) (7,700)
(17) Surplus Balance on 31 March (750)
Note 4 – Capital Expenditure in the year
The Housing Revenue Account capital expenditure and sources of funding during
the financial year are detailed in the following table:
2009/10 2010/11
£’000 £’000
Capital investment
13,099 Property, Plant and Equipment 10,263
0 Investment Properties 0
42 Intangible Assets 65
6 Revenue Expenditure funded from Capital
under Statute
0
13,147 10,328
Sources of funding
(1,020) Supported Borrowing (1,020)
(2,312) Capital Receipts (2,443)
(4,943) Major Repairs Reserve (4,983)
(274) Government grants and other contributions (336)
(4,598) Revenue Contributions (1,546)
(13,147) (10,328)
0 Balance unfunded at 31 March 0
Supported borrowing levels are issued annually by Central Government, authorising
the Council to borrow monies, which will be funded by Central Government to
cover capital expenditure. Additionally, the Council is able to take out unsupported
borrowing which must be financed from its own resources. In 2010/11 however, no
such borrowing was undertaken by the HRA.
Note 5 - Capital Receipts
The cash receipts from the disposal of land, houses and other property within the
HRA in the year are summarised as follows:
2009/10 2010/11
£’000 £’000
Council dwellings -
(338) - Right to Buy (612)
(8) - Discounts repaid (6)
0 - Non-Right to Buy 0
Other Receipts -
0 - Land sales 0
(425) - Other property sales 0
(13) - Mortgage Property (7)
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(784) (625)
241 Less Pooled (Paid to Central Government) 392
(543) Total (233)
Note 6 - Housing Subsidy
The Government (CLG) bases this subsidy entitlement on a notional account
representing their assessment of what the Council should be collecting and
spending. In 2010/11 the Council continued in a „negative‟ Housing Subsidy position
and the amount payable in respect of the financial year amounted to £1.078m as
detailed below:
2009/10 2010/11
£’000 £’000
Housing Subsidy
(13,374) Management & Maintenance (13,797)
(4,943) Major Repairs Allowance (4,983)
(1,915) Capital Charges (2,041)
2 Interest on Receipts 1
21,334 Guideline Rent Income 21,898
1,104 Total in-year HRA Subsidy Payable 1,078
(46) Previous year(s) Subsidy adjustments (20)
1,058 Total HRA Subsidy due to/(from) CLG 1,058
Note 7 - Rent Arrears
During the year 2010/11 total rent arrears decreased by £0.097m or 6.7%, to £1.36m.
A summary of rent arrears and prepayments is shown in the following table:
2009/10 2010/11
£’000 £’000
571 Current Tenant Arrears @ 31 March 558
887 Former Tenant Arrears @ 31March 802
1,458 Total Rent Arrears 1,360
(227) Prepayments @ 31 March (228)
1,231 Net Rent Arrears 1,132
A bad debt provision of £0.105m has been made in this year‟s accounts in respect of
potentially non-collectable rent arrears, as detailed above, and associated
miscellaneous debts. The value of the bad debt provision held on the Balance Sheet
at 31 March 2011 is £1.230m (£1.296m at 31 March 2010).
Note 8 - Pension Costs
In line with the full adoption of IAS 19 „Employee Benefits‟ the Net Cost of Services
includes the cost of retirement benefits when they are earned by employees, rather
than when the benefits are eventually paid as pensions. However, the charge that
is required when determining the movement on the HRA Balance for the year
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is based on the cash payable in the year, so the real cost of retirement benefits is
reversed out of the HRA in the Movement on the Housing Revenue Account
Statement. The following transactions have been made in the HRA during the year:
2009/10
2010/11
£’000 £’000
HRA Income & Expenditure Statement
360 Current Service Cost 907
0 Past Service Costs (2,866)
(1,423) Expected Return on Employer Assets (2,181)
2,314 Interest on Pension Scheme Liabilities 3,021
1,251 Total
(1,119)
(1,169) Amount to be met from HRA
(1,155)
82 Movement on Pension Reserve (2,274)
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T H E C O LLE C T I O N F U N D S T A T E M E N T F O R T H E Y E A R E N D E D 3 1 M A R C H 2 0 1 1
This account reflects the statutory requirements for all Billing Authorities, such as the
City Council, to maintain a separate Collection Fund Account. This shows the
transactions of the Billing Authority in relation to Non-Domestic Rates and the
Council Tax, and illustrates the way in which these have been distributed to
preceptors (Lincolnshire County Council & Lincolnshire Police Authority) and the
General Fund.
Notes
2010/11
£’000
2009/10
£’000
Income
Council Tax Income 4 (31,557) (30,647)
Transfers from General Fund:
Council Tax Benefit 4 (7,739) (7,252)
Pensioners Discount Contribution 4 (66) (66)
Transitional Relief 4 0 0
Income collectable from Business Ratepayers 5 (35,412) (36,183)
Total Income (74,774) (74,148)
Expenditure
Precepts 6 39,016 36,958
Business Rates:
Payment to National Pool 5 35,259 36,028
Cost of Collection 153 155
Provision for Bad & Doubtful Debts:
Council Tax/Community Charge 4 353 341
Contributions:
Community Charge Surplus 0 0
Council Tax Surplus 1(c) & 6 124 0
Adjustment of Previous Year Community Charge:
CC Payers A/c 4 0 0
Total Expenditure 74,905 73,482
Movement on Fund Balance 131 (666)
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N O T E S T O T H E C O LLE C T I O N F U N D
Note 1 - Council Tax
The introduction of Council Tax on 1 April 1993 revised the method of accounting for
the Council‟s Collection Fund. The main features of the arrangements may be
summarised as follows:
a) Revenue Support Grant and amounts for distribution from the NNDR National Pool
are paid directly to all Billing and Precepting Authorities and are disclosed in the
Collection Fund Statement on page 116.
b) Interest is no longer payable between the General Fund and the Collection Fund
on cash-flow deficits/surpluses. All interest is now payable directly to the General
Fund, as shown on the Collection Fund Statement page 116.
c) The year-end surplus or deficit on the Collection Fund is to be distributed between
Billing and Precepting Authorities on the basis of estimates, made in January of
each year-end balance. For 2010/11, the amount outstanding in January 2011 in
respect of Council Tax when compared with the provision made by the Council
for non-payment, was above the level anticipated and therefore a surplus was
declared.
Note 2 - Council Tax Valuation Bands
Most domestic Dwellings (including flats) whether rented or owned, occupied or not,
are subject to Council Tax. Each Dwelling is allocated to one of eight bands
according to their open market capital value at 1 April 1991.
Valuation Band Range of Values (£)
A Up to & including £40,000
B £40,001 - £52,000
C £52,001 - £68,000
D £68,001 - £88,000
E £88,001 to £120,000
F £120,001 - £160,000
G £160,001 - £320,000
H More than £320,001
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Note 3 - Council Tax Income
The amount of Council Tax payable is calculated by establishing a „Council Tax
Base‟. This is the Council‟s estimated number of chargeable dwellings expressed in
relation to those dwellings in Band D. Once this has been determined, the Council
Tax payable for each band is established as follows:
(The actual amount payable for each property is also subject to discounts where
applicable.)
Band Calculated
number of
dwell ings
Ratio to
Band D
Equated
number of
dwell ings
Council
Tax
Payable
Z 84 5/9 47 825.43
A 20,310 6/9 13,540 990.52
B 6,867 7/9 5,341 1,155.61
C 4,027 8/9 3,580 1,320.69
D 2,104 9/9 2,104 1,485.78
E 881 11/9 1,077 1,815.95
F 314 13/9 454 2,146.13
G 109 15/9 182 2,476.30
H 9 18/9 18 2,971.56
26,343
Note 4 - Council Tax Required
The amount of Council Tax required for Band D was calculated on the following
basis:
(i) Preceptor‟s Council Tax Requirements £39,139,975
(ii) Number of Band D equivalent Dwellings 26,343
Band D ( i divided by ii ) £1,485.78
The Council Tax required then forms part of Collection Fund Statement as detailed in
the following table:
2009/10 2010/11
£’000 £’000
30,647 Net Amount 31,557
7,252 Benefits 7,739
66 Pensioners Discount Contribution 66
(341) Use of Provision for Doubtful Debts (353)
(666) Balance carried forward 131
36,958 Council Tax Requirement 39,140
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Note 5 – Non-Domestic Rates
Non-Domestic Rates are organised on a national basis. The Government specifies
an amount and subject to the effects of transitional arrangements, local businesses
pay rates calculated by multiplying their rateable value by that amount. In 2010/11
the amount was 41.4p (48.5p = 2009/10). The Council is responsible for collecting
rates due from the ratepayers in its area but pays the proceeds into an NNDR Pool
administered by the Government.
The Government redistributes the sums paid into the Pool back to local authorities
on the basis of a fixed amount per head of population. This is shown in the
Collection Fund Statement on page 116.
The total rateable value @ 31 March 2011 was £102,771,442 (31 March 2010 =
£89,007,759).
Note 6 - Precepts & Demands
The following amounts were paid from the fund:
2009/10
£’000
2010/11
£’000
5,898 City of Lincoln Council 6,243
26,606 Lincolnshire County Council 28,160
4,454 Lincolnshire Police Authority 4,737
36,958 Total 39,140
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INDEPENDENT AUDITORS’ REPORT TO CITY OF LINCOLN COUNCIL
TO BE INSTERTED POST AUDIT
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GLOSSARY
AAA FITCH RATING
Highest credit quality - „AAA‟ ratings denote the lowest expectation of credit risk.
They are assigned only in case of exceptionally strong capacity for timely payment
of financial commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events.
AA FITCH RATING
Very high credit quality - „AA‟ ratings denote a very low expectation of credit risk.
They indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.
A FITCH RATING
High credit quality - „A‟ ratings denote a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered strong. This capacity
may, nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
ACCOUNTING PERIOD
The period of time covered by the accounts, normally a period of twelve months
commencing on 1 April. The end of the accounting period is the Balance Sheet
date.
ACCRUALS
Sums included in the final accounts to recognise revenue and capital income and
expenditure earned or incurred in the financial year, but for which actual payment
had not been received or made as at 31 March.
ACTUARIAL GAINS AND LOSSES
For a defined benefit pension scheme, the changes in actuarial surpluses or deficits
that arise because:
Events have not coincided with the actuarial assumptions made for the last
valuation (experience gains and losses); or
The actuarial assumptions have changed
ASSET
An item having value to the authority in monetary terms. Assets are categorised as
either current or fixed:
A current asset will be consumed or cease to have material value within the
next financial year (e.g. cash and stock);
A fixed asset provides benefits to the Authority and to the services it provides
for a period of more than one year and may be tangible e.g. a community
centre, or intangible, e.g. computer software licences.
AUDIT OF ACCOUNTS
An independent examination of the Authority‟s financial affairs.
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BALANCE SHEET
A statement of the recorded assets, liabilities and other balances at the end of the
accounting period.
BORROWING
Government support for capital investment is described as either Supported Capital
Expenditure (Revenue) known as SCE(R) or Supported Capital Expenditure (Capital
Grant) known as SCE(C). SCE can be further classified as either Single Capital Pot
(SCP) or ring-fenced. BUDGET
The forecast of net revenue and capital expenditure over the accounting period.
CAPITAL EXPENDITURE
Expenditure on the acquisition of a fixed asset, which will be used in providing
services beyond the current accounting period, or expenditure which adds to and
not merely maintains the value of an existing fixed asset.
CAPITAL FINANCING
Funds raised to pay for capital expenditure. There are various methods of financing
capital expenditure including borrowing, leasing, direct revenue financing, usable
capital receipts, capital grants, capital contributions, revenue reserves and
earmarked reserves.
CAPITAL PROGRAMME
The capital schemes the Authority intends to carry out over a specific period of time.
CAPITAL RECEIPT
The proceeds from the disposal of land or other fixed assets. Proportions of capital
receipts can be used to finance new capital expenditure, within rules set down by
the government but they cannot be used to finance revenue expenditure.
CLAW-BACK
Where average council house rents are set higher than the government‟s
prescribed average limit rent, used in the calculation of rent rebates, the
percentage difference reduces the amount of rent rebate subsidy due to the
authority, i.e. it is “clawed-back” by the government.
CIPFA
The Chartered Institute of Public Finance and Accountancy
COLLECTION FUND
A separate fund that records the income and expenditure relating to Council Tax
and non-domestic rates.
COMMUNITY ASSETS
Assets that the Authority intends to hold in perpetuity, that have no determinable
useful life and that may have restrictions on their disposal. Examples of community
assets are parks and historical buildings.
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CONSISTENCY
The concept that the accounting treatment of like items within an accounting
period and from one period to the next are the same.
CONTINGENT ASSET
A contingent asset is a possible asset arising from past events whose existence will
be confirmed only by the occurrence of one or more uncertain future events not
wholly within the Authority‟s accounts.
CONTINGENT LIABILITY
A contingent liability is either:
A possible obligation arising from past events whose existence will be
confirmed only by the occurrence of one or more uncertain future events not
wholly within the Authority‟s control; or
A present obligation arising from past events where it is not probable that a
transfer of economic benefits will be required, or the amount of the obligation
cannot be measured with sufficient reliability.
CORPORATE AND DEMOCRATIC CORE
The corporate and democratic core comprises all activities that local authorities
engage in specifically because they are elected, multi-purpose authorities. The cost
of these activities are thus over and above those which would be incurred by a
series of independent single purpose, nominated bodies managing the same
services. There is therefore no logical basis for apportioning these costs to services.
CREDITOR
Amount owed by the Authority for work done, goods received or services rendered
within the accounting period, but for which payment has not been made by the
end of that accounting period.
CURRENT SERVICE COST (PENSIONS)
The increase in the present value of a defined benefits pension scheme‟s liabilities,
expected to arise from employee service in the current period.
DEBTOR
Amount owed to the Authority for works done, goods received or services rendered
within the accounting period, but for which payment has not been received by the
end of that accounting period.
DEFERRED CHARGES
Expenditure which can be properly deferred (i.e. treated as capital in nature), but
which does not result in, or remain matched with, a tangible asset. Examples of
deferred charges are grants of a capital nature to voluntary organisations.
DEFINED BENEFIT PENSION SCHEME
Pension schemes in which the benefits received by the participants are
independent of the contributions paid and are not directly related to the
investments of the scheme.
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DEPRECIATION
The measure of the cost of wearing out, consumption or other reduction in the useful
economic life of the Authority‟s fixed assets during the accounting period, whether
from use, the passage of time or obsolescence through technical or other changes.
DISCRETIONARY BENEFITS (PENSIONS)
Retirement benefits, which the employer has no legal, contractual or constructive
obligation to award and are awarded under the Authority‟s discretionary powers
such as the Local Government (Discretionary Payments) Regulations 1996.
EQUITY
The Authority‟s value of total assets less total liabilities.
EVENTS AFTER THE BALANCE SHEET DATE
Events after the Balance Sheet date are those events, favourable or unfavourable,
that occur between the Balance Sheet date and the date when the Statement of
Accounts is authorised for issue.
EXCEPTIONAL ITEMS
Material items which derive from events or transactions that fall within the ordinary
activities of the Authority and which need to be disclosed separately by virtue of
their size or incidence to give fair presentation of the accounts.
EXPECTED RETURN ON PENSION ASSETS
For a funded defined benefit scheme, this is the average rate of return, including
both income and changes in fair value but net of scheme expenses, which is
expected over the remaining life of the related obligation on the actual assets held
by the scheme.
EXTRAORDINARY ITEMS
Material items, possessing a high degree of abnormality, which derive from events or
transactions that fall outside the ordinary activities of the Authority and which are
not expected to recur. They do not include exceptional items, nor do they include
prior period items merely because they relate to a prior period. FAIR VALUE
The fair value of an asset is the price at which it could be exchanged in an arm‟s
length transaction less, where applicable, any grants receivable towards the
purchase or use of the asset.
FINANCE LEASE
A lease that transfers substantially all of the risks and rewards of ownership of a fixed
asset to the lessee.
GOING CONCERN
The concept that the Statement of Accounts is prepared on the assumption that the
Authority will continue in operational existence for the foreseeable future.
GOVERNMENT GRANTS
Grants made by the government towards either revenue or capital
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expenditure in return for past or future compliance with certain conditions relating to
the activities of the Authority. These grants may be specific to a particular scheme or
may support the revenue spend of the Authority in general.
HOUSING BENEFITS
A system of financial assistance to individuals towards certain housing costs
administered by authorities and subsidised by central government.
HOUSING REVENUE ACCOUNT (HRA)
A separate account to the General Fund, which includes the income and
expenditure arising from the provision of housing accommodation by the Authority.
IMPAIRMENT
A reduction in the value of a fixed asset to below its carrying amount on the
Balance Sheet.
INCOME AND EXPENDITURE ACCOUNT
The revenue account of the Authority that reports the net cost for the year of the
functions for which it is responsible and demonstrates how that cost has been
financed from precepts, grants and other income.
INFRASTRUCTURE ASSETS
Fixed assets belonging to the Authority that cannot be transferred or sold, on which
expenditure is only recoverable by the continued use of the asset created.
Examples are highways, footpaths and bridges. INTANGIBLE ASSETS
An intangible (non-physical) item may be defined as an asset when access to the
future economic benefits it represents is controlled by the reporting entity. This
Authority‟s intangible assets comprise computer software licences.
INTEREST COST (PENSIONS)
For a defined benefit scheme, the expected increase during the period of the
present value of the scheme liabilities because the benefits are one period closer to
settlement.
INVESTMENTS (PENSION FUND)
The investments of the Pension Fund will be accounted for in the statements of that
fund. However, authorities are also required to disclose, as part of the disclosure
requirements relating to retirement benefits, the attributable share of the pension
scheme assets associated with their underlying obligations.
LIABILITY
A liability is where the Authority owes payment to an individual or another
organisation.
A current liability is an amount which will become payable or could be called
in within the next accounting period, e.g. creditors or cash overdrawn.
A deferred liability is an amount which by arrangement is payable beyond
the next year at some point in the future or to be paid off by an annual sum
over a period of time.
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LIQUID RESOURCES
Current asset investments that are readily disposable by the Authority without
disrupting its business and are either:
Readily convertible to known amounts of cash at or close to the carrying
amount; or
Traded in an active market
LONG-TERM CONTRACT
A contract entered into for the design, manufacture or construction of a single
substantial asset or the provision of a service (or a combination of assets or services
which together constitute a single project), where the time taken to substantially
complete the contract is such that the contract activity falls into more than one
accounting period.
MATERIALITY
The concept that the Statement of Accounts should include all amounts which, if
omitted, or mis-stated, could be expected to lead to a distortion of the financial
statements and ultimately mislead a user of the accounts.
MINIMUM REVENUE PROVISION (MRP)
The minimum amount which must be charged to the revenue account each year in
order to provide for the repayment of loans and other amounts borrowed by the
Authority.
NEGATIVE SUBSIDY
If the Subsidy Housing Revenue Account produces a result, which assumes that the
Authority‟s income is higher than its expenditure, a “negative subsidy” situation
arises. In this case the Authority must pay an amount equivalent to the deficit, from
its Housing Revenue Account to the government.
NET BOOK VALUE
The amount at which fixed assets are included in the Balance Sheet, i.e. their
historical costs or current value less the cumulative amounts provided for
depreciation.
NET DEBT
The Authority‟s borrowings less cash and liquid resources.
NON-DISTRIBUTED COSTS
These are overheads for which no user now benefits and as such are not
apportioned to services
NATIONAL NON-DOMESTIC RATES (NNDR)
The National Non-Domestic Rate is a levy on businesses, based on a national rate in
the pound set by the government and multiplied by the assessed rateable value of
the premises they occupy. It is collected by the Authority on behalf of central
government and then redistributed back to support the cost of services.
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NON-OPERATIONAL ASSETS
Fixed assets held by the Authority but not directly occupied, used or consumed in
the delivery of services. Examples are investment properties, assets under
construction or assets surplus to requirements pending sale or redevelopment.
OPERATING LEASE
A lease where the ownership of the fixed asset remains with the lessor.
OPERATIONAL ASSETS
Fixed assets held and occupied, used or consumed by the Authority in the pursuit of
its strategy and in the direct delivery of those services for which it has either a
statutory or discretionary responsibility.
PAST SERVICE COST (PENSIONS)
For a defined benefit pension scheme, the increase in the present value of the
scheme liabilities related to employee service in prior periods arising in the current
period as a result of the introduction of, or improvement to retirement benefits.
PENSION SCHEME LIABILITIES
The liabilities of a defined benefit pension scheme for outgoings due after the
valuation date. Scheme liabilities measured during the projected unit method
reflect the benefits that the employer is committed to provide for service up to the
valuation date.
PRECEPT
The levy made by precepting authorities by billing authorities, requiring the latter to
collect income from Council Tax on their behalf.
PRIOR YEAR ADJUSTMENT
Material adjustments applicable to previous years arising from changes in
accounting polices or from the correction of fundamental errors. This does not
include normal recurring corrections or adjustments of accounting estimates made
in prior years.
PROVISION
An amount put aside in the accounts for future liabilities or losses which are certain
or very likely to occur but the amounts or dates of when they will arise are uncertain.
PUBLIC WORKS LOAN BOARD (PWLB)
A Central Government Agency, which provides loans for one year and above to
authorities at interest rates only slightly higher than those at which the government
can borrow itself.
RATEABLE VALUE
The annual assumed rental of a hereditament, which is used for NNDR purposes.
RELATED PARTIES
There is a detailed definition of related parties in FRS 8. For the Council‟s purposes
related parties are deemed to include the Authority‟s members, the Chief Executive,
its Directors and their close family and household members.
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RELATED PARTY TRANSACTIONS
The Statement Of Recommended Practice requires the disclosure of any material
transactions between the Authority and related parties to ensure that stakeholders
are aware when these transactions occur and the amount and implications of such.
REMUNERATION
All sums paid to or receivable by an employee and sums due by way of expenses
allowances (as far as those sums are chargeable to UK income tax) and the money
value of any other benefits. Received other than in cash. Pension contributions
payable by the employer are excluded.
RESERVES
The accumulation of surpluses, deficits and appropriations over past years. Reserves
of a revenue nature are available and can be spent or earmarked at the discretion
of the Authority. Some capital reserves such as the fixed asset restatement account
cannot be used to meet current expenditure.
RESIDUAL VALUE
The net realisable value of an asset at the end of its useful life.
RETIREMENT BENEFITS
All forms of consideration given by an employer in exchange for services rendered
by employees that are payable after the completion of employment.
REVENUE EXPENDITURE
The day-to-day expenses of providing services.
REVENUE SUPPORT GRANT
A grant paid by Central Government to authorities, contributing towards the general
cost of their services.
STOCKS
Items of raw materials and stores an authority has procured and holds in
expectation of future use. Examples are consumable stores, raw materials and
products and services in intermediate stages of completion.
TEMPORARY BORROWING
Money borrowed for a period of less than one year.
TRUST FUNDS
Funds administered by the Authority for such purposes as prizes, charities, specific
projects and on behalf of minors.
USEFUL ECONOMIC LIFE (UEL)
The period over which the Authority will derive benefits form the use of a fixed asset. WORK IN PROGRESS (WIP)
The cost of work performed on an uncompleted project at the Balance Sheet date,
which should be accounted for.
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