statement of accounts for the year ended 31 march … · statement of accounts for the year ended...

STATEMENT OF ACCOUNTS

FOR THE

YEAR ENDED 31 MARCH 2013

1

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

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CONTENTS

PAGE

Explanatory Foreword 1

Council Approval 1 5

Statement of Responsibilities for the Statement of Accounts 1 6

Movement in Reserves Statement 1 7

Comprehensive Income and Expenditure Statement 2 0

Balance Sheet 2 1

Cash Flow Statement 2 3

Notes to the Accounts 2 4

Housing Revenue Account Income and Expenditure Statement 1 1 0

Movement on the Housing Revenue Account Statement 1 1 2

Notes to the Housing Revenue Account 1 1 3

Collection Fund 1 2 2

Notes to the Collection Fund 1 2 3

Independent Audit Opinion and Certificate – To Follow 1 2 6

Glossary 1 2 7

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EXP LANA T ORY F ORE W ORD The Statement of Accounts

The purpose of the Accounts, which follow, is 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 2012/13 and the financial position at 31 March 2013. The

Accounts present expenditure and income incurred by the Council in the financial

year 2012/13 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 consists 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 Section 151 Officer concerning the Council’s financial affairs and the actual

Statement of Accounts.

The Audit Opinion and Certificate – this is provided by KPMG following the

completion of the annual audit.

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

measurement and disclosure of transactions 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 unusable 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 Council. The net

assets (assets less liabilities) of the Council are 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 agent’s statement that

reflects the statutory obligation for billing authorities (such as the City of

Lincoln Council) to maintain a separate Collection Fund. The statement shows

the transactions of the Council in relation to the collection from council tax

and business rate payers and distribution to Lincolnshire County Council,

Lincolnshire Police Authority and Government of council tax and national

non-domestic rates.

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

information on the Financial Statements.

Financial Summary 2012/13

It has been another financially challenging year for the Council in 2012/13. The

economic climate has remained subdued throughout the year, and has continued

to present difficult circumstances with regards to the financial management of the

Council. Despite some encouraging signs of growth in the UK economy during 2012

overall recovery remains weak and continues to be affected by the financial

difficulties being experienced by the Eurozone countries. Against this backdrop the

Government continues its plans to balance public finances through the

implementation of a range of austerity measures.

These circumstances place the Council under considerable financial strain with the

most challenging areas for the year continuing to be treasury management, asset

values, the use of, and demand for, Council services, along with significant

reductions in Central Government funding; specific impacts include:

• Unprecedented reductions in Central Government funding, with

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reductions in year of 11.2%, equivalent to £0.949m, this was following a

reduction of 13.2%, £1.250m in 2011/12.

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

to increase, with currently 12,126 households (28%) in the City in receipt of

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

Homelessness, Benefits Advice 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, primarily, planning regulation fees, local land charges and car parking.

• Pressure over the payment of council tax and other charges, as household

income reduces, has contributed to a drop in council tax collection rates of

0.5% (£158k) compared to the previous year and rent collection rates have

reduced from 100% to 96.66% and tenant arrears increased from 1.91% to

3.10%.

• The Bank of England’s policy of continuing to maintain low interest rates to

combat the liquidity crisis has had a significant effect on the Council’s income

from investments. In addition, the ongoing financial instability in the Eurozone

has meant that the Council has limited the placing of investments to mainly

short term deposits in 2012/13 to reduce risk but thereby reducing investment

returns.

• Investment counterparty risk remains high. As a result there continues to be a

very limited range of counterparties available to the Council for investment

purposes.

• The property market has continued to show poor performance in 2012/13 and

the overall market value of the Council’s property holdings decreased by

£5.413m. This was mainly due to the revaluation of City Hall on an existing use

basis, reflecting the ongoing usage of the building by the Council, and

impairments in respect of the council’s car parks, which reflect the corrective

structural works currently in progress to restore full service potential. This overall

movement in 2012/13 includes net downwards revaluations and impairments

of £8.955m which were charged to the Comprehensive Income and

Expenditure Statement. These were offset by upwards revaluations on council

housing and other properties of £3.696m, which increased the revaluation

reserve by this amount and impairments of £0.154m, which reduced the

revaluation reserve.

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

ability to generate capital receipts affecting the affordability of the General

Fund Investment Programme with the financing of schemes being heavily

reliant on the sales of Council assets.

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

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delivery of revenue savings; and has delivered over £13.024m of capital investment.

The Council has also taken on the challenges and opportunities offered through HRA

self financing for the first time in 2012/13 and have delivered improvements in the

housing stock and tenants’ services in line with the HRA Business plan. 2012/13 has

also seen the following progress and developments:

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 and income from fees and charges.

For 2012/13, the approved net expenditure budget for General Fund services was

£14.125m. After allowing for planned contributions of £0.530m from non-earmarked

general reserves the total Net General Fund Budget for 2012/13 was £13.595m.

The Net General Fund Budget of £13.595m assumed the achievement of the

remaining balance of savings of £0.430m from the £1.500m which was to be

delivered in 2012/13 as part of the Council’s Next Steps Programme. The Programme

was successful in delivering these required savings with £0.568m secured in 2012/13

(taking total savings to £1.638m), an overachievement of the target by £0.139m.

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). The impact of IFRS is that there are a number of adjustments of a technical

nature (e.g. depreciation and asset valuations) which have resulted in significant

variances in individual service lines. These adjustments are however, in line with

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

ACTUAL

2012/13

£’000

BUDGET

2012/13

£’000

VARIANCE

2012/13

£’000

Chief Executive & Town Clerk 632 638 (6)

Directorate of Development &

Environmental Sustainability

6,950 6,576 374

Directorate of Resources 1,522 1,626 (104)

Directorate of Housing 5,960 4,900 1,060

Corporate 8,408 3,596 4,812

Net Operational Expenditure 23,472 17,336 6,136

IAS 19 Pension & Compensated

Absences

382 0 382

Capital Financing (6,694) (964) (5,730)

Specific Grants (2,373) (1,910) (463)

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ACTUAL

2012/13

£’000

BUDGET

2012/13

£’000

VARIANCE

2012/13

£’000

Contingencies 0 532 (532)

Savings Target 0 139 (139)

Earmarked Reserves (518) (1,007) 489

Contribution to CMS (IAS19/

Insurance)

7 0 7

CMS Repatriation of deficit 6 0 6

Total Expenditure 14,282 14,125 157

Contribution from general

reserves

(530) (530) 0

Total Net Budget 13,752 13,595 *157

Council Tax Payer 6,321 6,321 0

Council Tax Surplus 7 7 0

Formula Grant 7,423 7,266 157

Total Resources 13,752 13,595 *157 *Council Tax Freeze grant of £0.157m was budgeted for within specific grants, however the actual grant was

included within the Formula Grant settlement.

The Actual contribution from general balances was £0.530m compared to the

approved budget of £0.530m, resulting in a nil variance overall.

The overall nil variance for the year includes the following major variances:

£’000

Increased Income

Crematorium (51)

Reduced Income

Town Planning 105

Building Regulations 157

Car Parking 348

The Lawn (net position) 57

Increased Expenditure

Christmas Market (net position) 103

Corporate Repairs & Maintenance 109

Homeless Bed & Breakfast 79

Provision for Land Charges 122

Provision for Bad Debt 87

Reduced Expenditure

Refuse/ Waste Service pension provision (166)

Strategic Priority Schemes (169)

City Hall Improvement (65)

Savings Target (139)

Vacancy Savings (206)

Housing Benefits grant claim provision (86)

Earmarked Reserves

Car Parks loss of income 175

As at 31 March 2013, the Council held £6.836m General Fund revenue reserves,

comprising £5.229m earmarked reserves (to cover specific or potential

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financial risks and liabilities) and £1.607m non-earmarked general reserves. This latter

balance represents 11.4% of the 2013/14 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 2012/13, the approved net operating surplus for the Housing Revenue Account

was £0.106m. Actual net expenditure for 2012/13 showed a nil variance.

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

Revenue Account, against the net budget.

ACTUAL

2012/13

£’000

BUDGET

2012/13

£’000

VARIANCE

2012/13

£’000

Operational Expenditure

Repairs & Maintenance 7,700 7,774 (74)

Supervision & Management 5,274 6,137 (863)

Provisions (including Bad Debt) 226 225 1

Capital Financing 11,268 9,023 2,245

Sub Total 24,468 23,159 1,309

Add:

Subsidy Limitation Transfer 380 317 63

Contribution to/ from CMS (IAS19 & Insurance

Fund)

91 0 91

CMS – repatriation of surplus (120) 0 (120)

Interest Payable & Similar Charges 2,389 2,389 0

Amortisation of Premiums & Discounts 216 216 0

Total Expenditure 27,424 26,081 1,343

Income

Rents & Service Charges (27,340) (27,138) (202)

Interest (83) (62) (21)

Capital Grants and contributions (61) 0 (61)

Net Expenditure (60) (1,119) 1,059

Less:

Direct Revenue Financing 0 0 0

Capital Accounting Adjustment (1,912) (5) (1,907)

Appropriation to/(from) Major Repairs

Reserves

1,261 1,102 159

Appropriation to/(from) Pension Fund Liability 375 0 375

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ACTUAL

2012/13

£’000

BUDGET

2012/13

£’000

VARIANCE

2012/13

£’000

Appropriations to/(from) Earmarked Reserves 229 (85) 314

Net HRA (Surplus)/Deficit (107) (107) 0

The overall nil variance for the year includes the following major variances:

£’000

Increased Income

Gross Rents (95)

CMS repatriated surplus (120)

Reduced Expenditure

Supervision and management (169)

Increased Expenditure

Subsidy limitation transfer 63

Earmarked Reserves

Repairs Account 164

Major Repairs Reserve 159

As at 31 March 2013, the Council held £11.245m HRA revenue reserves, comprising

£9.866m earmarked reserves (to cover identified specific, potential financial risks and

liabilities) and £1.379m non-earmarked general reserves.

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 £13.025m compared to the revised

programme budget of £12.909m, representing a net variance of £0.116m against the

profiled budget. The reasons for the variance in 2012/13 were mainly due to final

settlement of the public realm scheme (funded by a contribution from Lincolnshire

County Council), offset by re-profiling of IT schemes and renovation grants in the

General Fund Investment Programme into future years and under-spends on the

Decent Homes programme and contingency schemes within the Housing

Investment Programme. The 2012/13 capital spending and funding position is

summarised as follows:

ACTUAL

2012/13

£’000

BUDGET

2012/13

£’000

VARIANCE

2012/13

£’000

Capital Expenditure

General Fund 5,128 4,896 232

Housing Revenue 7,897 8,013 (116)

Total Expenditure 13,025 12,909 116

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ACTUAL

2012/13

£’000

BUDGET

2012/13

£’000

VARIANCE

2012/13

£’000

Financed by:

Long Term Borrowing 1,502 1,494 8

Capital receipts 2,416 2,485 (69)

Capital Grants and

Contributions 1,146 419 727

Major Repairs Reserve 7,444 7,980 (536)

Revenue Contributions 517 531 (14)

Total Financing 13,025 12,909 116

Major Capital works carried out during 2012/13 are set out in the following table:

£’000

Housing

Decent Homes improvements to Council dwellings 5,814

Other major works to housing stock 1,652

Wellington St council house new build scheme 430

General Fund

Local Authority Mortgage scheme 1,000

Land for the provision of burial space 1,073

Car Park Works 458

Public Realm 725

Improvement & Renovation Grants 554

Mercury Abatement scheme at the crematorium 464

Revenues & Benefits ICT system 155

Other Schemes 700

Total 13,025

Capital Financing

The Council’s capital programme is funded by a number of sources including the

application of capital receipts, capital grants, contributions from the revenue

account and long term borrowing. A summary of significant transactions in capital

funding in 2012/13 is provided below:

Capital Receipts

The Council received £0.562m of General Fund capital receipts in 2012/13 which

have been used to support delivery of the General Fund Investment Programme.

The Council also received £1.014m of HRA receipts from Right-to-Buy sales and the

sale of HRA properties. These will be used to support the new build programme within

the Housing Investment Programme and investment in the housing stock.

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Long Term Borrowing

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

order to finance capital expenditure. An assessment of the use of borrowing to fund

capital expenditure is made through the application of the CIPFA Prudential Code in

the Council’s annual Treasury Management Strategy. This approach provides a

framework for decision making highlighting the level of capital expenditure, the

impact on borrowing and investment levels and the overall controls in place to

ensure activity remains affordable, prudent and sustainable.

The Council satisfies its long term borrowing requirement by securing external loans.

From 2011/12 the Council ceased to receive a supported borrowing allocation from

Central Government (supported borrowing allocations were accompanied by a

grant from Government to cover the costs of borrowing). As a result all borrowing

undertaken by the Council is now unsupported, which means all the costs of

borrowing must be funded by the Council.

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 (in line with its Treasury Management

Strategy); 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 2013 increased by

£0.007m to £75.442m compared to 31 March 2012; the only change in year being

due to interest-free loans from Salix (an independent company funded by the

Carbon Trust to help improve energy efficiency in public sector buildings), which are

repayable over 4 years.

Total Outstanding

Source of loan

31/03/13

£’000

31/03/12

£’000

Public Works Loan

Board

58,793 58,793

Money Market 16,000 16,000

Other 649 642

Total 75,442 75,435

No other long-term borrowing was undertaken during 2012/13 and the Council

remains under borrowed by £5.544m (i.e. the Council’s actual borrowing is £5.544m

less than its borrowing requirement at 31 March 2013). Additional long-term

borrowing will be taken in 2013/14 or future years to bring levels up to the Council’s

borrowing requirement, subject to liquidity requirements, if preferential interest rates

are available.

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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 an increase in the estimated Pension Fund Reserve net

liability over the 2012/13 year of £11.034m, up from £50.221m at 1 April 2012 to

£61.255m at 31 March 2013. This increase in the Pension Fund deficit resulted from

falling bond yields which has been partially offset by strong asset returns. This is

recognised as an actuarial loss on pension liabilities, which is shown in Other

Comprehensive Income and Expenditure within the Comprehensive Income and

Expenditure Statement.

The statutory arrangements for funding the remaining liability of £61.255m 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 2011 and although the results

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

funding level to 79%, 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. The UK’s economic recovery is likely to be slow and fragile with the

threat of further technical recessions remaining very real. The Government’s plans to

balance public finances through austerity measures are not progressing as quickly as

planned and further reductions in public expenditure are expected to continue

through until 2017/18 at the earliest.

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Against this 2013/14 will see the Government implement its plans to replace current

core funding mechanisms for councils with the introduction of the Business Rates

Retention Scheme and the Localisation of Council Tax Support. Both of these

schemes introduce a new level of financial risk to the Council, increasing the

uncertainly and volatility of the Council’s resources.

These lower levels of Government funding and increased financial risk, along with

pressure on the generation of local income streams from fees and charges together

with an increasing demand for council services, particularly from those most

vulnerable, pose a considerable financial challenge for the Council over the

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

accustomed to working within tight budgets, driving out savings of £4m pa since the

onset of the decline in the UK economy in 2008. Despite this achievement the

Council must continue to reduce its levels of expenditure or identify additional

resources if it is to remain sustainable.

The Council’s Medium Term Financial Strategy for 2013-18 is based on a reduction in

annual revenue spending of £1.000m in 2013/14, increasing annually to £3.000m by

2016/17. In striving towards financial sustainability, the Council’s strategy for delivery

of the required savings over the coming years will bring together, in a co-ordinated

programme, the following core strands:

• Implementing fair and appropriate charging regimes for services

• Driving greater value from procurement and commissioning activity

• Rationalising the City’s property and land portfolio to optimise usage and

commercial returns

• Redesigning and modernising services to improve customer experiences,

maximise efficiencies and continue to make the business fit for purpose

• Withdraw or part withdraw from some services not deemed to be of sufficient

priority or any longer affordable

The Council will continue to do all that it can to minimise the effect of these cuts on

the public, and will prioritise those services that are needed the most. It has taken

sensible steps to comprehensively review the services it delivers, and the way that it

delivers them, so that its limited resources are used to maximum effect, and it will

continue to build on its record of delivering new and better ways of doing things in

order to keep public services running in these tough times.

The result will be a smaller council, doing less, but continuing to do what it does

effectively and well for the people of Lincoln.

Housing Revenue Account (HRA)

HRA Self Financing was implemented from 1 April 2012 following a one-off

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settlement payment to the Treasury, in order to ‘buy out’ of the old subsidy system.

The new system incentivises landlords to manage their assets well and yield

efficiency savings. The Council now has greater certainty about future income and is

no longer subject to annual funding decisions by Central Government, enabling it to

develop long-term plans, and to retain income for reinvestment. The Council as

landlord now has greater flexibility to manage its stock in the way that best suits local

need and provides more opportunity for tenants to have a real say in setting

priorities looking to the longer term.

However, self financing also transfers significant risks from Central Government to

local authorities. The Council now bears the responsibility for the long term security

and viability of council housing in Lincoln. The Council now has to fund all activity

related to council housing from the income generated from rents through long term

business planning. The Council is more exposed to changes in interest rates, high

inflation and the financial impact of falling stock numbers and also needs to factor in

the impact of changes in government policy e.g. the impacts of the forthcoming

welfare reform on income recovery.

In order to optimise its resources for council housing over the short, medium and long

term the Council has developed a 30 year HRA business plan. A robust business

minded approach is being taken to ensure that the Council is in a position to

optimise the benefits of its new responsibilities and to minimise the impact of the

additional risks that self financing brings. Ultimately the business plan aims to ensure

that the Council is in a position to continue to enhance the housing stock, and

provide quality, affordable services to tenants.

Through delivery of the Business Plan improvements have been made in working

practices that have released savings within the Business Plan. These resources have

been redirected towards priority areas through a contribution to neighbourhood

working, addressing the increasing demand for aids and adaptations and external

decorating work and supporting environmental improvement works to housing

areas.

Capital Expenditure

The Council’s capital programmes will deliver projects to the value of £84.932m over

the next five years, with £18.087m estimated to be spent in 2013/14. This includes

significant investment and improvement to Council dwellings, and Council buildings,

housing assistance grant aid and a contribution towards the provision of a new

homeless change centre.

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 £5.749m over the 5 year period (representing 59% 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 a review programme of assets to identify potential disposals has

been undertaken, ongoing capital commitments have been reviewed and a

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number of contingency schemes decommissioned and the annual capital

programme has been set at a level that is affordable taking into account

anticipated capital receipts. If anticipated receipts are not realised prudential

borrowing will be used until such time as capital receipts can be realised. 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 predominantly reliant upon

revenue contributions from the Housing Revenue Account (HRA). This places

enormous pressure on the revenue budget and is a fundamental consideration in

the development of the 30 year HRA business plan. In the first 10 years of the

Housing Business Plan the majority of revenue resources will be fully committed to

support the capital investment required in the existing stock. Given the level of

revenue support required, and increased dependency on this as the primary source

of capital funding, it is recognised that it is critical that there is robust budget

management of the HRA and that opportunities to achieve efficiencies and

maintain/maximise income streams are actively pursued.

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 and the introduction of new core funding mechanisms, 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 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).

The Council has a collaborative arrangement with North Kesteven and West

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Lindsey District Councils to provide the Central Lincolnshire Joint Planning Unit. This

arrangement is hosted by North Kesteven District Council. The Council also has a

collaborative arrangement with North Kesteven to provide a shared Revenues and

Benefits Service. This shared service is hosted by the City of Lincoln Council. Both of

these arrangements are governed through a Joint Committee representing each of

the partner authorities. These arrangements are considered as Jointly Controlled

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

to joint control, and as such do 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

There have been a number of minor wording changes to the following accounting

policies to clarify the accounting treatment:

• Charges to Revenue for Non-Current Assets (number 6)

• Non-Current Assets – Property, Plant & Equipment (number 19)

Full details of accounting policies are provided in note 1 to the accounts.

Prior Period Adjustment

There were no prior period adjustments required in 2012/13.

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.

C O UNC I L APPR OVA L

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The Statement of Accounts for the year 1 April 2012 to 31 March 2013 has been

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

Council, at the meeting held on 24 September 2013.

Patrick Vaughan

Councillor Patrick Vaughan

Chairman of Council

Date:

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E MEN T O F R ESP ONS I B I L I T I ES F O R

T HE S TA TE MENT OF AC C OUNT 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 2013 and its income and expenditure for the year ended on that date.

ANGELA ANDREWS

A ANDREWS, CPFA,

Director of Resources DATE: 28 JUNE 2013

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M O VE MEN T IN RES ERV ES S TAT E MEN T

General Earmarked Housing CMS Major Capital Capital Total Unusable Total

Fund Revenue Repair Receipts Grants Usable Reserves Council

Balance Account Reserve Reserve Unapplied Reserves Reserves

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

Balance at 31 March 2011 1,785 11,233 1,183 (207) 0 3,399 1,418 18,811 161,049 179,860

Movement in reserves during

2011/12

Surplus or (deficit) on provision of

services (1,520) 0 (21,861) 0 0 0 (23,381) 0 (23,381)

Other Comprehensive Income

and Expenditure 0 0 0 0 0 0 0 (6,957) (6,957)

Total Comprehensive

Expenditure and Income (1,520) 0 (21,861) 0 0 0 0 (23,381) (6,957) (30,338)

Adjustments between

accounting basis & funding basis

under regulations (Note 7) 1,542 0 23,509 0 2,283 (1,219) 26,115 (26,115) 0

Other adjustments 0 0 0 0 0 0 0 0 0 0

Net Increase/Decrease before

Transfers to Earmarked Reserves 22 0 1,648 0 0 2,283 (1,219) 2,734 (33,072) (30,338)

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

Transfers to/from Earmarked

Reserves 330 1,092 (1,559) 138 0 0 0 0 0 0

Increase/Decrease (movement)

in 2011/12

352 1,092 89 138 0 2,283 (1,219) 2,735 (33,072) (30,337)

Balance at 31 March 2012

carried forward 2,137 12,325 1,272 (69) 0 5,682 199 21,546 127,977 149,523

Movement in reserves during

2012/13

Surplus or (deficit) on provision of

services (9,188) 0 27 0 0 0 0 (9,161) 0 (9,161)

Other Comprehensive

Expenditure and Income 0 0 0 0 0 0 0 (6,601) (6,601)

Total Comprehensive

Expenditure and Income (9,188) 0 27 0 0 0 0 (9,161) (6,601) (15,762)

Adjustments between

accounting basis & funding basis

under regulations (note 7) 8,354 0 348 0 (6,342) (1,212) 47 1,195 (1,195) 0

Other adjustments 0 0 0 0 9,239 0 0 9,239 (9,239) 0

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

Net Increase/Decrease before

Transfers to Earmarked Reserves (834) 0 375 0 2,897 (1,212) 47 1,274 (17,035) (15,761)

Transfers to/from Earmarked

Reserves

304 (3,910) (268) 94 3,783 0 0 0 0 0

Increase/Decrease in Year (530) (3,910) 107 94 6,680 (1,212) 47 1,276 (17,035) (15,759)

Balance at 31 March 2013

carried forward 1,607 8,415 1,379 25 6,680 4,470 246 22,822 110,942 133,764

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C O MPR EHENS IV E IN C OM E AND EXPEN DI TUR E S TA TE MEN T

2012/13

Restated

31 March 2012 Note 31 March 2013

Gross Gross Net Gross Gross Net

Expenditure Income Expenditure Expenditure Income Expenditure

£'000 £'000 £'000 £'000 £'000 £'000

9,828 (8,814) 1,014 Central services to the public 10,381 (9,154) 1,227

6,757 (2,206) 4,551 Cultural and Related Services 7,827 (2,097) 5,730

7,389 (1,540) 5,849

Environmental and Regulatory

Services

8,405 (1,707) 6,698

4,524 (1,869) 2,655 Planning Services 6,160 (1,918) 4,242

2,508 (4,358) (1,850) Highways and transport services 3,885 (4,337) (452)

20,732 (25,103) (4,371) Local authority housing (HRA) 24,466 (26,959) (2,493)

24,931 0 24,931

Local authority housing -

exceptional item, Self Financing

settlement payment to the

Secretary of State

0 0 0

35,606 (32,373) 3,233 Other housing services 38,471 (35,727) 2,744

1,605 0 1,605 Corporate and democratic core 2,639 (1) 2,638

51 0 51 Non distributed costs 43 252 0 252

113,931 (76,263) 37,668 Cost Of Services 102,486 (81,900) 20,586

(573) Other Operating Expenditure 9 560

3,048

Financing and Investment

Income and Expenditure

10 4,603

(257) Surplus/deficit on trading

accounts (not applicable to a

service)

31 (329)

(16,505)

Taxation and Non-Specific Grant

Income 11,36

(16,259)

23,381

(Surplus) or Deficit on Provision of

Services

9,161

(3,877) Surplus or deficit on revaluation

of non current assets

(3,542)

10,834 Actuarial gains / losses on

pension assets / liabilities

43 10,143

6,957 Other Comprehensive Income

and Expenditure

6,601

30,338 Total Comprehensive Income

and Expenditure

15,762

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BA LAN CE SHEE T A S A T 31 MAR CH 2013

31 March

2012 Notes

31 March

2013

£'000

241,760 Property, Plant & Equipment 4,12,38,40 237,954

4,667 Heritage Assets 13 4,677

12,754 Investment Property 12,38 9,512

546 Intangible Assets 12,38 519

0 Assets held for sale (> 1yr) 12 0

449 Long Term Investments 16,46 449

153 Long Term Debtors 1,154

260,329 Long Term Assets 254,265

20,723 Short Term Investments 16,46 18,167

141 Inventories 17 300

8,723 Short Term Debtors 16,18,46 9,758

0 Cash and Cash Equivalents 19 418

29,587 Current Assets 28,643

(3) Cash and Cash Equivalents 19 0

(993) Short Term Borrowing 16 (1,413)

(11,907) Short Term Creditors 16,21 (9,429)

(12,903) Current Liabilities (10,842)

(807) Long Term Creditors (483)

(1,053) Provisions 22 (1,158)

(75,409) Long Term Borrowing 5,16 (75,406)

(50,221) Other Long Term Liabilities 4,43 (61,255)

(127,490) Long Term Liabilities (138,302)

149,523 Net Assets 133,764

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BA LAN CE SHEE T A S A T 31 MAR CH 2013

21,546 Usable reserves 22,822

2,137 General Fund MIRS 1,607

10,111 Earmarked reserves 8 6,014

1,272 Housing Revenue Account MIRS 1,379

(69) CMS MIRS 25

0 Major Repairs Reserve MIRS 6,680

5,682 Capital Receipts Reserve MIRS 4,470

199 Capital Grants Unapplied MIRS 246

2,214 Insurance Fund 8 2,401

127,977 Unusable Reserves 110,942

20,157 Revaluation Reserve 24 23,113

(50,221) Pensions Reserve 24,43 (61,255)

158,080 Capital Adjustment Account 24 148,757

57 Deferred Capital Receipts 24 57

(298) Financial Instruments Adjustment Account 24 (79)

430 Available-for-Sale Financial Instruments Reserve 24 430

76 Collection Fund Adjustment Account 24 149

(304)

Accumulated Absences Account 24 (230)

149,523 Total Reserves 133,764

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C ASH F L OW S TA TE MEN T

31

March

2012

Notes 31 March

2013

£'000 £'000

23,381 Net (surplus) or deficit on the provision of services 9,161

(12,717) Adjustments to net surplus or deficit on the provision of

services for non-cash movements 26 (18,768)

10,475

Adjustments for items included in the net surplus or deficit

on the provision of services that are investing and

financing activities

27 (122)

21,139 Net cash flows from Operating Activities 25 (9,729)

3,700 Investing Activities 28 8,779

(24,440) Financing Activities 29 529

399 Net (increase) or decrease in cash and cash equivalents (421)

396 Cash and cash equivalents at the beginning of the

reporting period (3)

(3) Cash and cash equivalents at the end of the reporting

period 19 418

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N OT ES T O THE A CC OUN TS

Note 1 – Accounting Policies

1. General Principles

The Statement of Accounts summarises the Council’s transactions for the 2012/13

financial year and its position at the year-end of 31 March 2013. The Statement of

Accounts has been prepared in accordance with proper accounting practices.

These practices primarily comprise the Code of Practice on Local Authority

Accounting in the United Kingdom 2012/13 (the Code) and the CIPFA Service

Reporting Code of Practice 2012/13 (SeRCOP), supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 7 of the

Accounts and Audit Regulations 2011.

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.

The accounts are prepared on a going concern basis which assumes that the

functions of the Council will continue in operational existence for the foreseeable

future.

2. Accruals of Income and Expenditure

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

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

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

probable that economic benefits or service potential associated with the

transaction will flow to the Council.

• Supplies are recorded as expenditure when they are consumed – where there

is a gap between the date supplies are received and their consumption they

are carried as inventories on the Balance Sheet.

• Expenses in relation to services received (including services provided by

employees) are recorded as expenditure when the services are received

rather than when payments are made.

• Interest receivable on investments and payable on borrowings is accounted

for respectively as income and expenditure on the basis of the

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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 Council’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 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

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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.

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

• Expenditure in respect of the Local Authority Mortgage Scheme will not be

subject to MRP as this is a temporary arrangement and the funds will be

returned in full.

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 employees take the benefit. The accrual is charged to

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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 appropriate service 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.

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

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

mortality rates, employee turnover rates, etc, and forecasts of projected earnings for

current employees.

Liabilities are discounted to their value at current prices, using a discount rate of 4.5%

(based on the yield of UK Government Bonds plus a ‘credit spread’ allowance to

reflect the extra risk involved in using AA corporate bond yields).

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

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• 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 Costs

• Actuarial gains and losses – changes in the net pensions liability that arise

because events have not coincided with assumptions made at the last

actuarial valuation or because the actuaries have updated their assumptions

– debited to the Pensions Reserve

• Contributions paid to the 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

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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 the reporting period and the date

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

identified:

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

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

events

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

the Statement of Accounts 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.

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

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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.

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

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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 determinable

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

Expenditure Statement when it becomes receivable by the Council.

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

following principles:

• Instruments with quoted market prices – the market price

• Other instruments with fixed and determinable payments – discounted cash

flow analysis

• Equity shares with no quoted market prices – independent appraisal of

company 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

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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.

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.

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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.

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 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

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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

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.

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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.

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

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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.

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

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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.

18. Overheads and Support Services

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

from the supply or service in accordance with the costing principles of the CIPFA

Service Reporting Code of Practice 2012/13 (SeRCOP). The total absorption costing principle is used – the full cost of overheads and support services are shared

between users in proportion to the benefits received, with the exception of:

• Corporate and Democratic Core – costs relating to the Council’s status as a

multi-functional, democratic organisation.

• Non Distributed Costs – the cost of discretionary benefits awarded to

employees retiring early and impairment losses chargeable on Assets Held for

Sale.

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

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

Expenditure on Continuing Services.

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.

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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.

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).

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Where there is no market-based evidence of fair value because of the specialist

nature of an asset, depreciated replacement cost (DRC) is used as an estimate of

fair value.

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 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

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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 – straight-line allocation over the replacement lives of the major

components as identified within the Housing Investment Programme

• 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 or 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.

Council dwellings are separated into their principal components, which are

depreciated separately. The components are defined by reference to the Building &

Construction Industry Standard (BCIS) and the Housing Investment Programme

elements. The replacement life cycles as recommended by BCIS and the Housing

Investment Programme used for the purposes of depreciation.

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. Heritage Assets

The Council holds a number of Heritage Assets, which can be grouped into the

following categories:

• Civic Insignia

• Art and Sculptures

• Musical Instruments

• Vehicles

• Ancient Monuments and War Memorials

• Miscellaneous

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These are not held in a single collection but in a number of appropriate locations,

where they are considered to contribute to increasing the knowledge,

understanding and appreciation of the Council’s history and local area.

Heritage Assets are recognised and measured (including the treatment of

revaluation gains and losses) in accordance with the Council’s accounting policies

on Property, Plant and Equipment. However, some of the measurement rules are

relaxed in relation to heritage assets as detailed below.

• Civic Insignia

The collection of civic insignia includes the Mayor’s and Sheriff’s badges and

chains of office, mace and ceremonial swords. These items are reported in the

Balance Sheet at insurance valuation which is based on market values. These

insurance valuations are updated on an annual basis with periodic reviews by a

specialist valuer. The civic insignia are deemed to have indeterminate lives and

a high residual value; hence the Council does not consider it appropriate to

charge depreciation.

• Art and Sculptures

This category includes paintings and a number of public art works such as statues

and sculptures. Where a valuation is available e.g. an insurance valuation, the

asset is reported in the balance sheet at this valuation. However, for a number of

public art sculptures and statues, no cost or valuation information is available

and consequently, these assets are not recognised in the balance sheet. Where

artworks are recognised, they are deemed to have indeterminate lives and the

Council does not consider it appropriate to charge depreciation.

• Musical Instruments

The Council holds a Steinway grand piano at the Drill Hall and a Stradivarius violin,

which is on loan to the Halle orchestra. These items are reported in the Balance

Sheet at insurance valuation which is based on market values. These insurance

valuations are updated on an annual basis with periodic reviews by a specialist

valuer. The instruments are deemed to have indeterminate lives and a high

residual value; hence the Council does not consider it appropriate to charge

depreciation.

• Vehicles

The Council holds a number of vehicles as heritage assets; these are a vintage

Leyland bus and two diesel locomotives. These items are reported in the Balance

Sheet at insurance valuation which is based on market values. These insurance

valuations are updated on an annual basis with periodic reviews by a specialist

valuer. The vehicles are deemed to have indeterminate lives as they are not in

operation but are on display; hence the Council does not consider it appropriate

to charge depreciation.

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• Ancient Monuments and War Memorials

This category includes various roman ruins and ancient structures and four war

memorials. The Council does not consider that reliable cost or valuation

information can be obtained for the items in this category. This is because of the

nature of the assets held and the lack of market values. Consequently, these

assets are not recognised in the balance sheet.

• Miscellaneous

This category includes any other assets which are being held for their contribution

to knowledge and culture but do not readily fall into the above categories. One

example is the collection of Books of Remembrance held at the City

crematorium. These items are reported in the Balance Sheet at either cost or

insurance valuation where material. No depreciation is charged on these assets.

Heritage Assets – General

The carrying amounts of heritage assets are reviewed where there is evidence of

impairment e.g. where an item has suffered physical deterioration or breakage or

where doubts arise as to its authenticity. Any impairment is recognised and

measured in accordance with the Council’s accounting policies on impairment. The

Council may occasionally dispose of heritage assets which are unsuitable for public

display or to an appropriate body which will ensure the asset is maintained and

displayed within a suitable collection e.g. to a museum or historical trust. The

proceeds of such items are accounted for in accordance with the Council’s

accounting policy on disposal of Property, Plant and Equipment. Disposal proceeds

are disclosed separately in the notes to the financial statements and are accounted

for in accordance with statutory accounting requirements relating to capital

expenditure and capital receipts.

21. 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 recognised losses 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.

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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.

22. 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 Council

becomes aware of the obligation, and are measured at the best estimate at the

balance sheet date of the expenditure required to settle the obligation, taking into

account relevant risks and uncertainties.

When payments are eventually made, they are charged to the provision carried in

the Balance Sheet. Estimated settlements are reviewed at the end of each financial

year – where it becomes less than probable that a transfer of economic benefits will

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.

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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.

23. Reserves

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.

24. 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.

25. VAT

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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 2 – Accounting Standards Issued, Not Adopted

The Council will be required to adopt the amendments to IFRS7 Financial Instruments:

Disclosures (offsetting financial assets and liabilities) in the 2013/14 financial

statements. The accounting changes are included within the code and relate to

additional disclosure requirements in respect of offsetting financial assets and

liabilities. This will result in a change of accounting policy; however, it is not expected

to have a material impact upon the Council’s financial statements.

The Council is also required to adopt the amendments to IAS 19 Employee Benefits in

the 2013/14 financial statements. The effect of this change on the Comprehensive

Income & Expenditure Statement to 31 March 2013 will be an increase of £816,000

and this will be disclosed in the 2013/14 financial statements.

Note 3 – Critical Judgements in Applying Accounting Policies

In applying the accounting policies in Note 1, the Council has had to make certain

judgements about complex transactions or those involving uncertainty about future

events.

The critical judgements made in the Statement of Accounts are:

• 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 a collaborative arrangement with North Kesteven and West

Lindsey District Councils to provide the Central Lincolnshire Joint Planning Unit.

This arrangement is hosted by North Kesteven District Council. The Council

also has a collaborative arrangement with North Kesteven to provide a

shared Revenues and Benefits Service. This shared service is hosted by the

City of Lincoln Council. Both of these arrangements are governed through a

Joint Committee representing each of the partner authorities. These

arrangements are considered as a Jointly Controlled Operation, where

ventures use their own resources to undertake an activity subject to joint

control, and as such do not require consolidation into the Council’s accounts.

The Council’s proportion of activity is accounted for separately within the

Core Financial Statements.

• Investment in banks and other financial institutions are secure and will not

suffer impairments.

Note 4 – Assumptions Made about the Future and Other Major Sources of Estimation

Uncertainty

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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 2013 for which there is a

significant risk of material adjustment in the forthcoming financial year are as follows:

Item Uncertainties Effect if Actual Results Differ

from Assumptions

Property, Plant and

Equipment

Assets are depreciated over

useful lives that are

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 its

current spending on repairs

and maintenance, bringing

into 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 £0.380m for every year

that the useful lives had to be

reduced.

Assets held for sale and

investment properties

Assets classified as Held for

Sale or as Investment

Property are carried at fair

value based on a recently

observed market price. In the

current economic climate,

market prices can fluctuate

considerably due to global

events. The value of these

assets was current at the

balance sheet date, but it

cannot be determined for

how long this value will be

correct.

A 1% reduction in the value

of investment properties

would result in a charge to

the CIES of £0.095m; a 1%

increase in value would result

in the recognition of a gain

of £0.095m in the CIES.

Arrears As at 31 March 2013, the

Council had a balance on

current debtors of £3.059m. A

review of significant

balances suggested that an

impairment of doubtful debts

of £1.522m was required.

If collection rates were to

deteriorate by 5% the

amount of the impairment of

doubtful debts would require

an additional £0.153m to be

set aside as an allowance.

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Item Uncertainties Effect if Actual Results Differ

from Assumptions

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.

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 £16.018m.

A 1 year increase in member

life expectancy would result

in an increased liability of

£4.901m.

Investments At 31 March 2013, the

Council held £18.131m of

short term investments,

£9.131m of which were in

AAA-rated instant access

Money Market Funds. The

remaining £9m is all invested

in part-Government owned

banks for periods of up to 1

year.

As all the investments are

either in AAA-rated MMF’s or

short term deposits in part-

Government owned

institutions, the risk of

impairment is considered to

be minimal.

Note 5 – Material Items of Income and Expense

There were no material items of income and expense in 2012/13.

Note 6 – Events after the Balance Sheet Date

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

28th June 2013. 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 2013, the figures in the financial

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

impact of this information.

Note 7 – 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.

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2012/13 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) 1,749 0 0 0 0 0 1,749 (1,749)

Amortisation of Intangible Assets (excl HRA) 207 0 0 0 0 0 207 (207)

HRA Depreciation 0 167 0 0 0 0 167 (167)

HRA amortisation of intangible assets 0 0 0 0 0 0 0 0

Impairment/revaluation losses (charged to I&E) 4,984 1,967 0 0 0 0 6,951 (6,951)

Revenue Expenditure Funded from Capital under Statute 1,292 0 0 0 0 0 1,292 (1,292)

Movement in market value of investment property 2,003 0 0 0 0 0 2,003 (2,003)

Amounts of non current assets written off on disposal or sale as part of the

gain/loss on disposal to the CIES

439 585 0 0 0 0 1,024 (1,024)

Capital grant and contributions unapplied credited to I&E (1,133) (61) 0 0 0 1,194 0 0

Use of capital grants and contributions to finance capital expenditure 0 0 0 0 0 (1,147) (1,147) 1,147

Transfer of sale proceeds credited as part of the gain/loss on disposal to the

CIES

(562) (1,014) 0 0 1,576 0 0 0

Use of capital receipts reserve to finance capital expenditure 0 0 0 (2,416) 0 (2,416) 2,416

Reversal of items relating to retirement benefits debited or credited to the

Comprehensive Income and Expenditure Statement

2,787 1,373 0 0 0 0 4,160 (4,160)

Differences between statutory debits/credits and amounts recognised as

income and expenditure in relation to financial instruments e.g. Soft loans

(2) (216) 0 0 0 0 (218) 218

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Reserves




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

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

(73) 0 0 0 0 (73) 73

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

(48) (26) 0 0 0 0 (74) 74

(Amounts excluded in I&E to be included for determining movement in

general fund)

Statutory Provision for the repayment of debt - (MRP) (647) 0 0 0 0 0 (647) 647

Statutory Repayment of Debt (Finance Lease Liabilities) (40) 0 0 0 0 0 (40) 40

Voluntary provision above MRP (350) (163) 0 0 0 0 (513) 513

HRA capital receipts to housing central pool 372 0 0 0 (372) 0 0 0

Revenue contribution to finance capital (517) (1,102) 0 1,102 0 0 (517) 517

Employers contributions to pension schemes (2,107) (1,162) 0 0 0 0 (3,269) 3,269

Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 (7,444) 0 0 (7,444) 7,444

Total Adjustments 8,354 348 0 (6,342) (1,212) 47 1,195 (1,195)

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Reserves




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

Reversal of items debited or credited to the Comprehensive Income and


Depreciation (excl HRA depreciation) 1,876 0 0 0 0 0 1,876 (1,876)

Amortisation of Intangible Assets (excl HRA) 152 152 (152)

HRA Depreciation 0 0 0 4,502 0 0 4,502 (4,502)

HRA amortisation of intangible assets 0 0 0 41 0 0 41 (41)

Impairment/revaluation losses (charged to I&E) 108 1,362 0 0 0 0 1,470 (1,470)

Revenue Expenditure Funded from Capital under Statute 2,340 0 0 0 0 0 2,340 (2,340)

Movement in market value of investment property 188 0 0 0 0 0 188 (188)

Amounts of non current assets written off on disposal or sale as part of the

gain/loss on disposal to the CIES 2,601 155 0 0 0 0 2,756 (2,756)

Capital grant and contributions unapplied credited to I&E (909) (209) 0 0 0 1,118 0 0

Use of capital grants and contributions to finance capital expenditure 0 0 0 0 (2,337) (2,337) 2,337

Transfer of sale proceeds credited as part of the gain/loss on disposal to the

CIES (3,817) (408) 0 0 4,225 0 0 0

Use of capital receipts reserve to finance capital expenditure 0 0 0 (1,759) 0 (1,759) 1,759

Reversal of items relating to retirement benefits debited or credited to the

Comprehensive Income and Expenditure Statement 2,402 1,087 0 0 0 0 3,489 (3,489)

Differences between statutory debits/credits and amounts recognised as

income and expenditure in relation to financial instruments e.g. Soft loans (3) (205) 0 0 0 0 (208) 208

Reversal of Self Financing Settlement Payment to the Secretary of State 0 24,931 0 0 0 0 24,931 (24,931)

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Reserves




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

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

(11) 0 0 0 0 (11) 11

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

12 19 0 0 0 0 31 (31)

(Amounts excluded in I&E to be included for determining movement in

general fund)

Statutory Provision for the repayment of debt - (MRP) (638) 0 0 0 0 0 (638) 638

Statutory Repayment of Debt (Finance Lease Liabilities) (58) 0 0 0 0 0 (58) 58

Voluntary provision above MRP (346) (150) 0 0 0 0 (496) 496

HRA capital receipts to housing central pool 183 0 0 0 (183) 0 0 0

Revenue contribution to finance capital (295) (1,377) 0 0 0 0 (1,672) 1,672

Employers contributions to pension schemes (2,243) (1,186) 0 0 0 0 (3,429) 3,429

Reversal of Major Repairs Allowance credited to the HRA 0 (510) 0 510 0 0 0 0

Use of the Major Repairs Reserve to finance new capital expenditure 0 0 0 (5,053) 0 0 (5,053) 5,053

Total Adjustments 1,542 23,509 0 0 2,283 (1,219) 26,115 (26,115)

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Note 8 – Transfers to/from Earmarked Reserves

These amounts are held to meet expenditure in future financial years. The movements on

these Reserve Accounts during the year have been as follows:

Balance Appropriations Balance

@ 31.03.12 To Reserve From Reserve @ 31.03.13

£'000 £'000 £'000 £'000

General Fund

Yarborough Leisure Centre 0 20 0 20

Budget Carry Forwards 152 5 (68) 89

Concessionary Fares 12 0 (12) 0

Unused DRF 183 48 (137) 94

IT Reserve 376 115 (84) 407

Invest to Save 2,047 464 (891) 1,620

Mayoral car 24 8 0 32

Member training 6 0 0 6

Managed Workspace 70 0 0 70

Car Parking Strategy 25 0 0 25

Planning Delivery Grant 52 0 0 52

Private Sector Stock Condition Survey 61 0 (9) 52

Stronger, Safer Communities Fund 67 0 (67) 0

Uphill/Downhill Bus 93 0 0 93

Mercury Abatement 222 79 (32) 269

Leisure Debt Management 27 0 (27) 0

Homelessness Case Worker 5 0 (5) 0

Boston Audit Contract 8 5 0 13

Commons Parking 7 2 0 9

Backdated pay claim 141 0 0 141

Loss of income on asset Sales 77 140 (76) 141

Grants & Contributions 721 146 (325) 542

Revenues & Benefits shared service 50 0 (4) 46

Recycling Reserve 15 0 (15) 0

Tree Risk Assessment 110 16 (9) 117

Olympic Event (Infrastructure) 103 0 (71) 32

Backdated rent review 60 40 0 100

Funding for Strategic Priorities 127 0 (88) 39

R&M Reserve 125 0 (125) 0

County Wide Broadband Initiative 34 0 0 34

MA Reserve 9 10 0 19

Local Authority Mortgage Scheme 0 33 0 33

Section 106 Interest 0 19 0 19

Benefits – subsidy adjustment 0 100 0 100

Car Parks loss of income 0 175 0 175

5,009 1,425 (2,045) 4,389

HRA

Unused DRF 3,530 0 (3,530) 0

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Balance Appropriations Balance

@ 31.03.12 To Reserve From Reserve @ 31.03.13

£'000 £'000 £'000 £'000

Major Repairs Reserve 0 14,124 (7,444) 6,680

Invest to Save 500 0 (27) 473

HRA Repairs Account 914 7,786 (7,700) 1,000

HRA Survey Works 136 3 (9) 130

Stock Retention 22 0 0 22

5,102 21,913 (18,710) 8,305

Insurance Fund 2,214 444 (257) 2,401

Total Earmarked Reserves 12,325 23,782 (21,012) 15,095

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 2012/13 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:

2011/12 2012/13

£'000 £'000

1,944 Opening Balance 2,214

(240) Funding of claims/losses (257)

510 Contributions from revenue 444

0 Release of reserve 0

2,214 Closing Balance 2,401

Note 9 – Other Operating Expenditure

2011/12 2012/13

£'000 £'000

713 Levies 740

183 Payments to the Government Housing Capital

Receipts Pool 372

(1,469) Gains/ losses on the disposal of non current assets (552)

(573) Total 560

Note 10 - Financing and Investment Income and Expenditure

2011/12 2012/13

£'000 £'000

2,430 Interest payable and similar charges 3,240

878 Pensions interest cost and expected return on pension

assets 1,574

(260) Interest Receivable and similar income (211)

3,048 Total 4,603

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Note 11 – Taxation and Non-Specific Grant Income

2011/12 2012/13

£'000 £'000

(6,316) Council tax income (6,402)

(6,279) Non domestic rates (7,282)

(2,792) Non ring-fenced government grants (1,381)

(1,118) Capital grants and contributions (1,194)

(16,505) Total (16,259)

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Note 12 – 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 2012/13

Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

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

Cost or Valuation

At 1 April 2012 168,624 69,748 8,465 890 154 2,244 250,125 12,754 1,241 0 264,120

Additions 7,176 972 233 7 0 2,129 10,517 0 216 0 10,733

Donations 0 0 0 0 0 0 0 0 0 0 0

Revaluation

increases/(decreases)

recognised in the

Revaluation Reserve

(4,886) 192 0 0 55 0 (4,639) 0 0 0 4,639

Revaluation


recognised in the

Surplus/Deficit on the

Provision of Services

(1,992) (5,508) 0 0 0 0 (7,500) (2,003) 0 0 (9,503)

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

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

De-recognition-

disposals (620) 0 0 0 0 0 (620) (439) 0 0 (1,059)

De-recognition-

other 0 0 0 0 0 0 0 0 0 0 0

Other movements in

cost or valuation 552 (371) (298) 298 1,171 (552) 800 (800) 0 0 0

At 31 March 2013 168,854 65,033 8,400 1,195 1,380 3,821 248,683 9,512 1,457 0 259,652

Depreciation & Impairments

At 1 April 2012 (10) (3,063) (5,292) 0 0 0 (8,365) 0 (695) 0 (9,060)

Depreciation for year (9,040) (1,037) (1,034) 0 (7) 0 (11,118) 0 (243) 0 (11,361)

Depreciation written

out to the

Revaluation Reserve

7,754 113 0 0 0 0 7,867 0 0 0 7,867


out to the



1,245 216 0 0 0 0 1,461 0 0 0 1,461

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

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

Impairment

losses/(reversals)

recognised in the

Revaluation Reserve

0 304 0 0 0 0 304 0 0 0 304

Impairment

losses/(reversals)

recognised in the



0 (912) 0 0 0 0 (912) 0 0 0 (912)

De-recognition -

disposals 34 0 0 0 0 0 34 0 0 0 34

Other movements in

depreciation and

impairment

0 0 119 (119) 0 0 0 0 0 0 0

At 31 March 2013 (17) (4,379) (6,207) (119) (7) 0 (10,730) 0 (938) 0 (11,668)

Net book value of

assets at 31.03.13 168,837 60,654 2,193 1,076 1,373 3,821 237,954 9,512 519 0 247,985

Net book value of

assets at 31.03.12 168,614 66,685 3,173 890 154 2,244 241,760 12,754 546 0 255,060

Nature of asset holding

Owned 168,837 55,799 1,726 1,076 1,373 3,821 232,632 9,512 519 0 242,663

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

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

Finance lease 0 4,855 467 0 0 0 5,322 0 0 0 5,322

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Comparative Movements in 2011/12

Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

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

Cost or Valuation

At 1 April 2011 164,170 69,459 8,116 711 135 1,925 244,516 15,479 952 65 261,012

Additions 6,518 999 349 179 19 325 8,389 0 289 0 8,678

Revaluation


recognised in the

Revaluation Reserve

2,666 (679) 0 0 0 0 1,987 0 0 0 1,987

Revaluation


recognised in the



(4,572) (37) 0 0 0 0 (4,609) (188) 0 0 (4,797)

De-recognition-

disposals (158) 0 0 0 0 0 (158) (2,537) 0 (65) (2,760)

De-recognition-

other 0 0 0 0 0 0 0 0 0 0 0

Other movements in

cost or valuation 0 6 0 0 0 (6) 0 0 0 0 0

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

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

At 31 March 2012 168,624 69,748 8,465 890 154 2,244 250,125 12,754 1,241 0 264,120


At 1 April 2011 (539) (2,335) (4,147) 0 0 0 (7,021) 0 (502) 0 (7,523)

Depreciation for year (4,165) (1,068) (1,145) 0 0 0 (6,378) 0 (193) 0 (6,571)


out to the

Revaluation Reserve

1,479 43 0 0 0 0 1,522 0 0 0 1,522


out to the



2,678 8 0 0 0 0 2,686 0 0 0 2,686

Impairment

losses/(reversals)

recognised in the

Revaluation Reserve

0 368 0 0 0 0 368 0 0 0 368

Impairment

losses/(reversals)

recognised in the



533 (79) 0 0 0 0 454 0 0 0 454

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Council

dwellings

Land &

Buildings

Vehicles

Plant &

Equip.

Community

Assets

Surplus

Assets

Assets Under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Property

Intangible

Assets

Non

Current

Assets

Held for

Sale

TOTAL

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

De-recognition -

disposals 4 0 0 0 0 0 4 0 0 0 4

De-recognition -

other 0 0 0 0 0 0 0 0 0 0 0

At 31 March 2012 (10) (3,063) (5,292) 0 0 0 (8,365) 0 (695) 0 (9,060)

Net book value of

assets at 31.03.12 168,614 66,685 3,173 890 154 2,244 241,760 12,754 546 0 255,060

Net book value of

assets at 31.03.11 163,631 67,124 3,969 711 135 1,925 237,495 15,479 450 65 253,489

Nature of asset holding

Owned 168,614 62,119 2,182 891 154 2,244 236,204 12,754 546 0 249,505

Finance lease 4,566 991 5,557 5,556

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Fixed Asset Valuation

The Council 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 3,134 3,719

Valued at current value as at:

01/04/12 169,467 68,355 11,960

01/04/11 167,850 61,880 15,478

01/04/10 169,280 69,469 15,235

01/04/09 247,721 43,418 26,982

01/04/08 291,936 39,471 31,320

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 Various – average based on

major components

Other Land & Buildings

- Council Buildings 50 years

- Car Parks 60 years

- Cemeteries 50 years

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- Crematorium 21 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:


Intangible Asset

- Software 5 years

Note 13 – Heritage Assets

Reconciliation of the Carrying Value of Heritage Assets Held by the Council

Heritage Musical Civic Total

vehicles Instruments Insignia Other Assets

£000 £000 £000 £000 £000

Cost or Valuation

At 1 April 2011 130 2,070 2,357 110 4,667

At 31 March

2012 130 2,070 2,357 110 4,667

Cost or Valuation

At 1 April 2012 130 2,070 2,357 110 4,667

Additions 0 0 0 0 0

Disposals (30) 0 0 0 (30)

Revaluations 40 0 0 0 40

At 31 March

2013 140 2,070 2,357 110 4,677

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Heritage Vehicles

The Council's collection of heritage vehicles is reported in the Balance Sheet at

insurance valuation which is based on market values. These insurance valuations are

reviewed annually and re-valued every five years by an appropriately qualified

valuer.

The collection consists of a Vintage Leyland Bus, and two diesel locomotives. The Bus

is on display at the Museum of Lincolnshire Life. The locomotives are located at

Ludborough Station, where they are operated periodically by the North Thoresby

and Ludborough steam society for special events.

Musical Instruments

This category contains a donated asset, a violin by Antonio Stradivari of Cremona

dated 1695, which is on loan to the Halle Orchestra. The violin was valued by

Sotheby's in November 2011 at £2.000 million.

Civic Insignia

The collection of civic insignia includes the Mayor's and Sheriff's badges and chains

of office and mace. All items are on display at the Guildhall, Lincoln. It also includes

four ceremonial and fighting swords of significant historical significance, which

together are valued at £1.400 million. The Council's collection of civic insignia is

reported in the Balance Sheet at insurance valuation which is based on market

values. These insurance valuations are reviewed annually and revalued every five

years by an appropriately qualified valuer.

Other Heritage assets

This category includes artwork and paintings and miscellaneous assets recognised in

the Balance Sheet, such as the Books of Remembrance kept on display at the City

Crematorium. These are reported at insurance valuation which is based on market

values and are subject to periodic revaluation by an appropriately qualified valuer.

Heritage Assets not recognised in the Balance Sheet

In addition to the assets recognised in the Balance Sheet and disclosed in the above

table, the Council holds a number of assets which are by their nature heritage assets

but are not recognised in the Balance Sheet. The Council does not consider that

reliable cost or valuation information can be obtained for these assets due to the

nature of the assets and the lack of market values. Examples of this type of asset are

ancient structures and ruins, War memorials and public art.

These are listed below.

Scheduled Ancient Monuments

St Paul in the Bail Walls & Well

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Scheduled Ancient Monuments

Saltergate Roman Wall and

Posterngate

Wall & Gate

Mint Wall, West Bight Wall

Newport Arch Arch & Wall

Pottergate Arch

Lower West Gate & Wall, City

Hall

Gate & Wall

St Marys conduit Conduit

Temple Gardens, Close Wall Wall

Roman Wall, Mary Sookias

House, Cecil street

Wall

Memorials

High Street War memorial

Dixon Street War memorial

Birchwood Avenue War memorial

Newark Road/Maple Street War memorial

Public Art

The Chimes, Brayford Wharf

North

Artwork

Empowerment, Waterside Artwork

Exotic Cone I and II Artwork

Lilies, Altham Terrace Artwork

Lion, Arboretum Artwork

Love Seat, The Lawn Artwork

Dr Charlesworth Statue, The

Lawn

Artwork

Mother and Child, The Lawn Artwork

St Marks Obelisk Artwork

Light Sculpture, Wigford Bridge Artwork

Note 14 – Investment Properties

Movements in the value of Investment Properties are shown in note 12.

The following items of income and expenditure have been accounted for in the

Comprehensive Income and Expenditure Statement:

2011/12 2012/13

£'000 £'000

945 Rental income from investment property 963

(383) Direct operating expenses arising from investment

property (455)

562 Net gain/(loss) 508

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,

66


2 0 1 2 / 1 3

construct or develop investment property or repairs, maintenance or enhancement.

Note 15 – Intangible Assets

Movements in the value of Intangible Assets are shown in note 12.

Note 16 – Financial Instruments

The borrowings and investments disclosed in the Balance Sheet are made up of the

following categories of financial instruments:

Long-Term Current

31/03/12 31/03/13 31/03/12 31/03/13

£’000 £’000 £’000 £’000

Financial Liabilities (principal amount)* 75,409 75,406 59 68

Accrued Interest due within 12 months 0 0 934 1,344

Financial Liabilities at Amortised Cost 75,409 75,406 59 68

Financial Liabilities at Fair Value through

the CIES** 0 0 0 0

Total Borrowings 75,409 75,406 993 1,412

Financial Assets (principal amount)* 449 449 20,645 18,131

Accrued Interest due within 12 months 0 0 78 36

Loans and Receivables 0 0 20,645 18,131

Available-for-Sale Financial Assets 449 449 0 0

Financial Assets at Fair Value through the

CIES 0 0 0 0

Total Investments 449 449 20,723 18,167

* 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:

67


2 0 1 2 / 1 3

2012/13

Financial

Liabilities

Financial Assets Total

Liabilities

measured

at

amortised

cost

Loans and

Receivables

Available-

for-Sale

Assets

Fair

Value

through

the

CIES

£’000 £’000 £’000 £’000 £’000

Comprehensive Income &


Interest expense 3,240 0 0 0 3,240

Impairment losses 0 0 0 0 0

Interest payable and similar

charges

3,240 0 0 0 3,240

Interest income 0 (194) (15) 0 (209)

Interest and investment income 0 (194) (15) 0 (209)

Net (gain)/loss for the year 3,240 (194) (15) 0 3,031

2011/12

Financial

Liabilities

Financial Assets Total

Liabilities

measured

at

amortised

cost

Loans and

Receivables

Available-

for-Sale

Assets

Fair

Value

through

the

CIES

Comprehensive Income &


£’000 £’000 £’000 £’000 £’000

Interest expense 2,430 0 0 0 2,430

Impairment losses 0 0 0 0 0

Interest payable and similar

charges

2,430 0 0 0 2,430

Interest income 0 (291) (15) 0 (306)

Interest and investment income 0 (291) (15) 0 (306)

Net (gain)/loss for the year 2,430 (291) (15) 0 2,124

Fair Value of Assets and Liabilities carried at Amortised Cost

Financial liabilities and financial assets represented by loans and receivables are

carried on the Balance Sheet at amortised cost. Their fair value can be

68


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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 repayment 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

31/03/12 31/03/13

Carrying

Amount

Fair Value Carrying

Amount

Fair Value

£’000 £’000 £’000 £’000

58,793 68,138 PWLB Debt 58,793 71,134

16,000 17,076 Money Market Debt 16,000 17,597

561 369 Stock 561 370

114 114 Other 121 121

75,468 85,697 Total Debt 75,475 89,222

8,907 8,907 Trade Creditors 8,631 8,631

84,375 94,604 Total Financial Liabilities 84,106 97,853

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.

69


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Financial Assets

31/03/12 31/03/13

Carrying

Amount

Fair

Value Carrying

Amount

Fair

Value

£’000 £’000 £’000 £’000

20,645 20,723 Money Market Investments <1 year 18,131 18,167

20,645 20,723 Total Investments 18,131 18,167

7,829 7,829 Trade Debtors 8,723 8,723

28,474 28,552 Total Loans and receivables 26,854 26,890

The differences are attributable to fixed interest instruments payable being held by

the Council, 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:

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Consumable

Stores

City Maintenance

Services Materials

City Maintenance

Services Work in

Progress

Total

2011/12 2012/13 2011/12 2012/13 2011/12 2012/13 2011/12 2012/13

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance

outstanding at

the start of the

year

53 63 68 70 19 8 140 141

Purchases 14 10 7 0 0 177 21 187

Recognised as

an expense in

the year

(4) (23) (5) (5) (11) 0 (20) (28)

Written off

balances 0 0 0 0 0 0 0 0

Balance

outstanding at

the year-end

63 50 70 65 8 185 141 300

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:

31/03/12 31/03/13

£’000 £’000

3,682 Central Government Bodies 4,330

1,154 Other Local Authorities 1,178

9 NHS Bodies 143

1 Public Corporations and Trading Funds 0

6,231 Other Entities and Individuals 6,632

11,077 Total 12,283

Debtors balances are shown gross of impairment of doubtful debts (£2.525m in

2012/13, £2.354m in 2011/12)

Note 19 – Cash and Cash Equivalents

The balance of Cash and Cash Equivalents is made up of the following elements:

31/03/12 31/03/13

£’000

£’000

1 Cash held by the Council 1

(4) Bank Current accounts 417

71


2 0 1 2 / 1 3

(3) 418

Note 20 – Assets Held for Sale

Movements in the value of Assets Held for Sale are shown in note 12.

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:

31/03/12 31/03/13

£’000

£’000

(4,131) Central Government Bodies (1,222)

(261) Other Local Authorities (1,352)

(25) Public Corporations and Trading Funds 0

(7,490) Other Entities and Individuals (6,855)

(11,907) Total (9,429)

Note 22 – Provisions

These amounts are set aside to provide for potential liabilities relating to specific

occurrences and comprise the following balances:

Balance

31/03/12

£’000

Transfers

(From)

£’000

Transfers

To

£’000

Balance

31/03/13

£’000

Cory Pension (165) 165 0 0

CLAU Legacy Work (7) 0 0 (7)

Licensing Application Fee (9) 0 0 (9)

Environmental Searches (20) 0 (122) (142)

Business Rates Rateable

Value reduction

– Think Tank

(37) 0 0 (37)


Value reduction

– The Terrace

(71) 0 0 (71)


Value reduction

– Greetwell Place

(154) 0 0 (154)

Accumulated Absences (304) 304 (230) (230)

Redundancy & Pension

costs

(286) 286 (468) (468)

Municipal Mutual

Insurance

0 0 (40) (40)

Total (1,053) 755 (860) (1,158)

72


2 0 1 2 / 1 3

Note 23 – Usable Reserves

Movements in the Council’s usable reserves are detailed in the Movement in

Reserves Statement and Note 7.

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.

Reserve Balance

31/03/12

Net

Movement

in Year

Balance

31/03/13

Purpose of Reserve Further Details of

Movements

£'000 £'000 £'000

Revaluation

Reserve 20,157 2,956 23,113 Store of gains on

revaluation of fixed

assets

a) below

Capital Adjustment

Account

158,080 (9,323) 148,757 Store of capital

resources set aside to

meet past

expenditure

b) below

Financial

Instruments

Adjustment

Account

(298) 219 (79) Balancing

mechanism between

the rates at which

gains and losses are

recognised under the

Code of Practice

c) 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

76 73 149 Store of Council’s

share of

accumulated

surpluses and deficits

on the Collection

Fund

e) below

73


2 0 1 2 / 1 3

Reserve Balance

31/03/12

Net

Movement

in Year

Balance

31/03/13

Purpose of Reserve Further Details of

Movements

£'000 £'000 £'000

Accumulated

Absences Account

(304) 74 (230) 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

f) below

Deferred Capital

Receipts

57 0 57 Expected future

repayments from

sales of assets

received in

instalments

g) below

Pensions Reserve (50,221) (11,034) (61,255) Balancing account

to allow inclusion of

Pensions Liability in

the Balance Sheet

Note 43 to the

financial

statements

127,977 (17,035) 110,942

a) Revaluation Reserve

The Revaluation Reserve contains the gains made by the Council arising from

increases in the value of its Property, Plant and Equipment and Intangible Assets. The

balance is reduced when assets with accumulated gains are:

• 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.

2011/12

£’000

2012/13

£’000

(16,733) Balance 1 April (20,157)

(5,264) Upward Revaluation of assets (4,167)

74


2 0 1 2 / 1 3

2011/12

£’000

2012/13

£’000

1,386

Downward revaluation of assets and impairment losses

not charged to the Surplus/Deficit on Provision of

Services

595

(3,878)

Surplus or deficit on revaluation of non-current assets not

posted to the Surplus or Deficit on the Provision of

Services

(3,572)

454

Difference between fair value depreciation and

historical cost depreciation

586

0 Accumulated gains on assets sold or scrapped

30

(20,157)

Balance 31 March

(23,113)

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

Council 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 Council.

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.

2011/12

£’000

2012/13

£’000

(183,870) Balance 1 April (158,080)

75


2 0 1 2 / 1 3

2011/12

£’000

2012/13

£’000

Reversal of items relating to capital expenditure

debited or credited to the Comprehensive Income

and Expenditure Statement:

6,571 - Charges for depreciation and amortisation of non-

current assets 11,361

1,658 - Revaluation losses and impairments on Property,

Plant and Equipment 8,955

27,271 - Revenue expenditure funded from capital under

statute 1,292

2,756

- Amounts of non current assets written off on

disposal or sale as part of the gain/loss on disposal to

the Comprehensive Income and Expenditure

Statement

1,025

0 Other adjustments 0

38,256 22,633

(454) Adjusting amounts written out of the Revaluation

Reserve (586)

37,802 Net written out amount of the cost of non current

assets consumed in the year 22,047

Capital Financing applied in year:

(1,759) Use of Capital Receipts to finance new capital

expenditure (2,416)

(5,053) Use of the Major Repairs Reserve to finance new

capital expenditure (7,444)

(1,672) Capital expenditure charged against the General

Fund and HRA balances (517)

(2,336) Application of Capital Grants to finance new capital

expenditure (1,147)

(1,192)

Statutory Provision for the financing of capital

investment charged against the General Fund and

HRA balances (MRP/VRP)

(1,200)

(12,012) (12,724)

(158,080)

Balance 31 March

(148,757)

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.

76


2 0 1 2 / 1 3

2011/12

£’000

2012/13

£’000

505 Balance 1 April 298

22

Proportion of discounts incurred in previous financial

years to be credited to the General Fund Balance in

accordance with statutory requirements

9

(229)

Proportion of premiums incurred in previous financial

years to be charged against the General Fund Balance

in accordance with statutory requirements

(228)

298 Balance 31 March 79

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.

2011/12

£’000

2012/13

£’000

(430) Balance 1 April (430)

0 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.

2011/12

£’000

2012/13

£’000


(11) Council’s share of (surplus)/deficit for the year (73)


f) 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.

77


2 0 1 2 / 1 3

Statutory arrangements require that the impact on General Fund Balance is

neutralised by transfers to or from this account.

2011/12

£’000

2012/13

£’000


274 Settlement or cancellation of accrual made at the end

of the preceding year

304

(304) Amounts accrued at the end of the current year (230)

(30) 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

74


g) 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:

2011/12

£’000

2012/13

£’000


0 Council’s share of (surplus)/deficit for the year 0


Note 25 – Cash Flow Statement - Operating Activities

The cash flows for operating activities include the following items:

2011/12 2012/13

£'000 £'000

(476) Interest received (217)

2,419 Interest paid 2,830

Note 26 – Cash Flow Statement – Adjustment to surplus or deficit on provision of

services for non-cash movements

2011/12 2012/13

£'000 £'000

(6,571) Depreciation (11,361)

(2,503) Revaluation losses and impairments recognised in

Comp I&E (8,968)

78


2 0 1 2 / 1 3

2011/12 2012/13

£'000 £'000

845 Revaluation gains and reversal of impairments

recognised in Comp I&ES 13

(507) Contribution (to)/from provisions (106)

(60) Movement on Pension Reserve (891)

(8) RTB admin charges deducted for purposes of pooling (31)

(2,756) Carrying amount of non-current assets sold (1,025)

(61) Other non-cash transactions 54

1,418 (Decrease)/increase in debtors 922

391 (Increase)/decrease in creditors 861

1 (Decrease)/increase in stock 159

(2,723) Movement in Collection Fund balances 1,977

(183) Housing pooled capital receipts (372)

(12,717) (18,768)

Note 27 – Cash Flow Statement – Adjustment to surplus or deficit on the provision of

services for items that are investing & financing activities

2011/12 2012/13

£'000 £'000

5,348 (Decrease)/Increase in short term investments (2,514)

0 Decrease in long term investments 0

4,020 Proceeds from sale of PPE, investment property and

intangible assets 1,576

1,118 Capital Grants recognised in CI&ES 1,194

(11) (Increase)/decrease in short term borrowing (378)

10,475 (122)

Note 28 – Cash Flow Statement - Investing Activities

2011/12 2012/13

£'000 £'000

8,777 Purchase of property, plant and equipment,

investment property and intangible assets 11,575

(4,020) Proceeds from sale of non current assets (1,576)

(1,057) Other receipts from investing activities (1,220)

3,700 Net cash flows from investing activities 8,779

Note 29 – Cash Flow Statement - Financing Activities

2011/12 2012/13

£'000 £'000

(24,995) Cash receipts of short-term and long-term borrowing (37)

19 Repayments of short and long-term borrowing 31

536

Cash payments for the reduction of outstanding

liabilities relating to finance leases 535

(24,440) Net cash flows from investing activities 529

79


2 0 1 2 / 1 3

Note 30 – Amounts Reported for Resource Allocation Decisions

2012/13

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 (129) (1,606) (8,592) (6,524) (13,953) (27,340) (58,144)

Government grants 0 0 (6) (49) (43,999) 0 (44,054)

Total Income (129) (1,606) (8,598) (6,573) (57,952) (27,340) (102,198)

Employee expenses 305 1,464 3,957 2,599 6,309 3,006 17,640

Other operating expenses 8,130 302 6,258 8,265 46,552 19,715 89,222

Support Service Recharges 102 473 5,332 1,669 6,613 4,558 18,747

Total operating expenses 8,537 2,239 15,547 12,533 59,474 27,279 125,609

Net Cost of Services 8,408 633 6,949 5,960 1,522 (61) 23,411

Reconciliation to Net Cost of Services in Comprehensive Income and Expenditure Statement

£000s

Cost of Services in Service Analysis 23,411

Add services not included in main analysis 0

Add amounts not reported in service

management accounts (2,825)

80


2 0 1 2 / 1 3


£000s

Remove amounts reported to

management not included in

Comprehensive Income and Expenditure

Statement 0

Net Cost of Services in Comprehensive

Income and Expenditure Statement 20,586

Reconciliation to Subjective Analysis

Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c'

Not included

in I&E

Allocation of

recharges

Net Cost of

Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income (58,144) 1,335 19,910 (36,899) 0 (36,899)

Surplus or deficit on associates and joint

ventures 0 0 0 0 (330) (330)

Interest and investment income 0 0 0 0 (211) (211)

Income from council tax 0 0 0 0 (6,401) (6,401)

Government grants and contributions (44,054) 0 0 (44,054) (9,857) (53,911)

Pension - expected return on assets 0 0 0 0 (5,165) (5,165)

Total Income (102,198) 0 1,335 0 19,910 (80,953) (21,964) (102,917)

Employee expenses 17,640 (54) 0 17,586 0 17,586

Other service expenses 89,222 (3,714) (14,711) 70,797 0 70,797

Support Service recharges 18,747 (308) (5,199) 13,240 0 13,240

Depreciation, amortisation and

impairment 0 (84) 0 (84) 0 (84)

81


2 0 1 2 / 1 3


Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c'

Not included

in I&E

Allocation of

recharges

Net Cost of

Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Interest Payments 0 0 0 0 3,239 3,239

Precepts & Levies 0 0 0 0 740 740

Payments to Housing Capital Receipts Pool 0 0 0 0 372 372

Gain or Loss on Disposal of Fixed Assets 0 0 0 0 (551) (551)

Pension - interest on pension liabilities 0 0 0 0 6,739 6,739

Total operating expenses 125,609 0 (4,160) 0 (19,910) 101,539 10,539 112,078

Surplus or deficit on the provision of

services 23,411 0 (2,825) 0 0 20,586 (11,425) 9,161

82


2 0 1 2 / 1 3

2011/12 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 (10) (1,896) (6,351) (9,708) (13,096) (25,621) (56,682)

Government grants 0 0 (71) (65) (40,367) (209) (40,712)

Total Income (10) (1,896) (6,422) (9,773) (53,463) (25,830) (97,394)

Employee expenses 376 1,321 3,372 3,683 5,872 3,131 17,755

Other operating expenses 1,546 237 2,187 12,338 43,173 40,086 99,567

Support Service Recharges 73 550 5,112 3,279 6,008 4,627 19,649

Total operating expenses 1,995 2,108 10,671 19,300 55,053 47,844 136,971

Net Cost of Services 1,985 212 4,249 9,527 1,590 22,014 39,577


£000s

Cost of Services in Service Analysis 39,577

Add services not included in main analysis

Add amounts not reported in service

management accounts (1,909)

83


2 0 1 2 / 1 3


£000s

Remove amounts reported to

management not included in


Statement 0

Net Cost of Services in Comprehensive

Income and Expenditure Statement 37,668


Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c'

Not included

in I&E

Allocation of

recharges

Net Cost of

Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Fees, charges & other service income (56,682) 1,317 17,108 (38,257) 0 (38,257)

Surplus or deficit on associates and joint

ventures 0 0 0 0 (257) (257)

Interest and investment income 0 0 0 0 (260) (260)

Income from council tax 0 0 0 0 (6,316) (6,316)

Government grants and contributions (40,712) 209 0 (40,503) (10,189) (50,692)

Pension - expected return on assets 0 0 0 0 (6,225) (6,225)

Total Income (97,394) 0 1,526 0 17,108 (78,760) (23,247) (102,007)

Employee expenses 17,755 (47) 0 17,708 0 17,708

Other service expenses 99,567 (2,829) (12,599) 84,139 0 84,139

Support Service recharges 19,649 (13) (4,509) 15,127 0 15,127

Depreciation, amortisation and

impairment 0 (546) 0 (546) 0 (546)

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Service

Analysis

Services not

in Analysis

Note reported in

service

management

a/c'

Not included

in I&E

Allocation of

recharges

Net Cost of

Services

Corporate

Amounts Total

£000s £000s £000s £000s £000s £000s £000s £000s

Interest Payments 0 0 0 0 2,430 2,430

Precepts & Levies 0 0 0 0 713 713

Payments to Housing Capital Receipts Pool 0 0 0 0 183 183

Gain or Loss on Disposal of Fixed Assets 0 0 0 0 (1,469) (1,469)

Pension - interest on pension liabilities 0 0 0 0 7,103 7,103

Total operating expenses 136,971 0 (3,435) 0 (17,108) 116,428 8,960 125,388

Surplus or deficit on the provision of

services 39,577 0 (1,909) 0 0 37,668 (14,287) 23,381

.

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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.

2012/13 2011/12

Exp. Inc. Net Exp. Inc. Net

£'000 £'000 £'000 £'000 £'000 £'000

Markets 232 (270) (38) 195 (252) (57)

Car Parks 2,848 (4,054) (1,206) 1,808 (4,069) (2,261)

(Surplus)/ Deficit

applicable to a service

3,080 (4,324) (1,244) 2,003 (4,321) (2,318)

CMS 6,008 (6,116) (108) 5,685 (5,735) (50)

City Bus Station 215 (84) 131 169 (85) 84

Industrial Estates 253 (413) (160) 82 (403) (321)

Lincoln Properties 374 (566) (192) 599 (569) 30

(Surplus)/ Deficit not

applicable to a service

6,850 (7,179) (329) 6,535 (6,792) (257)

Total (Surplus)/Deficit 9,930 (11,503) (1,573) 8,538 (11,113) (2,575)

Note 32 – Agency Services

In accordance with the code, the collection and distribution of National Non-

Domestic Rates (NNDR) and Council Tax is deemed to be an agency arrangement.

The costs of collection of NNDR and the surplus or deficit on the Collection Fund for

the year, are shown in the Collection Fund Statement.

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 2012/13 totalled £213,046

(£210,711 in 2011/12).

Payments are defined as:

i. Basic Allowance

ii. Special Responsibility Allowance.

Note 34 – Officers’ Remuneration

The Accounts and Audit Regulations 2012 require the Council to disclose

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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 are 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

2012/13

Post Title Salary Bonuses Expense

Allowances

Compensation

for loss of

office

Pension

Contributions Total

£ £ £ £ £ £

Chief Executive* 125,638 0 1,650 0 26,007 153,295

Director of

Housing &

Community

Services

86,235 0 1,798 0 20,265 108,298

Director of

Development &

Environmental

Services

86,235 0 1,543 0 20,265 108,043

Director of

Resources 86,235 0 1,608 0 20,265 108,108

Total 384,343 0 6,599 0 86,802 477,744

2011/12

Post Title Salary Bonuses Expense

Allowances

Compensation

for loss of

office

Pension

Contributions Total

£ £ £ £ £ £

Chief Executive 118,420 0 1,665 0 27,829 147,914

Director of

Housing &

Community

Services

86,235 0 1,732 0 20,265 108,232

Director of

Development &

Environmental

Services

86,235 0 1,427 0 20,265 107,927

Director of

Resources 86,235 0 1,947 0 20,265 108,447

Total 377,125 0 6,771 0 88,624 472,520

* The salary costs of the Chief Executive includes £14k relating to election expenses in 2012/13 (£6k in 2011/12).

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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 as follows:

Remuneration Band Number of

£ Employees

2012/13 2011/12

50,000 - 54,999 3 1

55,000 - 59,999 6 5

60,000 - 64,999 4 2

65,000 – 69,999 0 0

70,000 – 74,999 0 0

75,000 – 79,999 0 0

80,000 – 84,999 0 0

85,000 – 89,999 3 3

90,000 – 94,999 0 0

95,000 – 99,999 0 1

100,000 – 104,999 0 0

105,000 – 109,999 0 1

110,000 – 114,999 0 1

115,000 – 119,999 0 0

120,000 – 124,999 0 3

125,000 – 129,999 1 0

130,000 – 134,999 0 0

135,000 - 139,999 0 0

140,000 – 144,999 0 0

145,000 – 149,999 0 0

The table above includes payments for redundancy agreed in 2012/13 affecting 4

employees (7 employees in 2011/12).

As part of a planned re-organisation of the Council a provision has been made for

£274,451 in respect of 5 officers who may be made redundant. If this decision is

made it will mean that they would receive more than £50,000 remuneration for the

year. However, at the time of preparing the accounts it has not been possible to slot

these employees into the above table.

The numbers of exit packages with total cost per band and total cost of the

compulsory and other redundancies are set out in the following table:

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Exit package

cost band

(including

special

payments)

Number of

compulsory

redundancies

Number of other

departures

agreed

Total number of

exit packages by

cost band [b + c]

Total cost of exit

packages in each

band

2011/12 2012/13 2011/12 2012/13 2011/12 2012/13 2011/12 2012/13

£ £

£0 - £20,000 9 6 0 0 9 6 72,871 62,163

£20,001 -

£40,000 5 2 0 0 5 2 131,323 43,231

£40,001 -

£60,000 3 2 0 0 3 2 138,543 92,264

£60,001 -

£80,000 0 0 2 0 2 0 122,722 0

£80,001 -

£100,000 0 0 1 0 1 0 99,539 0

£100,000 -

£150,000 0 0 1 0 1 0 112,075 0

Total cost

included in

bandings

677,073 197,658

Add: Amounts

provided for in

CIES not

included in

bandings

0 367,433

Total cost

included in

CIES

677,073 565,091

None of the exit packages shown in the table above related to senior employees.

As part of a planned re-organisation of the Council a provision has been made for

£367,433 in respect of 9 officers who may be made redundant. However, at the time

of preparing the accounts it has not been possible to slot these employees into

specific bandings in the above table.

Note 35 – External Audit Costs

In 2012/13 the following fees relating to External Audit and Inspection were incurred

and paid to the Audit Commission:

2011/12 2012/13

£'000 £'000

*103 Fees Payable with regard to external audit services

carried out by the appointed auditor

57

0 Fees payable in respect of statutory inspection 0

31 Fees payable for the certification of grant claims and

returns

16

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2011/12 2012/13

£'000 £'000

0 Fees payable for other services 0

134 Total 73

* F e e s a r e s h o w n g r o s s o f r e b a t e s r e c e i v e d ( £ 8 k i n 2 0 1 1 / 1 2 a n d £ 5 . 5 k i n

2 0 1 2 / 1 3 )

I n a d d i t i o n t o t h e c o s t s i n t h e a b o v e t a b l e f o r 2 0 1 2 / 1 3 a u d i t w o r k , f u r t h e r

£ 4 2 k c o s t s w e r e i n c u r r e d i n y e a r r e l a t i n g t o w o r k o n 2 0 1 1 / 1 2 g r a n t s .

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 2012/13 is an estimate, as the work will

be carried out in the period August to December 2013.

Note 36 – Grant Income

The Council credited the following grants, contributions and donations to the

Comprehensive Income and Expenditure Statement in 2012/13.

Credited to Taxation and Non Specific Grant Income

2011/12 2012/13

£'000 £'000

(1,941) Revenue Support Grant (141)

(157) Council Tax Freeze Grant (158)

0 Community Right to Challenge (8)

0 Community Right to Bid (5)

(28) LPSA2 performance grant 0

(536) New Homes Bonus (938)

(130) Local Services Support Grant (130)

(298) Disabled Facilities Grants (323)

0 Ringway (725)

(355) Section 106 agreements (32)

(4) Natural England (2)

(38) The Cory Trust 0

(105) North Kesteven District Council (77)

(115) East Midlands Development Agency 0

(27) Environment Agency (5)

(101) Decent Homes contract – profit share (22)

(36) Lincolnshire County Council 0

(23) Heritage Lottery Fund 0

(12) Leaseholder contributions (7)

(4) Other capital grants and contributions (2)

(3,910) Total (2,575)

2011/12 Credited to Services 2012/13

£'000 £'000

(15,532) Rent Allowances (17,647)

(8,025) Council Tax Benefit (8,212)

(15,099) Rent Rebates (16,422)

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2011/12 Credited to Services 2012/13

£'000 £'000

(40) Discretionary Housing Payments (78)

(874) Housing Benefit Administration (856)

(152) Business Rates Administration (152)

0 New Burdens Grant Determination (114)

(15) Innovation Lincolnshire 0

0 DCLG – Alcohol Fund (45)

(49) Preventing Repossessions 0

(35) English Heritage 0

(14) Supporting People 0

0 Home Office – Police Elections (124)

(96) The Electoral Commission 0

(20) Neighbourhood Planning 0

(160) Other Grants (36)

(40,111) Total (43,686)

2011/12 2012/13

£'000 Revenue Grants Received in Advance £'000

(19) Discretionary Housing Payments 0

(19) Total 0

There were no capital grants received in advance in 2012/13.

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 Members of

the Council have a controlling interest or influence in the activities of that

organisation. The code 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 Council.

Members/Officers - For 2012/13 the Council sent a letter, dated 1 April 2013, to all

Members, Chief Officers and Assistant Directors, 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.

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Name of Organisation Member

Representative

Officer Representative

Upper Witham – Drainage Board Cllr Coupland

Cllr Hewson

Cllr Jackson

Cllr Vaughan

N/A

Witham First – Drainage Board Cllr Coupland

Cllr Hewson

Cllr Jackson

Cllr Vaughan

N/A

Witham Third – Drainage Board Cllr Coupland

Cllr Hewson

Cllr Jackson

Cllr Vaughan

N/A

Lincoln Arts Trust Cllr Bushell N/A

Lincoln Dial-a-Ride Cllr Charlesworth Director of Resources

Citizens Advice Bureau Cllr Burke N/A

Investors in Lincoln Cllr Metcalfe

Cllr Murry

N/A

Central Lincolnshire Joint Strategic

Planning Partnership

Cllr Metcalfe

Cllr Murray

Cllr West

Director of

Development &

Environmental

Services

The Shared Revenues & Benefits Joint

Committee

Cllr Metcalfe

Cllr Nannestad

Director of Resources,

Head of Shared

Revenues & Benefits

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 significant influence over the general operations of the

Council. It is responsible for providing the statutory framework within which the

Council operates, provides the majority of its funding in the form of grants and

prescribes the terms of many of the transactions that the Council has with other

parties (e.g. 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 2012/13 were as follows:

2011/12

2012/13

£'000

£'000

380 Upper Witham Drainage Board 391

114 Witham 1st Drainage Board 119

219 Witham 3rd Drainage Board 230

713 Total 740

Assisted Organisations - the Council made material financial assistance to the

following organisations during the year:-

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2011/12

2012/13

£'000

£'000

271 Lincoln Arts Trust 277

47 Lincoln Dial-a-Ride 48

49 Citizens Advice Bureau 50

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 2012, showing net assets of £2.948m and a profit

of £224,249 before taxation, £172,400 after tax (£228,770 before tax and £177,302

after tax in 2010/11).

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

2012/13 a surplus on the managed workspace units of £4,252 was attributable to the

Council.

Details of amounts received from IIL during 2012/13 are shown below:

2011/12 2012/13

£'000 £'000

180 Property Management costs 141

90 Facility Fee 90

(1) Management Fee 4

An amount of £70 was owed from IIL at 31st March 2012 in respect of property

management costs, facility fees and management fees. This is included in the

debtors balance in the Council’s Balance Sheet.

The accounts of the company may be obtained from The Company Secretary, 5

Beck Hall, Welton, LN2 3LJ.

Joint Ventures - The Council has a collaborative arrangement with North Kesteven

and West Lindsey District Councils to provide the Central Lincolnshire Joint Planning

Unit. This arrangement is hosted by North Kesteven District Council. The Council also

has a collaborative arrangement with North Kesteven to provide a shared Revenues

and Benefits Service. This shared service is hosted by the City of Lincoln Council.

Both of these arrangements are governed through a Joint Committee representing

each of the partner authorities. These arrangements are considered as Jointly

Controlled Operations, where ventures use their own resources to undertake an

activity subject to joint control, and as such do not require consolidation into the

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Council’s accounts. The Council’s proportion of activity is accounted for separately

within the Core Financial Statements.

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 Council,

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:

2011/12 2012/13

£’000 £’000

Capital investment

8,389 Property, Plant and Equipment 10,517

0 Investment Properties 0

289 Intangible Assets 216

0 Other capital expenditure (LAMS) 1,000

27,271 Revenue Expenditure Funded from Capital under Statute** 1,292

35,949 13,025

Sources of finance

(1,759) Capital Receipts (2,416)

(2,337) Government grants and other contributions (1,146)

(1,672) Revenue Contributions (517)

(5,053) Major Repairs Reserve (7,444)

25,128 Capital Financing Requirement 1,502

Capital Financing Requirement - Funded by:

0 Supported Borrowing 0

25,128 Unsupported Borrowing 1,502

25,128 1,502

Analysis of movements in the Capital Financing Requirement

in Year:

57,554 Opening CFR 81,490

0 Supported borrowing 0

25,128 Unsupported borrowing 1,502

0 Adjustments in respect of embedded leases reflected within

non-current assets 0

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2011/12 2012/13

£’000 £’000

(1,192) Minimum Revenue Provision/Voluntary Revenue Provision (1,200)

81,490 Closing CFR 81,792

**Revenue Expenditure Funded from Capital under Statute in 2011/12 includes the HRA self financing

settlement payment of £24,931m.

The Council has a five-year Housing Investment programme, of which £26.377m is

contractually committed. This is for a period of investment of five years and relates

to partnership arrangements to ensure that all our properties continue to meet

Decent Homes Standard.

In addition, the Council also has a five-year General Fund Investment Programme, of

which £1.179m is contractually committed.

£000

Lucy Tower Street Car Park Works 1,074

Telephony/Unified Communications 105

Total 1,179

Note 39 – Leases

Council as Lessee

Finance Leases

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:

31/03/12 31/03/13

£000 £000

4,565 Other Land and Buildings 4,855

991 Vehicles, Plant and Equipment 467

5,556 5,322

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:

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31/03/12 31/03/13

£000 £000

Finance lease liabilities (net present value of

minimum lease payments)

535 • current 324

807 • non current 483

457 Finance costs payable in future years 343

1,799 Minimum lease payments 1,150

Minimum Lease Payments Finance Lease Liabilities

31/03/12 31/03/13 31/03/12 31/03/13

£000 £000 £000 £000

Not later than one year 650 396 535 324

Later than one year and not later

than five years

661 320 482 183

Later than five years 488 434 325 300

1,799 1,150 1,342 807

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:

31/03/12 31/03/13

£000 £000

141 Not later than one year 141

526

Later than one year and not later than

five years 460

83 Later than five years 8

750 609

The expenditure charged to the Comprehensive Income and Expenditure Statement

during the year in relation to these leases was:

2011/12

2012/13

£000 £000

21 Vehicles Plant & Equipment 21

121 Land and Buildings 121

142 Minimum lease payments 142

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Council 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 2012/13.

Operating Leases

The Council 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:

2011/12 2012/13

£000 £000

574 Not later than one year 546

1,629 Later than one year and not later than

five years 1,585

3,478 Later than five years 3,445

5,681 5,576

The minimum lease payments do not include rents that are contingent on events

taking place after the lease was entered into, such as rent reviews. In 2012/13,

£0.318m contingent rents were received by the Council (2011/12 £0.247m).

Note 40 – Impairment Losses

During 2012/13, the Council has increased the impairment on Lucy Tower Street Car

Park by £0.968m, which equates to an estimate of the value of additional corrective

works required to restore full service potential. This increases the impairment of

£0.532m brought forward at 31 March 2012, so that the balance carried forward at

31 March 2013 is £1.500m.

An impairment on Thornbridge car park of £0.500m was brought forward at 1 April

2012. Corrective works of £0.359m were carried out during 2012/13, reducing the

impairment carried forward at 31 March 2013 to £0.141m.

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

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parks have been revised to reflect this impairment of their service potential and the

impairments have been charged initially to the Revaluation Reserve, reducing the

balance of previous accumulated gains in respect of these assets. In the case of

Lucy Tower St Car Park, the impairment in 2012/13 reduced the Revaluation Reserve

balance to nil and the remaining value of the impairment of £0.912m has been

charged to the Comprehensive Income & Expenditure Statement. The value of the

impairment was 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, 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 2012/13, incurring

liabilities of £0.565m (£0.677m in 2011/12) – see note 34 for the number of exit

packages and total cost per band. These costs exclude any ill health retirements or

departures as they are not termination benefits in accordance with the requirements

of the code.

Note 43 – Defined Benefit Pension Scheme

Participation in Pension Schemes

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 need to be disclosed.

The Council 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

The Council recognises the cost of 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:

31/03/12

31/03/13

£’000 £’000

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31/03/12

31/03/13

£’000 £’000

Comprehensive Income & Expenditure Statement

Net Cost of Services:

2,417 Current Service Cost 2,431

143 Past Service Costs (97)

51 Curtailment and Settlements (NDC) 252

Net Operating Expenditure:

(6,225) Expected Return on Employer Assets (5,165)

7,103 Interest on Pension Scheme Liabilities 6,739

3,489 Net Charge to the Comprehensive Income & Expenditure

Statement

4,160

Movement in Reserves Statement

3,489 Reversal of net charges made for retirement benefits in

accordance with IAS 19

4,160

3,429 Actual amount charged against the General Fund Balance

for pensions in year

3,269

In addition to the entries recognised in Cost of Services in the Comprehensive

Income and Expenditure Statement, the Statement also includes an actuarial loss of

£10.143m on Other Comprehensive Income & Expenditure.

Assets and Liabilities in Relation to Retirement Benefits

Reconciliation of present value of scheme liabilities:

2011/12 2012/13

£'000 £'000

(128,462) 1 April (141,512)

(2,417) Current Service Cost (2,431)

(7,103) Interest Cost (6,739)

(821) Contributions by Members (789)

(5,867) Actuarial Losses/Gains (17,201)

(143) Past Service Costs/Gains 97

(51) Losses/Gains on Curtailments (252)

233 Estimated Unfunded Benefits Paid 233

(2,148) Liabilities Assumed in a Business Combination 0

5,267 Estimated Benefits Paid

5,190

(141,512) 31 March (163,404)

Reconciliation of fair value of the scheme assets:

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2011/12 2012/13

£'000 £'000

89,135 1 April 91,291

6,225 Expected rate of return 5,165

821 Contributions by scheme participants 789

3,199 Employer contributions 3,035

233 Contributions in respect of Unfunded Benefits 233

(4,881) Actuarial Gains/Losses 7,059

2,059 Assets Acquired on a Business Combination 0

(233) Unfunded Benefits Paid (233)

(5,267) Benefits paid

(5,190)

91,291 31 March 102,149

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

2012/13 2011/12 2010/11 2009/10 2008/09

£'000 £'000 £'000 £'000 £'000

Fair value of employer

assets

102,149 91,291 89,135 88,183 68,554

Present value liabilities (163,404) (141,512) (128,461) (166,460) (104,293)

Surplus/(Deficit) (61,255) (50,221) (39,326) (78,277) (35,739)

The total liability of £61.255m has a substantial impact on the net worth of the

Council as recorded in the Balance Sheet, resulting in an overall balance of

£133.764m. 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 2014 is £2.852m

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:

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2011/12 2012/13

Long-term expected rate of return on assets in the scheme:

6.2% Equity Investments 4.5%

4.4% Bonds 4.5%

4.4% Property 4.5%

3.5% Cash 4.5%

Mortality Assumptions:

Longevity at 65 for current pensioners:

21.2 yrs Men 21.2 yrs

23.4 yrs Women 23.4 yrs

Longevity at 65 for future pensioners:

23.7 yrs Men 23.7 yrs

25.7 yrs Women 25.7 yrs

2.5% Rate of inflation (CPI) 2.8%

4.8% Rate of increase in salaries 5.1%

2.5% Rate of increase in pensions 2.8%

4.8% Rate of discounting scheme liabilities 4.5%

Take-up of option to convert annual pension into retirement

lump sum:

25.0% Membership prior to 1 April 25%

63.0% Membership post 1 April 63%

The pension scheme’s assets consist of the following categories, by proportion of the

total assets held:

2011/12 2012/13

74% Equities 77%

13% Bonds 13%

12% Property 10%

1% Cash 0%

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:

2012/13 2011/12 2010/11 2009/10 2008/09

% % % % %

Differences between the

expected and actual

return on assets

6.91 (5.35) (4.77) 17.79 (32.52)

Experience gains and

losses on liabilities

(0.09) 1.37 (8.96) 0.08 0.01

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.

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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. There are two contingent liabilities as at 31 March 2013:

Land Charges - A group of Property Search Companies is seeking to claim refunds of

fees paid to the Council to access land charges data. Proceedings have not yet

been issued. The Council has been informed that the value of those claims at

present is £142k (including costs) plus interest. A provision has been established to

cover the estimated costs but at this time it is not possible to estimate the potential

interest cost and this therefore represents a contingent liability. The claimants have

also intimated that they may bring a claim against all English and Welsh local

authorities for alleged anti-competitive behaviour. It is not clear what the value of

any such claim would be as against the Council. It is possible that additional

claimants may come forward to submit claims for refunds, but none have been

intimated at present

Municipal Mutual Insurance (MMI) - During 1992-93, the then Council’s insurers, MM,

ceased accepting new business. The Council is a member of a scheme of

arrangement that has been put into place to try to ensure an orderly settlement of

the run-off of MMI. Claim payments to date that are liable to “claw-back” if the

scheme of arrangement is triggered, amount to a maximum of £266k as at 31 March

2013, however the Council has been informed that a levy of £40k will be payable in

2013/14 (a provision has been made for this amount in the accounts). This reduces

the maximum liable to claw back to £226k. It is not possible at this time to determine

the likelihood of the scheme of arrangement being called upon, but the decision of

the Supreme Court in the “trigger litigation” increases the likelihood that the scheme

of arrangement will be invoked.

Note 45 – Contingent Assets

The Council has no Contingent Assets as at 31st March 2013.

Note 46 – Nature and Extent of Risks Arising from Financial Instruments

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.

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� 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;

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 6th March 2012 and the prudential indicators

were revised on 5th March 2013 and is available on the Council’s website

(www.lincoln.gov.uk). The key issues within the strategy were:

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• The Authorised Limit for 2012/13 was set at £92.989m. This is the maximum limit

of external borrowings or other long term liabilities during the year. This was

revised in the 2013/14 strategy to £83.750m.

• The Operational Boundary was expected to be £92.336m. This is the expected

level of debt and other long term liabilities during the year. This was revised in

the 2013/14 strategy to £83.241m.

• The maximum amounts of fixed and variable interest rate exposure were set

at £70.10m and £30.20m 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 2012/13 included:

• Credit ratings of Short Term of F1, Long Term A, Support 3 and viability rating

BBB (Fitch or equivalent rating), with the lowest available rating being applied

to the criteria.

• Part Government owned UK banks.

The full Investment Strategy for 2012/13 was approved by full Council on 6th March

2012 and is available on the Council’s website.

The following analysis summarises the Council’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:

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Amount at

31/03/13

Historical

experience of

default**

Adjustment for

market

conditions at

31/03/13

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) 9,131 0.000% 0.00% 0

AA* rated counterparties

(investments up to 1 year) 0

A* rated counterparties

(investments 1-2 years) 9,000 0.009% 0.01% 1

BBB rated counterparties

(investments up to one year) 0

Other Investments 449 9.870% 9.87% 44

Debtors 9,758 7.170% 7.17% 700

28,338 745

*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

UK Banks & Building Societies

Lloyds TSB Bank plc 4,000 4,000 0 0 0

NatWest Bank plc 5,000 2,000 3,000 0 0

UK Money Market Funds

Ignis MMF 4,131 0 4,131 0 0

Prime Rate MMF 5,000 0 5,000 0 0

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Short term Long term

Principal

invested

Fixed

rate

Variable

rate

Fixed

rate

Variable

rate

£’000 £’000 £’000 £’000 £’000

18,131 6,000 12,131 0 0

The Council allows credit for its trade debtors, an age analysis of those debtors as at

31 March 2013 is as follows:

31/03/12

£’000

31/03/13

£’000

490 Less than one month 421

186 One to three months 147

115 Three to six months 91

127 Six months to one year 110

905 More than one year 871

1,823 Total 1,640

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.

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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 provides 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:

31/03/12 31/03/13

£’000 £’000

59 Less than one year 68

26 Between one and two years 31

29 Between two and seven years 22

8,397 Between seven and 15 years 10,897

66,957 More than fifteen years 64,457

75,468 Total borrowing 75,475

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

£9.429m and trade and other debtors of £9.758m 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:

31/03/12 31/03/13

£’000 £’000

20,645 Less than one year 18,131

0 Between one and two years 0

0 Between two and three years 0

449 More than three years 449

21,094 Total Investments 18,580

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� 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 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.

If all interest rates had been 1% higher with all other variables held constant the

financial effect would be:

2011/12 2012/13

£’000 £’000

0 Increase in interest payable on variable rate borrowings

(225) Increase in interest receivable on variable rate

investments

(227)

(225) Impact on Income and Expenditure Account (227)

(59) Share of overall impact credited to the HRA (58)

(166) Share of overall impact credited to the General Fund (169)

(225) Total (227)

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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

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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HRA IN CO ME AND EXPEN DI TU RE S TA TE MENT FO R THE

YEA R EN DIN G 31 MAR CH 2013

2011/12

Notes 2012/13 2012/13

£’000 £’000 £’000

Expenditure

(7,349) Repairs and Maintenance 3 (7,700)

(5,115) Supervision and Management (5,238)

(45) Rents, rates, taxes and other charges (36)

(2,199) Negative HRA Subsidy payable 0

(446) Subsidy limitation transferable to the General

Fund

(380)

(5,755) Depreciation and impairment of non-current

assets

(11,210)

(72) Debt management costs (56)

(197) Movement in the allowance for bad debts (226)

(24,931) Self Financing settlement payment to the

Secretary of State

0

(46,109) Total Expenditure (24,846)

Income

24,289 Dwelling rents 6 25,982

477 Non-dwelling rents 436

783 Charges for services and facilities 921

25,549 Total Income 27,339

(20,560) Net Cost of HRA Services as included in the


Statement

2,493

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

0

(82) Transfer from CMS (91)

(20,642) Net Cost for HRA Services 2,402

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HRA IN CO ME AND EXPEN DI TU RE S TA TE MENT FO R THE

YEA R EN DIN G 31 MAR CH 2013

2011/12

Notes 2012/13 2012/13

£’000 £’000 £’000

HRA share of the operating income and

expenditure included in the Comprehensive

Income and Expenditure Statement

253 Gain or loss on the sale of HRA assets 429

(1,448) Interest payable and similar charges (2,388)

71 Interest and investment income 83

(304) Pensions interest cost and expected return on

pensions assets

7 (560)

209 Capital grants and contributions receivable 61

(21,861) Surplus or (deficit) for the year on HRA services 27

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M O VE MEN T ON THE HO US ING R EVEN UE AC C OUN T

S TA TE MEN T

2011/12 2012/13

£'000 £'000

1,183 Balance on the HRA at the end of the previous year 1,272

(21,861) Surplus or (deficit) for year on the HRA Income and Expenditure

Statement

27

23,509 Adjustments between accounting basis and funding basis under

statute

348

1,648 Net increase or (decrease) before transfers to or from reserves 375

(1,559) Transfers (to) or from reserves (268)

89 Increase or (decrease) in year on the HRA 107

1,272 Balance on the HRA at the end of the current year 1,379

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N OT ES T O THE H OUS ING RE VEN UE A C CO UN T

Note 1 – Fixed Assets

The number of dwellings in the Council’s housing stock, as at 31 March 2013, totalled

7,904 properties. The type of properties and the period in which they were built, were

as follows:

<1945 1945-64 1965-74 >1974 TOTAL

Property Type No. No. No. No. No.

Low Rise Flats

(Blocks up to 2 Storeys)

1 Bed 44 663 379 361 1,447

2 Bed 6 98 35 43 182

3 Bed 0 0 13 1 14

Sub-Total 50 761 427 405 1,643

Medium Rise Flats

(Blocks of 3 up to 5 Storeys)

1 Bed 2 298 464 383 1,147

2 Bed 0 252 164 193 609

3 Bed 0 15 4 2 21

Sub-Total 2 565 632 578 1,777

High Rise Flats

(Blocks of 6 Storeys or more)

1 Bed 0 58 138 0 196

2 Bed 0 30 74 0 104

Sub-Total 0 88 212 0 300

Houses / Bungalows

1 Bed 158 146 32 9 345

2 Bed 761 836 107 237 1,941

3 Bed 863 600 79 229 1,771

4 or more Beds 100 22 0 5 127

Sub-Total 1,882 1,604 218 480 4,184

Total Dwellings 31 March 2013 1,934 3,018 1,489 1,463 7,904

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:

£ 000

Vacant possession value of council dwellings at 31 March 2013 495,077

Balance sheet valuation applying the Social Housing discount factor (34%) 168,400

The movement in fixed assets during the year was as follows:

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HRA Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Assets under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Properties

Non current assets

held for sale

Intangible

assets TOTAL

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

Cost or Valuation

At 1 April 2012 168,225 11,916 1,043 135 122 181,441 301 0 176 181,918

Additions 7,172 24 135 0 557 7,888 0 0 6 7,894

Donations 0 0 0 0 0 0 0 0 0 0

Revaluation


recognised in the

Revaluation Reserve

(4,886) 0 0 0 0 (4,886) 0 0 0 (4,886)

Revaluation


recognised in the



(1,992) (119) 0 0 0 (2,111) 0 0 0 (2,111)

Derecognition - disposals (620) 0 0 0 0 (620) 0 0 0 (620)

Derecognition - other 0 0 0 0 0 0 0 0 0 0

Other movements in cost

or valuation 501 0 0 0 (552) (51) 0 0 0 (51)

At 31 March 2013 168,400 11,821 1,178 135 127 181,661 301 0 182 182,144


At 1 April 2012 0 (458) (610) 0 0 (1,068) 0 0 (68) (1,136)

Depreciation for year (9,036) (159) (174) 0 0 (9,369) 0 0 (36) (9,405)

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HRA Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Assets under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Properties

Non current assets

held for sale

Intangible

assets TOTAL

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

Depreciation written out to

the Revaluation Reserve 7,754 0 0 0 0 7,754 0 0 0 7,754


the Surplus/Deficit on the


1,245 10 0 0 0 1,255 0 0 0 1,255

Impairment

losses/(reversals)

recognised in the

Revaluation Reserve

0 0 0 0 0 0 0 0 0 0

Impairment

losses/(reversals)

recognised in the



0 0 0 0 0 0 0 0 0 0

De-recognition - disposals 34 0 0 0 0 34 0 0 0 34

De-recognition - other 3 0 0 0 0 3 0 0 0 3

At 31 March 2013 0 (607) (784) 0 0 (1,391) 0 0 (104) (1,495)

Net book value of assets at

31.03.13 168,400 11,214 394 135 127 180,270 301 0 78 180,649


31.03.12 168,225 11,458 433 135 122 180,373 301 0 108 180,782

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HRA Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Assets under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Properties

Non current assets

held for sale

Intangible

assets TOTAL

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

Cost or Valuation

At 1 April 2011 163,771 12,046 1,043 135 0 176,995 301 0 149 177,445

Additions 6,518 29 0 0 93 6,640 0 0 27 6,667

Donations 0 0 0 0 0 0 0 0 0 0

Revaluation


recognised in the

Revaluation Reserve

2,666 (130) 0 0 0 2,536 0 0 0 2,536

Revaluation


recognised in the



(4,572) 0 0 0 0 (4,572) 0 0 0 (4,572)

Derecognition - disposals (158) 0 0 0 0 (158) 0 0 0 (158)

Other movements in cost

or valuation 0 (29) 0 0 29 0 0 0 0 0

At 31 March 2012 168,225 11,916 1,043 135 122 181,441 301 0 176 181,918


At 1 April 2011 (533) (301) (431) 0 0 (1,265) 0 0 (27) (1,292)

Depreciation for year (4,160) (163) (179) 0 0 (4,502) 0 0 (41) (4,543)

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HRA Council

Dwellings

Land &

buildings

Vehicles

Plant &

Equip.

Surplus

assets

Assets under

Construction

Property

Plant &

Equipment

Subtotal

Investment

Properties

Non current assets

held for sale

Intangible

assets TOTAL

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


the Revaluation Reserve 1,479 6 0 0 0 1,485 0 0 0 1,485


the Surplus/Deficit on the


2,677 0 0 0 0 2,677 0 0 0 2,677

Impairment

losses/(reversals)

recognised in the



533 0 0 0 0 533 0 0 0 533

De-recognition - disposals 4 0 0 0 0 4 0 0 0 4

At 31 March 2012 0 (458) (610) 0 0 (1,068) 0 0 (68) (1,136)


31.03.12 168,225 11,458 433 135 122 180,373 301 0 108 180,782


31.03.11 163,238 11,745 612 135 0 175,730 301 0 122 176,153

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Note 2 – Major Repairs Reserve

Until the start of self-financing on 1 April 2012, the Major Repairs Reserve reflected the

Major Repairs Allowance (MRA) received by the Council. This, received as part of

Housing Subsidy grant, was introduced for the first time in 2001/02. The MRA was

based on national average unit costs for each of the property types and

represented the estimated long-term average amount of capital spending required

to maintain a local authority’s stock in its current condition. Under self-financing, this

has been replaced by depreciation, which is charged to the Housing Revenue

Account and then transferred to the Major Repairs Reserve to finance capital

expenditure. This may be supplemented by additional revenue contributions from

the HRA to support the HRA capital programme. The balance on the Major Repairs

Reserve shows the amounts that have yet to be applied to financing.

2011/12 2012/13

£’000 £’000

0 Balance on 1 April 0

Transfers from other reserves (3,624)

Amount transferred from the HRA

- Depreciation

(4,160) Dwellings (9,037)

(383) Other Assets (202)

0 - Other revenue contributions (1,102)

(510) - Appropriations from HRA (159)

(5,053) (14,124)

5,053 - HRA Capital Expenditure 7,444

0 - Appropriations to HRA 0

5,053 7,444

0 Balance on 31 March (6,680)

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.

2011/12 2012/13

£’000 £’000

(750) Balance on 1 April (914) Expenditure in year

3,597 Tenant Notified Repairs 3,546

1,495 Void Repairs 1,511

1,552 Servicing Contracts 1,552

295 Painting Programme 557

41 Asbestos Removal/Surveys 32

323 Aids & adaptations 473

22 Decoration Grants 16

24 Other Expenditure 13

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2011/12 2012/13

£’000 £’000

7,349 7,700 Income in year

(7,427) Contribution from HRA (7,774)

(74) Contribution from Insurance Reserve 0

(5) Contribution from Leaseholders (3)

(7) Interest Received in year (9)

(7,513) (7,786)

(914) Surplus Balance on 31 March (1,000)

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:

2011/12 2012/13

£’000 £’000

Capital investment

6,640 Property, Plant and Equipment 7,890

0 Investment Properties 0

27 Intangible Assets 6

24,931 Revenue Expenditure funded from Capital

under Statute

0

31,598 7,896

Sources of funding (24,931) Supported Borrowing 0

0 Capital Receipts (398)

(5,053) Major Repairs Reserve (7,444)

(237) Government grants and other contributions (54)

(1,377) Revenue Contributions 0

(31,598) (7,896)

0 Balance unfunded at 31 March 0

Prior to the implementation of HRA Self-financing on 1 April 2012, supported

borrowing levels have been issued annually by Central Government, authorising the

Council to borrow monies, which were funded by Central Government to cover

capital expenditure. Additionally, the Council was able to take out unsupported or

prudential borrowing, which must be financed from its own resources. Post self

financing implementation and the end of the housing subsidy system, all borrowing

will be prudential borrowing. In 2012/13, no prudential borrowing was utilised 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:

2011/12 2012/13

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£’000 £’000

Council dwellings -

(245) - Right to Buy (952)

(9) - Discounts repaid 0

(135) - Non-Right to Buy (62)

Other Receipts -

(19) - Land sales 0

0 - Mortgage Property 0

(408) (1,014)

183 Less Pooled (Paid to Central Government) 372

(225) Total (642)

Note 6 - Rent Arrears

During the year 2012/13 total rent arrears increased by £0.171m or 11.5%, to £1.659m.

A summary of rent arrears and prepayments is shown in the following table:

2011/12 2012/13

£’000 £’000

664 Current Tenant Arrears @ 31 March 843

824 Former Tenant Arrears @ 31March 816

1,488 Total Rent Arrears 1,659

(264) Prepayments @ 31 March (290)

1,224 Net Rent Arrears 1,369

A bad debt provision of £0.226m 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 2013 is £1.386m (£1.327m at 31 March 2012).

Note 7 - 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 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:

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2011/12

2012/13

£’000 £’000

HRA Income & Expenditure Statement

783 Current Service Cost 813

0 Past Service Costs 0

(2,152) Expected Return on Employer Assets (1,836)

2,456 Interest on Pension Scheme Liabilities 2,396

1,087 Total

1,373

(1,186) Amount to be met from HRA

(1,162)

(99) Movement on Pension Reserve 211

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T HE C O L LE CT IO N FUND S TATE MEN T

F O R THE Y EAR EN DED 31 MAR CH 2013

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.

2011/12

£’000

Notes

2012/13

£’000

Income

(31,938) Council Tax Income 4 (32,183)

Transfers from General Fund:

(7,973) Council Tax Benefit 4 (8,198)

(38,994) Income collectable from Business Ratepayers 5 (39,533)

(78,905) Total Income (79,914)

Expenditure

39,337 Precepts 6 39,824

Business Rates:

38,842 Payment to National Pool 5 39,381

152 Cost of Collection 152

Provision for Bad & Doubtful Debts:

303 Council Tax/Community Charge 4 49

Contributions:

204 Council Tax Surplus 1(c) & 6 45

78,838 Total Expenditure 79,451

(67) Movement on Fund Balance (463)

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N OT ES T O THE C O L L EC T I ON FUN 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.

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.

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 2012/13, the amount outstanding in January 2013 in

respect of Council Tax when compared with the provision made by the Council

for non-payment, was at the level anticipated and therefore no surplus or deficit

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

dwel l ings

Rat io to

Band D

Equated

number of

dwel l ings

Council

Tax

Payable

Z 88 5/9 49 826.85

A 20,673 6/9 13,782 992.22

B 7,009 7/9 5,451 1,157.59

C 4,025 8/9 3,578 1,322.96

D 2,137 9/9 2,137 1,488.33

E 891 11/9 1,089 1,819.07

F 330 13/9 477 2,149.81

G 107 15/9 178 2,480.55

H 8 18/9 16 2,976.66

26,757

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 £39,823,885

(ii) Number of Band D equivalent Dwellings 26,757

Band D ( i divided by ii ) £1,488.33

The Council Tax required then forms part of Collection Fund Statement as detailed in

the following table:

2011/12 2012/13

£’000 £’000

31,938 Net Amount 32,183

7,973 Benefits 8,198

(204) (Surplus) or Deficit previously declared (45)

(303) Use of Provision for Doubtful Debts (49)

(67) Balance carried forward (463)

39,337 Council Tax Requirement 39,824

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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 2012/13

the amount was 45.8p (43.3p = 2011/12). 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.

The total rateable value @ 31 March 2013 was £104,015,430 (31 March 2012 =

£104,645,206).

Note 6 - Precepts & Demands

The following amounts were paid from the fund:

2011/12

£’000

2012/13

£’000

6,307 City of Lincoln Council 6,329

28,448 Lincolnshire County Council 28,547

4,786 Lincolnshire Police Authority 4,993

39,541 Total 39,869

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INDEPENDENT AUDITORS’ REPORT TO MEMBERS OF CITY OF LINCOLN

COUNCIL

TO BE INSERTED

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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 Council in monetary terms. Assets are categorised as

either current or fixed:

• A current asset will be consumed or cease to have material value within the

next financial year (e.g. cash and stock);

• A fixed asset provides benefits to the Council and to the services it provides

for a period of more than one year and may be tangible e.g. a community

centre, or intangible, e.g. computer software licences.

AUDIT OF ACCOUNTS

An independent examination of the Council’s financial affairs.

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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 Council 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 Council, i.e. it is “clawed-

back” by the government.

CIPFA

The Chartered Institute of Public Finance and Accountancy.

COLLECTION FUND

A separate fund that records the income and expenditure relating to Council Tax

and non-domestic rates.

COMMUNITY ASSETS

Assets that the Council intends to hold in perpetuity, that have no determinable

useful life and that may have restrictions on their disposal. Examples of community

assets are parks and historical buildings.

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COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT

The statement that 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.

CONSISTENCY

The concept that the accounting treatment of like items within an accounting

period and from one period to the next are the same.

CONTINGENT ASSET

A contingent asset is a possible asset arising from past events whose existence will be

confirmed only by the occurrence of one or more uncertain future events not wholly

within the Council’s accounts.

CONTINGENT LIABILITY

A contingent liability is either:

• A possible obligation arising from past events whose existence will be

confirmed only by the occurrence of one or more uncertain future events not

wholly within the Council’s control; or

• A present obligation arising from past events where it is not probable that a

transfer of economic benefits will be required, or the amount of the obligation

cannot be measured with sufficient reliability.

CORPORATE AND DEMOCRATIC CORE

The corporate and democratic core comprises all activities that local authorities

engage in specifically because they are elected, multi-purpose authorities. The costs

of these activities are thus over and above those which would be incurred by a

series of independent single purpose, nominated bodies managing the same

services. There is therefore no logical basis for apportioning these costs to services.

CREDITOR

Amount owed by the Council for work done, goods received or services rendered

within the accounting period, but for which payment has not been made by the

end of that accounting period.

CURRENT SERVICE COST (PENSIONS)

The increase in the present value of a defined benefits pension scheme’s liabilities,

expected to arise from employee service in the current period.

DEBTOR

Amount owed to the Council for works done, goods received or services rendered

within the accounting period, but for which payment has not been received by the

end of that accounting period.

DEFERRED CHARGES

Expenditure which can be properly deferred (i.e. treated as capital in nature), but

which does not result in, or remain matched with, a tangible asset. Examples of

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deferred charges are grants of a capital nature to voluntary organisations.

DEFINED BENEFIT PENSION SCHEME

Pension schemes in which the benefits received by the participants are independent

of the contributions paid and are not directly related to the investments of the

scheme.

DEPRECIATION

The measure of the cost of wearing out, consumption or other reduction in the useful

economic life of the Council’s 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 Council’s discretionary powers such

as the Local Government (Discretionary Payments) Regulations 1996.

EQUITY

The Council’s value of total assets less total liabilities.

EVENTS AFTER THE BALANCE SHEET DATE

Events after the Balance Sheet date are those events, favourable or unfavourable,

that occur between the Balance Sheet date and the date when the Statement of

Accounts is authorised for issue.

EXCEPTIONAL ITEMS

Material items which derive from events or transactions that fall within the ordinary

activities of the Council and which need to be disclosed separately by virtue of their

size or incidence to give fair presentation of the accounts.

EXPECTED RETURN ON PENSION ASSETS

For a funded defined benefit scheme, this is the average rate of return, including

both income and changes in fair value but net of scheme expenses, which is

expected over the remaining life of the related obligation on the actual assets held

by the scheme.

EXTRAORDINARY ITEMS

Material items, possessing a high degree of abnormality, which derive from events or

transactions that fall outside the ordinary activities of the Council and which are not

expected to recur. They do not include exceptional items, nor do they include prior

period items merely because they relate to a prior period.

FAIR VALUE

The fair value of an asset is the price at which it could be exchanged in an arm’s

length transaction less, where applicable, any grants receivable towards the

purchase or use of the asset.

FINANCE LEASE

A lease that transfers substantially all of the risks and rewards of ownership of a fixed

asset to the lessee.

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GOING CONCERN

The concept that the Statement of Accounts is prepared on the assumption that the

Council will continue in operational existence for the foreseeable future.

GOVERNMENT GRANTS

Grants made by the government towards either revenue or capital expenditure in

return for past or future compliance with certain conditions relating to the activities

of the Council. These grants may be specific to a particular scheme or may support

the revenue spend of the Council in general.

HOUSING BENEFITS

A system of financial assistance to individuals towards certain housing costs

administered by authorities and subsidised by central government.

HOUSING REVENUE ACCOUNT (HRA)

A separate account to the General Fund, which includes the income and

expenditure arising from the provision of housing accommodation by the Council.

IMPAIRMENT

A reduction in the value of a fixed asset to below its carrying amount on the Balance

Sheet.

INCOME AND EXPENDITURE ACCOUNT

The revenue account of the Council that reports the net cost for the year of the

functions for which it is responsible and demonstrates how that cost has been

financed from precepts, grants and other income.

INFRASTRUCTURE ASSETS

Fixed assets belonging to the Council that cannot be transferred or sold, on which

expenditure is only recoverable by the continued use of the asset created. Examples

are highways, footpaths and bridges.

INTANGIBLE ASSETS

An intangible (non-physical) item may be defined as an asset when access to the

future economic benefits it represents is controlled by the reporting entity. This

Council’s intangible assets comprise computer software licences.

INTEREST COST (PENSIONS)

For a defined benefit scheme, the expected increase during the period of the

present value of the scheme liabilities because the benefits are one period closer to

settlement.

INVESTMENTS (PENSION FUND)

The investments of the Pension Fund will be accounted for in the statements of that

fund. However, authorities are also required to disclose, as part of the disclosure

requirements relating to retirement benefits, the attributable share of the pension

scheme assets associated with their underlying obligations.

LIABILITY

A liability is where the Council owes payment to an individual or another

organisation.

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• A current liability is an amount which will become payable or could be called

in within the next accounting period, e.g. creditors or cash overdrawn.

• A deferred liability is an amount which by arrangement is payable beyond

the next year at some point in the future or to be paid off by an annual sum

over a period of time.

LIQUID RESOURCES

Current asset investments that are readily disposable by the Council without

disrupting its business and are either:

• Readily convertible to known amounts of cash at or close to the carrying

amount; or

• Traded in an active market

LONG-TERM CONTRACT

A contract entered into for the design, manufacture or construction of a single

substantial asset or the provision of a service (or a combination of assets or services

which together constitute a single project), where the time taken to substantially

complete the contract is such that the contract activity falls into more than one

accounting period.

MATERIALITY

The concept that the Statement of Accounts should include all amounts which, if

omitted or 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

Council.

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 Council’s borrowings less cash and liquid resources.

NON-DISTRIBUTED COSTS

These are overheads for which no user now benefits and as such are not

apportioned to services

NATIONAL NON-DOMESTIC RATES (NNDR)

The National Non-Domestic Rate is a levy on businesses, based on a national rate in

the pound set by the government and multiplied by the assessed rateable value of

the premises they occupy. It is collected by the Council on behalf of central

government and then redistributed back to support the cost of services.

NON-OPERATIONAL ASSETS

Fixed assets held by the Council but not directly occupied, used or consumed in the

delivery of services. Examples are investment properties, assets under

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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 Council in the pursuit of its

strategy and in the direct delivery of those services for which it has either a statutory

or discretionary responsibility.

PAST SERVICE COST (PENSIONS)

For a defined benefit pension scheme, the increase in the present value of the

scheme liabilities related to employee service in prior periods arising in the current

period as a result of the introduction of, or improvement to retirement benefits.

PENSION SCHEME LIABILITIES

The liabilities of a defined benefit pension scheme for outgoings due after the

valuation date. Scheme liabilities measured during the projected unit method reflect

the benefits that the employer is committed to provide for service up to the

valuation date.

PRECEPT

The levy made by precepting authorities on 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 Council’s members, the Chief Executive,

its Directors and their close family and household members.

RELATED PARTY TRANSACTIONS

The Statement Of Recommended Practice requires the disclosure of any material

transactions between the Council and related parties to ensure that stakeholders

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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 Council. 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 a Council has procured and holds in expectation

of future use. Examples are consumable stores, raw materials and products and

services in intermediate stages of completion.

TEMPORARY BORROWING

Money borrowed for a period of less than one year.

TRUST FUNDS

Funds administered by the Council for such purposes as prizes, charities, specific

projects and on behalf of minors.

USEFUL ECONOMIC LIFE (UEL)

The period over which the Council will derive benefits form the use of a 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.

statement of accounts for the year ended 31 march … · statement of accounts for the year ended...

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