Audited&Signed Statement of Accounts - Wellingborough · Borough Council of Wellingborough Statement of Accounts at 31st March 2011 - 5 - This version of the Statement of Accounts

Borough Council of Wellingborough Statement of Accounts at 31st March 2011 - 1 -

Statement of Accounts for the Borough Council

of Wellingborough 2010/11


CONTENTS Page A Forewords A1 Foreword by the Leader of the Council 3 A2 Foreword by the Director of Resources 4

B Statement of Responsibilities for the Statement of Accounts 18 C Independent Auditor's Report 20 D Statement of Accounting Policies 23 E The Core Financial Statements E1 Movement in Reserves Statement 48 E2 Comprehensive Income and Expenditure Statement 50 E3 Balance Sheet 51 E4 Cash Flow Statement 53

F Notes to the Core Financial Statements 1 IFRS Transition 54 2 Accounting Standards that have been Issued but Have Not Yet

Been Adopted 61

3 Critical Judgements in Applying Accounting Policies 61 4 Assumptions made about the Future and Other Major Sources of

Estimation Uncertainty 62

5 Material Items of Income and Expense 65 6 Events After the Balance Sheet Date 66 7 Adjustments Between Accounting Basis and Funding Basis under

Regulations 66

8 Transfers to/from Earmarked Reserves 69 9 Other Operating Expenditure 72 10 Financing and Investment Income and Expenditure 72 11 Taxation and Non-Specific Grant Income 72 12 Property, Plant and Equipment 72 13 Investment Property 75 14 Intangible Assets 77 15 Financial Instruments 78 16 Inventories 82


17 Debtors 83 18 Cash and Cash Equivalents 83 19 Assets Held for Sale 83 20 Creditors 84 21 Provisions 84 22 Usable Reserves 85 23 Unusable Reserves 85 24 Cash Flow Statement - Operating Activities 89 25 Cash Flow Statement - Investing Activities 90 26 Cash Flow Statement - Financing Activities 90 27 Amounts Reported for Resource Allocation Decisions 90 28 Trading Operations 94 29 Agency Services 95 30 Members’ Allowances 96 31 Officers’ Remuneration 97 32 External Audit Costs 98 33 Grant Income 98 34 Related Parties 100 35 Capital Expenditure and Capital Financing 102 36 Leases 102 37 Impairment Losses 105 38 Termination Benefits 105 39 Defined Benefit Pension Schemes 106 40 Contingent Liabilities 111 41 Nature and Extent of Risks arising from Financial Instruments 112 42 Prior Period Adjustment 116

G Supplementary Financial Statements and Notes

G1 The Collection Fund 118

G2 Notes to the Collection Fund 119

H Glossary of terms 122

I Your Feedback 129


I am delighted to introduce the 2010/11 Statement of Accounts for the Borough Council of Wellingborough. As the Leader and Chair of the Resources Committee part of that responsibility includes the production of the Annual Accounts. The Accounts show the people of Wellingborough what services have cost and how the funding has been provided. The Accounts also help provide reassurance to them of the care we take over the public funds that have been placed at the disposal of the Council by the local taxpayers and government. Nationally the economy is beginning to recover and despite continuing economic difficulties 2010/11 can be seen as another successful financial year for Wellingborough. The Council set a net budget for 2010/11 of £12.7m, with a modest increase in Council Tax of 2.9%. It was also expected that £2.5m would be drawn from reserves. As the Accounts show through prudent financial management at the end of the year the Council is reporting a small under spend for 2010/11 of £0.240m that means less has been needed from reserves. This prudence has come alongside the a re-direction of resources to significant investment in the future improvement of the Town and surrounding areas, as well as continuing to ensure the Council meets improvements highlighted by the Audit Commission. Like other councils Wellingborough faces many challenges arising from reductions in public sector funding and increases in demand for services. Our medium term financial plan has identified the need to save £2.9 million in 2011/12 and £0.6m in 2012/13 onwards. The Council has already begun the process to identify how it will continue to deliver excellent services whilst tackling competing demands for resources. This will require sound financial management and a focus on areas such as management, reducing bureaucracy and improving how we buy goods and services. Feedback from local people will also continue to shape services and how we prioritise spending. Looking forward we are keen that the Council is not complacent in the way it manages its money. The financial competence of an organisation is often seen as a key indicator of its overall health and effectiveness. Many aspects of the quality of people’s lives are significantly affected by what the Borough Council of Wellingborough does. In order to sustain the development and improvement in service levels it is vital that a sound financial function is present. Councillor Paul Bell Leader of the Council June 2011

A1 FOREWORD BY THE LEADER OF THE COUNCIL


1. Why do we produce the Statement of Accounts?

Like most organisations the Council has a statutory duty to approve and publish a statement of accounts. The accounts usually cover a 12 month reporting position. These Accounts relate to the period 1st April 2010 to 31st March 2011.

2. How have the Statements been produced?

This document has been compiled by officers of the Council using information recorded on its systems, most notably its financial ledger, in line with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the code). To comply with the Accounts and Audit Regulations 2011, the responsible officer of the Council i.e. The Director of Resources, is required to sign and date the Statement of Accounts no later than the 30th June immediately following the end of the year. A glossary of the various terminologies is set out at Section I.

3. What is contained in the accounts?

Auditor’s opinion

Wellingborough’s appointed external auditors are the Audit Commission. The Audit

Commission will be carrying out their statutory audit following the Director of Resources signing and dating the Statement of Accounts. They will then issue an opinion as to whether the Accounts need to be qualified or are unqualified. The deadline for this opinion is 30th September following the year end.

Accounting Policies

The Statement of Accounting Policies explains the bases, conventions, rules and

practices applied by the Council for recognising, measuring and disclosing the financial transactions of the Council. Wherever possible the accounting policies are based on interpretations and adaptations for the public sector set out in the code.

A2 FOREWORD BY THE DIRECTOR OF RESOURCES


This version of the Statement of Accounts for 2010/11 is the first to be prepared under the

code which is based on International Financial Reporting Standards (IFRS) (which has replaced the local authority SORP) and this has resulted in a significant number of changes to the Accounting Policies. The main changes to accounting policies are listed in the headings below and details of the accounting policies are included in section D.

• Assets Held for Sale • Cash and Cash Equivalents • Component Accounting for Non Current Assets • Employee Benefits Payable during Employment • Exceptional Items and Prior Period Adjustments • Grants and Contributions • Impairment of Assets • Intangible Assets • Investment Property • Leases • Property, Plant and Equipment • Provisions

Core financial statements and notes

The transition to the code has involved many challenges; the amendment of accounting policies as referred to above, but also the changes to the format of accounts and supporting disclosure notes. With 2010/11 being the first year that local authorities are required to prepare their accounts under the code, there are specific transitional arrangements that apply to this first year. These transitional arrangements cover:

• Retrospective application of changes in Accounting Policies, except where there are specific transitional provisions that override this basic principle (e.g. component accounting for Non Current Assets);

• Disclosure of an opening Balance Sheet as at the earliest comparative period (i.e. 1st April 2009) when the Council because the Council has applied accounting policies retrospective; and

• Disclosure notes showing the material changes to the Council’s assets, liabilities and reserves for 1st April 2009 and 31st March 2010, and Comprehensive Income and Expenditure Statement for 2009/10, as a result of the retrospective application of changes in Accounting Policies (see section F note 1).


Similarly there are major changes to the format of the main financial statements and the level of detail shown in the associated disclosure notes. The changes to the format of the accounts cover:

• The Movement in Reserves Statement - In the Movement in Reserves

Statement, the Surplus or Deficit on Provision of Services and Other Comprehensive Income and Expenditure are taken from the Comprehensive Income and Expenditure Statement (CIES) which replaces both the Income and Expenditure Account and the Statement of Total Recognised Gains and Losses (STRGL). The Surplus or Deficit on Provision of Services is the equivalent to the Income and Expenditure Account under the SORP. Other Comprehensive Income and Expenditure includes unrealised gains and losses (e.g. revaluation of land and buildings), and is the equivalent of the STRGL under the SORP.

• The Comprehensive Income and Expenditure Statement – The format of the

first section of the Comprehensive Income and Expenditure Statement, the (Surplus) or Deficit on Provision of Services, is very similar to the Income and Expenditure Account under the SORP, although less detail is required below the Cost of Services. The format of the second section of the Comprehensive Income and Expenditure Statement (referred to as Other Comprehensive Income and Expenditure) is very similar to the STRGL under the SORP.

• The Balance Sheet - The Balance Sheet remains under the code, and the layout

is also very similar to the SORP’s Balance Sheet. One difference is that the minimum requirements under IFRS are less detailed than under the SORP. For example, only one line is required for property, plant and equipment and the detail is shown in a supporting disclosure note. With a few exceptions (a new line for assets held for sale, and the cash line now including ‘cash equivalents’), the top half of the Balance Sheet (assets and liabilities) looks very similar to the SORP Balance Sheet. It’s the bottom half of the Balance Sheet (reserves) where the changes have occurred; not all reserves can be used to deliver services, and the code reflects this by reporting reserves in two groups – ‘usable’ and ‘unusable’ reserves. Usable reserves such as the General Fund and earmarked reserves are those where members will be involved in deciding on the levels maintained, and their use. Unusable reserves such as the Revaluation Reserve and the Capital Adjustment Account aren’t subject to such member influence. But it should be noted that some of the unusable reserves will become a charge against the revenue account – or usable reserves – over time for example pension reserve.

• The Cash Flow Statement - Although similar to the SORP Cash Flow Statement,

the cash flows of the council are presented over fewer headings under IFRS than under SORP. Consequently, the statement is quite short because the Council has used the minimum presentation with supporting detail in the disclosure notes. A


key difference is that the statement balances to the movement in ‘cash and cash equivalents’, not just to the movement in cash.

The core financial statements are shown in section E. The core financial statements are supported by detailed disclosure notes (where material) which aim to explain the key figures and to provide the reader with additional information that allows full interpretation of the accounts. The code introduced a greater number of disclosure notes than under the SORP. Examples of the additional disclosure notes are summarised below:

• IFRS Transition (note 1) • Accounting Standards that have been Issued but have Not been Adopted (note 2) • Critical Judgements in Applying Accounting Policies (note 3) • Assumptions Made about the Future and Other Major Source of Estimation and

Uncertainty (note 4) • Amounts Reported for Resource Allocation Decisions (note 27)

The core financial statements disclosure notes are shown in section F.

Supplementary financial statements and notes

• The Collection Fund (and disclosure notes) - The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority (Borough Council of Wellingborough) in relation to the collection from taxpayers and distribution to local authorities and the Government of council tax and non-domestic rates.

• Group Accounts (and disclosure notes) – Where the Council has a controlling

interest and/or significant influence in entities, it is required by the Code to produce Group Accounts (subject to materiality). The Council has concluded that it has not got controlling interest or significant interest in an external entity and as such Group Accounts have not been produced.

The Annual Governance Statement

Statutory regulations require the Council to conduct a review at least once in a year of the effectiveness of its system of internal control. The review of internal controls or internal financial controls provides assurance that the Statement of Accounts gives a true and fair view of the Council’s financial position at the reporting date and its financial performance during the year. The preparation and publication of the Council’s Annual Governance Statement is carried out in accordance with ‘Delivering Good Governance in Local Government’


published by CIPFA and SOLACE. The preparation and publication of an Annual Governance Statement in accordance with ‘Delivering Good Governance in Local Government’ fulfils the Council’s statutory requirement to conduct a review at least once in each financial year of the effectiveness of its system of internal control. The statement relates to the governance system as it applied during the financial year for the accounts that it accompanies. However, (where applicable) significant events or developments relating to the governance system that occur between the reporting date and the date on which the Statement of Accounts is signed by the Corporate Director (Resources) is also reported. The 2011 Accounts and Audit (England) Regulations state in Regulation 4(4) that the Annual Governance Statement (AGS) now "accompanies" the Statement of Accounts.

4. How well did the Council manage its finances in 2010/11?

Money in

The Council gets its money from a number of sources, principally: • Government grants; • Council Tax and NNDR (or Business Rates); and • Rent from our investment properties alongside other fees and charges.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Perc

enta

ge o

f ove

rall

inco

me

Rents Grants andContributions

BusinessRates

Council Tax Fees andCharges

RevenueSupport Grant

Interest

Type of income

2010/11 2009/10


In 2010/11 the overall split of this income was generally in line with prior years, although there has been a 41% (£0.484m) drop in income from investments with banks and building societies, and a reduction in Revenue Support Grant which was compensated for by an increase in the income from the National Non-Domestic Rates Pool.

The collection of fees and charges applies to certain services, such as licensing or bulky waste collection, and is the main source of income that the Council has some element of direct control over through the setting and collecting of fees. At the start of the year we estimate how much income we expected to collect based on forecast demand for services and the amount of charge set for certain services. In 2010/11 despite the economic downturn affecting areas such as planning fees, the total income from such fees was £0.241m higher than the previous year.

The Council has a policy to actively pursue all debts. At the end of the year our profile of money owed (debtors), excluding Council Tax and NNDR, was as follows:

-

100,000.00

200,000.00

300,000.00

400,000.00

500,000.00

600,000.00

700,000.00

Housing Benefit Overpayments Commercial Rents Other Sundry Debt

Type of debt

Tota

l deb

t £

More than 12 months Less than 12 months Only after all avenues have been followed does the Council look at writing off debts. In 2010/11 the Council made decisions to write off £226,423 of Council Tax and NNDR debt. That was only 0.4% of the total collectable amount.


Money spent

The Council originally set a net budget of £12.668m. This required a contribution from the General Fund Reserve of £2.498m.

During the year a number of changes (virements) were reported to and approved by the Resources Committee to produce a revised budget of £12.679m. Overall against the revised budget, after net transfers from earmarked reserves, the Council delivered a surplus of £1,107,000, as shown in the following table. The estimated costs of Management Restructure redundancies were £528k higher than budgeted resulting in a net increase in the amount to be taken from reserves of £35,000.

Council Spending by Directorate 2010/11 Revised

Budget £,000

2010/11 Outturn

£,000

2010/11 Variance

£,000 Chief Executives 1,363 1,225 (138) Community 4,391 3,924 (467) Development 11,809 12,038 229 Resources (4,884) (4,748) 136 Reported to Resources Committee on 22nd June 2011 12,679 12,439 (240)

Add: Parish Precepts 446 446 0 13,125 12,885 (240) Funding Formula Grant (6,984) (6,984) 0 Council Tax (3,632) (3,632) 0 (10,616) (10,616) 0 Planned Use of General Fund Balances (2,509) (2,509) 0 Net Use of General Fund Balances 0 (240) (240) Changes identified as part of Audit 0 (867) (867) Presentational requirements of IFRS (8,850) (8,850) 0

Comprehensive Income and Expenditure (8,850) (9,957) (1,107)

The main reasons for the surplus (or underspending), reported to Resources Committee on 22nd June 2011 in more detail, were:

a saving of £138,000 in the Chief Executives Department from salaries and associated costs/additional income;


an overspending of £141,000 associated with the Castle Theatre Management Contract procurement.;

additional spending of £164,000 in Finance for the transition to International Financial Reporting Standards; and

additional income from VAT refunds of £171,000.

Net Actual

2009/10

Actual Gross Expenditure

2010/11

Actual Gross

Income 2010/11

Net Actual

2010/11 Council Spending by Services

£,000 £,000 £,000 £,000Central Services to the Public 1,139 7,372 -5,626 1,746Cultural, Environmental, Regulatory and Planning Services 12,792 12,110 -1,603 10,507Highways and Transport services 4,176 1,738 -563 1,175Housing Services 2,113 23,877 -21,748 2,129Adult Social Care 321 462 -105 357Corporate and Democratic Core 2,327 2,296 -59 2,237Non Distributed Costs 218 719 -213 506Pension- Past Service gains -6,905 0 -6,905Net Cost of Services 23,086 41,669 -29,917 11,752Other Operating Expenditure -589 906 -3,502 -2,596Financing and Investment Income and Expenditure -74 8,994 -6,660 2,334Taxation and Non Specific Grant Income -11,819 0 -10,826 -10,826 Surplus/Deficit on Provision of Services 10,604 664 Surplus/Deficit on Revaluation of Fixed Assets -8,118 -213Surplus/Deficit on revaluation available for sale assets -88 -36Actuarial (Gains)/Losses on Pension Assets/Liabilities 15,438 -10,372 Comprehensive Income and Expenditure 17,836 -9,957


The money was spent on the following areas:

Premises Costs£1,498,818 (3%)

Supplies & Services£7,083,142 (15%)

Transport£1,065,060 (2%)

Housing/Council Tax Benefits

£24,769,796 (52%)

Employee Costs£13,128,329 (28%)

5. How was money spent on meeting our PRIDE mission?

In 2009 the Council set out its longer term vision for the Borough Council of Wellingborough through its PRIDE statement. This set out our five priorities:

Promoting high quality growth

Reducing crime and anti-social behaviour Improving life chances for young people

Delivering efficient and responsive services

Enhancing the environment


6. How well did the Council manage its Assets and Capital programme? The council owns various plots of land and buildings in Wellingborough, the total value of these assets on the balance sheet is in the region of £77m. These assets have been revalued by a decrease of £2.9m in the year. This revaluation consists of various increase and decreases, but the most significant change was the Swansgate Shopping Centre to £6m which represents a decrease of £2.4m due to prevailing market conditions.

The most significant sale in 2010/11 was for land at Finedon Road Industrial Estate which was sold for £1.8m to provide the northern access road to the WEAST development. Two derelict/redundant properties were sold for redevelopment to enhance the Wellingborough area, the proceeds from the sales totalled £0.455m. The remaining smaller disposals were for land and vehicles. The largest area of capital spend is in relation to the Disabled Facilities Grant, a total cost of £0.6m. The following areas of spend are each in the region of £0.250m IT replacement,


High Street Development work and 28 Church Street. All of the above spend excluding IT replacement is to enhance the Wellingborough community.

7. How much money does the Council have in Reserves?

The Council has set up a number of reserves for specific purposes - ‘earmarked reserves’ for events we know are going to happen, i.e. similar to setting up saving accounts for holidays or boilers breaking down. We also have the General Fund which we keep to manage potential risks that we continually assess. If the General Fund reserve is not needed to cover these risks then it is possible to use these as a one off to support spending. The opening and closing balances on our main cash reserves were:

Balance at 1st

April 2009

Transfers between reserves

Other movements

Balance at 31st March

2010


Other movements


2011

£000 £000 £000 £000 £000 £000 £000 Repairs and Renewals -95 95 0 0 Capital Fund -1,835 -1,835 1,835 0 Efficiency and Restructuring Reserve -55 -55 -55 Interest Equalisation Reserve -3,000 1,300 -1,700 256 -1,444

Environmental Impact Reserve -2,000 -2,000 2,000 0

Housing and Planning Delivery Grant -494 -139 -633 406 -227

S.38 Highways Adoption Grant 0 -137 -137 -3 -140

Ward Support 0 -11 -11 11 0 Election Package 0 -18 -18 -18 VAT Reserve 0 0 -121 -121 Planning Reserve 0 0 -100 -100 Revenue Equalisation Reserve 0 0 -1,565 -1,565 Neighbourhood Development Reserve 0 0 -34 -34

Miscellaneous Revenue Grants Reserve -25 -46 -71 -70 -141

New Burdens Impact Reserve 0 0 -51 -51

Earmarked Reserves -7,504 1,044 0 -6,460 2,565 0 -3,895 General Fund -7,514 1,957 -5,557 1,797 -3,760 Total Reserves -15,018 3,001 0 -12,017 4,362 0 -7,655

The Council is also required to keep a number of accounting reserves, which whilst being large in value are not related to actual cash sums but are technical accounting requirements,


such as the Capital Adjustment Reserve, the Revaluation Reserve, and the Pension Reserve.

8. How did we do managing our investments? The Council is debt free (except for debt inherent in Finance Leases) and, as shown by its level of reserves has a significant sum to invest. We do this to ensure that we are maximising our income by earning interest on our money. However, we fully understand that this is public money and we follow strict national guidelines when deciding where and how much to invest. This process is set out in our Annual Treasury Management Policy. This, for example, restricts the level of individual investment, to spread the risk of who we invest with, and restricts us to only use institutions based in the UK. In 2010/11 we received £0.674m of interest, or a 2.03% return. This is in line with other public and private sector institutions. At the year end we had £35.1m invested in banks and building societies, compared with £30.8m in 2009/10. Of this, £28.7m matures in the next 12 months and £6.4m beyond 31st March 2012. The Council’s Treasury Management Strategy restates the aim of the Authority remaining debt free, and as such we did not borrow any money in 2010/11. Further information on the way the Council’s invests its monies, and manages the risks arising, are set out in Note 42.

9. How is our Pension Fund? The Council employees are able to join the Local Government Pension Scheme. This is administered by the County Council in Northamptonshire. The Pension Fund pays the pensions of Council employees upon retirement and receives contributions from employees together with an employer’s contribution from the Council. Every three years the Fund’s actuary assesses how much money is in the fund and whether this is sufficient to meet the potential call from staff as they retire at a future date. The net amount chargeable to the General Fund is that payable for the year in accordance with the statutory requirements governing the Pension Fund. Where this amount does not match the amount charged to the Comprehensive Income and Expenditure Statement any difference is transferred to the pension reserve on the balance sheet via the Movement in Reserves Statement.

There are a range of factors that can affect the financial position of the Fund, most notably the level of income expected to be earned from investing funds. The recent economic downturn has meant that the Fund has experienced a significant drop in the forecast return on its investments. Nevertheless the Fund is reporting at this stage a net liability of £23.137m (£39.556m in 2009/10). The reasons for this improvement are set out in Note 39. This is a notional amount as this would only be due if all circumstances remained as they are from now up to when the current contributors retire and the Authority did not seek to address the matter. In reality history shows the level of investment income will improve over time and other factors, such as time in the scheme and levels of contributions will change. The Scheme’s actuary is about to revalue the Fund for the next three years and this review


will set out new contribution rates for the Authority to ensure that we extinguish this liability to meet with the Authority’s commitment to maintaining a balanced fund. Further information on the Council’s Pension Fund is set out in Note 39.

10. What does 2011/12 and beyond look like? The Council has a Medium Term Financial Strategy and Plan that looks at Wellingborough’s financial position over the next five years. This forecasts that, following the 2010 Comprehensive Spending Review, and with a reduction in Government Funding in both 2011/12 and 2012/13 combined with a nil increase in Council Tax in 2011/12, the Authority needs to save £2.9 million in 2011/12 with further significant savings each year thereafter. This position could see Government funding being reduced even further. Whilst the Council has some monies in reserves the Chief Financial Officer has recommend that they should not be to fund services from 2011/12 onwards. As such the Council continues its policy of reviewing services and costs. The authority at the year end currently holds £15.9m of capital receipts reserve, it does not borrow to fund the capital programme. This level of funding is likely to reduce in future years as income from capital receipts reduces. The current year has been exceptional with the receipt of £1.8m from the sale of land at Finedon Road Industrial Estate. Wellingborough will continue with a programme of future capital spend, with its focus to be on Disabled Facilities Grant distribution and regeneration of Wellingborough.

11. How can you give us your feedback on the content of these accounts? The Statement of Accounts is intended to give the people, businesses, partners, employees and members of Wellingborough clear information about the Council’s finances. Whilst accounts have to include large elements of technical data to comply with Accounting Standards, we believe that it is vital that we make it as easy as possible for people to read regardless of their background. We have included a feedback questionnaire at the end of the Accounts and would appreciate any comments you may have on the content and quality of these Accounts and your suggestions to improve them in future years. Further information about the accounts is available from the Head of Finance, Tithe Barn Offices, Tithe Barn Road, Wellingborough, NN8 1BP, or via email [email protected] The draft Statement of Accounts was made available on the Council website for the Audit Committee on 27 July 2011. Interested members of the public have a statutory right for 20 working days to inspect the accounts before the audit is completed. For 2010/11 the inspection date started on the 13th July and the appointed day for raising queries with the External Auditors was 10th August 2011. Following formal approval of the Audited Statement of Accounts it will be published on the Council’s website.


12. Concluding remarks

I would like to take the opportunity to thank all the staff who contributed to the timely completion of the Statement of Accounts. Considering the challenge of making the transition to International Financial Reporting Standards and the complexity of the closure of accounts process, producing the accounts ready for approval by the end of June is a considerable achievement. I would also like to extend that to our external auditors for ensuring the audit was completed satisfactorily and their helpful recommendations for future improvements.

R Micklewright BA (Hons), CPFA Corporate Director (Resources)


The Council’s Responsibilities The Council is required to:

• make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Authority that officer is Richard Micklewright (Director of Resources);

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

• approve the Statement of Accounts. The Director of Resources’ Responsibility The Director of Resources is responsible for the preparation of the council’s Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code). In preparing this Statement of Accounts, the Director of Resources has:

• selected suitable accounting policies and then applied them consistently; • made judgements and estimates that were reasonable and prudent; and • complied with the code.

The Director of Resources has also: • kept proper accounting records which were up to date; and • taken reasonable steps for the prevention and detection of fraud and other irregularities.

Certification and Approval I certify that this Statement of Accounts shows the true and fair position of the Council at the reporting date and of its income and expenditure for the year ended 31st March 2011. Richard Micklewright BA (Hons) CPFA Director of Resources

B STATEMENT OF RESPONSIBILITIES FOR THE STATEMENT OF ACCOUNTS


Date: I confirm that these audited accounts were approved by the Audit Committee at the meeting held on the 30th November 2011. Audit Committee approval of the Statement of the Accounts

Councillor John Bailey (Deputy Chairman)

Signature:

Date:


C AUDITOR’S REPORT

Independent auditor's report to Members of the Borough Council of Wellingborough

Opinion on the Authority accounting statements

I have audited the accounting statements of the Borough Council of Wellingborough for the year ended 31 March 2011 under the Audit Commission Act 1998. The accounting statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement and Collection Fund and the related notes. These accounting statements have been prepared under the accounting policies set out in the Statement of Accounting Policies.

This report is made solely to the members of the Borough Council of Wellingborough in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March 2010.

Respective responsibilities of the Section 151 Officer and auditor

As explained more fully in the Statement of the Section 151 Officer’s responsibilities, the Section 151 Officer is responsible for the preparation of the Authority’s Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom. My responsibility is to audit the accounting statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require me to comply with the Auditing Practice’s Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the accounting statements sufficient to give reasonable assurance that the accounting statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Authority’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authority; and the overall presentation of the accounting statements. I read all the information in the explanatory foreword to identify material inconsistencies with the audited accounting statements. If I become aware of any apparent material misstatements or inconsistencies I consider the implications for my report.

Opinion on accounting statements

In my opinion the accounting statements:


■ give a true and fair view of the state of the Borough Council of Wellingborough’s affairs as at 31 March 2011 and of its income and expenditure for the year then ended; and ■ have been properly prepared in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom.

Opinion on other matters

In my opinion, the information given in the explanatory foreword for the financial year for which the accounting statements are prepared is consistent with the accounting statements.

Matters on which I report by exception

I have nothing to report in respect of the governance statement on which I report to you if, in my opinion the governance statement does reflect compliance with ‘Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007.

Conclusion on Authority’s arrangements for securing economy, efficiency and effectiveness in the

use of resources

Authority’s responsibilities

The Authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements.

Auditor’s responsibilities

I am required under Section 5 of the Audit Commission Act 1998 to satisfy myself that the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires me to report to you my conclusion relating to proper arrangements, having regard to relevant criteria specified by the Audit Commission.

I report if significant matters have come to my attention which prevent me from concluding that the Authority has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. I am not required to consider, nor have I considered, whether all aspects of the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively.

Basis of conclusion

I have undertaken my audit in accordance with the Code of Audit Practice, having regard to the guidance on the specified criteria, published by the Audit Commission in October 2010, as to whether the Authority has proper arrangements for: ■ securing financial resilience; and ■ challenging how it secures economy, efficiency and effectiveness.


The Audit Commission has determined these two criteria as those necessary for me to consider under the Code of Audit Practice in satisfying myself whether the Authority put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2011.

I planned my work in accordance with the Code of Audit Practice. Based on my risk assessment, I undertook such work as I considered necessary to form a view on whether, in all significant respects, the Authority had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources.

Conclusion

On the basis of my work, having regard to the guidance on the specified criteria published by the Audit Commission in October 2010, I am satisfied that, in all significant respects, the Borough Council of Wellingborough put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2011.

Certificate

I certify that I have completed the audit of the accounts of the Borough Council of Wellingborough in accordance with the requirements of the Audit Commission Act 1998 and the Code of Audit Practice issued by the Audit Commission.

Neil Bellamy Officer of the Audit Commission

Audit Commission Whitwick Business Centre Stenson Road Coalville Leicestershire LE67 4JP

30th November 2011


D STATEMENT OF ACCOUNTING POLICIES The accounting policies set out below apply to the Financial Statements of the Council. The main changes to the accounting policies are summarised in the forward by the Corporate Director (Resources). For the financial year 2010/11 these include a significant number of changes arising from the migration to new International Financial Reporting Standards (IFRS).

1. General Principles

The Statement of Accounts summarises the Council’s transactions for the 2010/11 financial year and its financial position at 31st March 2011. It has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2010/11 (‘’the Code’’) which is recognised by statute (Accounts and Audit Regulations 2011) as representing proper accounting practice; taking into account any subsequent accounting guidance such as Local Authority Accounting Panel (LAAP) bulletins and any statutory requirements. Any variations from the Code or changes in accounting policy are highlighted where appropriate. The Code specifies the principles and practices of accounting required to give a “true and fair” view of the financial position and transactions of a local authority, including group financial statements where a local authority has material interests in subsidiaries, associates or joint ventures. The accounts are disclosed in accordance with the historic cost convention except for certain non-current assets, investments and financial assets that are disclosed in accordance with other requirements in the Code.

2. Accruals of Income and Expenditure

Activity on material items of income and expenditure is accounted for in the year it takes place, not simply when cash payments are made or received. In particular;

• Fees, charges and rents due from residents and customers are accounted for as

income at the date the Council provides the relevant goods or services. Where this is before 31 March but income had not been billed, a debtor is recorded in the balance sheet (above the de minimis of £100 for individual items). The debtors balance also includes payments in advance made by the Council at the balance sheet date representing amounts prepaid to suppliers by the Council that are not due until a subsequent financial year. An assessment is made annually as to what levels of debt are outstanding at the end of the financial year. The Council’s debtors are not subject to substantial fluctuation hence the Council does not review all debts and judge the probability of collection of each. Instead past experience is used within material limits to judge the percentages of each type of debt that will not eventually be recovered. A provision is made (the bad debt provision) for those debts for which


recovery is deemed doubtful, the provision being recognised in the relevant service(s). This has the effect of reducing the debtors balance shown in the balance sheet. Once a debt is deemed irrecoverable it is written off.

• 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 stock on the Balance Sheet.

• Works are charged as expenditure when they are completed, before which they are

carried as works in progress on the balance sheet. • Interest received on investments is accounted for on the basis of the effective

interest rate for the relevant financial instrument rather than the cash flow fixed or determined by the contract. As the Council is debt free it is not necessary to account for interest on borrowing.

• Where goods or services have been supplied but an invoice has not been processed

for payment by 31st March a creditor for the relevant amount is recorded in the Balance Sheet (above the de minimis of £100 for individual items). The creditors balance also includes receipts in advance at the balance sheet date representing amounts prepaid to the Council that are not payable until a subsequent financial year.

• The actual cost of employees is recorded in the accounts. Accruals are made for the

payment of pension and tax liabilities based on the actual March payments and included as creditors in the Balance Sheet. Accruals are made for salaries and other employee benefits (e.g. annual leave – see separate accounting policy ‘Employee Benefits’) earned but unpaid at the year end.

• Grants and contributions are accounted for on an accruals basis and recognised in

the accounting statements when there is reasonable assurance that

i. the conditions for their receipt have been complied with, and ii. the grant or contribution will be received.

3. Cash and Cash Equivalents

Cash and cash equivalents are recorded in the Council’s balance sheet. Cash comprises cash in hand and demand deposits. Cash equivalents are investments that mature within 3 months from the date of acquisition and are readily converted to known amounts of cash with insignificant risk of change in value. Deposits in call accounts are classified as cash equivalents. Bank overdrafts form an integral part of the Authority’s cash managements and as such are classified as cash equivalents as they are repayable on demand and are shown net of any bank balances in hand.


4. 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 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 Authority’s position or performance. The majority of prior period adjustments arise from corrections and adjustments that are accounted for in the year they are identified. Adjustments applicable to prior years arising from changes in accounting policy or correction of material errors are accounted for by restating comparative figures for the preceding year in the Statement of Accounts and notes and adjusting the opening balance of reserves for the cumulative effect. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years by the change and do not give rise to prior period adjustments. More details and full explanations are given in the individual relevant financial statements where adjustments occur. There are a number of accounting policy changes arising out of the adoptions of the Code that require changes to the 2009/10 comparative accounts and also require the disclosure of the opening balance sheet at 1st April 2009 these are detailed in note 1 to the core financial statements. In addition, Prior Period Adjustments have been made to Property, Plant & Equipment which are detailed in Note 42.

5. Charges for Revenue for Non current Assets

Services, support services and trading accounts are debited with the following amounts to record the cost of holding Non Current Assets during the year: • depreciation attributable to the assets used by the relevant service • revaluation and impairment losses on assets used by the service where there are

no accumulated gains in the Revaluation Reserve against which the losses can be written off

• amortisation of intangible Non Current Assets attributable to the service. The Council is not required to raise council tax to fund depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement (for the Council this relates to finance leases) equal to an amount calculated on a prudent basis determined by the authority in accordance with statutory guidance. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by the contribution in the General Fund Balance (Minimum Revenue


Provision), by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two.

The Council is a debt free authority (excluding finance leases) and is not therefore required to set aside a prudent level of minimum revenue provision for repayment of debt. However, the Council has finance leases (the Council is the lessee) which it sets aside from General Fund balances annual amounts equal to the repayment of the liability.

6. Employee Benefits

Benefits Payable During Employment Short-term employee benefits (those that fall due wholly within 12 months of the year-end), such as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees, are recognised as an expense in the year in which employees render service to the Council. An accrual is made against the service in the Surplus or Deficit on the Provision of Services for the cost of holiday entitlements and flexi-time earned by employees but not taken before the year-end and which employees can carry forward into the next financial year. The accrual made is required under statute to be reversed out of the General Fund balance by a credit to the Unusable Reserve - Accumulated Absences Account in the Movement in Reserves Statement.

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. These are charged on an accruals basis to the relevant service(s) line within the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Account when the Council is demonstrably committed to either terminating 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 the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for termination benefits related to pensions enhancements 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 Employee Benefits


Under the Code Council is required to account for retirement benefits when it is committed to pay them, even if the actual payment may be many years into the future.

The Council participates in the Local Government Pension Scheme (LGPS) for pensions to employees and the scheme is managed by Northamptonshire County Council (NCC). The scheme operates on a defined benefit basis related to pay and service in accordance with International Accounting Standard (IAS) 19. The attributable assets of the scheme are measured at fair value and include current assets and investments. The attributable liabilities are measured on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projections of projected earnings for current employees Contribution rates, which are included in the Accounts, are determined by triennial actuarial valuations. The surplus or deficit on the scheme is the excess or shortfall of the value of the assets in the scheme above or below the present value of the scheme liabilities. The change in the net pension 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/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 Authority, 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/losses on settlements and curtailments – the result of actions to relieve the


Authority of liabilities or events that reduce the expected future service or accrual of benefits of employees – debited/credited to the Surplus/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 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 Authority to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact on the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. 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 the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.

7. Events after the Balance Sheet Date

The Council reviews the accounts before the signing-off date to take into account any events that have occurred after the balance sheet date. Procedures are in place to validate amendments after the sign off date. Two types of event can be identified:

• those that provide evidence of conditions that existed at the end of the reporting

period – the accounts are adjusted to reflect such events, and • those that are indicative of conditions that arose after the reporting period – the

accounts are not adjusted to reflect such events, but where such events would have a material effect disclose is made in the notes of the nature of events and their estimated financial effect.


The Statement of Accounts was signed off by the Director of Resources on 30th June 2011 and is recommended to the Audit Committee on 30th November 2011 for approval. Events taking place after that date are not reflected in the statements or disclosure notes.

8. Financial Instruments

Financial instruments are categorised as either financial assets or financial liabilities, and the accounting policies for both are stated below; Financial Assets Financial assets the Council currently holds are divided into the following categories;

• Loans and receivables, and • Available for sale financial assets Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available. All financial assets are recognised on the balance sheet when the Council becomes a party to the contractual provisions of the financial instrument. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade debtors and investments are classified as loans and receivables. Loans and receivables are initially measured at fair value. Subsequent measurement is based on amortised cost. Where a receivable (i.e. debtor) 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/invoiced amount. Investments are shown in the balance sheet at cost. Where investments are fixed term deposits the accrued interest owing at the balance sheet date of 31st March is added to the value of the investment. 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. For most of the investments that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable in instrument agreement. In line with regulations, any difference between the interest receivable based on the effective rate


of interest and the interest rate in the instrument agreement is transferred to the Financial Instruments Adjustment Account in the Movement in Reserves Statements to negate the impact on the General Fund balance. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the relevant service (for receivables specific to that service) or the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The amount of the impairment is determined as the difference between the asset’s carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of debtors is adjusted for bad debts (see separate accounting policy – Accruals of Income and Expenditure). Any gains and losses that arise on the derecognition of an asset are credited/debited to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement.

Soft loans are defined as those loans granted by the Council at an interest rate that is below the prevailing market rate. The calculated market rate of interest is credited to the Comprehensive Income and Expenditure Statement and the difference between this amount and the interest actually charged to the recipient of the loan is reversed out in the Movement in Reserves Statement to the Financial Instruments Adjustment Account in the Balance Sheet. The Council made a soft loan of £100,000 to The Castle (Wellingborough) Limited which was repaid in 2010/11. Available for sale assets – are non-derivative financial assets that do not meet the requirements to be classified as loans and receivables or financial assets at fair value through profit and loss. Available for sale assets are initially measured and carried at fair value. Fair values are based on the following principal:

• Instruments with quoted market prices – the market price. Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses). 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.


Changes in fair value are balanced by an entry in the Available for Sale Reserve and the gain/loss is recognised in the Surplus/Deficit on Revaluation of Available for Sale Financial Assets in the Comprehensive Income and Expenditure Statement. The exception is where impairment losses have occurred – these are debited to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement, along with any net gain/loss for the asset accumulated in the Available for Sale Reserve. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made (fixed or determinable payments) or fair value falls below cost, the asset is written down and a charge made to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement. If the assets 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 instruments (net of any principal repayments and amortisation). Any gains and losses that arise on the derecognition of an asset are credited/debited to the financing and investment income and expenditure line in the Comprehensive Income and Expenditure Statement, along with any accumulated gains/losses previously recognised in the Available for Sale Reserve. Financial Liabilities Financial Liabilities are obligations to deliver cash or another financial asset to another entity and are recognised when the Council becomes a party to the contractual provisions of the financial instrument and initially measured at fair value and carried at amortised cost. The Council does not have any borrowings, with the exception of finance leases. Payables (i.e. creditors) are categorised as financial liabilities. Where a payable (i.e. creditor) has a maturity of less than 12 months or is a trade or other payable, the fair value is taken to be the principal outstanding or the billed/invoiced amount. A financial liability is de-recognised only when the obligation is extinguished, i.e. when the obligation is discharged or cancelled or expires.

9. Grants and Other Contributions

Whether paid on account, by instalments or in arrears, government grants and third party grants and contributions/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.

Revenue Grants, including Area Based Grant, for which there are no conditions or there is a reasonable expectation that the conditions will be met are credited to the Comprehensive Income and Expenditure Statement.

Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or condition 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 contributions are required to be consumed by the Council as specified or future economic benefits or service potential must be transferred to the transferor. Amounts 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 condition is credited to the relevant service line (attributable revenue grants) or taxations and non-specific grant income line (non-ring-fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. When capital grants or contributions 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 grants or contributions have yet to be used to finance capital expenditure, they are posted to Capital Grants Unapplied Reserve. Where it has been applied, it is posed 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 in the Movement in Reserves Statement.

10. Intangible Assets

Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council. Recognition Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and restricted to that


incurred during the development phase (research expenditure is not capitalised). Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. Measurement Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. Amortisation The depreciable amount of an intangible asset is amortised over its useful life (a 3 year useful life is assumed for all intangible assets) to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Amortisation is not permitted to have an impact on the General Fund Balance. The amortisation is therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account Impairment An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Impairment losses are not permitted to have an impact on the General Fund Balance. The losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. Disposal/Derecognition 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. Disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and (for any sale proceeds greater than £10,000) the Capital Receipts Reserve.


11. Interest in Companies and Other Entities

The Council is required to comply with the accounting requirements set out in the Code of Practice on Local Authority Accounting in the United Kingdom if it has an interest in subsidiaries, associates and joint ventures (jointly controlled entities) and has an ability, whether used or not, to control or exercise significant influence over the activities of such entities. The Castle (Wellingborough) Limited is responsible for the management of a Council owned theatre and arts complex for the community. The Council has assessed whether the Company is a regulated influenced company under the Local Authorities (Companies) Order 1995 and deemed that it is not, and as a result has concluded that there is no requirement to consolidate The Castle’s Accounts with the Council’s. Whilst Members of the Council are board members, the Council is not an investor as The Castle is a Company Limited by Guarantee and has no share capital. Further details of the accounts for The Castle may be obtained from The Castle (Wellingborough) Limited, Castle Way, Wellingborough, NN8 1XA. The Council transferred its housing stock to Wellingborough Homes, a Registered Social Landlord in 2009. The Council has assessed whether the Company is a regulated influenced company under the Local Authorities (Companies) Order 1995 and deemed that it is not, and as a result have concluded that there is no requirement to consolidate Wellingborough Homes’ Accounts with the Council’s. Whilst Members of the Council are Board Members they act independently of the Council under Wellingborough Homes’ Rules therefore the Council does not have significant control despite holding one third of voting right shares.

12. Inventories and Long Term Contracts

Stocks are valued at the lower of actual cost or net realisable value. The FIFO (first in, first out) costing methodology is used.

The Council does not undertake construction for its customers.

13. Investment Property

The Council’s non-current assets that are solely used to generate rental income and/or for capital appreciation in value and which are not used for the provision of services are classified as investment property. Expenditure on the acquisition, creation or enhancement of Investment Property 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 or fair value of the item can be measured reliably. Recognition Expenditure on the acquisition, creation or enhancement of Investment Property is charged to capital where it is probable that the future economic benefit or service potential associated with the item flows to the Council and the expenditure can be measured reliably, and is greater than the Council’s de minimis level of £10,000. This includes internal staffing costs where they are directly attributable to a capital project. Expenditure that maintains but does not add to a fixed 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 Investment properties are measured initially at cost and subsequently at their fair value (i.e. market value). Where an Investment Property is held under a lease (i.e. the Council is the lessee), the measurement is based on the lease interest. Investment Property is not depreciated but are revalued annually according to market conditions at the year-end. This means that a periodic revaluation approach (see accounting policy for Property, Plant and Equipment) is only used where the carrying amount does not differ materially from that which would be determined using fair value at the Balance Sheet date. 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. Investment Property are not permitted to be reclassified as Assets Held for Sale.

Gains and losses on revaluation 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. Income and Expenditure Rentals received in relation to investment property and expenditure are recognised in the Financing and Investment Income line within the Comprehensive Income and Expenditure Statement. Components Where part of an Investment Property is replaced, the cost of the replacement part is recognised (subject to meeting the capitalisation rules) in the carrying value of the Non


Current Assets and the carrying amount of those parts that are replaced will be de-recognised in the accounts and asset register. Disposal/Derecognition When an Investment Property is disposed of or decommissioned the value of the asset in the balance sheet is written off to the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. The usable capital receipt from the disposal (if any) is credited to the Comprehensive Income and Expenditure Statement. Capital receipts from the disposal of Non Current Assets are accounted for on an accrual basis. Any revaluation gains on the asset held in the Revaluation Reserve are transferred to the Capital Adjustment Account. The net gain or loss on the disposal is reversed out of the revenue account as a reconciling item in the Movement in Reserves Statement and transferred to the Capital Adjustment Account. Amounts in excess of £10,000 are classified as capital receipts and are credited initially to the Usable Capital Receipts Reserve. The receipts arising from the disposal of General Fund assets are 100% usable by the Council.

14. Jointly Controlled Operations and Assets

Jointly controlled operations are activities undertaken by the Council in conjunction with other venturers that involve the use of the assets and resources of the venturers rather than the establishment of a separate entity. The Council recognises on its Balance Sheet the assets that it controls and the liabilities that it incurs and debits and credits the Comprehensive Income and Expenditure Statement with the expenditure its incurs and the share of income it earns from the activity of the operation. Jointly controlled assets are items of property, plant or equipment that are jointly controlled by the Council and other venturers, with the assets being used to obtain benefits for the venturers. The joint venture does not involve the establishment of a separate entity. The Council does not have any jointly controlled assets, however if it did the Council would only account for 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. The Council has jointly controlled operations with a number of other local authorities in the area:

• Connect Law – provides legal services for Wellingborough, Kettering and Corby Councils. Kettering acts as the host and Wellingborough pays an annual contribution.


• Joint Planning Unit – provides strategic planning services for Wellingborough, Kettering, Corby, East Northamptonshire and Northamptonshire County Council. Northamptonshire County Council acts as the host and Wellingborough pays an annual contribution.

• IT Services – provides IT services for Wellingborough and East Northants Councils. East Northants acts as the host and Wellingborough pays an annual contribution.

• Northamptonshire Enterprise – is a partnership between the public, private and voluntary sectors. The purpose is to develop the Northamptonshire economy and support job creation in a key growth area. Wellingborough pays an annual contribution.

• Northamptonshire Area Procurement Services (NAPS) - provided procurement

services for Northamptonshire Councils until 31st March 2011. Northampton Borough Council acted as the host and Wellingborough paid an annual contribution.

• Wellingborough Town Centre Partnership – aims to improve and promote Wellingborough Town Centre and thereby attract more visitors, support existing businesses and pull in new businesses. Wellingborough pays an annual contribution.

• Northamptonshire Waste Partnership - provides a partnership to ensure continuing cooperation and longer term vision to deliver the Partnership’s vision jointly to implement the policies set out in the ‘Northampton Joint Municipal Waste Management Strategy’. The partners are Northamptonshire Councils. Northamptonshire County Council acts as the host and Wellingborough pays an annual contribution.

15. Leases

Leases are classified as finance leases where the terms of the lease transfer substantially all of the risks and rewards incidental to ownership of the asset 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 dependent on the use of specific assets The Council as Lessee

Finance Leases Property, plant and equipment or Investment Property 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 (if any) of the Authority are added to the carrying amount of the asset. Premiums paid on entry into a lease (if any) are applied to writing down the lease liability. Contingent rents are charged as expenses in the years in which they are incurred. Lease payments are apportioned between:

• a charge for the acquisition of the interest in the property, plant or equipment or investment property – applied to write down the lease liability, and

• a finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

Property, Plant and Equipment and Investment Property recognised under finance leases is accounted for using the policies applied generally to such assets, for Property, Plant and Equipment subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life. 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 provision is made from revenue towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore replaced by revenue provision (MRP) 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 services benefiting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g., there is a rent-free period at the commencement of the lease). An Investment Property held under an operating lease is accounted for as if it was a finance lease. The Authority as Lessor Finance Leases The Council currently does not have any finance leases where it is the lessor.


Operating Leases Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g., there is a premium paid at the commencement of the lease). Initial direct costs incurred (if any) 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.

Lease Type Arrangements Where the Council enters into an arrangement, comprising a transaction or a series of related transactions, that does not take the legal form of a lease but conveys a right to use an asset (e.g. an item of property, plant or equipment) in return for a payment or series of payments, the arrangement is accounted for as a lease as detailed above. The Council currently does not have any lease type arrangements

16. Overheads and Support Services

The costs of overheads and support services are charged to those that benefit from the supply or service in accordance with the costing principles of the CIPFA Best Value Accounting Code of Practice 2010/11 (BVACOP). The total absorption costing principle is used – the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:

• Corporate and Democratic Core – costs relating to the Council’s status as a multi-functional, democratic organisation.

• Non Distributed Costs – the cost of discretionary benefits awarded to employees retiring early and any depreciation and impairment losses chargeable on surplus assets in Property, Plant and Equipment.

These two cost categories are defined in BVACOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement.

17. Property, Plant and Equipment (PPE)

Property, Plant and Equipment assets are tangible assets that have physical substance and are held for use in the provision of goods or services or for administering purposes and that are expected to be used during more than one financial year.


Recognition Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Authority and the cost of the item can be measured reliably. Expenditure on the acquisition, creation or enhancement of Non Current Assets is charged to capital where it is probable that the future economic benefit or service potential associated with the item flows to the Council and the expenditure can be measured reliably, and is greater than the Council’s de minimis level of £10,000. This includes internal staffing costs where they are directly attributable to a capital project. Expenditure that maintains but does not add to a fixed 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, and

• 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

PPE 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 the amount that would be paid for the asset in its existing use (existing use value – EUV)

Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of fair value. Where non-property assets (i.e. Vehicles, Plant and Equipment) that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for fair value. The valuation of land and buildings (which are recorded separately) is undertaken by professionally qualified valuers.


Valuations of Property, Plant and Equipment assets are subject to review within a rolling 5 year programme of revaluations. The residual lives and estimated useful lives of asset, together with their depreciation policies, are reviewed on an annual basis.

Revaluation gains on PPE assets are posted to the Revaluation Reserve. Gains are credited to the appropriate line(s) in the Surplus or Deficit on Provision of Services (up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised) where they arise from the reversal of a revaluation loss previously charged to the same asset. Where decreases in value are identified, the revaluation loss is accounted for by:

• where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains)

• where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Surplus or Deficit on Provision of Services

Revaluation gains and revaluation losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. The Revaluation Reserve contains revaluation gains recognised since 1st April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. Where Property, Plant and Equipment meet the criteria for Investment Property, the asset is reclassified to Investment Property. The asset is revalued immediately before reclassification to Investment Property with any remaining balance on the Revaluation Reserve ‘frozen’ until such time it is reclassified.

Those Non Current Assets that are surplus to requirements (i.e. are not supporting services) but which do not meet the criteria to be classified as Assets Held for Sale or Investment Property are classified as Surplus in the Property, Plant and Equipment section of the balance sheet.


Depreciation The value of Non Current Assets is recognised in the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement in the form of a depreciation charge using the straight-line method. Variations to the above periods may occur if appropriate evidence is provided by a suitably qualified professional officer or external valuer. Depreciation is not permitted to have an impact on the General Fund balance. The depreciation is therefore reversed out of the General Fund balance in the Movement in Reserve Statement and posted to the Capital Adjustment Account. Depreciation is charged on all assets except for Investment Property, Community Assets and Assets Held for Sale. Land assets that have an indefinite useful life are not depreciated. Newly acquired assets are not depreciated in the year of acquisition and assets under construction are not depreciated until they are brought into operational use. Revaluation gains are also depreciated, with an amount equal to the difference between the current value depreciation charged on Non Current Assets and the depreciation that would have been chargeable on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

Impairment Property, Plant and Equipment, are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for by:

• Where there is a balance of revaluation gains for the assets in the Revaluation Reserve, the carrying amount of the assets is written down against that balance (i.e. up to the amount of any accumulated gains)

• Where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement.

In exceptional cases where an impairment loss is reversed (by a revaluation gain) subsequently on the same asset, the reversal is credited to the relevant service line(s) in the Surplus or Deficit on Provision of Services 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). Impairments loss and reversals are not permitted to have an impact on the General Fund balance. The loss and reversals are therefore reversed out of the General Fund balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account.

Components

Component parts of the Council’s PPE assets that are considered to be material and are above a de minimis level of 20% (based on cost of the component) will be separately identified and accounted for in the accounts with effect from 1st April 2010 and recorded in the Council’s asset register in accordance with the Code, where the component’s useful life is different from that of the other components of the fixed asset. A maximum of four components will be identified: • Structure (Host) • Roof • Lift • Services Componentisation is applicable to enhancement and acquisition expenditure incurred, and revaluations carried out from 1st April 2010. Each material component will be separately depreciated over its useful life. Where separate components have the same useful life, these components will be grouped together. Balances on the Revaluation Reserve for the total asset will be allocated to the structure (host) (whether this is one component or a number of components) because the structure will principally give rise to the revaluation gains or losses. As a result the other components will be valued at cost. Where part of a Property, Plant and Equipment is replaced, the cost of the replacement part is recognised (subject to meeting the capitalisation rules) in the carrying value of the Non Current Assets and the carrying amount of those parts that are replaced will be de-recognised in the accounts and asset register. The recognition and derecognition of components takes place regardless of whether the replaced part had been depreciated separately.


Disposals/Derecognition

The fixed asset disposal procedures followed by the Council mean that no PPE met the strict definition to be reclassified as held for sale, before being disposed of (see separate accounting policy – Assets Held for Sale). When a PPE asset is disposed of or decommissioned the value of the asset in the balance sheet is written off to the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. The usable capital receipt from the disposal (if any) is credited to the Comprehensive Income and Expenditure Statement. Capital receipts from the disposal of Non Current Assets are accounted for on an accrual basis. Any revaluation gains on the asset held in the Revaluation Reserve are transferred to the Capital Adjustment Account. The net gain or loss on the disposal is reversed out of the revenue account as a reconciling item in the Movement in Reserves Statement and transferred to the Capital Adjustment Account. Amounts in excess of £10,000 are classified as capital receipts and are credited initially to the Usable Capital Receipts Reserve. The receipts arising from the disposal of General Fund assets are 100% usable by the Council

18. Assets Held for Sale

Non Current Assets (excluding Investment Property) that have been declared surplus by the Council are classified as Assets Held for Sale in the Balance Sheet if they meet the meet strict criteria set out in the Code of Practice on Local Authority Accounting in the United Kingdom.

Assets held for sale are valued at the lower of their carrying value and fair value less costs to sell and they are not depreciated. The fixed asset disposal procedures followed by the Council mean that no Non Current Assets met the strict definition to be reclassified as Held for Sale.

19. 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 or service potential, and a reliable estimate can be made of the amount of the obligation.


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 measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Provisions are classified on the Balance Sheet as short term (due to be settled within 12 months of the financial year end) or long term (due to be settled over 12 months of the financial year end). For long term provisions where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. The unwinding of the discount due to the passage of time is recognised as interest within Surplus or Deficit on the Provision of services. The Council has made a provision for restructuring costs.

Contingent Liabilities

Where the Council has an event that has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain events not wholly within the control of the Council, a disclosure note is included in the accounts.

Contingent Assets

Where the Council has an event that has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain events not wholly within the control of the Council, a disclosure note is included in the accounts.

20. Reserves

The Council sets aside specific amounts as revenue or capital reserves, as appropriate, for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts in the Movement in Reserves Statement from General Fund balances. For each reserve established the purpose, usage and basis of transactions are identified in the notes to the financial statements.


Expenditure is charged to service revenue accounts and not directly to any reserve. The reserve is then appropriated in the Movement in Reserves Statement so that there is no net charge against Council Tax for the expenditure. The Capital Receipts Reserve is not available for revenue purposes and some of the reserves can only be used for statutory purposes. The reserves in the balance sheet at the end of the financial year are classified between usable reserves and non-usable reserves. Certain reserves in the Balance Sheet are kept to manage the accounting processes for certain transactions, these are grouped under Unusable Reserves in the Balance Sheet. These are detailed in the notes to the financial statements. The General Fund Reserve is not earmarked and is to allow for any future unknown contingencies that may arise. This reserve is recommended by the Council’s Chief Financial Officer at what is deemed to be a prudent level and in accordance with the reserves policy agreed at Full Council. In accordance with the Council’s current Medium Term Financial Strategy, as a minimum, the level of the General Fund working balance should not fall below £1m.

21. Revenue Expenditure Funded from Capital under Statute (REFCUS)

Expenditure incurred during the year that may be capitalised under statutory provisions but 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 Authority 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.

22. Value Added Tax

All income and expenditure in the financial statements excludes amounts related to VAT. VAT collected is payable to HM Revenue and Customs and VAT paid is recoverable from it. VAT will only be included in the Comprehensive Income and Expenditure Statement when it is irrecoverable from HM Revenue and Customs. Any net sum recoverable from HMRC at the end of the financial year is included in the balance sheet as a debtor at the balance sheet date.


23. Council Tax The Council is the billing agent for Council Tax and is responsible for the collection and distribution of council tax including precepts from other organisations. The Council acts as the agent of the preceptors and only includes its own element of any council tax due as a debtor in its balance sheet at the end of the financial year.

The difference between the council tax income credited to the Surplus or Deficit on Provision of Services in the Comprehensive Income and Expenditure Statement on an accruals basis and the amount required by Regulation to be credited to the General Fund is taken to the Collection Fund Adjustment Account in the Balance Sheet and included as a reconciling item in the Movement in Reserves Statement.

24. National Non-Domestic Rates

The Council acts as the agent of the Government in collecting National Non-Domestic Rates (NNDR). The Council does not recognise NNDR debtors in its balance sheet at the end of the financial year but recognises a debtor or creditor for cash collected from the NNDR debtors as agent of the Government but not paid to the Government at that date.

25. Deferred Capital Receipts

The Council in the past issued advances in the form of a mortgage to the purchaser of Council Dwellings, the outstanding mortgage is shown in the balance sheet as a long-term debt and an equal amount is shown as an unusable reserve - deferred capital receipt. The long-term debt and deferred capital receipt are both written down as the principal sum is repaid by mortgagees (with the corresponding entry in usable reserve – capital receipts reserve).

26. Exceptional Items

Where income and expenditure transactions are material, their nature and amount are 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 Authority’s financial performance.


E1 Movement in Reserves Statement This statement shows the movement in the financial year on the different reserves held by the Council, analysed into “usable reserves” (i.e. those that can be applied to fund expenditure or to reduce local taxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the authority’s services, more details of which are found in the Comprehensive Income and Expenditure Statement. These are different from the statutory accounts required to be charged to the General Fund Balance for council tax setting purposes. The net increase/decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.

General Earmarked Capital Capital Total Unusable Total Fund General Receipts Grants Usable Reserves Authority Balance Fund Reserve Unapplied Reserves Reserves Reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31st March 2009 -7,514 -7,505 -15,368 -427 -30814 -63,390 -94,204

Movement in reserves during 2009/2010

Surplus or (deficit) on provision of services

10,604 10,604 10,604

Other Comprehensive Expenditure and Income

0 7,233 7,233

Total Expenditure and Income 10,604 0 0 0 10, 604 7,233 17,837 Adjustments between accounting basis & funding basis under regulations (Note 7)

-7,602 1,753 44 -5,805 5,805 0

Net Increase/Decrease before Transfers to Earmarked Reserves

3,002 0 1,753 44 4,799 13,038 17,837

Transfers to/from Earmarked Reserves (Note 8)

-1,045 1045 0 0 0 0 0

(Increase)/Decrease in 2009/2010 1,957 1,045 1,753 44 4,799 13,038 17,837

Balance at 31st March 2010 carried forward

-5,557 -6,460 -13,615 -383 -26,015 -50,352 -76,367


General Earmarked Capital Capital Total Unusable Total Fund General Receipts Grants Usable Reserves Authority Balance Fund Reserve Unapplied Reserves Reserves Reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31st March 2010 -5557 -6,460 -13,615 -383 -26,015 -50,352 -76,367

Movement in Reserves during 2010/11

Surplus or (deficit) on provision of services

664 664 664

Other Comprehensive Expenditure and Income

0 -10,621 -10,621

Total Expenditure and Income 664 0 0 0 664 -10,621 -9,957 Adjustments between accounting basis & funding basis under regulations (Note 7)

3,698 -2,314 -245 1139 -1,086 53

Net Increase/Decrease before Transfers to Earmarked Reserves

4,362 0 -2,314 -245 1,803 -11,707 -9,904

Transfers to/from Earmarked Reserves (Note 8)

-2,565 2,565 0 0 0 0

(Increase)/Decrease in 2010/2011 1,797 2,565 -2,314 -245 1,803 -11,707 -9,904

Balance at 31st March 2011 carried forward

-3,760 -3,895 -15,929 -628 -24,212 -62,059 86,271


E2 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 to be funded from taxation. Authorities raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

2009/2010 Restated

2010/2011

Gross Gross Net Exp

Gross Gross Net Exp

Exp Income

Exp Income £'000 £'000 £'000 £'000 £'000 £'000

6,447 -5,308 1,139 Central services to the public 7,372 -5,626 1,746

15,112 -2,320 12,792 Cultural, environmental, regulatory & planning services

12,110 -1,603 10,507

4,532 -356 4,176 Highways and transport services 1,738 -563 1,17522,749 -20,636 2,113 Housing services 23,877 -21,748 2,129

416 -95 321 Adult social care 462 -105 3572,357 -30 2,327 Corporate and democratic core 2,296 -59 2,237

218 0 218 Non distributed costs 719 -213 5060 0 0 Pension - Past Service Gains (6,905) 0 -6,905

51,831 -28,745 23,086 Cost Of Services 41,669 -29,917 11,752

557 -1,146 -589 Other Operating Expenditure (Note 9) 906 -3,502 -2,596

5,265 -5,339 -74 Financing and Investment Income and Expenditure (Note 10)

8,994 -6,660 2,334

0 -11,819 -11,819 Taxation and Non-Specific Grant Income (Note

11) 0 -10,826 -10,826

10,604 (Surplus) or Deficit on Provision of Services 664 -8,118 (Surplus) or deficit on revaluation of fixed assets -213 -88 (Surplus) or deficit on revaluation of available for

sale financial assets -36

15,438 Actuarial (gains) / losses on pension assets / liabilities

-10,372

7,232 Other Comprehensive Income and Expenditure

-10,621

17,836 Total Comprehensive Income and

Expenditure -9,957


The Balance Sheet shows the value as at the balance sheet date of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the authority. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example, the Capital Receipts Reserve that may be used to fund capital expenditure or to repay debt). The second category of reserves includes reserves that hold unrealised gains or losses for example the Revaluation Reserve) where amounts would only become available to provide services if the assets are sold; and reserves that holds timing differences shown in the Movement in Reserves Statement line “Adjustments between accounting basis and funding basis under regulations”.

E3 BALANCE SHEET


1st April

2009 Restated

31st March 2010

Restated Notes

31st March 2011

£000 £000 £000 38,909 42,420 Property, Plant & Equipment 12 40,81639,802 39,464 Investment Property 13 36,110

16 12 Intangible Assets 14 00 0 Assets Held for Sale 19 0

6,215 8,651 Long Term Investments 15 6,766

38 30 Long Term Debtors 15 22

84,980 90,577 Long Term Assets 83,714

25,000 18,310 Short Term Investments 15 26,148

0 0 Assets Held for Sale 19 0

50 101 Inventories 16 74

9,028 8,085 Short Term Debtors 15 & 17 3,364

2,698 3,037 Cash and Cash Equivalents 18 3,245

36,776 29,533 Current Assets 32,831 0 0 Short Term Borrowing 15 0

-2,920 -2,963 Short Term Creditors 15 & 20 -4,787

0 0 Provisions 21 -920

-137 -147 Other Short Term Liabilities 15 & 36 -158

-3,057 -3,110 Current Liabilities -5,865

1st April 2009

31st March 2010 Notes

31st March 2011

£000 £000 £000 0 0 Provisions 21 0

0 0 Long Term Borrowing 15 0

-622 -475 Other Long Term Liabilities 15 & 36 -318

-23,165 -39,556 Pension Liability 39 -23,137

-708 -602 Capital Grants Receipts in Advance 33 -954

-24,495 -40,633 Long Term Liabilities -24,409

94,204 76,367 Net Assets 86,271

-30,814 -26,015 Usable reserves 22 -24,212

-63,390 -50,352 Unusable Reserves 23 -62,059

-94,204 -76,367 Total Reserves -86,271


E4 CASHFLOW STATEMENT The Cash Flow Statement shows the changes in cash and cash equivalents of the authority during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the authority. Investing activities represent the extent to which cash flows have been made for resources that are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council.

2009/10 2010/11 £'000 £'000

10,604 Net (surplus) or deficit on the provision of services 664

-12,895 Adjustments to net surplus or deficit on the provision of services for non cash movements -6,801

2,053 Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities 10,792

-238 Net cash flows from Operating Activities (Note 24) 4,655 -3,371 Investing Activities (Note 25) 2,320 3,268 Financing Activities (Note 26) -7,183 -341 Net (increase) or decrease in cash and cash equivalents -208

-2,698 Cash and cash equivalents at the beginning of the reporting period -3,037 -3,039 Cash and cash equivalents at the end of the reporting period (Note 18) -3,245


F NOTES TO THE CORE FINANCIAL STATEMENT

1. IFRS Transition

The Statement of Accounts for 2010/11 is the first to be prepared on an IFRS basis. Adoption of the IFRS-based Code has resulted in the restatement of various balances and transactions, with the result that some amounts presented in the financial statements are different from the equivalent figures presented in the Statement of Accounts for 2009/10. The following tables explain the material differences between the amounts presented in the 2009/10 financial statements and the equivalent amounts presented in the 2010/11 financial statements. Grants and Contributions Under the Code, grants and contributions for capital schemes are recognised as income when they become receivable. Previously, grants were held in a grants deferred account and recognised as income over the life of the assets which they were used to fund. As a consequence of adopting the accounting policy required by the Code, the financial statements have been amended as follows:

• The balance on the Government Grants Deferred Account at 31st March 2009 has been transferred to the Capital Adjustment Account in the opening 1st April 2009 Balance Sheet.

• Portions of government grants deferred were previously recognised as income in 2009/10; these have been removed from the Comprehensive Income and Expenditure Statement in the comparative figures and hence the Capital Adjustment Account.

• Government Grants received in 2009/10 and deferred on the balance sheet have been recognised in Comprehensive Income and Expenditure Statement in the comparative figures and hence the Capital Adjustment Account.

• Capital Grants and Contributions Unapplied at 31st March 2009 have been transferred to Capital Grants Received in Advance (where conditions remain unmet) or Capital Grants Unapplied Reserve (where conditions have been met but expenditure has not been incurred).

• Capital Grants and Contributions received or used in 2009/10 have been transferred to Capital Grants Received in Advance (where conditions remain unmet). The use of the Capital Grants and Contributions in 2009/10 that had been transferred to Capital Grants Unapplied Reserve at 31st March 2009 required a transfer to the Capital Grants Unapplied Reserve.


• An immaterial grant incorrectly recognised Capital Grants and Contributions Unapplied has been recognised in Comprehensive Income and Expenditure Statement, increasing General Fund balances by £5k.

This has resulted in the following changes being made to the 2009/10 financial statements:

Opening 1st April 2009 Balance Sheet SORP IFRS

2009/10 Statements

Adjustments made

2009/10 Statements

£000 £000 £000

Capital grants and contributions unapplied -1,135 1,135 0 Capital grants receipts in advance 0 -708 -708 Government grants deferred -3,690 3,690 0 Unusable reserves - Capital Adjustment Account -66,090 -3,690 -69,780 Unusable reserves - Capital Grants Unapplied Account 0 -427 -427 Short Term Creditors -3,294 519 -2,775 Earmarked Reserves -6,986 -519 -7,505

31st March 2010 Balance Sheet SORP IFRS

2009/10 Statements

Adjustments made

2009/10 Statements

£000 £000 £000

Capital grants and contributions unapplied -990 990 0 Capital grants receipts in advance 0 -602 -602 Government grants deferred -4,003 4,003 0 Short Term Creditors -2,907 96 -2,811 Capital adjustment account -56,662 -4,003 -60,665 Usable Reserves-Earmarked Reserve -6,389 -71 -6,460 Usable reserves - Capital grants Unapplied Account 0 -383 -383 Usable reserves - General Fund Balance -5,674 -30 -5,704

2009/10 Comprehensive Income and Expenditure Statement SORP IFRS

2009/10 Statements

Adjustments Made

2009/10 Statements

£000 £000 £000 Cultural, Related Services - gross expenditure 5,478 5 5,484 Environmental services - gross expenditure 5,636 43 5,679 Planning Services - gross expenditure 3,842 89 3,931 Highways and Transport Services - gross expenditure 4,569 7 4,576 Central Services to the Public - gross income -5,303 -5 -5,308 Cultural, Related Services - gross income -2,873 154 -2,719 Housing Services- gross income -20,565 -71 -20,636 Taxation and Non-Specific Grant Income -961 -500 -1,461


Leases Under the Code, leases of property are accounted for as separate leases of land and buildings. Previously, each property lease would have been accounted for as a single lease. The change in accounting treatment can result in the land or buildings element of the lease being accounted for as an operating lease where it was previously treated as a finance lease; or as a finance lease where it was previously treated as an operating lease. Investment Property under the Code where the Council is acting as the lessee must be accounted for as a finance lease. The Council reclassified one property lease in 2009/10 to a finance lease. As a consequence of classifying the lease as a finance lease the financial statements have been amended as follows:

• The liability as at 31st March 2009 has been reflected in the opening balance sheet.

• The 2009/10 transactions that recognised the liability have been reversed and the liability payable during 2011/12 has been recognised as a short term liability.

In addition the Council derecognised an asset in 2009/10 which was held under a lease. Under the Code this treatment is correct since the lease is classified as a finance lease but the lease payments that the Council incurs are deemed to be contingent rents and no asset or liability is recognised. As a consequence of classifying the lease as a finance lease the financial statements have been amended as follows:

• The write off of the asset has been reflected in the opening balance sheet. • The 2009/10 transactions that wrote out the asset been reversed.

However, the lease referred to above also has a head lease with regard to land, this lease is classified as an operating lease and therefore the land value has to be recognised on the Council’s Balance Sheet. This has resulted in the following changes being made to the 2009/10 financial statements:



2009/10 Statements

Adjustments Made

2009/10 Statements

£000 £000 £000 Investment property 0 316 316 Other short-term liabilities 0 -137 -137 Other long-term liabilities 0 -622 -622 Unusable reserves - Capital Adjustment Account -66,090 442 -65,648


2009/10 Statements

Adjustments Made

2009/10 Statements

£000 £000 £000 Investment property 37,981 1,230 39,211 Other short-term liabilities 0 -147 -147 Other long-term liabilities -622 147 -475 Unusable reserves - Capital Adjustment Account -56,662 -1,230 -57,892 Unusable reserves - Revaluation Reserve -31,945 0 -31,945

2009/10 Comprehensive Income and Expenditure Statement SORP IFRS 2009/10 Statements Adjustments

Made 2009/10

Statements £000 £000 £000

Financing and Investment Income & Expenditure 426 -30 396 Surplus or deficit on revaluation of non-current assets -16,056 -1,642 -17,698

Short Term Accumulated Compensated Absences Short-term accumulating compensated absences refers to benefits that employees receive as part of their contract of employment, entitlement to which is built up as they provide services to the council. The most significant benefit covered by this heading is holiday pay. Employees build up an entitlement to paid holidays as they work. Under the Code, the cost of providing holidays and similar benefits is required to be recognised when employees render services that increase their entitlement to future compensated absences. As a result, the council is required to accrue for any annual leave earned but not taken at 31 March each year. Under the previous accounting arrangements, no such accrual was required. The government has issued regulations that mean local authorities are only required to fund holiday pay and similar benefits when they are used, rather than when


employees earn the benefits. Amounts are transferred to the Accumulated Absences Account until the benefits are used. Accruing for short-term accumulating compensated absences has resulted in the following changes being made to the 2009/10 financial statements:

Opening 1st April 2009 Balance Sheet SORP IFRS 2009/10

Statements Adjustments

Made 2009/10


Short Term Creditors -3,294 -144 -3,438 Unusable reserves - Accumulated Absences Account 0 144 144

31st March 2010 Balance Sheet SORP IFRS 2009/10


Made 2009/10


Short Term Creditors -2,907 -153 -3,060 Unusable reserves - Accumulated Absences Account 0 153 153

2009/10 Comprehensive Income and Expenditure Statement SORP IFRS 2009/10


Made 2009/10


Housing Services - gross expenditure 22,796 1 22,797

Cultural, Related Services - gross expenditure 5,478 1 5,479

Environmental services - gross expenditure 5,636 3 5,639 Planning Services - gross expenditure 3,842 1 3,843 Highways and Transport Services - gross expenditure 4,569 0 4,569 Adult Social Work - gross expenditure 416 0 416 Central Services to the Public - gross expenditure 6,489 2 6,491 Corporate and Democratic Core - gross expenditure 2,356 1 2,357

51,582 9 51,591

Cash Equivalents Cash Equivalents are investments that mature within 3 months from the date of acquisition and that are readily converted to known amounts of cash with insignificant risk of change in value. Deposits in call accounts are classified as cash equivalents. Bank overdrafts form an integral part of the Authority’s cash managements and as such are classified as cash equivalents.


As a consequence of classifying transactions to cash equivalents the financial statements have been amended as follows:

• Bank deposits and bank overdraft at 31st March 2009 has been reclassified as cash equivalents and reflected in the opening balance sheet.

• The 2009/10 transactions arising from bank deposits and bank overdraft have been reclassified as cash equivalents and reflected in the balance sheet as at 31st March 2011.

This has resulted in the following changes being made to the 2009/10 financial statements:

Opening 1st April 2009 Balance Sheet SORP IFRS 2009/10


made 2009/10


Short-term investments 28,950 -3,950 25,000 Bank Overdraft -1,320 1,320 0 Cash and cash equivalents 68 2,629 2,697

31st March 2010 Balance Sheet SORP IFRS 2009/10


made 2009/10


Short-term investments 22,460 -4,150 18,310 Bank Overdraft -1,114 1,114 0 Cash and cash equivalents 1 3,036 3,037

Property, Plant and Equipment/ Investment Property Non-current assets that are solely used to generate rental income and/or for capital appreciation in value and which are not used for the provision of services are classified as investment property. As a consequence of adopting the accounting policy required by the Code, the financial statements have been amended as follows:

• A number of assets classified as investment property during 2009/10 have been reflected (including revaluations and elimination of the balances on the Revaluation Reserve) in the opening balance sheet.

• The 2009/10 transactions that have reflected in the opening balance sheet have been reversed.


• The 2009/10 revaluations (not reflected in the opening balance sheet) and the expenditure and income associated with investment property have been reflected in the Financing and Investment Income and Expenditure.

• Assets Under Construction have been reclassified as either Property, Plant and Equipment, and Investment Property.

As a consequence of adopting the accounting policy required by the Code, the financial statements have been amended as follows:


2009/10 Statements

Adjustments made

2009/10 Statements

£000 £000 £000

Property, plant and equipment 69,124 -28,058 41,066 Investment property 0 40,895 40,895 Assets Under Construction 4,192 -4,192 0 Unusable reserves - Capital Adjustment Account -66,090 -17,519 -83,609 Unusable reserves - Revaluation Reserve -12,692 8,874 -3,819


2009/10 Statements

Adjustments made

2009/10 Statements

£000 £000 £000

Property, plant and equipment 40,643 3,817 44,460 Investment property 37,981 1,663 39,644 Assets Under Construction 5,480 -5,480 0 Unusable reserves - Capital Adjustment Account -56,662 -18,601 -75,263 Unusable reserves - Revaluation Reserve -31,945 18,601 -13,345

2009/10 Comprehensive Income and Expenditure Statement SORP IFRS

2009/10 Statements

Adjustments Made

2009/10 Statements

£000 £000 £000 Financing and Investment Income and Expenditure - changes in

fair value on Investment Property 426 -1,082 -656

Surplus or deficit on revaluation of non-current assets -16,057 9,727 -6,329

2. Accounting Standards that have been issued but have not yet been adopted

The Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (the Code) has introduced a change in accounting policy in relation to the treatment


of heritage assets held by the Council, which will need to be adopted fully by the Council in the 2011/12 financial statements. The Council is required to disclose information relating to the impact of the accounting change on the financial statements as a result of the adoption by the Code of a new standard that been issued, but is not yet required to be adopted by the Council, in this case, heritage assets. Full adoption of the standard will be required for the 2011/12 financial statements. However, the Council is required to make disclosure of the estimated effect of the new standard in these (2010/11) financial statements. The new standard will require that a new class of asset, heritage assets, is disclosed separately on the face of the Council’s Balance Sheet in the 2011/12 financial statements. Heritage assets are assets that are held by the authority principally for their contribution to knowledge or culture. The Council has reviewed its assets held on the balance sheet during 2010/11 against the definition of heritage assets and has concluded that the Council does not have any heritage assets on its balance sheet, but the civic regalia will need to be included in the 2011/12 balance sheet.

3. Critical Judgements in Applying Accounting Policies

In applying the accounting policies set out on pages 21 to 45, 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:

• The going concern assumption is a fundamental principle in the preparation of

financial statements, under which an entity is ordinarily viewed as continuing in business for the foreseeable future and able to realise its assets and discharge its liabilities in the normal course of business. There is a high degree of uncertainty about future levels of funding for local government. As part of the closure of accounts process the Council has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Authority might be impaired as a result of a need to close facilities and reduce levels of service provision. The principal assumption is that the Council will experience no significant changes in its operating levels beyond those approved as part of the budget setting process.

• The Council has reviewed the requirement to prepare Group Accounts. This

review shows that the Council does not have any significant control or influence over any external organisations which would require the Council to prepare Group Accounts. The Council considered the relationship with ‘The


Castle’ and concluded that this did not meet the requirement to consolidate. Further details are set out in Note 34.

• The Council has considered its Contingent Liabilities and identified two items .

The first item relates to potential future higher employer contributions following the Council’s restructuring programme. A provision has been made for those costs which are required by Pension Fund Regulations. No additional provision has been made over and above this provision as any further costs will be assessed under the next actuarial review. The Council has also identified a contingent liability which would arise in relation to Faraday Court if the Council decided to terminate the lease in 2012 when the Council has to decide whether to renew at the next break opportunity. No provision has been made because the renewal is under consideration.

• The Council has considered whether it has any liability under IFRIC 12 in

respect of service concession arrangements. A review has been carried out and there are no assets or embedded leases which form part of any service concession arrangements.

4. Assumptions made about the Future and Other Major Sources of Estimation

Certainty The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the Council’s Balance Sheet at 31st March 2011 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows:

Item Uncertainties Effect if Actual Results Differ from Assumptions

Provisions

The Council has made a provision of £0.920m for further staff redundancy costs following a restructuring of the Council approved by members in 2010/11. It is still unclear where some of the redundancies will fall

An increase of 10% in the number of redundancies or the average cost of redundancies would mean a further £0.092m needing to be provided for this purpose.


and what the actual costs will be.

Arrears

At 31st March 2011, the Authority had a balance of sundry debtors for £4.424m. A review of significant balances suggested that an impairment of doubtful debts of £1.060m was appropriate. However, in the current economic climate it is not certain that such an allowance would be sufficient.

If collection rates were to deteriorate, a doubling of the amount of the impairment of doubtful debts would require an additional £1.060m to set aside as an allowance.

Pensions Liability

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

The effects on the net pensions liability of changes in individual assumptions can be measured. For instance, a 0.5% decrease in the discount rate assumption (used for discounting the scheme liabilities) would result in an increase in the pension liability of £4.937m. However, the assumptions interact in complex ways. During 2010/11, the Council’s actuaries advised that the net pensions liability had decreased by £16.419m partly as a result of estimates being corrected as a result of experience (i.e. the effects of differences between the previous actuarial assumptions and what has actually occurred). This estimate


adjustment accounts for £10.372m of the net pension liability decrease.

Property, Plant and Equipment

Variations can arise in respect of depreciation which flow from the annual revaluation of 20% of the asset portfolio. In addition There are also uncertainties associated with the extent to which impairment provided against assets reflects the consumption of the asset. Inevitably the extent to which the asset is impaired , depends on the use of the asset and the underlying robustness of the asset. The Council has also been required to identify assets into component elements. The Council has relied upon the work of the District Valuer to make these estimations There are limitations to the 2009/10 underlying records for Property Plant & Equipment and Investment Properties. The figures for these categories in the financial statements are based on the 2009-10 accounts which are then restated for IFRS and prior period adjustments.

Depreciation and Impairment charged to the Comprehensive Income and Expenditure Account does not impact on the Council’s General Fund balances and reserves as it is reversed out within the Movement on Reserves. The fixed asset register is unable to provide the detailed analysis required but the overall account balances on the register agree to the Council’s accounting system.


5. Material Items of Income and Expense

The Council has a number of jointly controlled operations as detailed in Accounting Policy No. 14 'Jointly Controlled Operations and Assets'. Included in the 2010/11 Cost of Services in the Comprehensive income and Expenditure Statement, the Council has made the following material annual contributions:

• Connect Law - £282,000 (£228,000 in 2009/10) • IT Services - £501,000 (£534,000 in 2009/10)

The Council has a contingent liability in respect of the Faraday Court finance lease in respect of tenant dilapidations when the lease expires in September 2012.

A total of £2,528,000 has been recognised in the Surplus or Deficit on Provision of Services in 2010/11 (£95,000 in 2009/10) in respect of termination benefits. Further details are shown in note 38 Termination Benefits.

Changes in the valuations of investment property has resulted in a charge of £3.1m recognised in Financing and Investment Income and Expenditure line within the Surplus or Deficit on Provision of Services. The £3.1m is not permitted to have an impact on the General Fund Balance. The losses is therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account.

Following the Chancellor’s budget statement on 22 June 2010, the Council’s actuary has based the calculation of future pension increases on the Consumer Price Index (CPI) and not the Retail Price Index (RPI). The effect of this change has resulted in a negative past service cost item in the Surplus or Deficit on Provision of Services of £6.905m. This has been disclosed separately on the face of the Comprehensive Income and Expenditure Statement as this is considered relevant to the understanding of the Council’s financial performance in 2010/11. The £6.905m is not permitted to have an impact on the General Fund Balance. The gains are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Pension Reserve. The Council paid a total sum of £25.808m in Housing Benefit payments to Wellingborough residents to meet the cost of rent, mortgage payments and Council Tax. The Council received Housing Benefit Grant of £25.499m from Central Government to defray the cost. As part of the preparation of the current financial statements, errors were identified in the asset register. These errors have been corrected in the Fixed Asset Register in the current financial statements and retrospectively through a Prior Period


Adjustment. The value of the Prior Period adjustments in previous accounting periods are as follows:-

1 April 2009 31 March 2010 £000’s £ 000’s Property Plant & Equipment -2,157 -2040 Investment Property -1,410 -1410 Intangible Assets -454 -280 Unusable Reserves 4,021 3,730

6. Events after the Balance Sheet date

The Statement of Accounts was authorised for audit by the Director of Resources on 30 June 2011. There were no events taking place after this date that needed to be reflected in the financial statements or notes. The financial statements and notes have not been adjusted for the following event which took place after the 31st March 2011 as they provide information that is relevant to an understanding of the Council’s financial position but do not relate to conditions at that date: The Council has applied for and received a capitalisation direction from the Department of Communities and Local Government (CLG) which will enable the Council to treat the statutory element of redundancy costs as Capital Expenditure. Further detailed information is set out in note 21 to the accounts.

7. Adjustments between the accounting basis and the funding basis under

regulations

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


Usable Reserves

General Fund

Balance

Capital Receipts Reserve

Capital Grants

Unapplied

Movement in

Unusable Reserves

2009/10

£000 £000 £000 £000 Reversal of items debited or credited to the comprehensive income and expenditure statement

Amortisation of intangible assets -8 0 0 8 Depreciation, Revaluation Losses and Impairment of non-current assets -6,835 0 0 6,835

Movement in market value of investment property -271 0 0 271

Capital Grants and Contributions credited to the Comprehensive income & Expenditure Statement (if applied credit to CAA, if unapplied credit to Cap Grants Unapplied Account)

1,127 0 -78 -1,049

Revenue expenditure funded from capital under statute -1,897 0 0 1,897

Net gain or loss on sale of non-current/current assets 1,007 -1,127 0 120

Insertion of items not debited or credited to the comprehensive income and expenditure statement

Capital expenditure charged to the General Fund balance (CFCR) 205 0 0 -205

Statutory Repayment of Debt (Finance Lease Liabilities) 137 0 0 -137

Adjustments involving the capital grants unapplied account Application of grants unapplied to capital financing transferred to the capital adjustment account -80 0 122 -42

Adjustments involving the capital receipts reserve Capital Receipts applied to fund Capital Expenditure (i.e transferred to Capital Adjustment Account ) 0 3,037 0 -3,037

Adjustment to Capital Receipts Reserve funding 0 -149 0 149

Contributions from the capital receipts reserves towards administrative costs of non current asset disposal 0 0 0 0

Transfer from Capital Receipts Deferred to Capital Receipts Reserve 0 -8 0 8

Adjustments involving the collection fund adjustment account

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 General Fund in accordance with regulation (England only)

-26 0 0 26

Adjustment involving the pension reserve Reserval of items relating to retirement benefits debited or credited to the comprehensive income and expenditure statement -2,633 2,633

Employer's pension contributions and direct payment to pensioners payable in year 1,680 -1,680

Adjustment involving the accumulated absences account Amount by which the officer remuneration charge to the comprehensive income and expenditure statement on an accruals basis is different from remuneration chargeable in year in line with statutory requirements

-8 8

Total Adjustments -7,602 1,753 44 5,805


Usable Reserves

General Fund

Balance

Capital Receipts Reserve

Capital Grants

Unapplied

Movement in

Unusable Reserves

2010/11

£000 £000 £000 £000 Reversal of items debited or credited to the comprehensive income and expenditure statement

Depreciation, Revaluation Losses and Impairment of non-current assets -2,328 2,328

Movement in market value of investment property -3,134 3,134 Capital Grants and Contributions credited to the Comprehensive income & Expenditure Statement (if applied credit to CAA, if unapplied credit to Cap Grants Unapplied Account)

1,225 -456 -769

Revenue expenditure funded from capital under statute -1,448 1,448

Net gain or loss on sale of non-current/current assets 3,272 -4,036 764

Insertion of items not debited or credited to the comprehensive income and expenditure statement

Capital expenditure charged to the General Fund balance (CFCR)

Statutory Repayment of Debt (Finance Lease Liabilities) 147 -147

Adjustments involving the capital grants unapplied account Application of grants unapplied to capital financing transferred to the capital adjustment account -188 211 -23

Adjustments involving the capital receipts reserve

Capital Receipts applied to fund Capital Expenditure (i.e transferred to Capital Adjustment Account ) 1,720 -1,720

Contributions from the capital receipts reserves towards administrative costs of non current asset disposal -10 10

Transfer from Capital Receipts Deferred to Capital Receipts Reserve -8 8

Adjustments involving the collection fund adjustment account

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 General Fund in accordance with regulation (England only)

93 -93

Adjustment involving the pension reserve Reserval of items relating to retirement benefits debited or credited to the comprehensive income and expenditure statement

4,250 -4,250

Employer's pension contributions and direct payment to pensioners payable in year

1,796 -1,796

Adjustment involving the accumulated absences account Amount by which the officer remuneration charge to the comprehensive income and expenditure statement on an accruals basis is different from remuneration chargeable in year in line with statutory requirements

-7 7

Other Adjustments Other balancing adjustments required to reconcile proper accounting practice with the resources specified in statutory provisions

30 23

Total Adjustments 3,698 -2,314 -245 -1,086


8. Transfers to/From Earmarked Reserves

This note sets out the amounts set aside from the General Fund balances in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund expenditure in 2009/10 and 2010/11.

Balance at 1st

April 2009


Other movements


2010


Other movements


2011

£000 £000 £000 £000 £000 £000 £000 Repairs and Renewals -95 95 0 0 Capital Fund -1,836 -1,836 1,836 0 Efficiency & Restructuring Reserve

-55 -55 -55

Interest Equalisation Reserve

-3,000 1,300 -1,700 256 -1,444

Environmental Impact Reserve

-2,000 -2,000 2,000 0

Housing and Planning Delivery Grant

-494 -139 -633 406 -227

S.38 Highways Adoption Grant

0 -137 -137 -3 -140

Ward Support 0 -11 -11 11 0 Election Package 0 -18 -18 -18 VAT Reserve 0 0 -121 -121 Planning Reserve 0 0 -100 -100 Revenue Equalisation Reserve

0 0 -1,565 -1,565

Redundancy and Restructuring Reserve

0 0 0 0

Neighbourhood Development Reserve

0 0 -34 -34

Miscellaneous Revenue Grants Reserve

-25 -46 -71 -70 -141

New Burdens Impact Reserve

0 0 -51 -51

Earmarked Reserves -7,504 1,044 0 -6,460 2,565 0 -3,895 General Fund -7,514 1,957 -5,557 1,797 -3,760 Total Reserves -15,018 3,001 0 -12,017 4,362 0 -7,655

The nature and purpose of each reserve is shown below:

• Repairs and Renewals - The balance on the Repair and Renewals Fund is held for the replacement of the Council's vehicles and equipment. This was fully utilised during 2009/10.


• Capital Fund - is provided in order to meet capital expenditure in future years. This reserve has been transferred to create a new reserve ‘Revenue Equalisation’ in 2010/11 – see below.

• Efficiency and Restructuring Reserve - provided to accommodate management restructuring and pump prime expenditure required to produce future savings.

• Interest Equalisation Reserve - this reserve was created in January 2009 to meet the impact of interest rate fluctuations on investment income. £256k was utilised in 2010/11 to meet the deficit in the budgeted investment income within Surplus or Deficit on Provision of Services.

• Environmental Impact Reserve - at the time of the housing stock transfer to Wellingborough Homes a reserve previously established for repairs and maintenance purposes was converted to an 'Environmental Impact' Reserve in the sum of £2m to provide for any costs arising after the Stock transfer. It has now been approved that the Reserve should be used to part fund redundancy and redeployment costs arising in 2010/11 and 2011/12. This has required the repatriation of this reserve back to General Fund balances and the subsequent transfer of £1,080k to Redundancy and Restructuring Reserve (see below) and £920k to provisions (see note 21).

• Housing and Planning Delivery Grant (HPDG) - the HPDG was a Government grant to allow local authorities to bring forward housing schemes and prepare the ground for increased delivery. In setting the budget for 2010/11 it was assumed that this grant could be abolished and it was agreed by Council to set up an earmarked reserve for the unspent balance at 31st March 2010 to fund ongoing works, whilst reviewing future service funding and provision. In 2010/11 £406k was utilised to fund expenditure.

• S.38 Highway Adoption Grants - The Council has powers under the Highways Act of 1980 to enter into agreements with developers or other persons to adopt highways for future maintenance provided they are constructed to the Council’s specification. Developers may enter into an Agreement under Section 38 of the Highways Act with the Council to ensure that the highways are adopted. This reserve represents the fees paid in advance to cover the Council’s costs in preparing the Agreement and inspecting the work during construction and the bond deposited to cover the cost of bringing the road up to an adoptable standard should the developer become insolvent or is unable to meet their obligation. In 2010/11 a contribution of £3k was made to the Reserve.

• Ward Support - at the end of 2009/10 11 Councillors had committed spending their £1,000 ward support fund, however the contracts for this work were yet to be awarded. Winter gritting accounted for £2,000 of the commitments and contributions to the Smart Water scheme for the remaining £9,000. As a result an earmarked reserve has been set up and fully utilised (£11k) in 2010/11.

• Election Postage - The allocation for postage in relation to expenses necessary to run elections varies from year to year depending on the number and type of elections, for example local and national elections. To ensure that


this budget is better managed a reserve has been set up to transfer under spends to, in order to fund and shortfalls in future years. There was no movement in this Reserve in 2010/11.

• VAT Reserve – The Council made a successful appeal to Her Majesty’s Revenues and Customs (HMRC) for a VAT refund including interest. During 2010/11 £213k was received in this respect, this was made up of principal and interest. This income was recognised in Surplus or Deficit on Provision of Services and used to fund specialist advice in respect of the VAT refund and within financial services. The remaining balance of £121k has been transferred to a VAT Reserve. It is intended that this Reserve will be applied in future financial years to offset the revenue financial pressures that the Borough Council of Wellingborough will face.

• Planning Reserve - A Planning Inquiry was budgeted for in the 2010/11 financial year at a total cost of £100,000. However, it was realised that this would not go ahead as planned in 2010/11 so the £100,000 has been transferred to an earmarked Planning Reserve, for use in future financial years, possibly in 2011/12.

• Revenue Equalisation Reserve - For a number of years the Council has held a Revenue Reserve built up from various revenue sources called the Capital Fund Reserve with a view to this being used to support future capital expenditure. Nothing has been spent from the Reserve since its inception. The decision was taken to formally close this Reserve and transfer the balance of £1,565k (net of £270k transferred to Provisions to fund dilapidations in respect of Investment Property leases) to a new 'Revenue Equalisation Reserve', in order to provide the Council with more flexibility to address the financial problems facing the Council in forthcoming financial years.

• Redundancy and Restructuring Reserve – As described above against the Environmental Impact Reserve, £1.080m was been transferred to a Redundancy and Restructuring Reserve. To fund redundancy and redeployment costs of £1,608 an additional £528k has been transferred to this Reserve from General Fund Balances. This Reserve has subsequently been transferred to from this balance to fund the £1,608k accrual recognised in Surplus or Deficit on Provision of Services.

• Neighbourhood Development Reserve - £34k has been set to fund youth opportunity projects. The reserve has been created from grant income reflected in the Surplus or Deficit on Provision of Services.

• Miscellaneous Revenue Grants-This reserve is a new reserve and results from the introduction of IFRS. Where revenue grants are received which do not have conditions to repay where not spent in year. New receipts are added to the reserve and applied when spent. This reserve reflects unspent grant several areas e.g Homelessness for which there are commitments in future years


• New Burdens Impact Reserve - £51k has been set aside to fund the costs associated with recent planning strategies. The reserve has been created from grant income reflected in the Surplus or Deficit on Provision of Services.

9. Other Operating Expenditure

2009/10 2010/11

£000

£000

438 Parish Council Precepts 446

-1,027 (Gains)/losses on the disposal of non current assets -3,042

-589 Total -2,596

10. Financing and Investment Income and Expenditure

2009/10 2010/11

£000

£000

43 Interest payable and similar charges 33

1,714

Pensions interest cost and expected return on pensions assets

1,208

-1,069 Interest receivable and similar income -689

-762 Income and expenditure, changes in their fair value and gains/losses in respect of Investment Property

2,052

- Other Investment Income and expenditure

-270

-74 Total 2,334

11. Taxation and Non-Specific Grant Income

2009/10 2010/11

£000

£000 -3,496 Council tax income -3,623 -5,575 Non domestic rates -6,098 -1,287 Non ring fenced Government Grants (RSG) -886 -1,461 Capital grants and contributions -219

-11,819 Total -10,826

12. Property, Plant and Equipment

Movement in Balances

Movement in Balances for 2009/10 and 2010/11 are shown in the two tables below:


Council

Dwellings

Other Land and

Buildings

Vehicles, Plant &

Equipment Infrastructure

Assets Community

Assets

Assets Under

Construction

Total Property, Plant and

Equipment £000 £000 £000 £000 £000 £000 £000 Cost or Valuation At 1st April 2009 31,477 2,669 1,650 1,787 2,359 39,942 Additions / Donations 149 245 16 1,508 1,918 Revaluation increases/(decreases) recognised in the Revaluation Reserve

10,046 10,046

Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services

-5,133 -5,133

Derecognition - Disposals -115 -17 -132

Derecognition - Other 0 Movement in Assets 313 12 108 -433 0 Adjustments -2,305 -234 544 544 -158 -1,609 Other movements in Cost or Valuation 0

At 31st March 2010 0 34,432 2,675 2,302 2,347 3,276 45,032 Accumulated Depreciation and Impairment

At 1st April 2009 140 635 258 1,033 Depreciation charge 1,015 516 161 1,692 Depreciation written out to Revaluation Reserve to ensure full Code compliance

0


Other movements in Depreciation and Impairment -84 -46 30 -100

At 31st March 2010 0 1,068 1,095 449 0 0 2,612 Net Book Value At 31st March 2009 0 31,337 2,034 1,392 1,787 2,359 38,909 At 31st March 2010 0 33,364 1,580 1,853 2,347 3,276 42,420


Council Dwellings

Other Land and Buildings

Vehicles, Plant &

Equipment Infrastructure

Assets Community

Assets Assets Under

Construction

Total Property, Plant and

Equipment

£000 £000 £000 £000 £000 £000 £000 Cost or Valuation

At 1st April 2010 34,432 2,675 2,302 2,347 3,276 45,032 Additions / Donations 40 434 317 791

Revaluation increases/(decreases) recognised in the Revaluation Reserve

213 213

Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services

-726 -726


Derecognition - Other 0

Assets reclassified within PPE 1,021 120 -164 286 -874 389

Assets reclassified to/from Investment Property or Intangible Assets

29 -209 -180

Accumulated depreciation adjustment for valuations -187 -187

Other movements in Cost or Valuation 18 18

At 31st March 2011 0 34,384 3,148 2,138 2,651 2,510 44,831 Accumulated Depreciation and Impairment

At 1st April 2010 0 1,068 1,095 449 0 2,612 Depreciation charge 1,112 361 148 1,621

Depreciation written out to Revaluation Reserve to ensure full Code compliance

0

Write back Depreciation on Valuations -187 -187

Derecognition - Disposals -65 -65

–Assets reclassified within PPE 79 - -61 18

Other movements in Depreciation and Impairment

16 -16

At 31st March 2011 0 2,072 1,407 536 0 0 4,015 Net Book Value at 31st March 2010 0 33,364 1,580 1,853 2,347 3,276 42,420

Net Book Value at t 31st March 2011 0 32,312 1,741 1,602 2,651 2,510 40,816


Depreciation The following useful lives have been used in the calculation of depreciation:

Property, Plant and Equipment: Vehicles, plant and equipment 0– 10 years Infrastructure assets 5- 36 years Buildings 0 -60 years Council dwellings 33-50 years

Capital Commitments At 31st March 2011, the Council has no significant capital commitments.

Revaluations The Council carries out a rolling programme that ensures that all Property, Plant and Equipment required to be measured at fair value is revalued at least every five years. All valuations were carried out externally by an independent valuer who holds a recognised and relevant professional qualification with recent appropriate experience. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. Valuations of vehicles, plant, furniture and equipment are based on current prices where there is an active second-hand market or latest list prices adjusted for the condition of the asset.

Other Land and

Buildings

Community Assets

Vehicles, Plant,

Furniture and

Equipment

Surplus Asset Infrastructure

Assets under

Construction Total

£000 £000 £000 £000 £000 £000 £000

Carried at historical cost 2,651

3,148 2,510 8,309

Valued at fair value as at:

31st March 2011 8,766 8,766

31st March 2010 23,230 385 23,615 31st March 2009 2,388 1,753 4,141 Total Cost or Valuation

34,384

2,651

3,148 -

2,138

2,510 44,831

13. Investment Property

The following items of income and expense have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement:


2009/10 2010/11

£000 £000

Rental income from investment property -2389 -2,621

Direct operating expenses arising from investment property 1,355 1,758

Net (gain)/loss - 1034 -863

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. All valuations were carried out externally by an independent valuer who holds a recognised and relevant professional qualification with recent appropriate experience. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. Valuations of Investment Properties, both freehold and leasehold interests, are measured initially at cost and subsequently re-valued annually at fair value ( market value). The Council has no contractual obligations to purchase, construct or develop investment property or repairs, maintenance or enhancement. The following table summarises the movement in the fair value of investment property in 2009/10 and 2010/11:

2009/10 2010/11

£000 £000

Balance at start of the year 39,802

39,464

Additions: - Purchases - Construction - Subsequent expenditure 79 273 Disposals -312 Disposals - other Net gains/losses from fair value adjustments -271 -3,134 Transfers: - to/from Inventories -to/from Property, Plant and Equipment -181 Other changes -146

Balance at end of the year 39,464

36,110


14. Intangible Assets

The Council accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware item of Property, Plant and Equipment. The intangible assets are purchased licenses. A 3 year useful life is assumed for all intangible assets. In 2010/11 the balance on Intangible Assets was reclassified to Vehicles, Plant and Equipment within Property, Plant and Equipment (see note 12). The movement on Intangible Asset balances during 2009/10 and 2010/11 is as follows:

2009/10 2010/11 Intangible

Assets Total Intangible

Assets Total

£000 £000 £000 £000 Balance at start of year: • Gross carrying amounts 25 25 29 29 • Accumulated amortisation

-9 -9 -17 -17

Net carrying amount at start of year

16 16 12 12

Additions: • Purchases 4 4 Other Disposals Amortisation for the period -8 -8 Other changes -12 -12 Net carrying amount at end of year

12 12

Comprising: • Gross carrying amounts 29 29 0 0 • Accumulated amortisation

-17 -17 0 0

12 12 0 0


15. Financial Instruments

Categories of Financial Instruments The following categories of financial instrument are carried in the Balance Sheet:

Long-term Current

1st April 2009

31st March 2010

31st March 2011

1st April 2009

31st March 2010

31st March 2011

£000 £000 £000 £000 £000

Investments

Loans and receivables 6,000 8,348 6,427 25,000 18,310 26,148 Cash and Cash Equivalents 0 0 0 2,698 3,037 3,245 Available-for-sale financial assets 215 303 339 0 0 0 Unquoted equity investment at cost 0 0 0 0 0 0

Financial assets at fair value through profit and loss 0 0 0 0 0 0

Total investments 6,215 8,651 6,766 27,698 21,347 29,393 Debtors Loans and receivables 38 30 22 0 0 0 Financial assets carried at contract amounts 0 0 0 2,561 1,388 1,449 Total Debtors 38 30 22 2,561 1,388 1,449 Borrowings Financial liabilities at amortised cost 0 0 0 0 0 0 Financial liabilities at fair value through profit and loss 0 0 0 0 0 0

Total borrowings 0 0 0 0 0 0 Other Long Term Liabilities finance lease liabilities -622 -475 -318 -137 -147 -158 Total other long term liabilities -622 -475 -318 -137 -147 -158 Creditors Financial liabilities at amortised cost 0 0 0 0 0 0 Financial liabilities carried at contract amount 0 0 0 -1,417, -1,441 -1,250

Total creditors 0 0 0 -1,417 -1,441 -1,250

Reclassifications of Financial Instruments In 2010/11 the Council did not reclassify any financial instruments as this is not permitted by the Code.


Income, Expense, Gains or Losses

F ina nc e Le a s e

Lia bilit ie s

Lia bilit ie s m e a s ure d

a t a m o rt is e d

c o s tLo a ns a nd

re c e iv a ble s

F ina nc ia l a s s e t s

c a rrie d a t c o nt ra c t a m o unt s

A v a ila ble -f o r- s a le a s s e t s

A s s e t s a nd

Lia bilit ie s a t F a ir V a lue

t hro ugh P ro f it a nd

Lo s s T o t a l

£ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0Interest expense 44 4 4

Lo sses o n dereco gnitio n

0

Reductio ns in fair value 0

Impairment lo sses 209 2 0 9

Fee expense 0

T o t a l e xpe ns e in S urplus o r D e f ic it o n t he P ro v is io n o f S e rv ic e s

4 4 0 0 2 0 9 0 0 2 5 3

Interest inco me -1,069 - 1,0 6 9

Interest inco me accrued o n impaired financial assets

0

Increases in fair value 0

Gains o n dereco gnit io n 0

Fee inco me 0

T o t a l inc o m e in S urplus o r D e f ic it o n t he P ro v is io n o f S e rv ic e s

0 0 - 1,0 6 9 0 0 0 - 1,0 6 9

Gains o n revaluatio n -88 - 8 8

Lo sses o n revaluatio n 0

A mo unts recycled to the Surplus o r Defic it o n the P ro vis io n o f Services after impairment

0

S urplus / de f ic it a ris ing o n re v a lua t io n o f f ina nc ia l a s s e t s in O t he r C o m pre he ns iv e Inc o m e a nd E xpe ndit ure

0 0 0 0 - 8 8 0 - 8 8

N e t ga in/ ( lo s s ) f o r t he ye a r

4 4 0 - 1,0 6 9 2 0 9 - 8 8 0 - 9 0 4

2 0 0 9 / 10

F ina nc ia l A s s e t sF ina nc ia l L ia bilit ie s


F ina nc e Le a s e

Lia bilit ie s

Lia bilit ie s m e a s ure d

a t a m o rt is e d

c o s tLo a ns a nd

re c e iv a ble s

F ina nc ia l a s s e t s

c a rrie d a t c o nt ra c t a m o unt s

A v a ila ble -f o r- s a le a s s e t s

A s s e t s a nd

Lia bilit ie s a t F a ir V a lue

t hro ugh P ro f it a nd

Lo s s T o t a l

£ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0Interest expense 33 3 3

Lo sses o n dereco gnitio n

0

Reductio ns in fair value 0

Impairment lo sses 338 3 3 8

Fee expense 0

T o t a l e xpe ns e in S urplus o r D e f ic it o n t he P ro v is io n o f S e rv ic e s

3 3 0 0 3 3 8 0 0 3 7 1

Interest inco me -689 - 6 8 9

Interest inco me accrued o n impaired financial assets

0

Increases in fair value 0

Gains o n dereco gnit io n 0

Fee inco me 0

T o t a l inc o m e in S urplus o r D e f ic it o n t he P ro v is io n o f S e rv ic e s

0 0 - 6 8 9 0 0 0 - 6 8 9

Gains o n revaluatio n -36 - 3 6

Lo sses o n revaluatio n 0

A mo unts recycled to the Surplus o r Defic it o n the P ro vis io n o f Services after impairment

0

S urplus / de f ic it a ris ing o n re v a lua t io n o f f ina nc ia l a s s e t s in O t he r C o m pre he ns iv e Inc o m e a nd E xpe ndit ure

0 0 0 0 - 3 6 0 - 3 6

N e t ga in/ ( lo s s ) f o r t he ye a r

3 3 0 - 6 8 9 3 3 8 - 3 6 0 - 3 5 4

2 0 10 / 11

F ina nc ia l L ia bilit ie s F ina nc ia l A s s e t s

Fair Values of Assets and Liabilities Financial liabilities, financial assets represented by loans and receivables and long-term debtors and creditors are carried in the Balance Sheet at contracted amounts (the Council does not have any financial instruments that are carried at amortised


cost). As a result of financial instruments being carried at contracted amounts there is no difference between the fair value and carrying amount on the Balance Sheet. The Council does not have any borrowings with the exception of finance leases. Available for sale assets (quoted securities) are carried in the Balance Sheet at their fair value. These fair values are based on public price quotations where there is an active market for the instrument. The gains or losses arising on changes to the fair value of available for sale assets are recognised in the Available for Sale Financial Instruments Reserve (Unusable Reserve). The two tables below illustrate the carrying amount and fair value of the Council’s financial liabilities and assets:

1st April 2009 31st March 2010 31st March 2011 Carrying

amount Fair Value Carrying amount Fair Value Carrying

amount Fair Value

£000 £000 £000 £000 £000 £000

Financial liabilities -2,176 -2,176 -2,063 -2,063 -1,726 -1,726

1st April 2009 31st March 2010 31st March /2011 Carrying

amount Fair Value Carrying amount Fair Value Carrying

amount Fair Value

£000 £000 £000 £000 £000 £000

Loans and receivables 36,474 36,474 31,386 31,386 37,608 37,608 Long-term debtors 38 38 30 30 22 22


16. Inventories

Amenities

Stores

Amenities Diesel & Gas

Oil

Waendel Walk

Medals

Bus Tokens

Electricity Cards

Total

2009/10 2009/10 2009/10 2009/10 2009/10 2009/10 2009/10 £000 £000 £000 £000 £000 £000 £000

Balance outstanding at start of year

2 0 4 14 30 0 50

Purchases 40 19 2 5 0 5 71

Recognised as an expense in the year

0 0 0 0 -20 0 -20

Written off balances

0 0 0 0 0 0 0

Reversals of write-offs in previous years

0 0 0 0 0 0 0

Balance outstanding at year-end

42 19 6 19 10 5 101

Amenities Stores

Amenities

Diesel & Gas Oil

Waendel Walk

Medals

Bus Tokens

Electricity

Cards

Total

2010/11 2010/11 2010/11 2010/11 2010/11 2010/11 2010/11 £000 £000 £000 £000 £000 £000 £000

Balance outstanding at start of year

42 19 6 19 10 5 101

Purchases -18 5 2 -2 -10 -4 -27

Recognised as an expense in the year

0 0 0 0 0 0 0

Written off balances

0 0 0 0 0 0 0

Reversals of write-offs in previous years

0 0 0 0 0 0 0

Balance outstanding at year-end

24 24 8 17 0 1 74


17. Debtors

The analysis of short-term debtors held on the Balance Sheet is shown in the table below. Debtors shown in the table below are shown net of any provision made for Impairment in respect of potential bad debts

1st April 2009 31st March 2010 31st March 2011

£000 £000 £000 Central government bodies

4,399

4,746 90

Other local authorities

1,824

2,271 1,513

NHS bodies

-

-

-

Public corporations and trading funds -

680

717

Other entities and individuals

2,805 388

1,044

Total

9,028

8,085

3,364

18. Cash and Cash Equivalents The balance of Cash and Cash Equivalents held on the Balance Sheet is made up of the following elements:

1st April 2009 31st March 2010 31st March 2011

£000 £000

£000 68 1 Cash Held/ Bank current accounts 689

-1,320 -1,114 Bank Overdraft - 3,950 4,150 Short-term deposits with building societies 2,556 2,698 3,037 Total Cash and Cash Equivalents 3,245

19. Assets Held for Sale The Council has not classified any Property, Plant and Equipment assets as Held for Sale in 2009/10 and 2010/11 (see accounting policy number 18).


20. Creditors

The analysis of short-term creditors held on the Balance Sheet is shown in the table below:

1st April 2009 31st March 2010

31st March 2011

£000 £000 £000 Central government bodies 187 -271 -860 Other local authorities 183 -442 -197 NHS bodies 0 0 0 Public corporations and trading funds 0 0 0 Other entities and individuals -2,550 -2,250 -3,731

Total -2,920 -2,963 -4,788

21. Provisions

The Council did not hold any provisions on the balance sheet during 2009/10. The Council has committed to making redundancies in 2011/12 as part of its overall saving initiatives. The actual costs of these redundancies cannot yet be determined as the individual posts have yet to be fully identified, but an estimate of the amounts likely to be paid has been made and provision made in the 2010/11 Statement of Accounts of £920,000 for this expenditure. The Council applied for capitalisation direction which would enable the Council to treat the statutory element of redundancy costs as Capital Expenditure. A formal approach was made to the CLG requesting that a directive be given to the Council by the Secretary of State authorising the statutory element of the redundancy costs to be capitalised. This was estimated at £708k based on the restructuring programme proposals. The Council received authorisation from the Secretary of State on the 22nd July 2011. The capitalisation directive will allow the Council to treat up to £708,150 of the statutory element of redundancy costs paid in 2011/12 as Capital Expenditure. Any expenditure which meets the terms of the capitalisation directive will be charged as capital expenditure in 2011/12 and the unused element of the provision of £920,000 will be written back to the General Fund. In addition the Council will be able to apply for a further capitalisation directive under ‘Exceptional Difficulties’ for non statutory redundancy and pension costs later in 2011/12. It is anticipated that although the Council meets the requirements to apply for capitalisation directives, at best, only proportion of the amounts applied for will be approved.


The table below illustrates the provision held on the balance sheet and associate movements in 2010/11:

Balance at 1st April

2010

New Provisions


2011

£000 £000 £000 Redundancy & Restructuring (Current Provision) 0 -920 -920

Total 0 -920 -920

22. Usable Reserves

Movement in the Council’s Usable Reserves are detailed in the Movement in Reserves Statement (see pages 46 and 47), and the disclosure notes 7 and 8 relating to Adjustments between Accounting Basis and Funding Basis Under Regulations and Transfer to/from Earmarked Reserves, respectively.

23. Unusable Reserves The Council holds a number of Unusable Reserves on the Balance Sheet. The table below shows a summary of the balances.

1st April 2009

31st March 2010

31st March 2011

£000

£000 £000 -2,804 Revaluation Reserve (note 23a) -12,331 -12,074

-55 Available for Sale Financial Instruments Reserve (note 23b) -143 -179

-83,852 Capital Adjustment Account (note 23 c) -77,633 -73,064 -38 Deferred Capital Receipts Reserve (note 23d) -30 -22

23,165 Pensions Reserve (note 23e) 39,556 23,137 50 Collection Fund Adjustment Account (note 23f) 76 -17

144 Accumulating Absences Account (note 23g) 153 160

-63,390 Total Unusable Reserves -50,352 -62,059

23a 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:

• revalued downwards or impaired and the gains are lost used in the provision of services and the gains are consumed through depreciation, or

• disposed of and the gains are realised.


The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

2009/10 2010/11 £000

£000

-2,805 Balance at 1st April -12,331 -10,520 Upward revaluation of assets -348

238 Downward revaluation of assets and impairment losses not charged to the Surplus/Deficit on the Provision of Services 135

-13,087 Surplus or deficit on revaluation of non-current assets not posted to the Surplus or Deficit on the Provision of Services -213

416 Difference between fair value depreciation and historical cost depreciation 381

340 Accumulated gains on assets sold or scrapped 89 756 470

-12,331 Balance at 31st March -12,074

23b Available for Sale Financial Instruments Reserve The Available for Sale Financial Instruments Reserve contains the gains made by the Council arising from increases in the value of its investments that have quoted market prices or otherwise do not have fixed or determinable payments. The balance is reduced when investments with accumulated gains are:

• revalued downwards or impaired and the gains are lost • disposed of and the gains are realised.

2009/10 2009/10

£000

£000

-55 Balance at 1st April -143

-88 Upward revaluation of investments not charged to the Surplus/Deficit on the Provision of Services -36

-

Accumulated gains on assets sold and maturing assets written out to the Comprehensive Income and Expenditure Statement as part of Other Investment Income

-

143 Balance at 31st March -179

23c 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 which 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 Property. The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 7 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve.

2009/10 2010/11 £000

£000

-83,851 Balance at 1st April -77,633

Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement:

1,873 • Charges for depreciation and impairment of non current assets 1,621 4,961 • Revaluation losses on Property, Plant and Equipment 726

8 • Amortisation of intangible assets 0 1,897 • Revenue expenditure funded from capital under statute 1,448

119 • Amounts of non current assets written off on disposal or sale as part of the gain/loss on disposal to the 'Surplus/Deficit on Provision of Services' in Comprehensive Income and Expenditure Statement

680

2,313 • Amounts of non current assets written off to the 'Other Comprehensive Income & Expenditure' in Comprehensive Income and Expenditure Statement 0

11,171

4,475

-756 Adjusting amounts written out of the Revaluation Reserve -381 10,415 Net written out amount of the cost of non current assets consumed in the year 4,094

Capital financing applied in the year: -3,037 • Use of the Capital Receipts Reserve to finance new capital expenditure -1,720

-1,196 • Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing

-769

-42 • Application of grants to capital financing from the Capital Grants Unapplied Account -23

149 • Capital financing adjustment to Capital Receipts Reserve 0

-137 • Statutory provision for the financing of capital investment charged against the General Fund balances -147

-205 • Capital expenditure charged against the General Fund 0 -4,468 -2,659

271 Movements in the market value of Investment Properties debited or credited to the Comprehensive Income and Expenditure Statement 3,134

0 Movements in assets held for sale debited or credited to the Comprehensive Income and Expenditure Statement 0

-77,633 Balance at 31st March -73,064


23d Deferred Capital Receipts The Council holds a balance of Long Term Debtors and a matching balance relating to Deferred Capital Receipts. These balances relate to Mortgages arising from the sale of Council houses which are not immediately payable, but are repayable over a longer period. When principal payments are received the Long Term Debtor is reduced and a matching amount is transferred from Deferred Capital Receipts to Capital Receipts Reserve.

2009/10 2010/11 £000

£000

-38 Balance at 1st April -30 0 New Advances 0 8 Transfer to Capital Receipts Reserve (principal repayments) 8

-30 Balance at 31st March -22

23e Pension Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

2009/10 2010/11 £000

£000

23,165 Balance at 1st April 39,556 15,438 Actuarial gains or losses on pensions assets and liabilities -10,372

2,633 Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement

-4,250

-1,680 Employer’s pensions contributions and direct payments to pensioners payable in the year -1,797

39,556 Balance at 31st March 23,137


23f Collection Fund Adjustment Account The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.

2009/10 2010/11 £000

£000

50 Balance at 1st April 76

26 Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

-93

76 Balance at 31st March -17

23g Accumulated Absences Account The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March. ] Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account.

2009/10 2010/11 £000

£000 144 Balance at 1st April 153

-144 Settlement or cancellation of accrual made at the end of the preceding year -153 153 Amounts accrued at the end of the current year 160

9 Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

7

153 Balance at 31st March 160

24. Cash Flow Statement – Operating Activities

The cash flows for operating activities include the following items:

2009/10 2010/11 £'000

£'000

-410 Interest Received -700 56 Interest paid 33

0 Dividends received -16


25. Cash Flow Statement – Investing Activities

2009/10 2010/11

£'000

£'000 2,108 Purchase of property, plant and equipment, investment property and intangible assets 1,022

61,817 Purchase of short-term and long-term investments 60,500 0 Other payments for investing activities 0

-474 Proceeds from the sale of property, plant and equipment, investment property and intangible assets -4,036

-66,160 Proceeds from short-term and long-term investments -54,500 -662 Other receipts from investing activities (including capital grants) -666

-3,371 Net cash flows from investing activities 2,320

26. Cash Flow Statement – Financing Activities

2009/10 2010/11 £'000 £'000

0 Cash receipts of short and long-term borrowing 0 0 Other receipts from financing activities -11,138

137 Cash payments for the reduction of the outstanding liabilities relating to finance leases 147

0 Repayments of short- and long-term borrowing 0 3,131 Other payments for financing activities 3,808 3,268 Net cash flows from financing activities -7,183

27. Amounts Reported for Resource Allocation Decisions

The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Best Value Accounting Code of Practice. However, decisions about resource allocation are taken by the Council’s Resources Committee on the basis of budget reports analysed across Services. These reports are prepared on a different basis from the accounting policies used in the financial statements. In particular:

• no charges are made in relation to capital expenditure (whereas depreciation, revaluation and impairment losses in excess of the balance on the Revaluation Reserve and amortisations are charged to services in the Comprehensive Income and Expenditure Statement)

• the cost of retirement benefits is based on cash flows (payment of employer’s pensions contributions) rather than current service cost of benefits accrued in the year

• expenditure on support services is budgeted for centrally and not charged to services.

The income and expenditure of the Council’s principal Services recorded in the budget outturn reports for the years 2009/10 and 2010/11 are as follows:


Service Income and Expenditure

Chief Executive Community Development Resources Total

2009/10 Comparative £000 £000 £000 £000 £000

Fees, charges & other service income 0 -2,070 -4,262 -9,871 -16,203

Government grants & contributions -23 -343 -1,241 -24,480 -26,087

Total Income -23 -2,413 -5,503 -34,351 -42,290 Employee expenses 684 2,264 5,134 3,083 11,165 Other service expenses 221 3,884 7,991 24,626 36,722 Support service recharges 574 678 3,434 1,360 6,046 Total Expenditure 1,479 6,826 16,559 29,069 53,933 Net Expenditure 1,456 4,413 11,056 -5,282 11,643

Service Income and Expenditure

Chief Executive Community Development Resources Total

2010/11 £000 £000 £000 £000 £000

Fees, charges & other service income 0 -2,323 -5,182 -10,125 -17,630

Government grants & contributions -52 -474 -97 -25,857 -26,480

Total Income -52 -2,797 -5,279 -35,982 -44,110 Employee expenses 709 2,193 4,999 2,920 10,821 Other service expenses 167 3,514 8,925 26,865 39,471 Support service recharges 401 1,014 3,393 1,449 6,257 Total Expenditure 1,277 6,721 17,317 31,234 56,549

Net Expenditure 1,225 3,924 12,038 -4,748 12,439


Reconciliation of Borough Council of Wellingborough Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement This reconciliation shows how the figures in the analysis of Service income and expenditure for 2009/10 and 2010/11 relate to the cost of services included in the Comprehensive Income and Expenditure Statement.

2009/10 Reconciliation of [Directorate] Income and Expenditure to Cost of Services in the Comprehensive Income and Expenditure Statement 2010/11

£000 £000 11,643 Net expenditure in the Service Analysis 12,439

0 Net expenditure of services and support services not included in the Analysis 0

512 Amounts in the Comprehensive Income and Expenditure Statement not reported to management in the Analysis -578

10,931 Amounts included in the Analysis not included in the Comprehensive Income and Expenditure Statement -109

23,086 Cost of Services in Comprehensive Income and Expenditure Statement 11,752

Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis of Service income and expenditure for 2009/10 and 2010/11 relate to a subjective analysis of the Surplus or Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.


Service

Analysis Services

and Support Services

not in Analysis

Amounts not reported to

management for decision

making

Amounts not

included in I&E

Allocation of

Recharges

Cost of Services

Corporate Amounts

Total

2009/10 comparative figures £000 £000 £000 £000 £000 £000 £000 £000

Fees, charges & other service income -15,134 11,819 -3,315 -5,672 -8,987

Interest and investment income -1,069 1,069 0 -1,069 -1,069

Income from council tax 0 -3,508 -3,508

Government grants and contributions -26,087 657 -25,430 -8,055 -33,485

Total Income -42,290 0 657 12,888 0 -28,745 -18,304 -47,049 Employee expenses 11,165 8 -2 11,171 -759 10,412 Other service expenses 36,679 138 -4,722 32,095 5,981 38,076 Support Service recharges 6,046 -6,046 0 0 Depreciation, amortisation and impairment

0 -291 8,856 8,565 8,565

Interest Payments 43 -43 0 43 43 Precepts & Levies 0 0 438 438 Gain or Loss on Disposal of Fixed Assets 0 0 119 119

Total expenditure 53,933 0 -145 -1,957 0 51,831 5,822 57,653

Surplus or deficit on the provision of services

11,643 0 512 10,931 0 23,086 -12,482 10,604


Service

Analysis Services

and Support Services

not in Analysis

Amounts not reported to

management for decision

making

Amounts not

included in I&E

Allocation of

Recharges

Cost of Services

Corporate Amounts

Total

2010/11 £000 £000 £000 £000 £000 £000 £000 £000 Fees, charges & other service income -16,941 6,877 -10,064 -9,467 -19,531

Interest and investment income -689 689 0 -689 -689

Income from council tax 0 0 -3,663 -3,663 Government grants and contributions -26,480 -228 -50 -26,758 -7,165 -33,923

Total Income -44,110 0 -228 7,516 -36,822 -20,984 -57,806 Employee expenses 10,821 2,039 -2 12,858 2 12,860 Other service expenses 36,783 -6,068 1,322 32,037 9,769 41,806 Support Service recharges 8,912 -8,912 0 0 0

Depreciation, amortisation and impairment

0 3,679 3,679 -665 3,014

Interest Payments 33 -33 0 33 33 Precepts & Levies 0 0 446 446 Gain or Loss on Disposal of Fixed Assets 0 0 311 311

Total expenditure 56,549 0 -350 -7,625 0 48,574 9,896 58,470

Surplus or deficit on the provision of services

12,439 0 -578 -109 0 11,752 -11,088 664

28. Trading Operations

The Council holds Investment Property for the purposes of rental income. The Authority’s Investment property portfolio consists of: Industrial Estates: This is a group of industrial retail units that the authority owns and lets out to a variety of users Town centre: This is a mixture of Retail units in and around the town centre including the shopping mall Market: Market stalls and other properties on market square Other: This consists of empty land and Garages owned by the Authority.

Details of trading position for Investment Property and the Market are shown in the table below:


Trading operations are incorporated into the Comprehensive Income and Expenditure Statement. The Market is an integral part of one of the Council’s services to the public. The expenditure of these operations is allocated or recharged to headings in the Net Operating Expenditure of Continuing Operations. Only the net surplus in relation to Investment Property is charged as Financing and Investment Income and Expenditure (see Note 10).

2009/10 2010/111

£000 £000

Net (surplus)/Deficit on Trading Operations -686 3,062

Services to the public included in Expenditure of Continuing Operations -76 -67

Net (surplus)/deficit credited to Financing and Investment Income and Expenditure

-762 2,995

29. Agency Services

The Council carries out cyclic highway maintenance on behalf of Northamptonshire County Council; this includes grass cutting, weed control and tree and hedge care.

2009/10 2010/11

£000 £000 Cyclic Maintenance Expenditure 125 122

Cyclic Maintenance Fee from Northants County Council -126 -111

Net Surplus -1 11

2009/10 2010/11

Income Expenditure (Surplus)/ Deficit Income Expenditure (Surplus)/

Deficit £000 £000 £000 £000 £000 £000 Investment Property -2,418 1,656 -762 -2,621 5,616 2,995 Market -94 170 76 -93 160 67

TOTAL -2,512 1,826 -686 -2,714 5,776 3,062


The Council acts as the host authority in providing a Consortium Internal Audit service with Kettering Borough Council.

2009/10 2010/11

£000 £000 Consortium Audit Expenditure 121 251 Consortium Audit Income -121 -251

Net Surplus 0 0

30. Members Allowances

The Council paid the following amounts to Members of the Council during 2009/10 and 2010/11.

2009/10 2010/11 Expenditure

£000 £000 Salaries 124 123 Mayor/Deputy Mayor Allowances 13 12

Special responsibility Allowances 54 53

Travelling Expenses 5 8

Total 196 196


31. Officers’ Remuneration

The remuneration paid to the Council’s senior employees is as follows:

Salary, Fees and

Allowances Expenses

Allowances

Employer Pension

Contribution Total Senior Officer Remuneration

£ £ £ £ 2010/11 31,111 378 8,369 39,858 Chief Executive (left Council

June 2010) 2009/10 116,869 1,366 29,451 147,686 2010/11 77,819 1,141 20,933 99,893 Chief Executive (started

with Council July 2010) 2009/10 -

-

-

-

2010/11 21,617 85 5,815 27,517 Deputy Chief Executive (left June 2010) 2009/10 85,599 558 21,571 107,728

2010/11 8,610 2,316 10,926 Head of Financial Services (started Feb 2011) 2009/10

-

-

-

- 2010/11 68,589 127 18,450 87,167 Corporate Director

(Resources) 2009/10 44,885 - 17,105 61,990

2010/11 61,878 14 16,645 78,537 Head of Policy, Property and Partnerships 2009/10 61,878 102 15,593 77,573

2010/11 56,772 498 15,271 72,541 Corporate Director (Development) 2009/10 56,202 188 14,163 70,553

2010/11 57,229 17 15,395 72,641 Corporate Director (Community) 2009/10 56,202 32 14,163 70,397

Total in 2010/11 383,626 2,260 103,195 489,081 Total in 2009/10 421,635 2,246 112,045 535,926

Note: 2009/10 comparative figures are only required for employees qualifying for the current year note (i.e. 2010/11), not for persons who left the Council in the prior year. 2009/10 The post holder of Chief Executive received £9,867.58 and £1,089.29 for salary and employer pension contribution respectively in relation to Returning Officer's duties. The post of Corporate Director (Resources) was vacant for 4 months. 2010/11 The post holder of Chief Executive (left Council June 2010) received £4,090.14 and £1,100.25 for salary and employer pension contribution respectively in relation to Returning Officer's duties. The holder of the Deputy Chief Executive post left in June to take up the position of Chief Executive


The Council’s employees receiving more than £50,000 remuneration (excluding the posts of senior officers in the previous table) for the year (excluding employer’s pension contributions) were paid the following amounts:

2009/10 2010/11 Remuneration Band Number of

employees Number of employees

£ £

50,000 - 54,999 55,000 - 59,999 _ 1 60,000 - 64,999 _ _

65,000 - 69,999 _ _

70,000 - 74,999 _ _

75,000 - 79,999 _ 1 80,000 - 84,999 1 _

85,000 - 89,999 _ _

90,000 - 94,999 1 _

The remuneration paid to the employees shown in 2009/10 in remuneration bands £80,000-£84,999 and £90,000-£94,999 and in 2010/11 in remuneration bands £55,000-£59,000 and £75,000- £79,999 include redundancy payments paid to those employees who left the Council as a result of restructuring.

32. External Audit Costs The Council has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by the Council’s external auditors:

2009/10 2010/11 £000 £000

Fees payable to the KPMG LLB with regard to external audit services carried out by the appointed auditor for the year 48 0

Fees payable to the Audit Commission with regard to external audit services carried out by the appointed auditor for the year 83 111

Fees payable to the Audit Commssion in respect of statutory inspections 14 0

Fees payable to Audit Commission KPMG LLP for the certification of grant claims and returns for the year 29 21

Total 174 132

33. Grant Income

The Council credited the following grants and contributions to the Comprehensive Income and Expenditure Statement in 2009/10 and 2010/11:


2009/10 2010/11 Credited to Taxation and Non Specific Grant Income £000 £000 High Street gaf grant -45 0 Swanpool - Single Regeneration Grant -122 0 Choice based lettings -28 0 Town Centre Site Assembly (Tresham) Grant -73 0 Area Based Grant -23 0 Planning Delivery Grant -891 0 Local Authority Business Grant -47 0 New Burdens Grant - Habitats/Climate Change 0 -51 Public Realm -154 -38 Section 106- Capital Grants -78 -130 Total -1,461 -219 Credited to Services Revenue Disabled Facilities Grant -208 -191 Decent Homes Grant 0 -292 Improvement Grant 0 -2 Heritage Lottery 0 -25 S106 -199 -548 Decent Homes -220 0 Housing Benefit Administration -677 -728 Housing Benefit - Rent Allowances -18,485 -19,571 Housing Benefit - Council Tax -4,740 -5,023 Housing Benefit - HRA Rent Rebates 15 7 Housing Benefit - Non HRA Rent Rebates -321 -256 Council Tax Administration -4 0 Concessionary Fares For The Elderly -185 -347 Homelessness Grant -125 -112 Housing Advice & Homelessness -1 0 Disabled Peoples Employment Allowance -5 -5 Housing Planning Delivery Grant -397 0 Swimming Grant -74 0 County Council Youth programme funding 0 -85 Lottery funding for Hemingwell Play area development 0 -80

Total -25,626 -27,258

The Council has received a number of grants and contributions that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the giver if the outstanding conditions are not met. The balances at the year-end are as follows:


1st April 2009 31st March 2010

31st March 2011

£000 £000 £000

Capital Grants Receipts in Advance

Disabled Facilities and Regional Housing Pot Grant -106 -65 -65

S106 - Developers' Contributions -602 -537 -889

Total -708 -602 -954

34. Related Parties

The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. Central Government Central government has effective control over the general operations of the Authority – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the subjective analysis in Note 27 on reporting for resources allocation decisions. Grant receipts outstanding at 31st March 2011 are shown in Note 33. Members Members of the Council have direct control over the council’s financial and operating policies. The total of members’ allowances paid in 2010/11 is shown in Note 30. During 2010/11, no works or services were commissioned from companies in which any members had an interest. The Community Committee paid grants totalling £261,085 to voluntary organisations including a total of £95,750 to five organisations in which two members had positions on the governing body. In all instances, the grants were made with proper consideration of declarations of interest. The relevant members did not take part in any discussion or decision relating to the grants.

A number of Councillors are board members of The Castle (Wellingborough) Limited. This organisation is responsible for the management of a Council owned theatre and arts complex for the community. The Council has assessed whether the Company is a regulated influenced company under the Local Authorities (Companies) Order 1995 and deemed that it is not, and as a result has concluded that there is no


requirement to consolidate The Castle’s Accounts with the Council’s. Whilst Members of the Council are board members, the Council is not an investor as The Castle is a Company Limited by Guarantee and has no share capital. The Council paid this organisation a management fee of £395,400 in 2010/11. Further details of the accounts for The Castle may be obtained from The Castle (Wellingborough) Limited, Castle Way, Wellingborough, NN8 1XA. The Council transferred its housing stock to Wellingborough Homes, a Registered Social Landlord in 2009. The Council has assessed whether the Company is a regulated influenced company under the Local Authorities (Companies) Order 1995 and deemed that it is not, and as a result have concluded that there is no requirement to consolidate Wellingborough Homes’ Accounts with the Council’s. Whilst Members of the Council are Board Members they act independently of the Council under Wellingborough Homes’ Rules therefore the Council does not have significant control despite holding one third of shares with voting right shares. Officers Chief Officers were asked at the end of the year to disclose whether they, or any member of their immediate family, had any significant financial dealings with the Authority during the year. Their replies were reviewed and no material transactions existed. Other Public Bodies / Entities Controlled or Significantly Influenced by the Council There were no other Public Bodies or Entities that were controlled or significantly influenced by the council during 2010/11.


35. Capital Expenditure and 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), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed in the second part of this note.

2009/10 2010/11

£000 £000

Opening Capital Financing Requirement -7,929 -8,066

Capital investment

Property, Plant and Equipment 2,350 791

Investment Properties 0 273

Revenue Expenditure Funded from Capital under Statute (REFCUS) 1,897 1,448

Sources of finance

Capital receipts -3,037 -1,720

Government grants and other contributions -1,005 -792

Sums set aside from revenue:

• Direct revenue contributions -205 0

• MRP -137 -147

Closing Capital Financing Requirement -8,066 -8,213 Explanation of movements in year

Assets acquired under finance leases -137 -147

Increase/(decrease) in Capital Financing Requirement -137 -147

36. Leases

Authority as Lessee Finance Leases The Council has acquired Booth Drive and Faraday Court business units under finance leases. The valuation of the assets acquired under the Faraday Court lease is nil (based on the lease interest). As a result no asset or long-term liability has been recorded on the Council’s balance sheet. The assets acquired under the Booth Drive leases are carried as Investment Property in the Balance Sheet at the following net amounts:


31st March 2010 31st March

2011

£000 £000 Investment Property 1,430 1,430 1,430 1,430

The Council is committed to making minimum payments under the Booth Drive lease comprising settlement of the long-term liability for the interest in the property acquired by the Council 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:

31st March 2010 31st March 2011

£000 £000 Finance lease liabilities (net present value of minimum lease payments):

• current -147 -158 • non current -475 -318

Finance costs payable in future years -66 -33 Minimum lease payments -688 -509

The minimum lease payments will be payable over the following periods:

Minimum Lease Payments Finance Lease Liabilities

31st March 2010 31st March 2011 31st March 2010 31st March 2011

£000 £000 £000 £000

Not later than one year 180

180 -147 -158

Later than one year and not later than five years

506

328 -473 -317

Later than five years 2

1 -2 -1

688

509

-622

-476

The minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. The lease payments made for the Faraday Court lease have been classified as contingent rent, because as indicated above there is no long-term liability for the interest in the property. In 2010/11 £303,193 contingent rents were payable by the Council (2009/10 £314,809). The Booth Drive lease does not have any contingent rent payments. The Council has sub-let the Booth Drive and Faraday Court business units held under these finance leases. At 31st March 2011 the minimum payments expected to


be received under non-cancellable sub-leases was £511,861 (£529,855 at 31st March 2011). Operating Leases The Council has acquired its use of street sweepers and refuse freighters by entering into operating leases, with typical lives of 5 years. The future minimum lease payments due under non-cancellable leases in future years are:

31st March 2010 31st March 2011 £000 £000 Not later than one year 350 350

Later than one year and not later than five years

1,458

1,108

1,808 1,458

The expenditure charged to the cultural, environmental, regulatory and planning services line in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:

2010/11 2009/10

£000 £000 Minimum lease payments 350 350 350 350

Authority as Lessor Finance Leases The Council does not hold any finance lease where it acts as lessor. Operating Leases

The Council leases out property (classified as Investment Property) under operating leases for the following purposes:

• To generate income (as opposed to supporting service delivery). The future minimum lease payments receivable under non-cancellable leases in future years are:


31st March 2010 31st March 2011 £000 £000 Not later than one year -2,455 -2,516

Later than one year and not later than five years -2,316 -1,874

Later than five years -71,868 -70,186 -76,639 -74,576

The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. Contingent rents are considered immaterial and have therefore been included in the amounts in the table above.

37. Impairment Losses

At the end of 31st March 2011 the Council has undertaken an assessment as to whether there is any indication that an asset may be impaired. No events have been identified and as such there are no impairments in 2010/11 (this was also the case in 2009/10.

38. Termination Benefits

The Council has recognised £2,528,000 termination costs in 2010/11 (£95,000 in 2009/10). £1,608,000 related to termination of contracts of a number of employees (approximately 52 employees) as approved by Resources Committee during 2010/11 and a short-term creditor has been recognised accordingly. A further £920k (approximately 38 employees) has been provided as provision for further anticipated termination costs payable in 2011/12 as a result of the management restructuring exercise. The Council applied for capitalisation direction which would enable the Council to treat the statutory element of redundancy costs as Capital Expenditure. A formal application was made to the CLG requesting that a directive be given to the Council by the Secretary of State authorising the statutory element of the redundancy costs to be capitalised. This was estimated at £708,150 based on the restructuring programme proposals. The Council received authorisation from the Secretary of State on the 22nd July 2011. The capitalisation directive will allow the Council to treat up to £708,150 of the statutory element of redundancy costs paid in 2011/12 as Capital Expenditure. Any expenditure which meets the terms of the capitalisation directive will be charged as capital expenditure in 2011/12.


In addition the Council will be able to apply for a further capitalisation directive under ‘Exceptional Difficulties’ for non statutory redundancy and pension costs later in 2011/12. It is anticipated that although the Council meets the requirements to apply for capitalisation directives, at best, only proportion of the amounts applied for will be approved.

39. Defined Benefit Pension Schemes

Participation in Pension Schemes As part of the terms and conditions of employment of its officers, the Council makes contributions towards the cost of post employment benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments that needs to be disclosed at the time that employees earn their future entitlement. The Council participates in two post employment schemes:

• The Local Government Pension Scheme, administered locally by Northamptonshire County Council – this is a funded defined benefit final salary scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pensions liabilities with investment assets.

• Arrangements for the award of discretionary post retirement benefits upon early retirement – this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet these pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due.

Transactions Relating to Post-employment Benefits The Council recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge the Council is required to make against council tax is based on the cash payable in the year, so the real cost of post employment/retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year:


Local Government

Pension Scheme

2009/10 2010/11 £000 £000

Comprehensive Income and Expenditure Statement

Cost of Services:

• current service costs 919 1,447

• past service costs/ (gains) 0 -6,905

Financing and Investment Income and Expenditure

• interest cost 3,565 4,024

• expected return on scheme assets -1,851 -2,816

Total Post Employment Benefit Charged to the Surplus or Deficit on the Provision of Services

2,633 -4,250

Other Post Employment Benefit Charged to the Comprehensive Income and Expenditure Statement

• actuarial gains and (losses) -15,537 10,372

Total Post Employment Benefit Charged to the Comprehensive Income and Expenditure Statement

-12,904 6,122

Movement in Reserves Statement

• reversal of net charges made to the Surplus or Deficit for the Provision of Services for post employment benefits in accordance with the Code

-2,633 4,250

Actual amount charged against the General Fund Balance for pensions in the year:

• employers’ contributions payable to scheme 1,680 1,796

• retirement benefits payable to pensioners 99 47

The cumulative amount of actuarial gains and losses recognised in the Comprehensive Income and Expenditure Statement to the 31st March 2011 is a loss of £15,604m.


Assets and Liabilities in Relation to Post-employment Benefits Reconciliation of present value of the scheme liabilities (defined benefit obligation):

Funded liabilities: Local Government Pension Scheme

£000 2009/10 2010/11 Opening balance at 1 April -52,169 -79,020 Current service cost -919 -1,447 Interest cost -3,565 -4,024 Contributions by scheme participants -439 -420 Actuarial gains and (losses) -24,298 11,348 Benefits paid 2,370 2,880 Past service (costs)/ gains 0 6,905

Closing balance at 31 March -79,020 -63,778

Reconciliation of fair value of the scheme (plan) assets:

Local Government Pension Scheme

£000 2009/10 2010/11

Opening balance at 1 April 29,004 39,464

Expected rate of return 1,851 2,816

Actuarial gains and (losses) 8,761 -976

Employer contributions 1,779 1,797

Contributions by scheme participants 439 420

Benefits paid -2,370 -2,880

Closing balance at 31 March 39,464 40,641

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. The actual return on scheme assets in the year was £2,675m (2009/10: £10,612m).


Scheme History

2006/07 2007/08 2008/09 2009/10 2010/11£000 £000 £000 £000 £000

Pre sent value of liabilities :Local Government Pension Scheme -58,121 -60,127 -51,465 -78,190 -63,076Discretionary Benef its * -974 -704 -830 -702Fair value of ass e ts in the Local Governm ent Pens ion Schem e

43,995 37,536 29,004 39,464 40,641

Surplus /(de ficit) in the schem e:Local Government Pension Scheme -14,126 -22,591 -22,461 -38,726 -22,435Discretionary Benef its * -974 -704 -830 -702Total -14,126 -23,565 -23,165 -39,556 -23,137 * Separate amount in respect of the Present Value of Liabilities for Discretionary Benefits is unavailable as at 31 March 2007 (therefore £58,121m is the total liability in respect of LGPS and Discretionary Benefits). The liabilities show the underlying commitments that the authority has in the long run to pay post employment (retirement) benefits. The total liability of £63,778m has a substantial impact on the net worth of the authority as recorded in the Balance Sheet, resulting in a negative overall balance of £23,137m. However, statutory arrangements for funding the deficit mean that the financial position of the Council remains healthy:

• the deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees (i.e. before payments fall due), as assessed by the scheme actuary

• finance is only required to be raised to cover discretionary benefits when the pensions are actually paid.

The total contributions expected to be made to the Local Government Pension Scheme by the Council in the year to 31 March 2012 is £1,693m. There is expected to be contributions of £47k for the Discretionary Benefits scheme in the year to 31 March 2012. The net liability as at 31st March 2011 (£23,137m) has substantially reduced from 31st March 2011 (£39,556m) principally as a result of:

• positive asset returns and falling long term inflation expectations • the pension increase change from RPI to CPI. CPI is used rather than RPI as

a result of the Emergency Budget announcement in June 2010. This change in the pension increase assumption is regarded as a change in benefit and has been treated as a past serve credit (this in line with the recommendation by CIPFA (LAAP bulletin 89 refers).


Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. Both the Local Government Pension Scheme and Discretionary Benefits liabilities have been assessed by Hymans Robertson LLP, an independent firm of actuaries, estimates for the County Council Fund being based on the latest full valuation of the scheme as at 31st March 2011. The principal assumptions used by the actuary have been:

Local Government

Pension Scheme 2009/10 2010/11 Long-term expected rate of return on assets in the scheme:

Equity investments 7.80% 7.50% Bonds 5.00% 4.90% Property 5.80% 5.50% Cash 4.80% 4.60% Mortality assumptions: Longevity at 65 for current pensioners:

Men 20.8 years

21.4 years

Women 24.1 years

23.3 years

Longevity at 65 for future pensioners:

Men 22.3 years

23.4 years

Women 25.7 years

25.5 years

Rate of inflation (CPI) 3.80% 2.80% Rate of increase in salaries 5.30% 5.10% Rate of increase in Pensions 3.80% 2.80% Expected Return on Assets 7.20% 6.80% Rate for discounting scheme liabilities 5.50% 5.50% Take-up of option to convert annual pension into retirement lump sum:

Pre April 2008 Service 50% 50% Post April 2008 Service 75% 75%

The Discretionary Benefits arrangements have no assets to cover its liabilities. The Local Government Pension Scheme’s assets consist of the following categories, by proportion of the total assets held:


31st March 2010 31st March 2011

% %

Equity investments 76 72 Bonds 16 20 Property 6 6 Cash 2 2 100 100

History of Gains and Losses

The actuarial gains/losses identified as movements on the Pensions net liability in 2006/07 - 2010/11 can be analysed into the following categories, measured as a percentage of assets or liabilities at 31March 2011 (and the respective financial years:

2006/07 2007/08 2008/09 2009/10 2010/11 % % % % %

Differences between expected and actual return on assets (expressed as a percentage of plan assets at balance sheet date)

-1.15 -23.52 -37.83 22.20 -2.40

Experience of gains and losses on liabilities (expressed as a percentage of plan liabilities at balance sheet date)

-4.70 0.82 -23.22 30.75 -17.79

40. Contingent Liabilities

At 31st March 2011, the Council had the following material contingent liabilities:

• It anticipated that as a result of the management restructure a significant reduction in staffing numbers will result. As a result there will be a lower number of active members in the Local Government Pension Scheme in relation to inactive members, thus giving the potential for higher employer pension contributions to fund the pension liability.

• The Council has a potential repairing obligations of £270,000 in respect of

Investment Property leases (Faraday Court) that expire in September 2012. There is a possibility that the Council may also incur an additional liability for a further sum if the tenants were unable to meet their repairing obligations under their leases. The Council is currently seeking legal advice on this issue. The Council has an entitlement to renew the lease for a further 30 years in


this instance any repairing obligations under the lease would be discharged through the normal maintenance programme.

41. Nature and Extent of Risks arising from Financial Instruments

The Council’s activities expose it to a variety of financial risks:

• credit risk – the possibility that other parties might fail to pay amounts due to the Council

• liquidity risk – the possibility that the Authority might not have funds available to meet its commitments to make payments

• market risk – the possibility that financial loss might arise for the Authority as a result of changes in such measures as interest rates and stock market movements.

The Council’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. Risk management is carried out by a central treasury team, under policies stated within the annual Treasury Management Strategy, approved by the Council in March 2010. This document provides 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. Credit Risk

Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the authority’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, as laid down by Fitch and Moody’s and Standard and Poor’s Ratings Services. The Annual Treasury Management Strategy also imposes a maximum sum to be invested with a financial institution located within each category. The credit criteria in respect of financial assets held by the Council are as detailed below:


Financial Asset Category Criteria Maximum Investment

£ Deposits with Banks As assessed by our treasury

management advisors: High rating Medium rating Subsidiaries

5m 3m 2m

Deposits with Building Societies

Only the top 30 Building Societies, assessed by their asset base are used, together with recognised ratings: High rating Medium rating Lower rating: With assets exceeding £1bn With assets between £500m and £1bn

5m 3m

2m

1m

The Council does not rely solely on the current credit ratings of counterparties but also uses the following as overlays:

• credit watches and credit outlooks from credit rating agencies

• Certificates of Deposit (CDS) spreads to give early warning of likely changes

in credit ratings

• sovereign ratings to select counterparties from only the most creditworthy countries

Customers for goods and services are assessed, taking into account their financial position, past experience and other factors. The Council’s maximum exposure to credit risk in relation to its investments in banks and building societies of £35,132,890 cannot be assessed generally as the risk of any institution failing to make interest payments or repay the principal sum will be specific to each individual institution. Recent experience has shown that it is rare for such entities to be unable to meet their commitments. A risk of irrecoverability applies to all of the Authority’s deposits, but there was no evidence at the 31st March 2011 that this was likely to crystallise.

The following analysis summarises the Council’s potential maximum exposure to credit risk on other financial assets, based on experience of default and uncollectability over the last three financial years, adjusted to reflect current market conditions:


Amount at 31st March 2011

Historical experience of

default

Historical experience adjusted for

market conditions at 31st March 2011

Estimated maximum exposure to default and uncollectability at 31st March 2011

Estimated maximum

exposure at 31st March 2010

£000 % % £000 £000A B C (A X C)

Customers 5145 2.78 2.98 153 128 The Council does not generally allow credit for customers, such that £857,886 of the £1,011,796 balance is past its due date for payment. The past due but not impaired amount can be analysed by age as follows:

31st March 2011 31st March 2010 `

£000 £000 Less than three months 599

168 Three to six months 34 Six months to one year 23 106 More than one year 49 705 274

Liquidity Risk The Council is a debt free authority, which means it has no borrowings to finance capital expenditure. 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 no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. The Council manages its liquidity position through risk management procedures such as the setting and approval of prudential indicators and the approval of the treasury and investment strategy reports. It also maintains detailed cash flow planning to manage its day to day liquidity. The Authority has an overdraft facility, has ready access to borrowings from the Money Markets to cover any day to day cash flow need, and the Public Works Loan Board (PWLB) also acts as a lender of last resort to councils.

All trade and other payables are due to be paid in less than one year.


Market Risk Interest Rate Risk The Council is exposed to risk in terms of its exposure to interest rate movements on its investments only, as it has no borrowings. Movements in interest rates have a complex impact on the authority. For instance, a rise in interest rates would have the following effects:

• investments at variable rates – the interest income credited to the Surplus or Deficit on the Provision of Services will rise

• investments at fixed rates – the fair value of the assets will fall.

Changes in interest receivable on variable rate investments will be posted to the Surplus or Deficit on the Provision of Services and affect the General Fund Balance. Movements in the fair value of fixed rate investments that have a quoted market price will be reflected in Other Comprehensive Income and Expenditure. Local Authorities should have due regard for the risks associated with the financial instruments that they hold. The procedures for risk management are set out through a legal framework 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. Active treasury management allows continual re-assessment of the impact that movements in interest rates have both in respect of feeding into the setting of the annual budget and also used to update the budget quarterly during the year. This allows any adverse changes to be accommodated. According to this assessment strategy, at 31st March 2011, if interest rates had been 1% higher with all other variables held constant, the financial effect would be:

£000 Increase in interest receivable on variable rate investments 60 Impact on Surplus or Deficit on the Provision of Services 60 Decrease in fair value of fixed rate investment assets 260 Impact on Other Comprehensive Income and Expenditure 260

Decrease in fair value of fixed rate borrowings liabilities (no impact on the Surplus or Deficit on the Provision of Services or Other Comprehensive Income and Expenditure)

0


The impact of a 1% fall in interest rates would be as above but with the movements being reversed.

Price Risk The Council does not generally invest in equity shares but does have shareholdings to the value of £334,375 in British Assets plc and holds 7.75% Treasury stock to the value of £4,207 at the 31st March 2011. Consequently, the Council is consequently exposed to losses or surpluses arising from movements in the prices of these stocks and shares. The total value of the stocks and shares at the 31st March 2011, amounting to £338,582, (£302,575 at 31st March 2010) are classified as ‘available for sale’, meaning that all movements in price will impact on gains and losses recognised in Other Comprehensive Income and Expenditure. This represented an overall gain of 11.90%. However, a shift of 5% in the general price of shares (positive or negative) would thus have resulted in a £15,129 gain or loss being recognised in the Other Comprehensive Income and Expenditure for 2010/11. Foreign Exchange Risk The Council has no financial assets or liabilities denominated in foreign currencies and thus has no exposure to loss arising from movements in exchange rates.

42. Prior Period Adjustment A prior period adjustment has been made in 2008/9 for the financial year ending 2009/10 to reflect corrections to the Council’s Fixed Asset Register.

Opening 1st April 2009 Balance Sheet IFRS IFRS

2009/10 Statements

Adjustments made

2009/10 Statements

£000 £000 £000

Property, Plant and Equipment 41,066 -2,156 38,909 Investment Property 41,212 -1,409 39,802 Intangible Assets 470 -454 16 Unusable Reserves - Capital Adjustment Account -86,857 3,005 -83,852 Unusable Reserves-Revaluation Reserve -3,818 1,014 -2,804 Unusable Reserves-Capital Receipts Reserve -15,221 -147 -15,368 Usable Reserves- General Fund -7,661 147 -7,514


31st March 2010 Balance Sheet IFRS IFRS

2009/10 Statements

Adjustments made

2009/10 Statements

£000 £000 £000

Property, Plant and Equipment 44,460 -2,040 42,420 Investment Property 40,873 -1,409 39,464 Intangible Assets 292 -280 12 Unusable Reserves - Capital Adjustment Account -80,496 2,863 -77,633 Unusable Reserves-Revaluation Reserve -13,345 1,014 -12,331 Usable Reserves-Capital Receipts Reserve -13,319 -296 -13,615 Usable Reserves- General Fund -5,706 149 -5,557

2009/10 Comprehensive Income and Expenditure Statement IFRS IFRS

2009/10 Statements

Adjustments Made

2009/10 Statements

£000 £000 £000 Central Services to the Public-gross expenditure 6,491 -44 6,447 Cultural, Related Services - gross expenditure 15,268 -156 15,112 Highways and Transport Services - gross expenditure 4,576 -44 4,532 Housing - gross expenditure -22,797 -48 -22,749


G1 THE COLLECTION FUND Income and Expenditure Account

The Collection Fund account reflects the statutory requirement for billing Authorities to establish and maintain a separate fund for the collection and distribution of amounts due in respect of Council Tax and National Non-Domestic Rates (NNDR).

2009/10 2010/11

Note Ref. £000 £000

INCOME

27,837 Council Tax (net of benefits, discounts and transitional relief) 29,099 4

Transfers from General Fund:

4,697 - Council Tax benefits 4,983

29,099 Income collectable from business ratepayers 27,574 1

108 Prior year Collection Fund deficit 597 61,741 62,253

EXPENDITURE Precepts and demands:

24,337 - Northamptonshire County Council 25,189 3 4,573 - Northamptonshire Police Authority 4,733 3 3,534 - Wellingborough Borough Council 3,592 3

Business Rate:

28,979 - Payments to National Pool 27,459 1 120 - Cost of Collection 115 1

85 Write offs – Council Tax 181

358 Movement in Provision for Bad/Doubtful debts – Council Tax 141

Contributions: 0 - From previous years Collection Fund surplus 0 5 61,986 61,410 245 (-Surplus)/Deficit in the year -843 454 Fund Balance b/f - note Deficit 699

699 Fund Balance c/f - note Deficit -144 6


G2 NOTES TO THE COLLECTION FUND

1. National Non Domestic Rates (NNDR)

The Council collects non-domestic rates for its area which are based on local rateable values multiplied by a uniform rate in the pound. The total amount, less certain reliefs and other deductions, is paid to a central pool (the NNDR pool) managed by Central Government, which in turn pays back to Councils a standard amount per head of the local adult population.

The total non-domestic rateable value as at 31st March 2011 was £72,193,551 and the equivalent figure for 31st March 2011 was £72,708,656.

The National Domestic Rate multiplier for 2010/11 was 41.4p with the equivalent figure for 2009/10 of 48.5p. In addition, a small business rate multiplier was introduced in 2006/07. The rate for 2010/11 was 40.7p, the equivalent figure for 2009/10 was 48.1p and for 2008/09 45.8p.

2. Council Tax

The Council's tax base i.e. the number of chargeable dwellings in each valuation band (adjusted for dwellings where discounts apply) converted to an equivalent number of band D dwellings for 2010/11 and 2009/10 is calculated as follows:

2009/10 2010/11

Band D

Equivalents Band

Estimated number of taxable properties after effect of discounts Ratio

Band D Equivalents

11 A(-) 20 5/9 11 5,825 A 8,744 6/9 5,829 6,449 B 8,295 7/9 6,452 5,215 C 5,891 8/9 5,236 3,332 D 3,354 9/9 3,354 2,382 E 1,957 11/9 2,392 1,047 F 714 13/9 1,031 638 G 390 15/9 650 50 H 25 18/9 50

24,949 25,005

(449) Non-Collection Provision (2010/11 2.0%) (500)

24,500 Council Tax Base 24,505


3. Precepts and Demands

Northamptonshire County Council and Northamptonshire Police Authority issue precepts to the Council that must be collected as part of the overall Council Tax. The Council itself also "demands" an amount to be collected. The amounts paid in 2009/10 and 2010/11 were as follows:

2009/10 2010/11 £000 Precepts and Demands £000

3,534 Borough Council of Wellingborough 3,592

24,337 Northamptonshire County Council 25,189

4,573 Northamptonshire Police Authority 4,733

32,444 Total Precepts and Demands 33,514

4. Council Tax Income 2009/10 2010/11 £000 Council Tax Income £000 31,952 Collectable Debit 33,207 Less: (2,925) Tax Discounts (3,021) (1,155) Tax Exemptions (1,053) (35) Tax Disabled Relief (34) 27,837 Total Income 29,099

5. Collection Fund Surpluses

The precepts detailed at note 3 are shown net of the previous year’s deficit/surplus. The Council estimates the year end Collection Fund balance in January each year. The estimated balance is distributed in the following financial year between Northamptonshire County Council, Northamptonshire Police Authority and the Borough Council of Wellingborough in proportion to the value of the respective precepts and demands made by the three authorities on the Collection Fund. The estimated deficit were distributed as follows:


2009/10 2010/11 £000 Collection Fund deficit £000

Payment of deficit: 81 Northamptonshire County Council 446 15 Northamptonshire Police Authority 87 12 Borough Council of Wellingborough 63 108 Total Deficit 597

6. Collection Fund Balance

As a result of the 2009 SORP it is a requirement for the billing authority to show only the Collection Fund balance which is attributable to the billing authority in the balance sheet and for the amounts to be distributed or charged back to both Northamptonshire County Council and Northamptonshire Police Authority as creditors where there is a surplus or debtors where there is a deficit. Previously there was no requirement to disaggregate the Collection Fund Balance.

The deficit at 31st March 2011 was estimated at £364,000 and was notified to the major preceptors by 15 January 2010, which is an annual requirement and is charged in the following financial year (2010/11), based on the precepts levied in 2009/10.

The surplus for the 2010/11 financial year has been allocated based on the level of precepts levied for 2011/12. However, this value will be dependent on the transactions that occur during 2011/12.

Collection Fund Balance 2009/10 2010/11 Total

£000 £000 £000 Deficit Balances: Northamptonshire County Council 524 -632 -108 Northamptonshire Police Authority 98 -118 -20

Wellingborough Borough Council

77 -93 -16 Total Deficit /(Surplus) 699 -843 -144


H GLOSSARY OF TERMS Accounting Period This is the period of time covered by the accounts. For The Borough Council of Wellingborough

this is a period of twelve months commencing on 1st April. The end of the accounting period is the balance sheet date that being 31st March.

Accrual This is the concept that Income or expenditure relating to goods or services during the accounting

period as they are received / provided, not as money is paid in or out. So if we received goods such as stationery on 28th March, but do not pay for them until 7th April we accrue for that cost at the 31st March so we record expenditure and identify a payment as being due for the same amount (i.e. a creditor).

Actuarial Valuation The Council’s pension fund is administered by the County Council. They employ an actuary to

undertake a valuation of the fund for each employer, by comparing the value of the pension scheme’s assets with its liabilities. The actuary then calculates how much needs to be paid into the scheme by the employer and members to ensure there will be adequate funds to pay the pensions when they become due. This valuation is carried out every three years, the next being due in 2010.

Actuarial Gains and Losses Wellingborough’s pension fund experiences annual changes in what the actuary calculates its

assets and liabilities are, and as such what deficit or surplus arises. This tends to be because events have not coincided with the actuarial assumptions made at the last valuation, such as the number of staff employed by the Authority or the life expectancy of former employees; or the actuarial assumptions have changed such as the likely interest to be earned from invested funds.

Agency Arrangements Services performed by, or for another Authority or public body, where the agent is reimbursed for

the cost of the work done. Asset An asset is something the Council owns. The Asset may be a physical one, such as a building or

an intangible one, such as a software licence. Assets are also classed as either current or fixed:

o o A current asset is one that will be used or cease to have a material value by the end of the next financial year.

o o A fixed asset provides a benefit to the Council for a period greater than one year.


Balance Sheet A statement summarising the Council’s financial position at the end of the accounting period. The statement shows the Council’s assets and liabilities. Billing Council Wellingborough Borough Council is classed as a billing Council as it has the responsibility of collecting the Council tax and non-domestic rates. It collects the Council tax on behalf of the County Council and Police Authority and the non-domestic rates on behalf of central government. Budget A statement defining in financial terms the Authority’s plans to spend over a specified period, normally the accounting period. The budget is prepared as part of the process of setting the Council Tax. Capital Expenditure and Financing Expenditure on the acquisition, or enhancement of a fixed asset, which adds to and not merely maintains the value of existing assets. This is not the same as revenue expenditure that is normally spent on assets consumed in the financial year. Capital spend is funded from various sources of money, including revenue, capital receipts, capital grants, and reserves Capital Financing Costs Each service is charged with an annual capital charge to reflect the cost of using Non Current Assets (e.g. buildings or vehicles) in pursuit of providing services. Capital Receipts This is money received from the sale of a capital fixed asset, such as land, buildings and vehicles. The Council can use the proceeds from the disposal of Non Current Assets to finance new capital investments, but the proceeds cannot be used to finance revenue expenditure. In certain cases the Government has set out rules that govern when a receipt can or cannot be used and these are referred to as usable and non-usable receipts (set aside receipts). Capital Adjustment Account This account contains the amount that was required to be set aside from the capital receipts and the amount of capital expenditure financed from revenue and capital receipts. It also contains the difference between amounts provided for depreciation and the statutory minimum amount that must be set aside from revenue for the repayment of external debt. Capital Grants Unapplied These are capital grants that the Council has received, that have not yet been used to finance capital expenditure. Capital Programme


The planned capital schemes the Council intends to carry out over a specified period of time. Chartered Institute of Public Finance and Accountancy (CIPFA) Professional accountancy body specialising in the public sector. Collection Fund A separate statutory fund to detail the transactions in relation to income and expenditure relating to Council Tax, National Non-Domestic Rates (NNDR or Business Rates as they are often referred to) and the residual Community Charge. Commutation Amount of money that must be set aside at 31st March at the current interest rates to provide for sums such as the pension funds on a future date. The lower the interest rates higher the amount required, and vice versa. Contingent Liabilities / Assets A contingent liability / asset is either:

o 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

o a present obligation arising from past events where it is not probable that a transfer of economic benefits will be required or the amount cannot be measured with sufficient reliability.

Council Tax This is the banded property tax levied on domestic properties in the Borough. The banding is based on estimated property values. Corporate / Democratic Core The corporate and democratic core comprises all activities which local authorities engage in specifically because they are elected, multi purpose authorities. These are concerned with the costs of corporate policy making and member based activities. Other costs relate to the general running of the Authority including corporate management, public accountability and treasury management. The cost of these activities are thus over and above those which would be incurred by a series of independent, single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services. Creditor Amounts owed by the Council for goods or services they have received for which payment has not been made. Current Service Cost (Pensions) The increase in the present value of the pension schemes liabilities.


Code The Code is a code of practice that has been developed by the CIPFA/LASAAC Joint Committee in accordance with the IFRS, as adapted and interpreted for local authorities. (This Code has been replaced the SORP). Debtor Amounts owed to the Council for goods or services the Council has provided for before 31st March but for which payment has not been received by 31st March. Deferred Liabilities These are liabilities that are payable beyond the next year; they are primarily for mortgage payments. Depreciation This is a charge made to the service revenue accounts each year to reflect the reduction in the value of the asset used in the delivery of services. Fair Value This is the amount that an asset could be bought or sold for between parties; the current market value of an asset can be evidence that the asset has been valued fairly. Financial Instruments This is any contract that gives rise to a financial asset of one entity and a financial liability or equity of another. The term covers both financial assets (e.g. loans receivable) and financial liabilities (e.g. borrowings). Finance Lease A lease which transfers substantially all of the risks and rewards of ownership of a fixed asset to the lessee. International Financial Reporting Standards (IFRS) The accounting standards issued by the International Accounting Standards Board setting out the approved accounting treatment. Government Grants Grants made by the government towards either revenue or capital expenditure to support the cost of the provision of services. These grants may be specifically towards the cost of particular schemes or to support the revenue spend of the Council. Gross Book Value The historical cost or the revalued amount of the asset before depreciation.


Historical Cost Adjustment This is the difference between Historical Cost Depreciation and the actual depreciation charged calculated on revalued assets. Impairment Where the value (based on the asset’s recoverable amount) of the fixed asset reduces below its carrying amount on the balance sheet. Liability A liability is where the Council owes payment to an individual or an organisation. Minimum Revenue Provision (MRP) The minimum amount which must be charged to a Council’s revenue account each year to provide for future debt repayments. As Wellingborough is debt free the MRP is zero. Net Book Value This is the value of an asset that is counted in the balance sheet. It represents its historical or re-valued cost less the accumulated depreciation of the asset. Net Realisable Value The market value of the asset in its existing use (or open-market value in the case of a non-operational asset), less any expenses incurred in realising the asset. Net Worth The total value of an organisation expressed as total assets less total liabilities. Non-Domestic Rate (NNDR) A levy on businesses, based on a national rate in the pound set by the government multiplied by the rateable value of the premises they occupy. NNDR is collected by billing authorities on behalf of central government and paid to central government who then redistribute among all local authorities and police authorities on the basis of population. Non Operational Asset Non Current Assets held by the Council but are not directly occupied used or consumed in the delivery of services. Operating Lease A lease where the ownership of the asset remains with the lessor. Operational Asset Non Current Assets held and occupied, used or consumed by the Council in the direct delivery of services.


Precept The levy made by precepting authorities on billing authorities, requiring the latter to collect income from taxpayers on their behalf. Provision Provisions are for liabilities or losses which are likely or certain to be incurred, but the amounts or the dates on which they will arise are uncertain. Rateable Value (RV) The annual assumed rental value of a property that is used for business purposes. Realised Valuations Any revaluations in the Revaluation Reserve relating to individual assets when they are disposed of are transferred to the Capital Adjustment Account this transfer is referred to as Realised Valuation. This ensures the Revaluation Reserves balance represents revaluations on assets that the Council still holds. Revenue Funded from Capital Under Statute (REFCUS) Capital expenditure for which no capital asset is created, but which may properly be financed over a period of years. They include private sector renewal grants and advances to other parties to finance capital investment. Related Parties The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Reserves Funds set aside for expenditure in future years. Certain reserves (earmarked) have constraints on how they can be spent. Revaluation Reserve This reserve records unrealised revaluation gains / losses from holding Non Current Assets. Revenue Expenditure Expenditure on the day-to-day costs of providing services. Revenue Support Grant (RSG) Grant from Central Government towards the cost of service provision. Society of Local Authority Chief Executives (SOLACE)


The membership body for Local Authority Chief Executives. SORP (Statement of Recommended Practice) The SORP is a code of practice that has been developed by the CIPFA/LASAAC Joint Committee in accordance with the Accounting Standards Board (ASB) code of practice for the development of Statements of Recommended Practice in accounting (SORPs). (This has been replaced by the Code of Practice on Local Authority Accounting in the UK based on IFRS) Stocks Items bought for consumption or resale, or raw materials, currently being held. Transfer Payments Relates to payments for which no goods or services are received by the Council e.g. Rent Allowances. Stocks Items bought for consumption or resale, or raw materials, currently being held. Transfer Payments Relates to payments for which no goods or services are received by the Council e.g. Rent Allowances.


I YOUR FEEDBACK

2010/11 Statement of Accounts – Feedback Questionnaire At The Borough Council of Wellingborough we value the input and views of our local residents, businesses and partners. Having read our 2010/11 Statement of Accounts we would be extremely grateful if you could spare a few moments to complete and return your feedback questionnaire. Your views are valuable in assisting us to improve the content, language and format used in the production of the 2011/12 Accounts.

Please tick the appropriate box and place any comments on the dotted lines provided below.

1.

Did you find the information contained within the Statement of Accounts easy to understand?

Yes No If no, please state why

2.

Was there a sufficient level of detailed information to allow you the user to assess the financial performance of the Borough Council of Wellingborough?


3.

Did you find the financial information contained was presented in a clear and easy to understand format?



4. Did you find the notes to the Accounts added value to the financial statements?


5.

Overall, has the Statement of Accounts been of value in helping you to assess the Borough Council of Wellingborough’s financial position and performance?


6.

Do you think there is anything that should be added to the Statement of Accounts to provide you as user with a more complete view of the financial position and performance of the Borough Council of Wellingborough?

Yes No If yes, please state why

7.

Please state below any further comments or suggested improvements you may have regarding the Statement of Accounts.

8. Which of the following best describes you? An employee or elected member of the authority

A member of the public

A member of another organisation / interested party


Thank you for taking the time to complete this

questionnaire

Please return your completed feedback questionnaire to: Ray Bowmer, Head of Finance, Borough Council of Wellingborough,

Tithe Barn, Tithe Barn Road, Wellingborough NN8 1BP

If you require any further information please do not hesitate to contact us on 01933 231679

Documents

Audited&Signed Statement of Accounts - Wellingborough · Borough Council of Wellingborough Statement of Accounts at 31st March 2011 - 5 - This version of the Statement of Accounts