NORTH EAST LINCOLNSHIRE COUNCIL STATEMENT OF ACCOUNTS 2012/13

Transcription

1 NORTH EAST LINCOLNSHIRE COUNCIL STATEMENT OF ACCOUNTS 2012/13 30 AUGUST 2013

2 CONTENTS Explanatory Foreword An introduction to the financial statements and a guide to the most significant matters reported in the accounts. Auditor s Report The independent auditor s report and opinion on the financial statements and the Council s arrangements for securing economy, efficiency and effectiveness in its use of resources. Page 2 10 STATEMENT OF ACCOUNTS Statement of Responsibilities Sets out the respective responsibilities of the Council and the Chief Finance Officer in respect of the Statement of Accounts. 13 Core Accounting Statements: - Comprehensive Income and Expenditure Statement - Movement in Reserves Statement - Balance Sheet 14 - Cash Flow Statement - Notes to the Accounts Supplementary Accounting Statements: 67 - Collection Fund Annual Governance Statement (required to accompany the annual accounts) This statement reports on the outcome of the review of the systems that the Council has in place to ensure that its business is conducted in accordance with the law and proper standards and that public money is safeguarded. 67 Glossary 70 1

3 EXPLANATORY FOREWORD Introduction The Statement of Accounts summarises the Council s transactions for the 2012/13 financial year and its financial position as at the 31 March It has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 (the Code), which is based on International Financial Reporting Standards (IFRS). The Statement of Accounts comprises: A Statement of Responsibilities for the Statement of Accounts The Core Accounting Statements Notes to the Accounts Supplementary Accounting Statements The publication also includes the Annual Governance Statement which is not part of the Statement of Accounts, but is required to be included alongside it. The objective of each of the accounting statements is: Comprehensive Income and Expenditure Statement a summary of the resources generated and used by the Council in the year. Movement in Reserves Statement shows the movement in the year on the different reserves held by the Council, analysed into usable reserves (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. Balance Sheet sets out the financial position of the Council as at 31 March It summarises Long-term assets held (e.g. property, plant and equipment), current assets employed and current and long-term liabilities along with the balances and reserves available to the Council. The Cash Flow Statement this statement summarises the inflow and outflow of cash arising from transactions with third parties. The Collection Fund shows the level of non-domestic rates and council tax that has been received by the Council during the period and the distribution of these funds. The following paragraphs provide an overview of the Council's financial performance during 2012/13 and position at 31 March Revenue Spending in 2012/13 Revenue spending is generally on day to day spending such as salaries, utility bills and other operational expenditure and this is financed from government grants, council tax, nationally redistributed business rates and other income (largely fees and charges to service users). The table below shows a comparison between the final spend and the approved budget: 2012/13 Budget Actual Over/ (Under) Spend People and Communities 84,470 85,505 1,035 Environment, Economy and Housing 53,589 53,267 (322) Resources 9,204 9, Chief Executives 2,173 2,117 (56) Governance and Transformation (37) Other Budgets (5,446) (7,665) (2,219) Total General Fund Reserve 143, ,145 (808) Individual Schools Budget Transfer to Reserve 0 (386) (386) 2

4 Overall, the Council s outturn position showed an underspend of 0.808m ( 1.099m in 2011/12). This position shows that the Council continues to maintain a firm grasp over its finances, despite the economic conditions and the significant savings required to be delivered in year. Positive and timely management actions ensured in-year budget pressures were addressed and spending was contained within the approved budget. Some of the areas that impacted on the financial position of the Council are outlined: The Council experienced unprecedented increases in referrals to children s social care during 2012/13. A number of measures were agreed to tackle social worker case loads and the retention and recruitment of staff. However, there were a number of related demand led pressures that contributed to an overall overspend of 1.035m within the People and Communities Directorate. For example, there was an increase in the number of children in care from 150 to 190 which resulted in an overspend of 0.400m and an increased cost of 0.500m for children in out-of-borough placements. Elsewhere, Other Budgets showed a favourable movement of 2.219m, largely attributable to treasury management activity reducing debt financing costs and generating higher than forecast return on investments. In addition, one-off income and the avoidance of calls on contingencies contributed to the underspend. Recurrent efficiency savings of 8.3m were delivered in-year bringing the combined total savings in 2011/12 and 2012/13 to 22.1m. Whilst not all the originally planned efficiency savings were delivered, alternative savings were identified to ensure spending was contained within approved budgets. The on-going impact of the budget pressures were taken into account in framing and updating the medium term financial forecast. The impact on the General Fund and School balances is shown in the Movement in Reserves Statement and is summarised in the table below As at Movement As at 1 April in 31 March 2012 year 2013 General Fund Reserve (8,993) (808) (9,801) Individual Schools Budget Reserve (4,746) (386) (5,132) Overall General Fund Balance (13,739) (1,194) (14,933) Comprehensive Income and Expenditure Statement For the purposes of the accounts, the spend has to be reported in the Comprehensive Income and Expenditure Statement in a statutory format, as specified by the CIPFA Service Reporting Code of Practice. This means that some figures are included that are not chargeable to council tax payers and these are subsequently removed from the accounts through the Movement in Reserves Statement to get to the true position for the taxpayer. The following table shows how we get from the (Surplus)/Deficit in Provision of Services in the Comprehensive Income and Expenditure Statement to the movements in General Fund Balance that impacts on the taxpayer and that is reported in the Movement in Reserves Statement: Amount Total Comprehensive Income and Expenditure Statement Deficit for the Year 54,931 Technical Accounting Adjustments not charged to taxpayer (see note 10 of accounts) - - charges made for the depreciation and losses on revaluations of assets (33,336) - capital spend and financing that has to be shown through CI&ES 15,851 - gains and (losses) on the disposals of assets (includes academy school transfers) (37,130) - pension accounting entries not charged to the taxpayer 3,094 - other 616 Total Technical Accounting Adjustments (50,905) Transfers to and from Earmarked Reserves (see note 32 of accounts) (5,220) Movement in Overall General Fund Balance in Movement in Reserves Statement (1,194) 3

5 Gross revenue spending on services in the year as reported in the Comprehensive Income and Expenditure Statement was 340.8m, as detailed below - Education & Children's Services (including schools) m Housing (mainly benefits) m Where the money ( 340.8m) was spent: Environment & Regulatory Services m 14% 5% 7% 36% Planning Services m Cultural and Related Services m Adult Social Care m 4% 4% 7% 23% Highways & Transport m Central and Other Services m The following table shows how this was financed - Where the money ( 340.8m) came from: Council Tax m Rent Allowances Grant m 30% 18% Non Domestic Rates Grant m 17% Dedicated Schools Grant m Other Grants and Income m 15% 20% Capital Spending in 2012/13 Capital spend in 2012/13 was 18.7m compared to an original approved programme of 25.8m, indicating delivery of 72% of the original programme by value. Whilst this shows better delivery performance from previous years, there remains scope for further improvement. The strengthened role of the Capital and Asset Management Board (CAMB) should drive further improvement in delivery in 2013/14. It should also be recognised that a fundamental review of the Capital Programme to 2017/18 was undertaken in the year which had specific regard to deliverability and affordability of investment plans. This resulted in the reprofiling of 8.2m and the de-committing of schemes totalling 0.6m. 4

6 To mitigate the impact of slippage a number of new schemes and additions to the Capital Programme were approved in year. These totalled 13.9m and brought the revised programme to 30.9m. The outturn indicates an underspend on completed schemes of 0.5m which will reduce the overall borrowing requirement for capital investment. CAMB s role includes an examination of the final position, seeking justification for the slippage and challenging the continuing need for that resource. The outcome of this exercise is reported to Cabinet. However, the inherent complexities in delivering significant capital projects will inevitably mean delivery plans are based on indicative timescales. Resolution of issues outside the Council s control for example decisions driven by external partners (grant approvals and conditions), planning and land negotiations, procurement and legal issues, unexpected difficulties such as asbestos and contamination all contribute to the reported performance. Through the CAMB we are looking to actively manage the overall capital programme by value to ensure proper monitoring and project management arrangements are in place, that there is realism in profiling, that slippage is challenged and that consideration is given to bringing forward schemes where practicable to offset any slippage. The following tables indicate where the money was spent and how it was financed: Capital Spending ( 18.7m): People and Communities ( 7.4m) Environment, Economy and Housing ( 9.7m) 6% 2% 40% Resources ( 1.1m) Governance and Transformation ( 0.5m) 52% Financing Capital Spend ( 18.7m): Grants & Contributions ( 11.8m) 13% 24% Capital Receipts ( 2.5m) Revenue Contributions ( 4.4m) 63% Review of the Council s Financial Position and Significant Points in Respect of the Balance Sheet Reserves The Council s Medium Term Financial Forecast assumes a General Fund Reserve of 9.0m, compared to an end year balance of 9.8m, over the planning period. This is 2.0m above the recommended minimum level of 7.0m. 5

7 During 2012/13, there was a net reduction of 5.2m in earmarked reserves. Reserves were applied to meet oneoff spending, for example specific projects such as the Change Programme, to fund capital investment and to fund the Transformation Programme (redundancy and pension costs). Despite this utilisation the balance on reserves at 31 March 2013 was 44.0m, 4.6m higher than forecast. This was largely due to effective budgetary control meaning the budgeted drawdown from reserves was not required, the need to recognise grants received in year but not planned to be spent until future periods and the carry forward of partnership funds. The School Financing and Framework Act 1998 requires the Council to ring fence school balances in their entirety. There was a net contribution to school balances of 0.4m during the year despite a number of schools transferring to academy status. Schools with deficit balances at the end of the financial year are required to agree an action plan to bring their school budget into balance. Overall Balance Sheet The Balance Sheet shows the balances held by the Council at the end of the year. The top part of the Balance Sheet shows the value of the Council s assets, how much is owed to the Council and how much the Council owes to others. The bottom half summarises the financing of those assets between usable and unusable (technical accounting) reserves. The Balance Sheet shows a net worth (assets exceed liabilities) for the Council of 10.5m as at 31 March 2013, compared to 103.7m as at 31 March The reduction of 93.1m can largely be attributed to reductions in the value of fixed assets of 64.4m and an increase in the pension liability of 29.3m and these are further explained below. Fixed Assets (Investment Properties, Property, Plant and Equipment and Assets Held for Sale) The value of assets held by the Council is affected by the level of capital spend through asset purchases and new building and enhancement works and also through the sale or disposal of assets. In addition, regular valuations are undertaken to ensure the value of assets is up to date and takes into account any depreciation, reduction and upward revaluation of assets held. Capital spending increased asset values by 13.5m. However, this was offset by depreciation ( 16.6m), and an overall fall from revaluation and impairment ( 22.6m) and disposals ( 38.7m) to give an overall fall in the value of assets of 64.3m. It should be noted that disposals of 37.6m were as a result of schools converting to academies and the finalising of long-term leases during the year, which requires that they are removed from the Council s asset portfolio as ownership transfers to the respective academy. Separate disclosure notes are provided that outline the impact on each classification of assets. There are a number of schools that are expected to transfer to academy schools in 2013/14 and which are expected to also be treated as disposals from the Council s balance sheet with nil proceeds. A separate disclosure is provided under Events After the Balance Sheet Date that details the likely impact. Pension Liability / Pension Reserve (unusable) The Pension Liability represents the best estimate of the current value of pension benefits that will ultimately have to be funded by the Council. The pension deficit continues to fluctuate significantly between years. The deficit, as assessed by the pension actuary, showed a deterioration of 29.2m during the year (compared with a deterioration of 33.8m in 2011/12). The overall pension liability is now 226.5m. It is important to note that the overall liability figure represents an estimate of the value of scheme assets and liabilities at a point in time and therefore there is no direct link to funding or contribution rates. The technical accounting entries have no impact on the Council s ability to meet current and ongoing pension liabilities from existing revenue streams and budgets. The information should be considered with the long-term view provided by the triennial valuation. Borrowing and Investments The Council s underlying need to borrow for capital purposes is measured by reference to its Capital Financing Requirement (CFR). The CFR represents capital expenditure that has not yet been financed through direct contribution (e.g. grants, capital receipts) or through amounts set aside from revenue towards the repayment of debt (i.e. Minimum Revenue Provision or Voluntary Revenue Provision). The Council sets its own prudential borrowing limits each year. For example, the Council ensures that the net external borrowing does not, except in the short-term, exceed the total of CFR in the preceding year plus the estimates of any additional CFR for the current and next two financial years. The Council has, to date, been able to operate within its prudential borrowing limits and no problems are anticipated for future years. 6

8 The Council s general policy objective in respect of investments is to invest prudently. The Council s investment priorities are: - security of the invested capital - liquidity of the invested capital - an optimum yield which is commensurate with security and yield The Council has not deemed it necessary to use borrowing to finance its capital programme in 2012/13 and has instead been able to utilise grants, capital receipts and revenue balances. Annual Governance Statement The Annual Governance Statement reports on the outcome of the review of systems that the Council has in place to ensure that its business is conducted in accordance with the law and proper standards and that public money is safeguarded. Performance and Future Plans In 2012/13, the Council s focus was on three main priorities, with a fourth to support them. Progress and future plans against these priorities are shown below - Priority A - All people in North East Lincolnshire benefit from a strong economy 2012/13 has seen considerable progress in developing the local economy, many milestones in key projects have been achieved: A new Enterprise Zone is under construction The Council has led the successful 30m 'Growing the Humber' Regional Growth Fund (RGF) Works to renew the lock gates is complete Key investments in renewables have been secured from Centrica and Siemens CATCH 3 is complete A new Development and Growth Plan has been adopted The Council s Change Programme has supported over 450 individuals to come off benefits and gain employment and 297 direct jobs have been created To improve the skills of local people, a new Skills Group has been constituted as part of new sector governance arrangements. The group, supported by the Council and the Regeneration Partnership, will drive skills attainment by collaborating with industry and education providers to ensure qualifications are appropriate to industry. Through managed interventions the performance to bring empty homes back into use and to remove health hazards from homes has improved significantly on last year. This has improved living standards for many residents and helped to improve the local environment. Plans to help unemployed people travel to seek and obtain work are well underway. Priority B - All children, young people and adults learn and are ready for work Performance has improved in many strategic areas, particularly attainment and progress in Key Stage 2 (KS2) and attainment in Key Stage 4 (KS4). The attainment for English and Mathematics combined in KS2 has increased by 4% along with an improvement of 7% for attainment of 5 A*-C GCSEs, including English and Mathematics, in KS4. The percentage of pupils making expected progress from KS1 to KS2 has increased by 10% in English and 6% in Mathematics. There has also been a consolidation of performance in Early Years and Foundation Stage (EYFS) and in relation to those young people who are Not in Education, Employment or Training (NEET). Gaps have been reduced between disadvantaged pupils and their peers in primary and EYFS and they have also been reduced in SEN groups in all key stages. Work to progress school leavers to further education and learning has been improved through the development of the lincs2 guidance partnership. This has enabled us to develop a combined offer for young people in supported schools and academies across the borough, leading to more effective resource allocation. This has led to an improvement in the applications to the lincs2 site to progress into further learning, which corresponds to 91% of the current cohort. 7

9 We have significantly broadened the young advisors network across the borough. We have also held UK Youth Parliament elections locally and young people have been involved in the Young People's Support Service redesign across the borough. The Young People's Support Service has won several regional and national awards for voice an influence work namely: Children and Young People Now Award The British Youth Council Award Regional and Local Government Awards Rotary Award Priority C - All people in North East Lincolnshire enjoy good health and wellbeing Major modernisation has taken place in 2012/13 with regard to public health and the development of the Health and Wellbeing Board. This is set to completely transform the local authority integration with the health of our communities. The transfer of Public Health to the Council is now complete and transformation work is beginning to meet the constraints of the financial settlement of this service. Children's Health provision, Children's Centres and Children's Social Care Services continue to deliver to expectations. However, there are increasing pressures of rising numbers of Looked After Children (25% increase in year) and with the early intervention grant, which funds children's centres, reducing, this will need careful consideration in order that we can continue to support vulnerable families. The number of Common Assessment Framework (CAF) cases continues to rise. This is seen as a positive factor in the context that the numbers which subsequently refer to a statutory service on closure is falling (4% for the year). Overall crime related targets of a 4% reduction have been achieved and exceeded but there were high levels of violent crime and domestic violence. The trend for violent crimes and domestic violence is falling, which shows initiatives to address these are having a positive effect. The Stop Smoking Service is performing particularly well in relation to its success rate. However, there has been a marked reduction in the number of referrals which mean that the full year objective in the number of successful quits will not be met. Smoking during pregnancy continues to be a difficult target group to address as a result of multiple lifestyle risk takers from areas of high deprivation. Public Protection continues to deliver the programmes of advice to business, inspection of businesses and market testing of illegal sales. Areas with high levels of illegal sales to young people have been targeted and good progress has been made in correcting poor trading standards. Compliance levels in relation to standards of merchandise, food hygiene and health and safety have been good and all high risk businesses have been inspected. The Children and Adolescent Mental Health Service (CAMHS) has been re-tendered and continues to deliver timely intervention. Priority D - All people benefit from an efficient and effective council We are the 'best' in the country on web accessibility, which looks at our code quality, performance and speed of our website. This makes the website easier to use, by all our customers whether they have a disability or not. The number of twitter follows has increased from 2,644 to 5,749 since the start of the year and the percentage of satisfied website users over the year has increased from 40% to 56%. ICT have made a key contribution to the agile working and Improving Customer Experience (ICE) Project and this will continue into 2013/14. Throughout the year the projects ICT have been working on have consistently ran to the planned timescales. A voluntary 'peer review' took place in December 2012 and we benefited from a week of challenge from experts from other councils. The report has been published and an action plan going forward has been agreed by Council. The reduction in Council accommodation is impacting on our ability to reduce the operational and maintenance costs of corporate office buildings and we are currently on target on number of disposals. Significant progress has been made this year in the timely publication of reports, agendas and decisions (77% up to 90%). Over a third of all key decisions are now subject to pre-decision scrutiny; an improvement which has been seen in the reduction of the number of call-in's of Cabinet decisions which are down from 5 in 2011/12 to 2 in 2012/13. There have been no findings of maladministration this year. 8

10 There has been a full programme of scrutiny activity including select committees on the Humberston Fitties Chalet Park, Great Coates Village Council Community Governance Review and speed limits. During these select committees, evidence was heard from the community and stakeholders, with recommendations reported through to Cabinet or Council. Working groups of pupil exclusions, alcohol misuse and partnership governance were also completed this year. The Council has also played a lead scrutiny role in the regional review of the Children's Heart Surgery Unit in Leeds. The Police and Crime Panel for Humberside has been established and the Council has been actively involved in the election of the Police and Crime Commissioner and the approval of the Annual Policing Plan. The Government s ongoing deficit reduction programme will continue to shape the public sector financial landscape for the Council, its partners and our citizens over the next three years. The Council continues to maintain a sound financial position and this puts it in a strong position to tackle these. Over the next three years the Council is required to make further annual savings of around 33m and it plans to address around 18m from the continued delivery of efficiencies and a further 15m through a series of outcome reviews, which will look to achieve efficiencies through changes to service delivery and different ways of working. This is a critical challenge due to the nature and complexity of the services the Council delivers and will need to be monitored closely and governed robustly over the coming financial period. It is anticipated that 1.1m of the target will be delivered in 2013/14, with the majority of the target being achieved in later years Our planned spending is sustainable, with affordable increases in council tax over the period including no increase in 2013/14. This is supported by a prudent investment programme funded in part by planned use of reserves and an affordable borrowing strategy. Balances held in reserve remain at a level considered sufficient to manage cash flow volatility and to meet urgent needs if required. Stephen Barrett Chief Finance Officer 30 August 2013 Copies of this and previous years accounts are available for viewing on the Council s website at or from the Chief Finance Officer, North East Lincolnshire Council, Civic Offices, Knoll Street, Cleethorpes DN35 8LN 9

11 AUDITORS REPORT 10

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14 The Council s Responsibilities The Council is required to: STATEMENT OF RESPONSIBILITIES make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this Council that officer is the Chief Finance Officer. manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets. approve the Statement of Accounts by the 30 September Council Approval I hereby confirm that the Statement of Accounts 2012/13 has been approved by the Audit Committee on 30 August Tim Render Independent Chair of Audit Committee 30 August 2013 The Chief Finance Officer s Responsibilities The Chief Finance Officer is responsible for the preparation of the Council s Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom ( the Code ). In preparing this Statement of Accounts, the Chief Finance Officer has: selected suitable accounting policies and then applied them consistently. made judgements and estimates that were reasonable and prudent. complied with the local authority Code. The Chief Finance Officer has also: kept proper accounting records which were up to date. taken reasonable steps for the prevention and detection of fraud and other irregularities. Chief Finance Officer Certification I hereby certify that the following Statement of Accounts presents a true and fair view of the financial position, financial performance and cash flows of North East Lincolnshire Council for the period ending 31 March Stephen Barrett Chief Finance Officer 30 August

15 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. Councils raise taxation to cover expenditure in accordance with regulations, which may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement. 2011/ /13 Gross Gross Net Gross Gross Net Spend Income Spend Note Spend Income Spend Cost of Services 20,081 (19,549) 532 Central Services to the Public 19,871 (19,370) ,974 (3,296) 15,678 Cultural and Related Services 15,130 (2,012) 13,118 22,433 (6,728) 15,705 Environment and Regulatory Services 22,173 (7,765) 14,408 16,039 (4,941) 11,098 Planning Services 13,562 (3,534) 10, ,659 (110,032) 42,627 Education and Children's Services 123,290 (82,247) 41,043 21,033 (5,423) 15,610 Highways and Transport Services 16,439 (4,748) 11,691 68,088 (60,081) 8,007 Housing Services 76,503 (62,908) 13,595 48,704 (7,060) 41,644 Adult Social Care 48,480 (6,364) 42,116 3,436 (412) 3,024 Corporate and Democratic Core 3,591 (1,019) 2,572 2,184 (9,019) (6,835) Non Distributed Costs 1,711 (8,032) (6,321) 373,631 (226,541) 147,090 Sub-total: Net Cost of Services 340,750 (197,999) 142,751 Other Operating Expenditure 30,703 (Gain)/loss on disposal of non current assets 37, Loss on Revaluation of Asset Held for Sale 17 1,136 Precepts of local precepting authorities 1,143 2 Amounts payable into the Housing Capital Receipts Pool 2 Financing and Investment Income and Expenditure 3,963 Interest payable and similar charges 4,014 (964) Interest and investment income (576) (3,218) Income and expenditure for investment properties and changes in their fair value 1,911 4,564 Pensions interest cost and expected return on pensions assets 3 6, ,317 Sub-total: Net Operating Expenditure 192,865 Income from Taxation and Non Specific Grant (60,278) Council tax income (60,269) (18,679) General revenue grants and contributions 4 (2,678) (17,652) Capital grants and contributions 4 (7,086) (56,636) Non domestic rates 4 (67,901) 30,072 Total: (Surplus)/Deficit on Provision of Services 54,931 Other Comprehensive Income and Expenditure 1,699 (Surplus) or deficit on revaluation of non-current assets 9, 39 3,580 2,354 Impairment losses on non current assets charged to Revaluation Reserve 9, 39 2,257 40,175 Actuarial gains or losses on pension assets and 3, 9 liabilities 32,383 44,228 Total: Other Comprehensive Income and Expenditure 38,220 74,300 Overall Total: Comprehensive Income and Expenditure 93,151 14

16 General Fund Balance Earmarked Reserves Capital Receipts Reserve Capital Grants Unapplied Total Usable Reserves Unusable Reserves Total Council Reserves MOVEMENT IN RESERVES STATEMENT Balance at 31 March 2011 (12,322) (54,165) (780) (4,544) (71,811) (106,189) (178,000) Movement in reserves during 2011/12 (Surplus) or deficit in the provision of services 30, , ,072 Other Comprehensive Income and Expenditure (note 9) Total Comprehensive Income and Expenditure Adjustments between accounting basis and funding basis under regulations (note 10) ,228 44,228 30, ,072 44,228 74,300 (26,578) 0 (439) 1,757 (25,260) 25,260 0 Net Increase/Decrease before Transfers to Earmarked Reserves Transfers to and from Earmarked Reserves (note 32) 3,494 0 (439) 1,757 4,812 69,488 74,300 (4,911) 4, Increase/Decrease in 2011/12 (1,417) 4,911 (439) 1,757 4,812 69,488 74,300 Balance at 31 March 2012 Carried Forward (13,739) (49,254) (1,219) (2,787) (66,999) (36,701) (103,700) Movement in reserves during 2012/13 (Surplus) or deficit in the provision of services 54, , ,931 Other Comprehensive Income and Expenditure (note 9) Total Comprehensive Income and Expenditure Adjustments between accounting basis and funding basis under regulations (note 10) ,220 38,220 54, ,931 38,220 93,151 (50,905) ,711 (48,261) 48,261 0 Net Increase/Decrease before Transfers to Earmarked Reserves Transfers to and from Earmarked Reserves (note 32) 4, ,711 6,670 86,481 93,151 (5,220) 5, Increase/Decrease in 2012/13 (1,194) 5, ,711 6,670 86,481 93,151 Balance at 31 March 2013 Carried Forward (14,933) (44,034) (286) (1,076) (60,329) 49,780 (10,549) 15

17 BALANCE SHEET 31 March 2012 Notes 31 March 2013 Long-term Assets 174 Intangible Assets ,503 Investment Properties 14 42, Heritage Assets Property, Plant and Equipment 194,735 Other Land and Buildings ,067 5,396 Vehicles, Plant and Equipment 16 3,978 66,750 Infrastructure Assets 16 68,394 14,126 Community Assets 16 14,261 35,328 Assets Under Construction 16 4,383 6,036 Long-term Investments 2, Long-term Debtors 22 1, ,856 Sub total: Long-term Assets 300,338 Current Assets 329 Inventories Assets Held for Sale ,855 Short-term Debtors 24 20,179 7,512 Short-term Investments 9,791 33,864 Cash and Cash Equivalents 27 29,606 59,784 Sub total: Current Assets 60,100 Current Liabilities (291) Short-term Borrowing 25 (241) (29,981) Short-term Creditors 28 (28,206) (1,859) Capital Grants Receipts in Advance 4 (1,142) (1,499) Short-term Provisions 29 (1,835) (818) Cash and Cash Equivalents - Bank Overdraft 27 0 (34,448) Sub total: Current Liabilities (31,424) Long-term Liabilities (88,898) Long-term Borrowing 25 (88,527) (3,360) Long-term Provisions 29 (3,415) Other Long-term Liabilities (197,234) Pensions Liability 3 (226,523) (289,492) Sub total: Long-term Liabilities (318,465) 103,700 TOTAL NET ASSETS 10,549 Usable Reserves (49,254) Earmarked Reserves 32 (44,034) (13,739) General Fund Balance 33 (14,933) (1,219) Capital Receipts Reserve 38 (286) (2,787) Capital Grants Unapplied (1,076) (66,999) (60,329) Unusable Reserves (66,773) Revaluation Reserve 39 (50,735) (169,126) Capital Adjustment Account 40 (127,358) 197,234 Pensions Reserve 3 & ,523 2,632 Accumulated Absences Account 2,162 (12) Deferred Capital Receipts Reserve (9) (656) Collection Fund Adjustment Account 41 (803) (36,701) 49,780 (103,700) TOTAL RESERVES (10,549) I certify that these accounts present a true and fair view of the financial position, financial performance and cash flows of North East Lincolnshire Council for the period ending 31 March Stephen Barrett Chief Finance Officer 30 August

18 CASH FLOW STATEMENT 2011/ /13 Note (30,072) Net Surplus or (Deficit) on the Provision of Services (54,931) 48,755 (20,302) Adjustments to Net Surplus or Deficit on the Provision of Services for non cash movements Adjustments for items included in the Net Surplus or Deficit on the Provision of Services that are investing and financing activities ,016 (11,618) (1,619) Net Cash Flow from Operating Activities 6,467 Investing Activities (30,551) Purchase of Property, Plant and Equipment, Investment Property (11,664) and Intangible Assets (11,000) Purchase of Short and Long-term Investments (11,000) (13) Other Payments for Investing Activities (1,071) 649 Proceeds from the Sale of Property, Plant and Equipment, 1,544 Investment Property and Intangible Assets 18,521 Capital Grants Received 9,330 10,188 Proceeds from Short and Long-term Investments 12, Other Receipts from Investing Activities 117 (12,062) Net Cash Flow from Investing Activities (734) Financing Activities (249) Repayment of Amounts Borrowed (438) 50 Cash Receipts of Short and Long-term Borrowing 15 8,628 Billing Authorities - Council Tax and NNDR Adjustments (8,897) (526) Movement in Collection Fund Adjustment Account 147 7,903 Net Cash Flow from Financing Activities (9,173) (5,778) Net Increase/(Decrease) in Cash and Cash Equivalents (3,440) 38,824 Cash and Cash Equivalents at 1 April 33,046 33,046 Cash and Cash Equivalents at 31 March 27 29,606 17

19 NOTES TO THE ACCOUNTS 1. Accounting Policies i. General Principles - the Statement of Accounts summarises the Council s transactions for the 2012/13 financial year and its position at the year-end of 31 March It has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2012/13 (the Code), which is based on International Financial Reporting Standards (IFRS), and the Service Reporting Code of Practice 2012/13. The accounting convention adopted is historical cost, modified by the revaluation of certain categories of non-current assets. The Accounting Policies outlined are the specific principles, bases, conventions, rules and practices applied in preparing and presenting these financial statements. ii. Critical Judgements in Applying Accounting Policies In applying these accounting policies the Council has had to make judgements about complex transactions or those involving uncertainty about future events. There are no specific judgements that require disclosure at this point in time although the Council continues to review its plans to manage the high degree of uncertainty about future levels of funding from local government. iii. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty The Statement of Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, some may need revision if changes occur in the circumstances on which the estimate was based or as a result of new information or more experience. In respect of the amounts in the Council s accounts the estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries is engaged to provide the Authority with expert advice about the assumptions to be applied. The effects on the net pension liability of changes in individual assumptions can be measured. For instance, a 1 year increase in scheme members life expectancy would result in an increase in the Council s pension liability of 16.1m. A separate pensions disclosure note is provided with further information. iv. Changes in Accounting Policies, Estimates and Errors - The Code requires that a change in accounting policy should only be made if the change is required by the Code, or will result in the financial statements providing more reliable and relevant financial information about the effects of transactions, other events or conditions on the Council's financial position, financial performance and cash flows. Where a change is made, it is applied retrospectively by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. There are no changes in accounting policy that require disclosure in 2012/13. Changes in accounting estimate are accounted for prospectively. Material errors discovered in prior period figures are corrected retrospectively. There were no material errors in the 2011/12 accounts that require correcting in 2012/13. v. Accruals of Income and Expenditure - the accounts of the Council are prepared on an accruals basis. This means that the sums due to or from the Council during the year are included in the accounts, whether or not the cash has actually been received or paid in the year in question. Accruals have been made for all known material debtors and creditors for goods and services supplied both by and to the Council during the year. Interest payable and receivable is accounted for in the year to which it relates. vi. Provisions - Provisions are required for any liabilities of uncertain timing or amount that arise from past events. Provisions are made where the Council has a financial obligation (either legal or constructive) for which settlement is at least probable and where a reliable estimate can be made of the financial impact of settling that obligation. 18

20 Provisions are charged to the appropriate service revenue account in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation, based on the best estimate of the likely settlement. When payments are eventually made, they are charged to the provision set up in the balance sheet. Estimated settlements are reviewed at the end of each financial year. An allowance is also set aside for Bad and Doubtful Debts - the carrying amount of debtors is adjusted for debts assessed as uncollectible and an impairment charge is made to the relevant service revenue account. The carrying amount of debtors is also adjusted for council tax debts that are assessed as uncollectable, and a charge is made to the Collection Fund. vii. Reserves Reserves are an accumulation of previous years surpluses, deficits and transfers. The Council has an agreed policy with respect to reserves and sets aside specific amounts for future policy purposes or to cover contingencies. Transfers in and out of reserves are shown in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate revenue account in that year to score against the Surplus or Deficit in the Provision of Services in the Comprehensive Income and Expenditure Statement. A transfer is then made, through the Movement in Reserves Statement, into the General Fund Balance so that there is no net charge against council tax for the expenditure. Certain reserves are classed as unusable reserves as they are kept to manage the accounting processes for non-current assets, financial instruments and retirement benefits and cannot be used to support revenue spending, although an element of the Capital Adjustment Account can be used to repay external loan debt. Usable reserves are those the Council may use to fund either revenue or capital expenditure as prescribed. The usable reserves held at 31 March 2013 include General Fund Earmarked Revenue Reserves Capital Receipts Reserve Capital Grants Unapplied Unusable reserves held at 31 March 2013 include Capital Adjustment Account Revaluation Reserve Pensions Reserve Accumulated Absences Account Collection Fund Adjustment Account viii. Government Grants and Contributions under the Code, grants and contributions for capital schemes are recognised as income when they become receivable. When grant conditions are met, grants relating to the funding of capital expenditure are credited to Taxation and Non-specific Grant Income in the Comprehensive Income and Expenditure Statement. This is then transferred, via the Movement in Reserves Statement, to either the Capital Adjustment Account (CAA) if the grant has been used to finance capital expenditure in the year, or to the Capital Grants Unapplied Account (CGUA) until it is applied. When grant balances held in the CGUA are applied in the year they are transferred directly to the CAA. Revenue grants, including grants for Revenue Expenditure Funded from Capital Under Statute (REFCUS), are accrued and credited to income within service revenue accounts when the conditions regarding their use are met. Any income credited to service revenue that does not match the expenditure they are intended to fund is, subject to approval, transferred to or from earmarked reserves (or CGUA for REFCUS grants), via the Movement in Reserves Statement. This helps ensure that the grant is properly set aside to finance the services for which it has been provided and budgeted for and prevents unnecessary fluctuations in General Fund balances. All grants and contributions with conditions attached are held as receipts in advance until such time as the conditions regarding their use are met. Grants to cover general expenditure, such as Revenue Support Grant, are credited to Taxation and Non Specific Grant Income in the Comprehensive Income and Expenditure Statement. ix. Employee Benefits Employee benefits are accounted for in accordance with the Code s interpretation of IAS 19 Employee Benefits. This standard covers both benefits payable during and after employment. 19

21 Benefits Payable During Employment Liabilities for employees entitlements to shorter term employee benefits are recognised as an expense in the year in which employees render service to the Council. Short-term employee benefits are employee benefits that are due to be settled within 12 months after the year end in which the employee renders the service. These include Wages and salaries, including bonuses Short-term compensated absences Non-monetary benefits Compensated absences can be either accumulating or non-accumulating. Accumulating absences are those that are carried forward and can be used in future periods if the current period entitlement is not used in full. This includes carried forward annual leave and flexi time. These absences are recognised as an expense in the year that the employee accrues the entitlement and are measured as the additional amount that the Council expects to pay as a result of unused entitlement that has accumulated at 31 March This expense is reversed via a credit transfer from the Accumulated Absences Account to the Movement in Reserves Statement so that it does not result in a charge to council taxpayers in that year and so that these benefits are charged to the General Fund in the year that the absence occurs. Non accumulating absences are those that cannot be carried forward for use in future periods, such as sick leave and maternity leave. These are recognised when the absence occurs. The Council does not award long-term employee benefits i.e. those that are not expected to be paid within 12 months of the balance sheet date. Post -Employment Benefits Employees of the Council are generally eligible to be members of two separate pension schemes: The Teachers Pension Scheme, administered by Capita Teachers Pensions on behalf of the Department for Education (DfE). The Local Government Pension Scheme, administered in this area by East Riding of Yorkshire Council. Both schemes provide defined benefits to members (retirement lump sums and pensions), linked to length of service as employees of the Council, including transferred in service for past employers. However, the arrangements for the Teachers scheme mean that liabilities for these benefits cannot be identified to the Council. The scheme is therefore accounted for as if it were a defined contributions scheme no liability for future payments of benefits is recognised in the Balance Sheet and the Education and Children s Service, within the Comprehensive Income and Expenditure Statement, is charged with the employer s contributions payable to Teachers Pensions in the year. The Local Government Pension Scheme The Local Government Pension Scheme is accounted for as a defined benefits scheme: The liabilities of the East Riding Pension Fund Scheme (the Fund) attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on certain assumptions, such as mortality rates, employee turnover rates and projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate based on the indicative rate of return on high quality (at least AA rated) corporate bonds. The assets of the Fund attributable to the Council are included in the Balance Sheet at their fair value except for unquoted Private Equity Fund and Private Finance Initiative investments, which are shown at the lower of cost or fair value, which the Pensions Committee considers to be a more prudent measure of valuation. The change in the net pensions liability is analysed into seven components: (a) current service cost the increase in liabilities as a result of years of service earned this year (allocated to the revenue accounts of services for which the employees worked in the Comprehensive Income and Expenditure Statement). 20

22 (b) (c) (d) (e) (f) (g) 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 Net Cost 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 the benefits are one year closer to being paid (debited to Financing Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement). expected return on assets - the annual investment return on the fund assets attributable to the Council, based on an average of the expected long-term return (credited to Financing Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement). gains or losses on settlements and curtailments - the result of actions to relieve the Council of liabilities or events that reduce the expected future service or accrual of benefits of employees (debited or credited to the Net Cost 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 or credited to the Comprehensive Income and Expenditure Statement as part of Other Expenditure). contributions paid to the Fund - cash paid as employer s contributions to the Pension Fund. Statutory provisions require the Council to raise council tax to at least cover the amounts payable by the Council to the Pension Fund in the year. In the Movement in Reserves Statement there are transfers to and from the Pensions Reserve to remove the debits and credits for retirement benefits and replace them with the actual cash paid or payable to the Pension Fund. The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award. Both teachers and other staff benefits are accounted for using the policies as applied to the Local Government Pension Scheme. x. Value Added Tax (VAT) - income and expenditure excludes any amounts related to VAT, as all VAT collected is payable to HM Revenue & Customs and all VAT paid is recoverable from it. xi. Overheads and Support Services - the cost of support services are recharged to services based on use and in accordance with CIPFA's Service Reporting Code of Practice (SERCOP) 2012/13 using the principle of total absorption costing. The full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of those costs that relate to the elected and multi-functional nature of the Council, which are disclosed separately as Corporate and Democratic Core and Non Distributed Costs. These two categories are defined in SERCOP and accounted for as separate headings in the Comprehensive Income and Expenditure Statement. xii. Exceptional Items When items of income and expenditure 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 and dependent upon their significance to the Council s financial performance. xiii. Intangible Assets - intangible assets acquired by the Council, e.g. computer software licences, are capitalised at cost and amortised over their useful life (typically 5 years). Assets are only revalued where the fair value of the assets can be determined by reference to an active market. In practice, no intangible assets held by the Council meets this criterion and they are therefore carried at amortised cost. Services are charged with a provision for amortisation of intangible assets used in providing services and, where required, any related impairment loss. These charges are credited to the Movement in Reserves Statement, and therefore have a neutral impact on the amount that is required from local taxation. Any gain or loss arising on the disposal of an intangible asset is posted to Other Operating Expenditure in the Comprehensive Income and Expenditure Statement, which is then reversed out, via the Movement in Reserves Statement. The Capital Receipts Reserve is credited with an amount equal to the sales proceeds and the Capital Adjustment Account is debited with an amount equal to the carrying amount of the intangible asset. A deminimis level for recognition has been set at 50,000. xiv. Property, Plant and Equipment are tangible fixed assets that have physical substance and are held for use in the provision of services or for administrative purposes on a continuing basis and are not classed as an investment property, see separate note. 21