Agenda Item No 10 Trading Undertakings Principal Accountant The purpose of the report is to discuss the issue as to Trading Undertakings in the 2009/10 Statement of Accounts, what should be included specifically looking at Car Parks and Leisure Centres and whether in future accounts this should be changed. Cabinet member(s): Garry Wheatley Contact Officer, telephone number, and e-mail: Ward(s) affected: All Emma Teviotdale 01508 533919 teviotdale@s-norfolk.gov.uk 1. Background 1.1. At the Accounts and Audit Committee on 29 th June the 2009/10 Statement of Accounts were discussed and approved. One point that was queried was the content of the Trading Undertakings Line and whether other service areas should be included. The committee felt that both Leisure Centres and Car Parks were also commercial in nature and should be included. This paper discusses the recommendations and guidelines within the Code of Practice on Local Authority Accounting in the United Kingdom (based on International Financial Reporting Standards) and Best Value Accounting Code of Practice (BVACOP). 2. Introduction 2.1. The objectives of financial statements are to provide information about the financial position, financial performance and cash flows of an authority that is useful to a wide range of users in making and evaluating decisions about the allocation of resources. The objectives of Financial Reporting in the public sector should be to provide information useful for decision making, and to demonstrate the accountability of the authority for the resources entrusted to it. 2.2. In the Code of Practice for /11 the Comprehensive Income and Expenditure Account should include items in a specified list. Trading Undertakings are not in
this list. However, when items of income and expenditure are material, an authority should disclose the amounts separately. 2.3. As part of the notes to the accounts the Code of Practice states that disclosure requirements should include the following regarding Trading Operations: The nature, turnover, and profits/losses of any significant trading operation 3. Current Position and Issues 3.1. Currently within the Statement of Accounts the line Trading Undertakings has included Industrial Estates (Ketteringham and Ayton Road, Wymondham) and Business Centres (Diss and Loddon). In the 2009/10 accounts the following note was included showing the Income and Expenditure for these properties: 2008/09 2009/10 Expenditure Income (Surplus) /Deficit Expenditure Income (Surplus) /Deficit 000s 000s 000s 000s 000s 000s Industrial Estates 167 (16) 151 Ketteringham 110 (16) 94 39 (106) (67) Ayton Road 19 (106) (87) 254 (133) 121 Diss Business Centre 119 (134) (15) 0 0 0 Loddon Business Centre 16 (51) (35) 460 (255) 205 264 (307) (43) 4. Best Value Accounting Code of Practice (BVACOP) 4.1. BVACOP provides guidance on financial reporting to stakeholders; it establishes proper practice with regard to consistent financial reporting below the Statement of Accounts level. This is given statutory force in England and Wales by regulations made under the Local Government Act 2003. Sections 2 and 3 of BVACOP present the mandatory requirements for local authorities. Section 2 deals with Total Cost and section 3 deals with Service Expenditure Analysis (SEA). 4.2. Section 3 provides the service classification and defines the mandatory divisions of service at which Total Cost must be aggregated. BVACOP does not prescribe guidance on the Statement of Accounts. This is provided by the Code. However, the Code notes the importance of using the SEA to provide the service analysis on the costs of local authorities services. The SEA also enables comparisons between authorities and ensures data is presented in a consistent manner. 4.3. The Service Expenditure Analysis is divided into the following divisions Adult Social Care Central Services Children s and Education Services
Cultural, Environment, Regulatory and Planning Services Fire and Rescue Services Highways and Transport Services Housing Services National Parks Services Police Services Bold denotes services that relate to South Norfolk Council 4.4. Included within Cultural and Related Services is Recreation and Sport which encompasses Indoor and Outdoor sports and recreation facilities. S19 of the Local Government Act 1976 empowers councils to provide or support recreation facilities and therefore should include these expenses in this division of services. 4.5. Included within Highways and Transport Services is Parking Services which includes On-street and Off-street parking. BVACOP suggests splitting out multistorey car parks as they tend to have permanent staff and trading accounts can easily be prepared as well as private sector comparisons being readily available. 4.6. South Norfolk Council codes all income and expenses for all car parks to the same cost centre. We have three members of staff and fourteen car parks across Diss, Loddon and Wymondham that we manage as well as other car parks that we rent out. Included in the Statement of Accounts for 2009/10 is the following Income and Expenditure for car parks. 000s Income 291 Expenditure (346) Net Loss (55) 4.7. It is in my professional opinion that this is not a trading account and therefore should remain in Highways and Transport Services. 4.8. Within Central Services is Other Operating Income. This includes all costs that arise as a result of running a local authority service that do not form part of the costs of any one service. They fall within overall net operating expenditure, but not within net cost of services as defined by BVACOP. Included in this mandatory service is Trading Account Surpluses and Deficits. 5. Trading Accounts and Trading Operations 5.1. A Trading Account is a method of matching income and expenditure for a particular activity or group of activities. Trading Accounts should be maintained where services are provided on a basis other than a straightforward recharge of cost or on a cash-limited vote basis.
5.2. The council does not produce any Trading Accounts and does not have any legally separate trading companies. 5.3. Trading Operations are services provided to users on a basis other than a straightforward recharge of cost, such as a quoted price or a schedule of rates. Formal financial reports of performance may need to include summarised details of performance for significant trading operations providing services in a competitive environment. 5.4. A competitive environment is one in which the user has discretion over whether to procure the service from the in-house provider either as part of a periodic tendering procedure or on a continuous basis. There are five categories where trading activities are deemed to provide a service in a competitive environment and the following relates to services we provide at the council. Trading Services or undertakings with the public or with other third parties. These include catering undertakings, markets, trade refuse collection and industrial units. 6. Proposal and Reasons 6.1. The proposal is to make no changes and to leave car parks and leisure centres in their existing service area, and to continue to report on the business centres and industrial units in trading operations. 7. Other Options 7.1. To move Leisure Centres to Trading Undertakings This would go against the mandatory requirements in BVACOP which could jeopardise the sign off of the Statement of Accounts. It would also mean it would be difficult to measure our performance against other councils. 7.2. To move Car Parks to Trading Undertakings We do not produce trading accounts for our car parks and there is no competition for parking in South Norfolk. BVACOP advises that multi-storey car parks should be separated out but we do not have any of these. Therefore we should follow the recommended practice and keep the service in Highways and Transport. 8. Relevant Corporate Objectives 8.1. To be business like and efficient. 9. Conclusion 9.1. The Code of Practice and BVACOP have been revised for /11 and so it is imperative that we follow the mandatory requirements but when there are options that we ensure the information we provide is relevant to the stakeholders.
10. Recommendations 10.1. To keep the reporting requirements in line with the Code of Practice and BVACOP.